Archive for mental

Do we benefit off the foolishness of other?

I just came upon a sudden realization:

The only reason we can buy low and sell high is that someone else out there is selling low and buying high.

Unless a company is actively putting more shares out there, there is a static number of shares to buy and sell from.  This means that in order to buy, there must be someone selling at the same price and in order to sell, there must be someone willing to buy it at the same price.

So, if we’re doing well in our investments, perhaps it’s because someone else isn’t doing quite as well and when we’re buying and selling at the wrong times based on emotions or bad information, then someone else is relishing their good luck.

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My FBP Account, and how I learned to have splurging as a goal

One of the biggest problems I had with saving was that I wanted lots of things.  I tried telling myself that “things” don’t matter when I have bigger future goals.  But, the problem with that was that to an early-20-something-year-old closet tech geek and wannabe artist is that the future just doesn’t seem quite real when compared to a new wacom tablet or gadgets for my Holga camera or a really cool usb microscope.

However, my relatively low income, my lofty savings goals, and an aversion to carrying a balance on my credit card instead left me with no way to feasibly buy anything just for fun and left me with the uneasy feeling like I was somehow missing out on my youth to focus on a very hazy future.  “What if I die tomorrow? or in 5 years and I really don’t need any of my retirement money!” is a popular refrain in my mind.

And whenever I did break down and splurge on something, the next month I would have to cut back even more savagely on my normal day-to-day spending just to make sure I paid off my credit card balance at the end of the month leaving me feeling even more deprived and upset.

I tried to focus on only free activities and told myself I didn’t really NEED that <insert really cool gadget> and it would just be cluttering up my limited space at home.  I tried not to watch TV or read magazines so I wouldn’t see advertisements.  But I would catch myself looking longingly at my friend’s spiffy mp3 player that they could strap onto their arm as we went to exercise together while I fiddled with my ancient CD player that skipped every time someone breathed too hard on it.  And then I contemplated how many functioning security video cameras they actually had at Circuit City and whether I could get away with filching something.

Obviously, this system was definitely not working.  I needed to be able to save for my goals but also I needed to have some fun once in a while and get to buy myself something just for the sake of its coolness.

So, I opened an ING sub-account three months ago and named it “my FBP account”.  FBP stands for Fun Big Purchase.  Every month I stick a little money in it.  Whenever I save up $300 or so, I plan to withdraw the money and splurge on something Fun and Big (meaning expensive).  While I’m waiting for the balance to reach that number, I like to plan out exactly what I want to purchase and this makes me excited since I know that eventually I will get it and I’ll actually have the money to buy it without cutting back on anything.

In fact, I have 5 different sets of things I want to purchase with that money and I really have a great time trying to prioritize them or trying to find the best prices for them.  And a great benefit of this plan is that since it takes me quite a few months to save up that amount in that account, it lets me really think about exactly what I want as opposed to short-term gadget lust so whatever I’ll end up getting is something that I’ll really treasure and want.

And…just maybe I’ll get that fancy new mp3 player eventually.  But for now, I just listen to the radio.

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How to save money: Stop driving like an idiot

As I drove to work in the morning, I saw a car shaking a little erratically as it suffered behind a car a bit too slow.  It switched into the other lane of a two lane road but again it was stymied by another slow car so impatient, it switched back almost clipping another car in the process.  Over and over again, the car switched  lanes back and forth and in the end, had ended up back where it had originally started.  Now, I’m all for switching lanes once or twice if I’m really stuck behind an incredibly slow vehicle but this was just getting ridiculous.  I wanted to pull that guy over myself and sit him down and tell him to just “Stop!”.  Besides, he could save a lot of money if he just had a little patience.  How?

Save on Gas

All this rapid acceleration and decceleration was just wasting a lot of gas which with it being $4.50 or more per gallon around here was a LOT of money.

Save on Auto Service

I’m not an automobile expert here but I’m sure that all this swerving back and forth has got to be tough on the tires.  Not to mention this guy may have been lucky not to get hit by another car this time but things are unpredictable and I’m sure he’s gotten or will get into a few accidents that could have been wholly preventable.  This means getting his car fixed over and over again when he didn’t have to.

