4 Books to Change Your Life

I was not a fan of self-help books in my early 20s, because me, like everyone, likes to think they don't need any help.  At some point you start to realize that you don't know everything, and that some of these people that have had great success have it for a reason.  Why not see what's going on in their heads?

1.  Rich Dad, Poor Dad (Robert Kiyosaki, Sharon Lechter, 2001)

This is an excellent book to help change your outlook on the world, and your finances.  Robert Kiyosaki does a good job keeping the reader engaged (even if it is by telling stories that seem a bit far-fetched.  Who remembers details like that from their childhood?) and makes the book hard to put down.   The book was originally written in 2001, so some of the things that are discussed are a little outdated, such as real estate (although investing in 2001 and selling in 2005 would have been a nice move.)  The generic concepts and principals are timeless and motivating.


2.  I Will Teach You to be Rich (Ramit Sethi, 2009)

This is a more recent book that was written by Ramit Sethi in 2009.  If you read two books, read Rich Dad, Poor Dad first, and then this one.  It's interesting to see what is being said before, and after the economy busted.  This book is also directed towards people that are in the 20-35 age demographic, since he focuses on the time value of money quite a bit.  He also uses a lot of humor, diagrams, charts, and bullet points to make it a surprisingly easy read, considering it's mostly about numbers.  Ramit claims that his book is a 6 week program, but this is no get rich quick scheme.  The idea of the book, is that it's program will get you on the right track in 6 weeks, not get you rich in 6 weeks.

3.  The Official Alibaba.com Success Guide (Brad and Debra Schepp, 2009)

Gone are the days where only huge corporations are able to import goods from other overseas.  Thanks to the Al Gore's "World Wide Web", international commerce is now available to everyone.  There are, however, still many risks with doing business in other countries, with people you have never met.  The Official Alibaba.com Guide does an excellent job of teaching you the ropes and minimizing risk.  I'm sure once you're done reading, you'll be ready to starting buy on Alibaba.com, and selling on Ebay.  Which brings me to...

4.  How to Buy, Sell, and Profit on Ebay (Adam Ginsberg, 2005)

Brick and Mortar stores are dead men walking (unless shipping costs go up).  It's only a matter of time before we never have to leave our houses again.  Online businesses such as Amazon and Ebay are increasing their sales dramatically every year, while the K-marts and Circuit Cities of the world are closing their doors.  The only thing keeping many of these store open now, are the generations that grew with Brick and Mortar, and aren't yet ready to trust the Internet yet.  If you ever want to start your own business, getting yourself acquainted with online commerce is a good start.

Get a start on your future

I'm not saying you should go out and start your own online business by sourcing products from China (you may end up like me, and wake up in at 3am with international trade logistics flying through your head).  Maybe you want to make changes, but don't know where to start.  These books are great to get your mind working, change your view on things, and hopefully motivate you into making some changes for the better.

5 Credit Card Benefits You Probably Didn't Know About

You could also call this article "5 things Mike didn't know about a few days ago".  Now that I know, I will funnel all my purchases through my credit card, and pay it off immediately.  Combined with the travel points, credit cards have never made this much sense.

1.  Extended Warranties.

If you purchased that item on your credit card, the credit card company will extend the manufacturer's warranty by up to one year.  Yes, that is correct.  So if you bought a blu-ray player 18 months ago, and it breaks, call your credit card company.  They will pay you the original cost of the item.  Stop paying for extended warranties you already have!

2.  Return protection up to 90 days.

If you try and return a product to the manufacturer, and they won't let you, your credit card company will refund the purchase price, minus shipping and handling (there are limits on how much they refund; mine was $300).   All you need to do is send the purchased item to your credit card company, along with providing the receipt and the record of charge on your credit card.

3.  Travel accident insurance of $100,000.

This insurance covers death or dismemberment insurance while traveling on common conveyance (plains, trains, automobiles, etc) when the entire fare was purchased on your credit card.  This is also extended to the cardholder's spouses, and dependant children under 23 years of age (good news for those "adults" still living in the basement).  Card members can designate their own beneficiary.  


4.  Purchase protection up to $1000.

This is insurance that protects purchases for 90 days after the date of purchase, as long as it was purchased with the card.  So if a flood destroys your blu-ray player after 58 days, it is likely covered by this insurance.

5.  Rental car insurance.

"Would you like to add insurance to your rental car?" might as well be "would you like me to charge you an extra $20 for no reason?".  This one many already knew about, but it's still worth writing here.  It's a great benefit.

Please be sure to check your card's specific benefits.  What I wrote above is common, but not absolute.  Now, the next time someone is bragging about how they don't own any credit cards (me, last month), you can explain why they are wrong.  The general consensus on credit cards is that they are evil, but they make a whole lot of sense for disciplined users. If your card doesn't have these benefits, I suggest finding one that does immediately.

