Thursday, May 31, 2012

The Gold Standard - a mechanism for stability

I written about the cost of gas and why I feel it costs less today then it did in back in the 50s and 60s.  I will attempt to give a reason why the gold standard was good for the country, but am not saying that it would be easy to revert back.  In fact, I say that going back to a gold standard would be disastrous for many reasons.
You can't print this
Rather than dwell on disaster, I want to focus why I liked the gold standard.

People work for money typically.  The barter system is still in use today, but typically people work for money (dollars).  These dollars are a form of purchasing power that can be used at a later date.  People use dollars in exchange for goods and services.  What are these dollars?  Dollars are debt.  All dollars in existence have been borrowed by someone.  The dollars you hold in your wallet or purse...someone else is paying interest on those dollars.  This is why every dollars says Federal Reserve Note.  A note is a form of debt.

I realize that our currency value is not in the price of the metals.  However, the price of metals are tangible.  The coins quarters from 1932-64 that are composed of silver have been able to retain purchasing power.  The currency we have today has not been able to do the same.

I heard a story that 50 years ago, you could buy a fine Italian suit for 1 ounce of gold.  Today, you can buy a fine Italian suit for 1 ounce of gold.  I remember that I could buy a gallon of gas for a dollar back in the 90s.  Then in 2002 it cost me $1.50.  Now it is over $3.50 even $4.00 per gallon of gas.

You all have heard that as soon as you drive your new car off the lot that instantly you lose $3000 or something to that effect.  Why is that?  Was it depreciation of the vehicle?  I do not think so...because had that car sat in the parking lot one extra day, it would have not lost $3000.  So what happened?

The object that you purchased with your money wasn't ever worth the amount that you paid for.  In fact, I would suggest that the different might be the dealership's profit.

Getting back to currency we have today.  Our dollars are made out of paper and no real difference exists between a $1 or $100 with the exception of an idea that one is worth more than the other.  We as a country have accepted this. What happens if a country decides to create lots more money?  Well, you could have hyperinflation like Zimbabwe.  Another example of throwing money at a problem.  You could become a billionaire pretty easy in Zimbabwe. 

This sort of thing would not happen under a gold standard.  Under the gold standard, paper notes are convertible into pre-set, fixed quantities of gold.  If you saw lots of currency being easily available, then people would start exchanging currency for gold.  It wasn't perfect, but at least you knew that you would lose purchasing power if you kept your dollars under your mattress.

I can here people thinking...why would you want to do this?  Well, if you don't trust banks, where else would you put it?  Perhaps a tin can and bury the can in your backyard.  Create a treasury map to find your gold.  Hey...it worked for pirates.  Because for you to actually believe you can get something for nothing...well let me tell you that you've been lied to all these years.

I'm certain people have been told that you can put money in the bank or CD, and you'll make money.  Well, this isn't the case.  After all...what did you do to earn this money?  Should you really deserve additional purchasing power by giving your money to the bank?  Does this make any sense?

If you do a job for someone.  Let's say you work on a farm.  All you do is collect eggs and feed chickens.  In return you get a place to sleep and 3 meals a day.  The farmer doesn't care how long it takes...the pay is the same.  You are only working 20 hours per week for this job. You do this for a year.  The next year rolls around.  The farmer asks if you could milk the cows as well.  The farmer said he will pay you $100 per month to milk the cows.  You tell the farmer that you will not milk the cows, and expect a $50 raise to collect eggs and feed chickens.  This year it only takes you 15 hours per week to do the job.

Is it fair?

My answer is no.  It wouldn't be fair to the farmer.  You are doing the same job.  You receive the same pay.  Since you are not being paid in dollars...inflation is not a factor for you.  However, you actually increased your productivity, and could look for another job if you wanted to enhance your situation.

Since the gold standard doesn't exist anymore, it is one of the reasons why the rich get richer, and the poor get poorer.  For every dollar created, reduces your purchasing power.  Thus requires you to work more to maintain the same standard of living.

This is one of my problem with the current system.  Feel free to criticize.

Wednesday, May 30, 2012

The price of good schools

I heard it probably 100 times (more like 27 times).  I live in (name the city) and they have good schools.  My sister recently told me she was looking at buying a house in West Chester, Ohio.  The prices for housing is expensive in my opinion, and she told me that is because they have good schools.

Let's take a step back.  What on Earth does it mean to qualify as a "good" school.  I'm certain people that sent their kids to Columbine High School would have claimed that they had good schools too.  Since I live in Dayton, I've heard from the following areas as to having good schools.  If you ask...why do you live in (name the city).  Because they have a good school district is certain to be a top reason.  Especially if they have children.  I've heard that about Beavercreek, Centerville, Kettering, Oakwood, Kettering, Fairborn, Tipp City, Miamisburg and Bellbrook.  Each of these cities have good schools.  This is practically every city in the Dayton area.  I'm certain if I hung out Huber Heights or Riverside long enough...someone would say they have good schools as well.

I asked my sister...does West Chester really have good schools?  Really?  Are most of these kids going to Harvard after they graduate?  Are they taught to be free thinkers?  What qualifies as a good school?

Let me set something straight...their is no such thing as a good or bad school.  Every school is a good school if you want to believe it.  Unless of course you can find a method of measurement you could classify all schools as good.  This is like asking a room full of people how many people are good drivers?  Typically the majority of the people would raise their hands.  If you asked how many people are bad drivers...probably no one would answer yes.

Instead of asking good verse bad...why not ask how many people have caused a car accident within the last 3 years.  If someone answers yes...then they are bad drivers.  This is something that people could probably agree with.  You could say that people who have a speeding ticket are careless drivers.  Why?  Well, they didn't do anything bad like cause an accident.  However, they don't care about the posted speed limit...therefore classifying them as a careless driver (who got caught).  Same could be said about someone who runs a stop sign/light.

When it comes to local government...for some reason the people who want to get your money always uses some kind of scare tactic with a slogan.  For example...if you don't vote for that fire levy, then your house will burn down.  Or the firefighter won't have the equipment needed to put out the fire quickly.  If you don't vote for that police levy, then crime will rise.  If you don't vote for that school levy, your kids will suffer...and after all our kids are our future.

Why does this happen?  Throwing money at a problem rarely ever works.  If it did...then you wouldn't have people making millions going bankrupt.  You wouldn't have people worse off after winning the lottery.  I'm all for fire, police and education.  What I'm not for is catchy slogans.  Plus the typically the threat continues that if a levy doesn't pass then people get laid off.

In my last article I stated that taxes are the number two expense when it comes to housing.  I've also showed that taxes have outpaced inflation.  Certainly property taxes have outpaced wage inflation.  If you were a government employee you have received a pay cut for the last two years because your purchasing power has decreased due to inflation.  Most people in the private sector their wages haven't increased greater than inflation either.