Save on Auto Insurance

Speaking of accidents, even minor accidents when happening multiple times will make an insurance company take pause.  The insurance companies still want to make sure they have a profit in the end and if they’re always paying claims since most of the time, it’s this guy at fault, then they’re definitely going to raise his premiums.

Save on Medical Bills

Ok, if this guy gets in a car accident, he has a likely chance of getting hurt or at the minimum: whiplash.  Also, this guy’s rather impatient and even his car seemed a bit stressed.  Stress, whether it be from daily life or simply the fact that he has to pay more on gas or auto service or auto insurance, is definitely not good for one’s health in the long run (heart disease or high blood pressure to name a few).

This guy could potentially be paying hundreds of dollars more and all he gets in the end is that he arrived at work 5 minutes earlier than he could have.  Is it worth it?  That’s for him to decide.

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Are sales really sales? A tale of shoe shopping.

Payless is an incredibly tempting place to browse for someone who adores shoes as much as I do. The prices are great and very occasionally, I can find something that I really love. Payless often has their BOGO sale which is their “Buy one, get one half off” sale.

One time, I went with my sister to shop. She browsed the aisle looking for a pair of plain black flats while I whirled through the aisles pulling down boxes left and right. Eventually, she settled on a pair of shoes while I had found two pairs to my liking that I could wear to work for a total of three pairs of shoes. However, I realized they were having the BOGO sale on and I frantically combed the shelves for another pair of shoes to take advantage of the deal.

Until, suddenly I realized: Why am I trying to find another pair of shoes that I don’t need and that I don’t even like just to take advantage of a 1/2 off deal? Instead of saving money, that would just be spending money that I didn’t need to spend.

In fact, did I really need 2 more pairs of shoes when I could just buy one and get great use out of it?

So, I deliberated, shoved one pair of shoes back on the shelf and bought myself a pair of shoes and my sister a pair of shoes (1/2 off!!). I had a great new pair of shoes, my sister was happy, and I saved a bunch of money. All in all, quite happy.

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Everytime I receive my paycheck, the first thing that comes out of it is 10% for tithe. Then the rest is meant for various accounts and purchases.

Why do I do this?

Because it enables me to keep perspective on my money. Each time I write a check out for tithe, I realize yet again that my money isn’t in my own hands. Yes, I worked hard for it but it’s not just about me. God gave me this money too. My job pays me to do what I like to. I am in good health so that I can do my job. My family supports me in my sometimes crazy schedule. I have to be thankful.

So, in order to show my thanks, I give my money away. This way, my money can go toward helping others (oh, and a nice tax deduction of course but that’s not the main reason). It makes me feel good that my work can go toward others in more need than me.

So, I think tithe is a good thing. You don’t have to give it to a church. Give it to a charity, a foundation, or even just another person down on their luck. I believe that helping others will bless us a hundredfold in the long run.

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Defining Success

A very important thing while pursuing your financial goals is that you need to know when you’re successful. What is success anyways?

There’s a very good article written by Wise Bread about defining success.

Here’s an excerpt:

” When it comes to your life, what do you want? How does your money fit into that?

If you can’t answer these two questions, you won’t ever know when you’ve been successful. In fact, it might be worse than that: you might achive what you thought you wanted, or what all of your friends want, and suddenly realize that it doesn’t satisfy. In order to make sure you’re going the right direction for you, it’s important to figure out what you want from your life (to find your definition of “success”).”

See what you think.

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A Mental Habit of Frugality

From an early age, I’ve somehow understood that money was tight for my family and that it would always be that way.  I wasn’t deprived of anything I needed but I understood I couldn’t always have anything I wanted.

As I’ve observed my parents over the years, I’ve developed an automatic habit of frugality.  Growing up in mostly second-hand clothes, I can’t bring myself to buy a shirt over $10 or pants over $20.  When I buy groceries, I automatically calculate and compare the unit prices.  My arm reaches automatically for generic brands.  This is good in that I automatically save money.