Top 5 Financial Moves to Start the New Year

1.  Try a new income source

This is going to be different for everyone, as everyone has different schedules, situations, free time, etc.  Also, I don't mean you should go out and get a second job.  A second job is just a second rat race shift.  It won't stimulate your mind, and it won't make you happy.  Find something you're passionate about, or something you enjoy doing.  For example, I have been trying to sell extra items around the house on Ebay.  So far, I have absolutely enjoyed it.  I made some extra money for Christmas, and got rid of some stuff I don't need (like that exercise bike I used once in 2005).  It's also very interesting and funny to see what people will actually buy.  (I currently have huge inflatable dice listed that someone gave me as a joke gift.  I'll keep you posted...)  If you enjoy making things with your hands, try to make something that could sell at a profit.  If you enjoy writing, try starting a blog (yes, I love doing this).  Find something that isn't work to you, and see if you can turn it into income.  At the very least, you'll learn something, and you will have stimulated your mind.

2.  Open an Etrade account

I'll start this off by saying PLEASE START SMALL.  It's always dangerous to recommend   to inexperienced listeners that they should start trading stock.  My goal here is that you put some disposable income (not much to start) at stake.  If you know nothing about the market, this will force you to start paying attention. When you have a stake in something, it makes it much more interesting.  It's like horse racing.  I could care less about horse racing, unless I have money riding on it.  You'll start learning about markets, ETFs, dividends, capital gains, taxes, etc.  Now the market won't intimidate you anymore.  Don't be scared of losing either.  I lost a lot of money this year (which is why I don't blog about which stocks to buy), but that hasn't changed my mind one bit.  You don't weigh in, you don't wrestle.

3.  Open a Mint.com account

Mint.com links to all your bank accounts, credit cards, loans, mortgages, etc, to show you where you are spending your money, and what your current net worth is.  That sounds scary I'm sure, but thousands of people are using it, and it's been secure so far.

It's hard to patch a leak if you don't know where it is.  Mint.com will break all your expenses down, and show you how much you spend on groceries, eating out, bars, etc.  You'll likely be very surprised at how much you spend on certain things.  You can get started here.

4.  Opening a savings account with direct deposit

I wrote on an earlier post that your savings account should be in a different account than your checking.  This way you won't see it every time you check on your checking account online.  Hopefully that keeps you from using it to buy a new TV, upgrade to Iphone 48s, or bad investments like a autographed Tim Tebow jersey.  Set your direct deposit up so that about 5-10% of your paycheck goes into your savings, so that the money is like taxes.  What you never had, you won't miss.  Cover, and let simmer.

5.  Start a Roth IRA

I doubt most people realize how easy this is.  I'll tell you.  It's as easy as starting a new bank account online. When people want your business, they usually make the process very simple.  You can start a Roth IRA at most online stock trading sites, or at most banks.  To simplify a Roth IRA, think of it as a magic bucket that you can add a max of $5000 to each year (you can still add money under 2011 until 4/17/2012).  Once the money is in the magic bucket, you can buy stocks, bonds, mutual funds, and even a house if you have enough.  The magic is that all these things that you buy will grow TAX FREE.  That means that all your gains will not be taxed.  That includes capital gains, dividends, whatever.  The only stipulation is that you can't draw from it without penalties until you are 59.5 years old.  You can learn more on Roth IRAs here.

Of course, if you believe the world is ending in 2012, then disregard this post.  

Quitting Smoking and Not Saving For Retirement: New Year's Devotions

Imagine if you could travel into the future and see yourself 20-30 years from now.  Do you think it would change the way you live your life now?  If you saw yourself battling lung cancer, would you instantly quit smoking?  If you saw yourself with a long scar on your chest from bypass surgery, would you start to eating healthier?  If you saw yourself still working with no end in sight, would you start saving more now?  The problem with things like smoking and lack of saving for retirement is that the negative effects always seem so far away.  Your paycheck is right in front of you now; why would you want to put it away for 30 years?  Can you even imagine yourself at 60 years old?  Do you look at the 60 year old you as the actual you?  I believe that a big problem is that people consider their future selves as different people, and that your bad habits now will only effect that future you.  Or people will rely on the future you to do the hard work, such as going to the gym, or quitting smoking.  Let's try and get rid of that disconnect.