Although a small part of the problems we face in this country.  Hopefully it does give you something to think about.  Next time someone says...our schools are great.  Ask what makes them great compared to the surrounding schools.

Tuesday, May 29, 2012

It costs too much to rent! Breakdown of rental costs.


For those who rent...or even if you are a home owner you should pay close attention.  I'm certain that many people do not understand how rent is calculated.  After all, those greedy landlords are just stealing from those poor tenants right?

In a previous articles I wrote that many military members decided to rent out their homes.  Primarily because either they couldn't sell or they wanted to move back in the house they are renting after they retire.  Renting out a house is a great learning experience, and is recommended for anyone who wants to be a military millionaire.

So, why does it costs so much to rent?

First of all...shelter in this country is expensive.  Regardless if you rent or buy a home.  Whether you rent or buy the following expenses may exist:

  • Property Taxes
  • Home Insurance
  • Mortgage
  • Maintenance and repairs (upkeep, depreciation)
  • Utilities (heating, cooling, water, sewer)

In the area where I live many of the houses (1000 sqft) are being rented for $800.
How much is this money going towards profit?

Well, if you used the 1% rule to purchase your house then you would have bought the house for $80,000.  If you put 20% down this leaves you with a mortgage of $64,000.  You can get a 15 year mortgage @ 3.3% costing you $451.23 per month.

Let's break it down

Rent monthly income $800

Rental monthly expenses
Mortgage $451.23 or 56.4%
Taxes $164 or 20.5%
Insurance $48 or 6%
Maintenance $75 9.3%
Utilitizes - renter pays
Total - $738.23 92.27%

Potential monthly profit - $61.77 or 7.72%

Why potential?  Well, you still need to get a renter.  Maintenance may or may not occur.  If you count the time and effort landlords take to get a tenant screened and into the property you could be looking at a small amount.

Let's examine this further.  If you notice property taxes is 20.5%.  The government makes two times the amount the landlord receives.  The quickest way to get your rent lowered is to have the property taxes lowered.  This is a fact.  Probably one of the reasons why rent hasn't gone up as much as it should have is because property taxes actually decreased in many areas.

Regardless if you own or rent...you are paying property taxes.  Just because someone pays the bill for you, doesn't mean you are not paying.  Be sure to keep this in mind next time your local government wants to raise money though property taxes.  Taxes is the second largest expense a landlord has to pay, and the same would be true for homeowners.

Video is an Autotune the news video.  It seemed appropriate for the subject matter.

Monday, May 28, 2012

Memorial Day

Memorial Day is a day to remember America's fallen soldiers.  Originally Memorial Day was Decoration Day to remember the fallen soldiers during the Civil War.  Basically it is a time of remembrance, the start of summer (pools open), and retailers usually have some form of sales to get people to buy stuff.


My family spent most of our day painting a rental property after a tenant moved out.  Spent all weekend painting and cleaning.  We never seem to have time for a vacation.

Before joining the Army I never really thought much about many of the holidays we have in this country.  I did appreciate any holiday we did have since I didn't have to go to school.  I did typically work on most holidays in my younger years working retail or fast food.  During those days...it was just another day of work.

Today...holidays like Memorial Day, 4th of July and Veterans Day means much more to me.  I appreciate the history of our country much more, as well as, the men and women who helped make this country great.

Everyone will do something different this Memorial Day weekend.  Some people who have lost loved ones will more than likely spend it differently then those who haven't.  However, everyone can take some time to remember and thank the people who died fighting for our freedom.

Although the day is almost over...I am glad to have been born in America.  We are a truly blessed nation.

Sunday, May 27, 2012

Facebook - Fad or the real thing?

Facebook (FB) recently sold shares to the public and has been in the news for several reasons.  The Initial Price Offering (IPO) was issued, and the current stock price fell well below where it started.  This obviously happens from time to time.  I was reading an article that wrote about 15 companies that had failed IPO.

What is a failed IPO? 

Simply put...the stock sells for less than you bought it at the beginning.  With smaller offerings this is much more frequent which is why buying into an IPO is quite risky.  The chance of incorrectly pricing the company is great for a few reasons.  This is true for mergers as well.  The original owners want to get the most money it can for selling the shares to the public.  However, the company doesn't want the shares to go down immediately after the offering.  In short, the IPO price needs to be less than what the market is willing to pay for, but not too much less.  For example...
Facebook last traded at $31.91.  The company priced FB at $38 per share.

Had Facebook sold the shares at $25 per share...people would be saying FB was IPO was a bargain.  Because it was sold too high...you now start seeing articles written saying FB is worth $7.50 or worse.

All of this talk is nothing but noise.  What really matters is whether Facebook is a company that can make money for the shareholders.  CEO Mark Zuckerberg controls 56.9% of the voting power according to Bloomberg.  This means regardless of share price Mark Zuckerberg is going to get paid.

Is Facebook a standard?  I believe that Facebook is the standard for social media.  Much like Microsoft is the standard for operating systems.  Blu-ray is the standard for HD.  Coke and Pespi are the standards for the cola industry.  Google is the standard for search engines.

Standards can be broken.  However, typically this is due to new technology rather than a competitor defeating the current standard.  For example...VHS was the standard for a long time in the 80s.  This gave way to DVDs.  HD DVD tried to become the standard for High Definition TV, but lost this standard to Blu-ray.  All those who purchased HD DVD lost...as did Toshiba.  The Blu-ray Disc Association became the new standard for high definition.

Is Facebook a Fad?  I do not think so.  Facebook offers something that no one else does.  A quick and easy way to get in contact with people, play games and share your life with others.  Unless someone comes out with a new way to communicate with people, and can market this technology successfully...I do not see Facebook losing their standard within the next decade.  The most important thing to remember is Facebook created vast wealth and didn't even charge their users anything.

Kind of like this blog...it is free.  Free is good!


Disclosure:  I do not currently own shares in any of the mentioned companies.

Saturday, May 26, 2012

Becker CPA - ordering nightmare

I've tried over the last few days to order Becker CPA review.  You would think that it would be pretty straight forward since Becker is suppose to be one of the top CPA review courses.  For someone who doesn't work for a big accounting firm, I have to pay for the materials myself.

I went to the Becker website and created a log in.  I filled out my information such as name, address and so forth.  It has a section where it wants you to type in your affiliations such as where you work and what school you attended.  I tried to put in Air Force as the agency I work for, but they didn't have it listed.  The site did list federal government employee.  It has a place to select stating that I would be paying for the product myself.  I checked that radio button.  I selected the product I wished to purchase.  Total price...$0.

I knew something wasn't correct, so I called Becker.  I was put on hold several times, and was told I didn't select the right option.   The customer service representative said I selected the option that my employer would be paying for the course.  I'm sorry, but you don't ever blame the customer.  People call customer service because a problem exists.  You do not need to exacerbate the situation.  Plus I know that I clicked right box.

