Well, it’s been a while since I’ve had the time to post a weekly recap, but I’m bringing it back today. Given the market conditions over the past few weeks, my job has become incredibly difficult, and the last thing I want to do when I get home is to read about, or talk about finance. But, I had some time at a remote location earlier this week which meant sitting in a hotel room by myself with only a few channels on TV, so I had some time to get caught up on everything and see what everyone is talking about these days.

And since tomorrow is going to be the biggest day for college football in many years, the last thing I’ll be thinking about tomorrow is finance or the economy. I need my Spartans to pull off something special and beat Penn State. Then, in a bittersweet turn of events, to clinch a Rose Bowl spot we need our sworn enemies, the Wolverines to upset Ohio State. I’m a bit torn, because I’d like to see the Buckeyes tear Michigan apart, but considering we haven’t been to the rose bowl since 1987, obviously that would be quite special. Of course, odds aren’t in your favor anyway when you need to beat one of the top teams in the nation, and you need one of the worst teams to upset another great team. But, it makes for an exciting Saturday!

Common Job Interview Questions -With unemployment on the rise, you might find yourself looking for a job in the near future. If it’s been a while since you’ve interviewed for a job, it can take a little time and practice to brush up your interview skills. Here are some common interview questions and how you should approach them.

Matt Furey: 101 Ways To Magnetize Money -Would you like your money to act like a magnet and pull in more money? That’s the first thing I visualized when I read the title of this post and book with the same name. Lazy Man reviews Matt Furey’s book to see whether or not it will help you make more money.

What is ROWE and How Does it Affect the Workplace? -What is ROWE? I had no idea, so I had to read this one. It was interesting to see that this business management strategy is used by Best Buy, and I hate that store more than anything. Maybe it’s because I know more about the products I’m buying than the people that work there and understand I don’t need $500 worth of Monster Cables to go with any audio/video product.

E-Trade Online Savings Account Opening Process -Have you thought about opening a savings account with an online bank, but was unsure about doing something like that online? Well, nickel gives a step-by-step outline of what this process is like with E-Trade, complete with pictures. This should give you a better idea of what to expect when opening your account.

Quick and Easy Ways to Start a Savings Plan Today -When times are tough and money is tight, saving money might seem impossible, but it’s during times like these that you need to have savings, and need to be disciplined. Frugal Dad has some great tips to help you get started with a savings plan today, and it won’t hurt that much.

Last Minute Gift Ideas and Shopping Tips For Holiday Procrastinators -I’m a big advocate of shopping early, mainly because I hate dealing with idiots on the road and at the mall. Unfortunately, I haven’t started any shopping yet! The clock is ticking, and the stores will only continue to get busier in the coming weeks. There are some good ideas on this list I can probably take advantage of to save me a headache or two.

Are You Ready to Lose Your Job? -Most people aren’t really “ready” to lose their job, but being mentally and physically prepared can make a job loss that much easier. If you know how a job loss will affect you, what benefits you’ll lose, what you’ll gain, and what your prospects are, you’ll be in a better position to get back on your feet.

100 Money Saving Tips for the Holiday Gifting Bonanza -Do you want to save money this holiday season? If so, this is probably the only post you’ll need. Jim has 100 great ways to save money, not only during the holidays, but at any time. It is quite a list!

Debt Reduction 101 - Beginner?s Guide To Debt Reduction -Are you trying to get out of debt but don’t know where to start? Don’t worry, we have NCN to the rescue. Here is a great beginner’s worksheet to help you start your quest to becoming debt free.

Transfer A Brokerage Account: How Much Does It Cost? -There are a lot of different brokerage options, and finding the best account with low fees is great, but it can come at a cost. Transferring out of an account often costs money. So, finding out what it will actually cost and help you determine whether or not it’s worth the move.

Five Things You Don?t Want to Hear From Your Financial Planner -This is a guest post by Jeff Rose, a CFP over on Moolanomy’s site. But here are 5 things you probably don’t want to hear your financial advisor tell you. Sadly, I’ve had to tell people all of these things quite a bit in the past few months. Of course, most people already know they need to do these things, but they just never admit it, or take action to fix it.

S&P 500 Down Nearly 50% in 2008 -I had to include at least one really depressing post. The S&P is down almost 50% this year. It sucks, I know. Be thankful you don’t have to work with clients who come to you for answers on a daily basis.

Friday Finance Findings for November 21st

How much of your money is in domestic stocks? What percentage of your portfolio is invested internationally?  If you’re like many average investors in the US the majority of your investments are in US companies.

Global Investing Seminar
I attended a seminar on global investing yesterday and it really made me think a little harder about our current exposure to international investments.  I had to keep in mind it was presented by a financial company that runs a global fund, so the point of the seminar was to reinforce the importance of international investing in the minds of current and potential investors.