Stop waiting

I hate New Years Resolutions.  What percentage of people who make resolutions actually stick to them?  Fitness Centers must love January.  Thousands of people sign up to memberships and instantly feel better about themselves because they signed up.  Then they might workout a few times, then never cancel their membership because it's easier to get a home loan than to cancel a gym membership.  Resolutions are the Instant Gratification King.  It feels so good to draw up that list of self improvements in December, but when the moment of truth comes, most of us fall flat.  If you want to stop smoking, start TODAY.  If you want to work out more, start TODAY.  If you want to start saving for retirement, start TODAY.  Don't put it off and hope the you of the future has more will power than the you of the present.  You're the same person, so if you don't want to start saving today, you won't want to start tomorrow either.

Think about retirement ALL THE TIME

Do you remember hearing people tell you "start contributing to your 401K, and then forget about it".  I believe that you should think about retirement every single day.  I check to see if I can retire every single day.  That's no joke.  Shower, Coffee, Breakfast, Retirement Fund.  That's my morning ritual.  It helps me stay focused on my goal, keeps me up to date on the market info, and shortens the distance in my head to retirement.  If you can see the finish line in front of you, you'll run faster.  

Get used to your new income

The money that you set aside for retirement does not exist anymore. If you run into money problems, turning off your 401K is NOT an option.  Imagine that you just had you wage decrease.  It's so tempting turn it off every time you want to buy something new.  The problem is that one month turns into several, and suddenly it's been over year and you haven't saved at all.  If you're 25 years old, make $50,000/year, and contribute 10% of your income to a 401k, you should have $1.183 million by age 60 (assuming an 8% return).  If you wait until age 26 to start instead, you drop to $1.089M.  That's almost a 100k drop because of just one year.     Long story short (too late), turn on your 401k, and adjust your standard of living accordingly.  If you have trouble making ends meet, you either cut expenses, or get new income sources (legally of course).

Disconnected from future you

There is a disconnect in most people's mind about the you of the present, and the you of the future.  It's easy to forget that you are the same person, or that you'll ever get to 60 years old.  It's easy to tell yourself that something will will change between now and then, and you'll start saving, quit smoking, or win the lottery. Wake up.  Nothing is going to change until you change it.  Don't set a date, don't put it off. Turn on your company's 401K, start a Roth IRA account.  Do it right now!


Big thanks to Personal Finance Whiz for including me in his top posts of the week!

The New Car Mistake

Looking for a new family truckster?

When I see someone gloating about their new car, I struggle to share their excitement.  In fact, I usually feel anguish more than anything, which is quite a buzzkill for the new owner.  This is because most of the people I see buying new cars are buying something they can't afford, or they are buying far more than they need.  In this article, I'm going to do my best to talk you out of the new car mistake.

New car excitement lasts about 1-2 months, while the payments last for 60

For some (myself included), buying a new car is an impulse buy.  I made this mistake many years ago, and it took long time for that mistake to go away.  It was an emotional buy, mostly out of boredom.   What happens with emotional buys is you don't think about the long term effects, like what the total cost of the vehicle will be with interest payments.  This is why dealerships always talk about monthly payments instead of total cost.

A car is not an asset

Another mistake (or justification) people make is to call their car an asset.  Your car is an expense, therefore it is a liability.  If you are using your car to win cash prizes at underground drag race tournaments, then you can call it a liability.  Chances are, this is not the case.  So remember, the higher the price, the bigger the liability.  The more you pay each money for a car, the less you can put away into savings.

New job, or promotion is not an excuse

This one really makes me cringe, and I see it constantly.  Someone gets a new job or promotion, and immediately goes out and buys a new car.  Now you're locked into that payment for the next 60-72 months.  If that job or promotion doesn't work out, you're now stuck with the stress of making that payment.  Don't fall into the trap of matching your expenses to your income, unless of course you enjoy life in the rat race.  If you need to take a loan out for a car, keep the cost to a minimum.  Put the extra money in savings or invest it.  If you really want an expensive car, save you money, and wait until you can pay cash.

New cars not always a bad choice

I'm not saying a new car is always a bad idea, but it is when you buy more than need, or when it's unnecessary.  New car warranties and lack of maintenance issues can eliminate unexpected expenses, and the gas mileage continues to improve with every year.  As I always say, do your research, and find the car that makes the most sense for you.

Saving Money While on Vacation

Vacation can quickly turn into a money trap. Justifications will run rampant while you are on vacation. Just as exercising is replaced with late nights and hangovers, smart spending is replaced with the words "I'm on vacation". Those 3 words can justify anything while on vacation. Over-eating, under-sleeping, and especially over-spending. I'll be quick to point out that being thrifty can often be misunderstood. I'm not saying you should cut back on the things you love, especially on vacation, but there may be a way to keep the cost down, while still doing the things you love.