After all that mess is over with I get my $135 discount per course.  I decided to purchase only one section at a time, rather than the last two courses that I will be taking.  I enter in my credit card information and click submit order.

I receive a prompt thanking me for my order, and now it is on hold.  Why is my order on hold?  Becker needs to verify my employer.  The verification takes 24 hours apparently.  I send the information Becker requested, and for whatever reason...I receive an error from Becker stating they cannot verify my e-mail.

I call Becker again...

Needless to say Becker didn't have any supervisors that I could talk with.  I wouldn't be able get the hold status removed until possibly Wednesday of next week.  You would think that if I placed an order on Thursday that it wouldn't take until Wednesday of the following week to go through.  Then who knows how long it will take to process and ship.  This means I could risk waiting two weeks to get my materials.

I went to another71.com to find out more about different CPA courses.  I decided to go with Yeager.  I got a government discount through them as well.  $50 discount to be exact.  What did I need to do?  Enter in the code that is available on their website.  Simple.

Why Becker takes forever to order the review course...I'm not really quite certain. 

Friday, May 25, 2012

Poor advice, retirement and risk aversion

Nothing gets me more upset than listening to someone give bad financial advice.  I heard someone talking to an older gentleman the other day about investing.  The guy talked about how he was interested in purchasing gold for his portfolio.  He said he invested only in bonds and CDs.  He said he doesn’t like losing money.  The financial advisor began to talk about how they are believers in capitalism and thinks that America isn’t big on capitalism anymore.  He thinks that internationally capitalism is growing.  He told the man if it were him he’d buy an international mutual fund.  I couldn’t believe what I heard.

First of all, from my training at Fidelity, you would never steer someone with this type of risk tolerance to something that is extremely risky!  Looking at my January/February TSP Highlights newsletter I looked at the performance of the different funds. The international fund had a negative return of -42.43% in 2008, positive 30% in 2009, positive 7.94% in 2010, and -11.81% in 2011. Unless the goal was to give this man a heart attack I’m not sure why this advice was given.

Here is a different point of view from one of my favorite authors.  His point is it’s your money.  Do not give it away.

Everyone probably has heard about Occupy Wall Street by now.  Let me ask you this…why aren’t people in this group targeting the 401k?  Like Robert Kiyosaki said…it is your money!  Why are we sending it to Wall Street?  This doesn’t make any sense to me.

Worse is that you have to PAY to get YOUR money from your employer.  I’m glad the Military doesn’t do this.  I hope they never do…otherwise I’m afraid there wouldn’t be any incentive to staying in the military long term.  Putting your necks on the line means you should get paid.  I don’t care if it is a volunteer military…this doesn’t mean you shouldn’t get properly compensated.  America’s wealth is in it’s rich land and it’s diverse citizens that reside here.  I want America to remain strong, and I want to take care of our biggest assets which are the men and women in uniform who serve this great nation.  After your service is up, you will continue to do great things.  Hopefully through this blog, books and your personal thirst for knowledge you will be able to take your new skills to even greater heights.

Thursday, May 24, 2012

CPA Results - Regulation (REG)

I got my CPA regulation results today.  I had a pretty good idea before I received the results whether or not I passed.  I thought I did really well on the simulation part, and didn't do very good on the multiple choice.  My conclusion was correct.

Regulation results 5/23/2012

I'm sure that the Gleim system may work for some people, but it won't work for me.  I am not someone who can comprehend vast amounts of information that isn't very focused.  I am not someone who got straight As in school.  Those people typically are excellent readers...not something I excel in at all.  I found some typos in the materials, and it really bothered me that my counselor didn't have a clue what was going on.  In fact, when I wrote to my personal counselor that I had failed BEC she replied with, "Congratulations!"

I was shocked that she didn't even read the one sentence that I wrote.  I could possibly understand if I wrote a paragraph, but when you write, "I got a 74 and I would be taking the next section on Friday."  You could take the time to not spit out a canned congrats message. 

I asked for my money back via e-mail, but I will probably need to call tomorrow now that I have my official scores.  I've tried to study the material I have with Gleim for the Auditing Section, but it is too difficult.  Hopefully I will get my material from Becker soon.  I need to start studying again.  This time I pray that I'll be able to pass the test.


Wednesday, May 23, 2012

Failing the CPA using Gleim

More bad news on the CPA front.  I failed regulation with a score of 70.  I have failed two exams in a row, and believe it is time for a change.

I choose Gleim to prepare for the CPA exam for a few reasons.  First of all the price was hard to beat.  Just under $1000.  Plus they have a money back guarantee if you do not pass on your first try.  My auditing teacher told me that she passed using Gleim.  I probably should have asked her if she passed all four sections without failing.  I will be certain to let my readers know if I run into any problems, and exactly how much money I get back.

One of my co-workers Kim has been a great cheerleader for me to pass the exam.  In fact, several co-workers have been very encouraging to me, and I appreciate each one of them.  I also appreciate my kids, and wife being patient with me as I study daily.

So, I will have to shell out more money for a different CPA review.  This time I am going with the most prominent review...Becker.  I will also use Yeager CRAM for the two sections I didn't pass.

Hopefully my next CPA update will have some positive results.

For all those who are taking any type of standardize testing, whether it be the CPA, CFA, Securities license, ASVAB, or technician training for your job...don't give up.  These tests have very little to do with whether you will be good at a job.  Your personal motivation has much more to do with your success in a job then anything else.  It is nothing more than a game, hurdle or club membership.  If you want it bad enough, it is typically obtainable.  Failure is not an option.  The only way you achieve failure is when you quit.  Believe me when I say...I've wanted to quit many times.  The thought runs through my mind daily.  However, this is something I want to have, and by golly I am going to get it!

Tuesday, May 22, 2012

Get paid to drop out of college

I've written an article previously with my thoughts on college, and your return on investment.  Well, it appears that someone with lots more money than I have tends to agree.  Peter Thiel is paying $100,000 for students with promising ideas to drop out of college and become entrepreneurs.

You can watch the video on 60 minutes.

I do not know very much about the billionaire, however I do know that what he is saying about our education is correct.  If you look at education and how much it has gone up in the last 12 years...it is rather staggering.  This isn't just about college either.  If you look at your property taxes that you paid back in 2000, the amount I am paying today has risen by 43%.  Many other areas has risen 77%.

According to the article above, inflation has only grown at 30%.  Peter Thiel says our education system is a bubble.  He might be right.

I know from my experiences going to school, and talking with many people...they feel that we aren't very prepared after college.  Hardly anyone knows anything about money.  Even if you were a finance major...you wouldn't know any more about money than anyone else.  Finance majors are off learning worthless financial theories such as the efficient market theory, CAPM, arbitrage or beta.  Rather than reading the Intelligent Investor or Security Analysis...we  read from some worthless book written by someone who never made much money.