However, this hurts me in many ways.   I may end up buying a lot more than I planned on simply because “they were on sale!!”.  Also, I purposely deprive myself of fun things because I can’t justify the cost.  However, this just ends up with me being miserable in the end.  I’ve had to teach myself to splurge on myself a little and try to lessen the overwhelming feelings of guilt. Mostly though, I end up buying crap stuff simply because it’s “cheaper” and suffer with constant breakdowns and mechanical failures.

I think that even if I become wealthy, it’ll be very difficult for me to break that mental habit that’s so ingrained in me.

Perhaps if frugality is difficult for you at this time, it’s good to force yourself to get into the habit enough so that it become natural.  However, make sure you’re not doing it simply for frugality’s sake.  It’s only worthwhile if you’re really saving for a goal or through necessity.

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Stock Regrets

I’ve made some good decisions on stock investing.  CEO is up more than 30% from when I bought it.  DELL is doing surprisingly well.

However, as I’m researching, I find that I missed on some good deals.  I should’ve bought Nintendo when I first started putting in money because the Wii sales actually is lasting a lot longer than I thought.  Instead of investing in a general international index ETF, I should have poured my money in a China ETF or an emerging markets ETF which are doing ridiculously well to the point that I can’t really afford it on my limited funds anymore. I really regret it but really, there’s no point in dwelling on regrets.

Mostly, I find that I shied away from amazing opportunities because I was afraid of the risk, afraid of making a wrong decision, afraid that at any second (as soon as I pour my money in) that the stocks will drop like a rock.   I must learn to trust my instincts more and give my intelligence more credit.

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Not being Dependent anymore

It was such a great day graduating from college until I was hit by reality.  Now, I don’t count as a dependent so not only do my parents not get to have me as a tax deduction, I myself am not exempt from tax withholding anymore.  I have to purchase health insurance, auto insurance, and AAA membership since I’m not covered under my parents anymore. I have to save up for graduate school since I promised my parents I’d pay for that myself.
In a few years, I’ll be looking to buy a car and then take on a mortgage, cable costs, estate taxes, and the cost of maintaining my own home.  I’ll get married so I’ll have to juggle wedding costs, joint accounts and the taxes that come with that.  I’ll have kids which will entail life insurance, 529 college savings plans, family vacations, and the various costs that come with child-rearing.  I want pets so pet food, veterinarian visits, and flea collars.

On top of this, I have to save for retirement and possibly have to care for my parents as they get older.

It’s definitely not like what I imagined when I was little dreaming about a successful career with a lot of money.  Sure I’ll finally be earning a decent salary once I find a great job, but it’ll be eaten away just as quickly.  I finally understand why sometimes it’s just hard to get on top of the finances but I figure if I instill good habits with myself now, it’ll be much easier down the line.

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Having Patience in Investments

I keep telling myself I’m a buy-and-hold kinda gal.  I try to buy stocks when I feel they are pretty low and I tell myself that I’m only selling when they’re decently high.  Or at least that’s the theory.

However, it’s nerve-wracking when a particular day was particularly bad for the market and all my stocks are down and it can get even worse when all my other stocks do well and just one of them is abysmal.  Then, I keep thinking to myself, should I sell it now and cut my losses when it could get any worse?

Or when a particular day comes when one of the companies are doing particularly well, jumping up beyond my expectations.  Then, I frantically ask myself whether I should sell it or will it keep going up?

I try to be emotionless about my investments but that’s the thing about personal finance: they’re deeply personal to me.  I feel like an anxious mother, exulting at the highs and worrying at the lows.  But, I keep telling myself to be patient and to be cool about it.  I keep telling myself to buy at the price I determine and the to sell at the price I also previously determined.

Though, I may wince a little when I sell a stock and it keeps going drastically higher or buy a stock whose price then drops like a rock, I keep trying to be patient.  In the end, I figure, I’m pretty bullish and the market will be fine in the end.

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