Hotels

Before you even leave, the hotel you stay at will play a big part of your spending. DO YOUR RESEARCH. Much like airline tickets, prices can vary daily, so monitor the prices for a few weeks to ensure you're getting the best deal. Check the location of the hotel. If you are close to attractions, you may be able to walk or take a free shuttle, and save yourself the price of a rental car, as well as parking. Make sure you have a kitchen in your room (we'll get to that later). Pay attention to user reviews. These always give an accurate description of what your sojourn experience will entail. I'm a huge fan of Hotels.com for it's ease of use, critic and user content, and their points system (book 10 nights, get one free). I prefer their points system over specific hotels point systems, because I am not limited to using one hotel chain.

Drinks and Meals

This can quickly turn into a vacation's biggest expense. You can easily fall into the trap of dining out for every meal, and ordering all your drinks, but this can become expensive very quickly. This does not mean you should eat sandwiches and granola bars the entire time, but pick and choose when to spend. Breakfast and lunch are two meals that can easily be handled cheaply. If your hotel room has a kitchen, then you should buy a few essentials like bread, milk, eggs, cereal/oats, lunch meat and snacks. Anytime you need to eat quick, or it doesn't need to be a special meal, just make your meal in your room. This way you can splurge on the big dinner guilt-free. If you do check a bag, you can take bottle of your favorite drink.  Another option is to buy at a local store. Avoid the bar, which is where resorts love to make their money.  You can save yourself a boatload of bar tabs if you bring your own alcohol.

Souvenirs

Two things bother me when people go on vacation. First, I see far too many people buying souvenirs they will never look at again, and taking too many pictures they will never look at again. Well, you may look at them when you force your friends, co-workers, and family to look at every single picture. Now pictures don't really cost you money, but it still bothers me. Relax, stop worrying about pictures. You may feel the need to take pictures because that's what you have always done, but honestly, how many do you really need? The same can be said for souvenirs. A few is fine, but don't go overboard. You don't need to bring an extra suitcase just for souvenirs. Not only are they unnecessary, but they are a hassle. Anything you buy, you will have to carry with you the rest of the day. You're on vacation for the experience, not to buy more stuff.  Keep it hassle-free, and save your money for your next trip.

Break the mold

I will say it many times, but being thrifty does not mean cutting out all the things you love to do. Thrifty means being smart with your money. If you love a fancy dinner on the beach, then by all means treat yourself. But don't eat out every meal when you don't need to. Don't buy unnecessary items that will never see the light of day again. Keep your trip simple. Focus on enjoying yourself and the things you love guilt-free.

How do your Saving Habits Rank vs. a Squirrel's?

You may think this is a joke but the stats say that squirrels are much smarter than us when it comes to saving up a 6 month emergency fund.  In fact, only 24% of Americans can match a squirrel's 6 month savings habit.  This tells me that humans don't have the willpower of a squirrel.  This is likely because without their savings, squirrels will die, and we can just rack up credit cards and loans, so we lack accountability.  So in order to save like a squirrel, we'll have to play some mind games.

Automatic transfers

This still remains one of the best methods to ensure you contribute to your savings every pay period.  People by nature have trouble letting go of their money, so it can be hard to manually transfer money into a savings account.  Most banks can set up an automatic transfer that puts money in your savings every month.  The only drawback is that you are seeing the money deducted from your checking every time.  The preferred method is to have your direct deposit set up so that part of every paycheck goes to your savings.  That way, much like taxes, you never see the money.  How much more annoying would taxes be if your gross pay was deposited into your account, and then the taxes were deducted?

Accessibility of accounts

Another problem people face when trying to save is that their accounts are too visible, and available. Every time you log into your checking account online, there's your savings account, just a few clicks away from becoming a new HD TV.  These "Keep the Change" auto transfers that banks do (every transaction is rounded up to the next dollar, and that change is put in savings) sound great in theory, but run into this problem of visibility. What I suggest here is using two different banks.  One bank for your everyday checking, and one that is used only for savings.  Don't even set up an online account for the savings account.  If you can't see it, you won't be tempted.

"I don't have enough money left over"

This is the excuse you hear the most.  People just don't have any money left over to save.  I will call you out on this.   There is no way that you can't spare ANY money for savings.  The problem is that you spend according to your income.  An easy fix for this is to set up the direct deposit transfer anyway.  You'll figure it out, because you'll have to.  I did this recently.  I set up a direct deposit at a much higher amount than I can afford, because it forces me to make it work.  I'll have to find places to cut expenses, hold back on unnecessary purchases, or find more places for additional income.

Squirrels are on to something

If humans were squirrels, we'd likely trade our stash of nuts in for the latest Iphone, and starve within a few weeks.  Back in the day, this is actually how things were.  If you ran out of money, you would starve.  Now, with credit cards, support systems, bailouts and loans, that accountability has vanished.  This is why many people don't ever worry about their savings.  I propose we go back to thinking like a squirrel.