College really doesn't prepare you to do your job.  Certainly it doesn't prepare you to start your own business.  Starting your own business is what America needs.  We do not need more employees...we need jobs.  How do we create more jobs?  Well, you need people who knows how to create jobs to create them.  Even if you create a job for yourself...that helps the economy.  Rather than have someone sit around putting their resume online hoping for a call back.

My friend who has his own law practice said he was ill prepared on how to start his business.  He also said that while he was taking the bar exam several people from prestigious schools failed in preparing their students to pass the bar exam.  I didn't get a degree in accounting, however I was only a few classes from getting one.  Even if I would have taken the test right out of school, I would have failed miserably.

For anyone who can go to school for free this is a different story.  However, I think he did shed some light on a huge problem we have in this country.  We have about a $1 trillion in student loan debt.  Sounds like a serious problem to me.

Monday, May 21, 2012

Gas is cheaper today

Everyone probably already knows that the price for gas is high.  What you might not know is that gas is cheaper today then it was in the 70s.  Some websites might make you believe that gas is cheaper in 1959 then it is today.  This is simply not true.  Two sources have said this.  One of them said that based on inflation, gas price would be $1.86.  Gas apparently was $0.25 in 1959...so how could it be cheaper today?

$0.50 piece worth about $4.20 today

Well, you cannot take the current price today nor use the consumer price index to adjust for inflation.  Why not?  Well, if you use the CPI calculator and put in $0.25 it says that the dollar has the same buying power as $1.98.  It is a government site...it cannot be wrong right?

The Bureau of Labor Statistics does a great job.  We use the data they gather for the work that we do.  However, the fundamental flaw with the CPI calculator is that our currency was different back then.  The quarter and dimes were made out of silver.  If you go to coinstudy website...and look up a 1959 quarter you'll notice that the quarter is worth $4.72.    I'm not certain how often the website adjusts based on silver prices, but last time I checked gas was not $4.72 per gallon.  As of today, coinflation has the value of 1932-1964 quarters at $5.13.

Folks...this means that if you had all your wealth in quarters back in 1959 and held onto those quarters, then you would be wealthier today, then you were back in 1959.  If you held all your money in a bank collecting zero interest...then you would be much poorer today, then you were back in 1959.

If you look at the picture of my $0.50 piece...you'll notice that it is worth less than the 1959 quarter.  How come?  Well, because the U.S. Mint changed the half dollar silver content to 40% from 90%.  This is currency debasement working its magic.

It is of my opinion, that inflation or devaluing of currency is one of the main reason why the rich get richer, and the poor get poorer.  It puts certain individuals who understand the rules of money on a vastly different level than everyone else.  Back when the gold standard existed, it was acceptable not to like or care about money.  Today if you don't understand, then you lose.  Let me leave you with a few famous currency quotes.

“At the end fiat money returns to its inner value—zero.” - Voltaire

“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.” - Adam Smith

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation […] Deficit spending is simply a scheme for the “hidden” confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights.” - Alan Greenspan, Gold and Economic Freedom (1968)


Sunday, May 20, 2012

Wednesday, May 16, 2012

Money – Historical Returns


In my quest to figure out an easy way to find historical returns on all asset classes I have had a difficult time finding them. Sure, I can find out how the S&P 500 performed, or Dow, or Treasury notes. However, other asset classes such as commodities, real estate investments, and businesses are harder to find.

As a cost analyst the hardest part is finding the data. Even more difficult is finding good data. Having an understanding of averages is important since many businesses use them as benchmarks. Benchmarks are standards. The S&P 500 is typically the benchmark that money managers are trying to beat. Beating the standard means more money will flow into their mutual or hedge fund.

When choosing CDs many people look for APR %. Which one has the highest rate for a period of time.

For example:

FDIC insured Bank XYZ offers a one year $1,000 CD that yields 1% and pays interest at maturity.

FDIC insured Bank ABC offers a one year $1,000 CD that yields 1.1% and pays interest at maturity.

If no other choices exist, which one would you choose and why?

I am hoping you would choose the ABC offer. You will receive $10 from XYZ and $11 from ABC bank. That is a 10% increase in money received! You get this percentage by taking $1/$10. Again percentages matters!

I'm sure almost everybody understands this...however questions get asked all the time which credit card or debt should you pay off first. The answer is always the one with the highest percentage. Forget the psychological...I paid off one card yeah me! The goal isn't about paying off cards or debt. The goal is to increase your cash flow...period! This is why filling out budgets, personal financial statements, and financial plans are important.

To measure success, it is about the cash flow. Do you have more cash flow this month than previous months?

If the answer is yes...then you are on the right track.

Tuesday, May 15, 2012

Money – Military Retirement

Carrying forward with our conversation regarding how much money is the Military Retirement worth.  Some people will say there is no way my retirement for an E7 is worth millions.  Well, much like the stock market, how much your retirement is worth changes all the time.  Look at bonds. If you purchased a 5 year bond for $1,000 giving you 3% per year, and the next day interest rates for that 5 year bonds goes to 10%. Your bond would lose a lot of value maybe in half.   Meaning your $1,000 bond might only be worth $500 (if you tried to sell it).  At maturity of course your bond would still be worth the $1,000.

This was a real issue when working at Fidelity.  People are used to buying a CD and not seeing the CD value change with interest rates.  The value has changed, but the banks buffered this change with payment penalties.  Your retirement money and your $22,200 per year could technically be worth $2,220,000 in today’s interest rates.  If rates goes to 10% then your annuity is really worth only $22,200/.1 = $222,000. Regardless of how much your retirement money is worth, you do not have access to it.  It is a fixed amount with COLA increases.

Many other great benefits to retiring in the military exist. You have base access to go bowling, watch movies, grocery shop, and purchase gas at highly competitive rates. You have access to repair garages and healthcare to name a few areas.  How much is all this worth?  I would say at least $10,000 extra per year.

There is another blog that talks about this…

As military member you still pay into social security.  If the time comes that you can tap into this income, you could receive an extra 10-20k per year. How much is this worth? Again, it depends on how much current fixed rates are going for. In this low interest environment $10k per year is worth around $1,000,000 @ 1% interest rates (less taxes).

This is why it is critical to have the skills of calculating percentages. When I was working at Fidelity I had someone call me wanting some information about their account.  I noticed that they had a little over $1,000,000 sitting in what Fidelity calls your core account.  This is where money is parked until it goes into an investment such as CD, bonds, mutual funds, options, or stocks. The core account that he had his money in was called FCASH and was earning the customer 0.1%. This means he was earning $1,000 per year and being taxed on this $1,000.  I offered to change his core account from FCASH to a tax free money market that was earning 1.24% at the time. The customer would have received $12,400 tax free for the year. That is 12 times or 1240% greater return on their investment. The customer said, no thanks and hung up.

