Stormy's Corner

Book Review: The Complete Guide to Offshore Money Havens

I don't usually blog about books I don't like but I thought I could save people some time - don't bother with The Complete Guide to Offshore Money Havens. I was in the library looking at finance books (like the rest of the world) and I ran across it. As I had a two year old with me (hanging out in the library is an excellent thing to do with a two year old on a cold rainy Sunday) I couldn't really peruse it well, but it had 3.5 stars on Amazon. I figured that meant the writing style was hard to read but the content might still be ok.

I spent half an hour on the book this evening and it was terrible. The main point I got? "Taxes are way too high, start a bank in the Bahamas, sell yourself insurance and get deposits from your friends." Granted I didn't really read it but I read the first few pages and skimmed the rest and what I read was ... biased, wrong, and lacking any background explanation. You've been warned.

Now if anybody knows of a good book that explains international banking and finance ... I'm still looking.

How much allowance did you get?

There's an interesting blog post over on freemoneyfinance that is asking two serious financial questions:

• How much did you get for an allowance as a kid?
• How much did the tooth fairy leave you?

I answered:

I got $1/week allowance starting around first grade and $1/tooth from the tooth fairy. 

My seven year old stepson gets $1/week at both houses and $1/tooth from the tooth fairy. I think the tooth fairy is being a bit cheap since she gave me a $1/tooth over 25 years ago!

What about you?

What's your credit card number mean?

I have two credit cards from the same bank and I noticed that they were almost all the same number.  That seemed strange to me since I got them at very different times. 

Turns out that you can tell a lot just from your credit card number.  For example, the first number tells you what type of company issued it: a bank, an airline or an oil company.  The first six numbers will tell you exactly which company issued it (if you had the master sheet of companies.)  You can read all about your credit card number in Anatomy of Credit Card Numbers. 

Have fun!

Do you live well?

I keep pointing out how cheap things are these days and how much we have.  Most people look at me like I'm crazy and then try to point out how expensive things are.   Really, you can eat out for an hour's worth of work at minimum wage.  Groceries are even cheaper, if you buy the right stuff.  You can buy a t-shirt at Old Navy for $5!  You can buy an entire outfit in very good condition at my local thrift store for less than $10.  Toys are cheap - we consider a lot of them "disposable."  Looks like the author of Our high, high standard of living would agree with me.

as late as 1970 the median single-family home  was still less than 1400 square feet (versus over 2200 now).

I have a personal recollection of the 1960s and 1970s (I graduated from high school in 1977). My dad was a college professor and probably made a pretty good income, but we never had a standard of living as high as lots of "poor" folks seem to have now: We never had air conditioning. We didn't get a second car until I was in high school. We didn't get a color TV until I'd gone away to college. We never took vacations overseas. Eating out was for special occasions.

The only problem I've encountered with living inexpensively these days is that it's hard to find a new, small home these days.  All the new homes in good locations are huge homes.  So most homes are expensive, but it's because they are huge, not because the cost of living has gone up drastically.  It has gone up, but in general, we all live very well.

Money is social debt

I saw an interesting way to think about money in Steve Pavlina's post The Abundance Mindset:

Remember that money is social debt.  The size of your bank account is a measure of how much society owes you for the value you’ve already contributed.

He's not saying money is the only type of social debt, he's just saying that it is social debt.  People pay for things they value.  So what do you do that people value enough to pay for?

Yet another unlucky lottery winner

This guy won $5 million dollars and is now living off social security!  His problem?  Bad investment advice.  It sounds like he might have a case although he probably should have gotten multiple opinions!  He was getting $98000 a year when an investment company convinced him to:

sell the future annual payments off to a private firm for an immediate lump sum - in his case, about $2 million - that he could roll into investments. He'd just live off the earnings and interest.

All these stories of lottery winners going broke almost makes you afraid to win the lottery!

Money is not Evil

Money is not evil.  Having money is not wrong.  Spending money is not wrong. 

Steve Olson has a great post about Why People Believe Money is the Root of all Evil - both Steve Olson and Steve Pavlina take that one step further and explain why if you think money is evil you will never have any.  Steve Olson's post has a great list of things he grew up hearing that implied having money was bad.  Here's the ones on his list that I also heard a lot:

• He’s filthy rich
• That house is a waste of space, can you imagine the heat bill
• Whadda ya think money grows on trees
• He’s got money to burn
• How much money does a person need?