Folks the goal of an investment account is to make money, and I was offering a risk free way to make more money for the customer.  The customer said no.  I obviously didn’t explain myself very well, but hey in the end it’s your money, and you are free to do whatever you want with it even if it means making a lot less.

Monday, May 14, 2012

Mutual funds...the destroyer of wealth (2)

In my last article I talked a little bit about mutual funds.  I want to be more specific to why they destroy your wealth.

First question to ask...would you send your paycheck to a "mortgage fund" and have them pay your mortgage for a small fee?  What would a mortgage fund do for you?  Take care of your real estate investment of course!  They would pay your mortgage bill by deducting from your paycheck every month.  They would pay your property taxes, and insurance on your house.  They would make sure you got the best interest rates at any given time.  They would charge you a 5% sales fee on all mortgage payments plus and annual fee (accrued daily) of 1% of your total mortgage payments.

Sounds like a great deal right?

Here is some more details on how this would work:

Say you have a $1000 monthly mortgage ($12,000 per year including taxes and insurance).

The mortgage fund would charge you 5% each month or $50 a month ($600 annual), and then only $120 per year management fee.  I'm surprised that everyone doesn't have a mortgage fund.

Fortunately no such industry exists...at least I hope not.  However, this is essentially what many people are doing with their retirement.  At least with the mortgage fund, you wouldn't be taking any additional losses or get taxed on losing money.  Unlike with mutual funds.

This is why mutual funds are, and will always be destroyers of wealth.  If you can pay your mortgage, or pay your rent...then you can handle learning how to invest.  It will take time, and you will need to do reading.  Some work is involved, but it isn't like putting a new roof on your house.  You may get a paper cut if you aren't careful.  However, trust me...learning about investing is much easier than taking the CPA exam.  Most of investing can be learned by a 5th grader.

Legendary mutual fund manager Peter Lynch once said, “Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.”

If you work for the government, then I know you made it through fifth grade math.  If you forgot how fun it is to learn new things...start by going to my recommended reading page.  Let your millionaire journey begin.  Pick up that first book today!

Sunday, May 13, 2012

Money - Mutual Funds destroyers of wealth

My experience with mutual funds ranges from bad to horrible.  I am not a big fan of them.  I personally feel they are a destroyer of wealth, and creativity of the American people. Why create a new business, or invest in your local community when you can just send your money to the Wall Street casino and get returns of 10% or more?

Some jobs create negative value...and this is one of them. 

I literally cringe every time I have prepared taxes and see mutual funds.  It gives me the heebie-jeebies, and I start to break out in hives.  Seriously, I have heard more horror stories than good ones.   I’m certain I would hear many more horror stories, but people do not tend to talk about how much money they lost or didn't make.  Probably due to embarrassment.  When investing in mutual funds you gain about zero financial knowledge. Your fund manager might have gotten smarter at your expense.  Your fund manager just lost 30% for your account…oops…I guess that didn’t work out too well.  On the brighter side...at least your fund manager still got paid.

I’m not positive, but I have a hunch that a certain mutual fund broker is taking advantage of the military in ways that I find are unethical.  I will not name the company, but I will say that I believe this taking place.  Same thing with those loan companies that give you money before payday.  If you are going to a company to get money before you get your paycheck...you need help.  This is no way to live.  The military offers ways to get money without the huge interest rates and fees.  Get the help you need.  Do not be ashamed to talk to your supervisor.

When it comes to mutual funds...almost all the people you talk to up front are sales people.  Some of them are not financially smart.  None of them will actually do any trading in your account typically unless it is selling one fund for another.  Mutual funds nothing more than a basket of stocks and/or bonds.  Sometimes a mutual fund would buy or sell options, but the strategy has to be in the prospectus.  

A mutual fund is nothing more than a vehicle for many people to collectively pay for fund managers, analysts, traders and others to purchase stocks and/or bonds for the fund.  In my opinion, an index fund can do the same thing with much less cost, human error risk, and typically has lower turnover.  Turnover is the percentage of stocks that have been bought and sold over a period of time.  High turnover typically means the manager is trading several stocks each year.  This can result in higher management fees, can force taxes on the fund holder and could mean all sorts of problems.

Something I have noticed is many military members are purchasing loaded mutual funds.  In my opinion you should never purchase a loaded mutual fund. This means you are paying for your sales person's vacation.  It is a sales tax that goes to the broker.  This plus a high management fees of 1% or more can sometimes gets assessed!  This is financially damaging. You can get Warren Buffett one of the greatest investors of all time to manage your money.  He only charges his shareholders $100,000 per year for his salary.  Unlike mutual funds...Buffett actually owns companies.  He does have shares in publicly traded companies, but the majority of the money comes from the companies he owns.  I would guess that most mutual fund managers make more than this per year.  Do some research and find out!



Saturday, May 12, 2012

Investing is like raising children

People love their children.  Society talks about "investing" in our children or "children are our future".  Especially when a school levy needs to be passed.  More recently with the whole debt problem.  People talk about our children and grandchildren won't have the same opportunities as we had...if XYZ candidate gets elected.

I have heard time and time again that people love investing in their kids.  They spend time with them, teach them new things, help them grow and pay for their education.  Many people would consider our children an investment.  Others consider them a liability.  I suppose it all depends on how you raise your kids.

My question is then...how come when it comes to investing to make money it shouldn't be the same way?  The idea that it takes time, learning new things, management, and money to grow your investment seems rather silly.  All these elements are equally important.  Most of us would rather raise our own kids, than have some stranger raise our kids.  However, when it comes to investing...many people let others do that work for them.

I wrote about this in my previous article trading vs. investing.  Most "investments" aren't even investments at all, but rather a trading activity.  This is regardless of how long you keep the "investment".  After all, most people who invest tend to think of the stock market.  The only element of the investment process is dumping money in some fund or stock.

The stock market is primarily a secondary market.  Meaning the initial investment has already been made.  The company gets no money from you.  All you are doing is buying from another shareholder.  The company had been grown, managed, and eventually marketed to the public.  The people who did this are the ones who got rich.  Can anyone do this?  It is possible for anyone to start their own company and take it public.  However, it does take time, money, management, business skills, knowledge and leadership.  The great thing about business is that you don't even have to do it by yourself!

I suppose if you hate people...or think everyone is ignorant and stupid...business is probably not right for you.  If you aren't willing to learn or share your knowledge with others...then forget it.  Business people need to be open minded, and realize that they don't know very much.  Some of the most successful business people are teachers.  Not your government teachers...these are business leaders.

Unlike in school where you get in trouble for using the answers from the smartest kid in the class.  In business...it is encouraged to have the smartest people you can afford to help you out.  Sometimes you can even get those smart people to work for free.  This is called a partnership, or you could have several people become major stakeholders and form a small company.  No longer do you have to memorize stupid formulas or definitions...you can just Google it.

Unfortunately for some reason it is frowned on in academia to have others help out.  With the exception of group projects.  People loathe group projects.  I loved them...it was a great opportunity to do more work in less time.  Plus you get to meet new people.  Why don't people like doing group projects?  Probably because someone gets stuck on a team where someone doesn't deliver.  I've had this happen only one time, and it really didn't matter too much in the end.  I think perhaps the reason why group projects go so poorly is because people don't take the time to get to know each others strengths and weaknesses.  The focus typically is on passing the class and working on whatever the "team" assigned you to do.

In my opinion college is all about networking.  If you built the right relationships with people at the university...surely you could start a business in your dorm room and launch a business.  Many others have done this.  I wish I would have done that my freshman year instead of playing video games.  I just didn't know any better.

The same is true for those in the military.  You might have to be a little more tactful in your approach, but could be a great opportunity to learn.  One thing to look for is people who aren't quite like yourself.  The old saying...a bird of a feather flock together.  In business, that doesn't help you out very much.  Diversity is much more important and necessary.  You can run into other problems like personality conflict problems.  Regardless of these problems...the most important aspect of a team is trust.  If you cannot trust each other, then it is game over.  The good thing about trust is typically it isn't earned.  I would say that for most people...trust is lost.  Once trust is lost it is nearly impossible to get back.

Friday, May 11, 2012

CPA - Regulation exam

I took my second installment of the CPA exam.  If it weren't for the free burger I received from Red Robin for my birthday, and my friend Eric helping me aerate my lawn...I'd be feeling pretty lousy.  I feel like I am not prepared enough for the test.

Nothing like a mentally and physically exhausting day.  My friend Eric is helping me make my lawn look like Augusta National.  He's a golf pro and knows his grass, and how to play golf.  I played golf in high school, but the only reason why I made the team is because 6 people went to the tryouts.  My swing is terrible because my dad taught me to hit lefty for baseball.  Hitting left handed in baseball has several advantages.  Easier to hit off right handed pitchers, and you are closer to first base.  Plus it is easier to hit to right field where many coaches stick their worst fielders.  However, when I played floor hockey...I always hit right handed.  I think that I'm just not fit to play the sport, and it is too expensive

I'd like to think that I passed this exam, however I don't feel like I did that well.  I've read and heard others say that they felt terrible after they finished and then passed.  The exam is a mystery to me.  I've taken standardize tests before like the ACT, insurance exam, Series 63 and Series 7.  I knew I did well and the results reflected this.  On the ACT, I knew that I did better the second time, but not much better.  It wasn't like I studied.

I've already told my friends that when I pass the exam I will be throwing a Billy Madison type party.  I sure hope that I pass sooner rather than later, because I need a serious vacation.  To those who have their CPA, I have a new level of respect for those who completed it.  The same goes to lawyers who have to pass the bar exam, doctors who have to pass the United States Medical Licensing Examination (USMLE), mechanics who need to be Automobile Service Excellence (ASE) certified, IT professionals who take the Cisco Certified Internetwork Expert (CCIE) and so forth.


I never liked taking tests in school, but these tests are far worse than anything I've ever had in school.


Thursday, May 10, 2012

Money – Who are you trying to impress?

Being a part of the world’s best military is impressive regardless of your rank and job. Not everyone is disciplined enough, tough enough, or physically able to make it.  Everyone who works for the DoD has a purpose and is important to the National Security of this great nation.  For those who aren’t in the military, and whether you are a citizen, or resident you are important. American’s number one asset are its people. An old Chinese Proverb says:

If you want 1 year of prosperity, grow grain.
If you want 10 years of prosperity, grow trees.
If you want 100 years of prosperity, grow people.

As Americans we should never forget this.  You do not need to do anything else in your life to be impressive.  In my cube at my office one of my coworkers gave me a great gift.  Best of all it was free because someone threw it in a dumpster. It’s the seal of the Army saying this we’ll defend.  Karin, one of my co-workers, who gave it to me…understands the meaning of value.

I’m a married man…and as a married man I really shouldn’t be going out of my way to impress others outside of my family.  However, many of us do this all the time even if we do not intend to do it.  If you are in the business of impressing people, such as show business, that is an exception.  In life there is a lot of noise. Tons of marketing is going on around you telling you what to buy, and how it will make you feel.  Beer commercials say…drink me and you’ll be cool, have fun, and have hot chicks want to dance with you.  I'm not sure where the appeal is for women, but perhaps I'm in a minority.  Some car commercials might say…look at me, I’m rich and classy.  Before you make any purchases ask yourself this question.  Who am I trying to impress?  If it is some random stranger that you think you want to meet, forget it.

If you smoke cigars or cigarettes I ask, who are you trying to impress?  Certainly not your kids or yourself. 

In the military and practically all government workers...we can all find out how much each other is making.  I think this is a great learning opportunity.  I’m not a big fan of secrets when it comes to money.  I have no problem showing my tax returns to people.  How else can you learn?

So my question is…why do some E3 military members drive a Dodge Neon, and another E3 is driving a BMW?  Doesn’t make a whole lot of sense to me.  Even if your parents are rich and wealthy...it can send the wrong signals.

Which brings me to a story about a guy who owned a janitorial service.  This guy had about 100 janitors working for him.  He paid them fair wages and they did good work for the company.  One day the board of directors were so pleased with how well the owner/operator ran the company that they wanted to do something nice for his 60th birthday.  They decided to buy him a brand new Bentley.  After all he was driving a used F-150, and they thought he could use an upgrade.  To show everyone how well he has done.

The owner was very angry and refused the gift.  He said, “Do you want to ruin my business?  My workers trust me.  They work hard for me.  To pull up in a fancy car like that would signal to my workers that I have been taking advantage of them.  Even if it wasn’t true, perception is reality.”

Let this be a lesson to all of you.  Your actions especially your buying decisions can lead to the wrong impression.  Driving a Ferrari while living in a trailer park can give mixed signals to many different people.  Cops might think you are a drug dealer.  Thieves think you have money.  Friends want you to take them out all the time thinking you have money.  The opposite sex might think the same. The last thing I ever wanted was my spouse to say the only reason why I dated you was because I saw your car an thought you had money.

Wednesday, May 9, 2012

Being Average

I talk quite a bit about finance and investing every day.  Not everyone I talk to always sees eye to eye on everything I discuss.  This is good because it helps me argue my position.  If you have a hard time arguing something you believe in...you might want to either do more research, or perhaps alter your thinking.