All of those are negative comments and imply that having money is evil, but money enables you to do things.  It's very hard to save the world or even yourself if you don't have any money. 

So, earn the money, make sure it doesn't ruin you, use it wisely and accomplish your goals.  You can use money to find a cure for autism or to hang out on the beach for the rest of your life or make sure everybody in your town makes it to college.  Without money any of those will be hard to accomplish.  It's even easier to stay in shape, eat healthy and live a longer life if you have money.   

Passing on having money won't make you a better person, it will just give you one less tool to accomplish what you'd like to do in life.

Photo by Big-E-Mr-G.

Quote of the Day

"Spend at least as much time researching
a stock as you would choosing a refrigerator."
                                                - Peter Lynch

Cash or Charge? How to spend less money.

Spending cash does help you to spend less money than when you pay with credit.

Numerous personal finance experts claim that spending strictly cash will not only help keep you on a budget but will also help you spend less.  The problem I have is that I hate spending cash.  As a 11 year old I left $40 in a purse in McDonalds and ever since I've been terrified I'll lose the money!  (We went back and found the $40.)  Also, I love credit cards because you never have to worry about how much cash you have, you never have to go to an ATM, and everything you spend is automatically tracked for you in a nice computerized report.  (And I pay it off every month so using credit cards is not a financial penalty.)  But I recently decided to try again for a couple of reasons:

• I wanted to keep a budget and it's easier to stick a couple of hundred dollars in your wallet and say "this is it for the week" than it is to track all the money you spend on gas, eating out, groceries, the coke from the vending machine, etc.
• I think I'm over my fear of losing cash.  I realized a while back that losing the money in my wallet might make me upset but it wouldn't really devastate me.  ($40 to that 11 year old was a lot more than $200 is to me now.)
• I was curious ... would sticking to cash make me spend less?  Would I treat money differently?

So I've been doing this for about a month - every Friday I put a certain amount of cash in my wallet and that's it for the week.  If I buy gas with my credit card, I actually take that much cash out of my wallet and put it aside.  (Buying gas with my credit card is too convenient to give up.)  And it works.  I'm spending less money!  I'm not sure what I'm spending less on since I tend to track overall numbers not all the details but I don't feel like I'm depriving myself of anything.  (If I had to guess it's lunches by myself, snacks and impulse purchases.)  Here's some of the reasons I think I'm spending less:

• I'm very aware of what everything costs.  With my credit card that I don't pay much attention to what anything costs.  Thirty seconds after I pay I couldn't tell you what I just paid.  (I saw it, I made sure it made sense, and then I didn't bother to store the information in my memory.)  With cash I pay attention to what things cost and I remember what I spent.
• I make tradeoffs.  Since I can see how much is left in my budget I can say, "I'd better not eat lunch out if I want to go to sushi on Friday night."  Using credit cards I'd just do both.  (Note that giving out the lunch out if it's by myself isn't really giving anything up.  I just need to remember to grab leftovers at home in the morning - Frank always has lots of great leftovers in lunch size containers in the fridge.  See My Man's Man for more on that.  I haven't given up any lunches or going out with friends - those events are high on my priority list!)
• Another theory that I don't think applies to me is one from freemoneyfinance that says that if you keep $100 bills in your wallet you are less likely to spend them because you don't want to break them.  I use $100s simply because they take up less room but I don't think I'm any less likely to spend them than $20s.  But who knows, maybe that can be my next experiment.

What do you think?  Do you spend less when you spend cash?  If so, why?

Photo by velo_city.

How long until your money doubles?

I wrote about calculating appreciation so now you can figure out how much your money is worth in n number of years, but what if you want to know how long your money will take to double?  Since I don't know how to embed an online calculator here, you are going to need a spreadsheet (use this one) or calculator unless you can do log's in your head.

n = ln(2) / ln(1+b)

where

n = number of years
b = interest (3% = .03)

and if you want to count for inflation

n = ln(2) / ln(1+b-f)

where

f = inflation (3% = .03)

Dad always said your money would double every 7 years.  Turns out he was figuring on 10% interest or appreciation.  At 7% your money will double every 10 years.  Add 3% inflation and it'll double every 18 years.

Here's a very simple Excel spreadsheet to run the calculations for you.