When it comes to finance something that irritates me is what I call...solid investing advice for the average person.  Average advice such as maxing out your 401k, TSP or Roth IRA and investing in some major index like the S&P 500, DJIA, or Total Market Index.  Investing in a 529 plan to save money for your kids college.  Wanting to be a military millionaire isn’t about being average. Let’s face it…average sucks, and below average can be devastating. No guy says…boy I wish I can be average height when I grow up.  No one says...someday I hope my kids have an average IQ.  Being born or living in America already probably makes you above average in many ways.  Our standard of living is certainly above average compared to many countries. 
 

You didn’t join the world’s greatest military in the world to be average.  You hopefully joined to help become something you might not be able to otherwise.  I would have never been able to go to school for free if I hadn’t joined the military.  Getting a 17 on my ACT certainly wasn't going to win any academic achievement awards.  I did retest and later got a 21 on my ACT...the lower score was due to...shall we say technical difficulties.

For some reason being average is acceptable.  For military or civilian millionaires this is not acceptable.  Strive to be the best. To do this…it does require extra effort.  I heard somewhere that people plan more for a Halloween party than they do for their retirement.  I believe this to be a true statement.  So, if you have spent more time planning than that...you are already above average.

This brings me to quick advice.  Quick advice seems to be the average advice given to a broad range of people.  Whether or not these people who follow such advice do well is another story.  We just do not know.  I would bet that this advice has failed miserably.  Had it worked, I feel that many baby boomers would have already left the work place.  Instead, a lot of them are working much longer than they had planned.  Is it their fault?  I don't think so.  Lots of things changed in the last 100 years.  We are not creatures of change...we try to avoid change.  Change makes people uncomfortable.

I am hoping that I will never fall into the category of giving out average advice to anyone.  Such advice can be found anywhere and in my opinion adds little to no value. The average
American has $10,700 in credit card debt. You do not want to be average, or normal in this category.  Strive for excellence...but realize setbacks will occur.  I've had my share of setbacks.  I had one last week when I didn't pass my CPA test.  I felt like quitting...but deep down I knew that wouldn't be acceptable.

When I joined the Army, the last thing I wanted to happen was to come home not being able to make it through basic training.  I know there were several people that didn't make it.  I felt bad for them.  One woman had tried 3 times get get through basic training.  She was in her early thirties and was running out of time to finish.  Each time she had some sort of physical injury.  To her...this was her opportunity to get out of a terrible situation.  I hope that she eventually made it through.

Life is about the journey.  Much like blogging about finance...you aren't going to find all your answers in one article.  You might find, a specific answer...but certainly not all of them.  

One of my favorite TV series was the show LOST.  I heard great things about the show when it was being aired.  I opted to wait and watched it all on Netflix.  A lot of people were disappointed about the ending.  However...the ending in real life isn't that great either.  We all die in the end.  If you are religious and believe in an afterlife...perhaps a new journey will begin.  So...make the most of the life you have today.  Enjoy the journey that is to unfold...and most importantly...leave your comments below.

Tuesday, May 8, 2012

CPA Exam - BEC results

If you ever wondered what it looks like after you get the results back from a CPA exam...look no further!  I have posted them below.

Something that I am happy about with is my written communication part.  I was a tad nervous that it was the cause of my failure.  I was wrong.  I am glad that I did strongly in the Economic Concepts part.  I guess that economics minor really paid off.

After learning more about the CPA exam, I'm not too upset that I didn't pass this section.  Many people have trouble with BEC.  Besides...coming from someone who could barely read in the 7th grade, I've come a long way.

I was at a party at my friend's house and there was an older gentleman who owned a CPA firm for 25 years.  He said he has 11 employees, and enjoys the work.  He asked me if I knew what CPA stood for.  I told him Certified Public Accountant...he said, "Can't Pass Again."

I read somewhere that less than 20% of all candidates pass all 4 sections on the first time.  Well, I already knew that I wasn't in the top 20% academically.  So, it was inevitable that I would fail at least one section if not more.  Failing a test is kinda like getting rejected for a date.  If you ask out enough people, and aren't afraid of rejection...eventually someone will say yes.

When I was younger my friend Braden and I would go to King's Island during summer breaks.  We would always see some hot girl with a less than attractive guy.  Braden would ask...how did he get to go out with that hot girl?  I told him...probably because he was the only person not afraid to ask her out.  Hot girls can be intimidating to many guys.  I remember a few years ago, an attractive co-worker of mine told me she has trouble with guys never asking her out.  She said no one ever asks her out.  She wasn't unintelligent either.  I cannot remember if I told her that guys were probably intimidated by her.  She did eventually get married. 

If you fear rejection...you'll miss out on some great opportunities.  Keep that in mind.

Blog Milestone

This blog just hit a new milestone.  75 articles written!  It seems like just yesterday that I started doing my daily writing.  Remember...you can still comment on any of the past articles.  I will reply to anyone who leaves a comment.

If you have any areas of interest, or topics that you enjoy more than others...send me an e-mail or leave a comment below.

As always...thanks for reading!

Monday, May 7, 2012

Hobbies - Backyard farming


The other day I was outside spending time with of my favorite hobbies…farming.  I never knew I had a passion for farming until I got a job at Fidelity Investments and moved to Kentucky.  Farming is very American, and can be an easy hobby to get into.  Growing up in the suburbs farming seems to have a negative image for some reason.
Couple of fresh eggs from my farm
Laws are put in place to discourage you from raising a few pigs, a couple lambs, goats or few chickens in your backyard.  However, there are no restrictions on having 8 barking dogs, pit bulls that bite people’s ears off or 100 cats.  You won't see my chickens pooping in your front yard or scratching up your backyard.  You won't see them attacking small children, or attacking you while you are out for a jog.  Never are the cops called for domestic abuse.  Why?  Because chickens are good people.

Personally, I'd rather have a pet sheep that mows my lawn.  I don't like those noisy lawnmowers.  They cost a lot of money, it is truly a waste of time cutting grass.  People might say...oh but I want my kids to play in the backyard.  Do kids play in the backyard anymore?  No, they are inside watching TV or playing video games on their iPad or iPhone.  My kids do play in the backyard.  They chase the chickens around, collect the eggs, play on the playground, and jump on the trampoline.

I believe people are trained to be ignorant.  People don't even know where their food is coming from.  I met one lady that didn't even know vegetables came out of the ground and had dirt on them.  I think farming has a negative view in people's minds.  I feel farmers are categorized with smokers, drug dealers, beggars and blue collar workers like mechanics.  Mechanics?  Why are they on there?

I know people...if you are a blue collar worker like a mechanic, and have several cars in your driveway...people don't like that.  It is looked down on.  Why?  To many people they want every house to look a certain way.  Cars should be in the garage.  No weeds in the lawn and grass needs to be cut twice a week.  A nice lawn and house is important.  It is a status symbol.  Forget raising a good family that is diverse, and teaching them skills that will last a life time.  No, kids should be put in their place...just like those beggars...sight unseen (This is sarcasm).  You can't go to a party with your kids right?  If you bring kids to an "adult" only party...shame on you. All of this really needs to stop...the hate, arrogance and egotistical mindset.

This is why Home Owners Associations have become so popular.  A place where everyone's yard will look a certain way, and NO privacy fences...because that would prevent people from spying on you.  People like to look and see what you are doing in your backyard, and be envious of your new grill.  Envy is good for the economy.  Drives people to buy things they don't need or have the money for...in order to keep up with your neighbors (who you don't like).  Reminds me of reading about the Cold War.  How did America win?  We out spent the USSR.  Perhaps that is the goal...see who goes bankrupt first...then finally you can get rid of those neighbors you don't like.

I heard on the radio the DJ was making fun of the "People of Wal-Mart".  You know what?  They don't want to be like that either.  They are nothing more than a product of their environment.  The great movie from the 80s...Trading Places talked about this.  Given the chance and training...anyone in America can be successful.  However, those things probably rarely ever happen.  Or do they?  Except perhaps in sports, and more importantly...the Military.  I think the U.S. Military could list countless success stories from rags to riches.  However, for some reason I do not think it is covered.  Probably because it isn't negative news.

Some American citizens don’t want people to be productive, independent, self-sufficient.  The problems we face in this country today is caused by our "modern" way of life.  It is not sustainable.  Instead of making small changes, we prefer disaster.  Why?  Disaster makes certain people very wealthy and ignorance fuels the fire.

Getting back on track...having pets can be an expensive hobby.  According to the Investopedia article pets on average have the following expenses per year:
Large Dog – $1,300 food and $356 medical expenses
Cat – $208 food and $190 medical expenses
Over a 10 year life this means you would shell out about $16,560 for a large dog and $3,980 for a cat.

Typically pets such as dogs and cats produce zero income, and thus can potentially be a large liability.  Being the type of person who doesn’t like liabilities, I have four pet chickens.  

Like most pets, I received these chickens for free.  I was sleeping one Saturday morning and my wife and kids went to Korean church.  I was awoken by a strange chirping sound as my daughter yells excitedly, “Daddy Daddy, guess what we got?  Chickens!”
Yes, 4 cute little chickens of all different types.  I had read several books on chickens when I lived in Kentucky.  It seemed to be a very profitable business for many farmers.  So, I wasn’t too upset.  However, of course my wife didn’t have any food.  I’m off to the local tractor supply store.  Chicken food costs about $15 for a large bag and lasts about 2 months initially.

The great thing about our chickens is they are very friendly and want to be petted.  Best of all they eat most of our food scraps that we don’t eat.  They keep the bugs away like ticks, mosquitoes, beetles, etc.  I'm not certain...but I think I found a new solution to getting rid of head lice. 

They lay about an egg a day during the winter time here in Ohio.  One of them lays a green egg.  I believe is an Easter Egger chicken.

The economics part of this is the following:
I pay $30 for food that lasts about four months or more during the winter time and after they are mature.  Costs have gone down since they can forge more for their food.  I recently bought a bag for $15, and I think it will last four or five months.

They lay three large and one extra-large eggs per day.  This is 480 eggs or 40 dozen in 120 days.  Getting about $3 per dozen that means my economic benefit is $120 less $30 for food or $90 I save in food costs every four months.
These are conservative numbers…and I do hope my food costs do come down now that Spring is here.

Let us know of any hobbies you might enjoy or had in the past.  Or tell us a story when you were a kid that helped you make or save some money.  Maybe you bought and sold baseball cards, or garbage pail kid cards.  Input your comments!

Sunday, May 6, 2012

Asking the right person for advise


You would think it was obvious, but people ask the wrong people for advice all the time.  I’ve been a stockbroker, and I am a real estate investor.  I believe that I have a decent understanding of both markets, but I'm not an expert in any field.  I probably never will be.  Why?  It isn't the type of person that I am.  I like to learn new things and would rather have knowledge in many areas.  If I don't know something about a particular area...I would consult with an expert in that field.  Some people thrive on being an expert, however this isn't the type of person that I am.

I also know a good deal about bonds.  I spoke with a captain in the Air Force a few weeks ago and we talked about EE and I bonds as well as TIPS and Treasury notes.  He seemed excited about investing in them from what he told me about his risk tolerance and tax reduction he was looking for.  A week later he said he wasn’t sure about investing in bonds.  He said he spoke with his broker about these types of investments.  Of course, the broker didn’t like them, and managed to discourage him from purchasing them.

I told him that you wouldn’t talk to your stockbroker and ask whether buying an apartment building would be a good way to diversify would you?  If you did...they would probably tell you to invest in a Real Estate Investment Trust (REIT).  So, why are you talking to your stockbroker about Savings or Treasury bonds?  They cannot make money off you if you invest in them.

Remember who you are talking to about your investments.  Many brokers have a vested interest to steer you clear of anything that will reduce their assets.  That is right...their assets.  You gave up your assets as soon as you forked your money over to them.  Some brokerage firms are only interested in making themselves wealthy.  Sure they hope you don't lose money, but the broker's top priority is figure out a way to make sure you do not withdraw your money and move it somewhere else.  Smoke and mirrors is the name of the game when it comes to many of these sales people.

I’ve been studying for the CPA since late February.   I took an auditing course last year in preparation for taking the CPA.  In auditing, they drive home the importance of independence.  This holds true when looking for help with your investments.  Finding someone who is impartial can be a huge advantage, but they are very rare.  Which is why managing your own finances is a skill that is critical to becoming a Military or Civilian Millionaire.

After failing my first CPA exam by one point I needed to rethink why I am doing this.  Why am I wanting to get my CPA?  After all...this studying is taking time away from other things I would rather be doing.  My kids are going up so fast.  I really want to help my oldest daughter to play basketball better.  The weather is getting nicer, and we all enjoy going for a swim.  So, I wanted to be sure that getting my CPA is something that is important enough to obtain while putting aside some of the things possibly more important to me.

I decided that continuing the journey regardless of how horrible...must be completed.  In a previous article I talked about getting a CPA was a goal I set in high school.  But why?  Why put myself through this punishment when it isn't even required in my field of work?

I decided that getting my CPA would be important for my kids.  The knowledge that I can share with my kids and experiences that I am going through will help them in the future.  If they saw that dad quit, then I cannot argue with them if they wanted to do the same.  Having something this challenging is worth doing.

Sometime in the future I want to start a CPA firm.  Some people are counting on me to get this certification.  I think I can help create some jobs in the area, and more importantly it can be a family based business.  I would have a home office, and would charge less than my competitors.  Instead of investing in Wall Street, and can invest locally.  A large percentage of people would much rather work for themselves than someone else, but I think a major hurdle that people face is health care.

I'll end this article with one of my favorite quotes, "Remember that free advice...is sometimes the most expensive."