However, they did cover some interesting statistics that apply no matter what investment vehicle you use to diversify overseas.  They fed us lunch so I didn’t get to write down all the statistics since I was busy feeding my face but I still remember the general concepts.

Global Growth Trends
One of the graphs was from a Morgan Stanley study that looked at the total value of US public companies compared to the total value of international companies.  The graphic showed the value in approximately 20 year time intervals: 1988, 2008, and 2030 projected. 

I wish I had the exact numbers but the overall trend showed a global economy that was dominated by American companies in 1988, maybe about 2/3 of the global corporate value was in the US,  but the estimates for 2030 approximated US companies making up only a quarter of corporate capital markets.

Of course the numbers aren’t exact but I think the trend is definitely accurate and that the US position as the world’s financial superpower is slipping.  While this may not be great news for us as consumers or workers, it does present an opportunity for us as investors.

Evaluating International Markets
The speaker worked for a global fund, his role is to fly around the world visiting and evaluating companies that the fund is considering putting money into. He walked us through his fund’s investment positions in the various global regions, explaining their reasoning behind being underweight in places like Great Britain and overweight in places like Taiwan and South Korea.  He definitely pointed to Asia as the region with highest potential for growth over the next two decades.

He gave some staggering statistics on the sheer size of the Chinese consumer and business market and the enormous potential for growth there.  He also commented on the enormous currency reserves the Chinese government has built up and all the money they need to spend on infrastructure.

However, the speaker went on to warn us that the Chinese markets are overpriced, in his opinion, due to a massive runup in the stocks of Chinese companies over the last few years.  He had the same caution for stocks in India, that the price earning (PE) valuations were higher than they wanted to pay.  His company is looking for opportunities in areas like Taiwan or South Korea where the PE ratios are much lower.

Risks of Investing Internationally
The truth is we live in a global economy and changes around the world can effect how US companies perform so even domestic investments are influenced to an extent by international markets.  However, if you decide to put your money in a foreign company your investment is suddenly influenced heavily by regional events, currency fluctuations, and the policies of the foreign government. 

If you’re investing in an emerging market where there is large amount of growth there’s also typically a lot of change both economically and politically that can potentially put your investment at risk. Although there are risks associated with global investing, in my opinion they are definitely worth the opportunity to benefit from the growth in economies around the world. 

You wouldn’t want to put all of your money into international companies, just make them a part of your investment portfolio.  Several years ago about 10% of our portfolio was in international funds when I increased it to around 15% and now I’m looking to raise the percentage even higher.  How much exposure you want to international markets is up to your situation but it’s definitely something you should at least look into.

How to Invest Internationally
So how can you put your money into companies overseas?  The easiest way is to buy an international ETF or mutual fund.  The approach I decided to take several years ago was to invest in multiple international funds.  I choose an option from my 401k, Dodge & Cox International Stock (DODFX), one from my wife’s 403b, American Century Intl Growth (TWIEX), and also opened a non-retirement account with Oakmark International (OAKIX).

Dodge & Cox International Stock has done the best for us. American Century Intl Growth has been decent but nowhere near the performance of the Dodge and Cox fund.

Oakmark International had been going gangbusters until last December when it took a big hit.  I had been debating between the Oakmark fund and the Vanguard Total International Stock Index Fund (VGTSX) back in early 2003. 

Our financial advisor recommended Vanguard but I went with Oakmark instead.  As the graph shows, I’d be wealthier if I’d have listened to her, I guess hindsight is 20/20.  The Total International Stock Index Fund is actually composed of investments in three other Vanguard international indexes:

• Vanguard European Stock Index Fund
• Vanguard Pacific Stock Index Fund
• Vanguard Emerging Markets Stock Index Fund

The fund is a simple way to gain exposure to a variety of markets all over the world.  There are many other international funds available so you have lots to choose from.

One other option I’m considering for investing overseas is opening an account with ETrade to take advantage of their online global trading.  This would be a different approach than the mutual fund route which would require more research and carry more risk.  It would allow me to invest directly in companies in Canada, France, Germany, Hong Kong, Japan and the United Kingdom.

International Investing Summary
Whatever approach you decide to take, I’d recommend at least reading up on the growth of economies outside our borders and how you can invest in them.  As I mentioned in the beginning, the long term trend is that international companies are growing to compose more and more of the investment options available to you and all the other investors in the world.  In order to diversify your portfolio and benefit from global growth consider taking a look at your international investment options.

Many small business owners reach a point in their career wherein they make the decision to reduce personal risk and maximize gains through the acquisition of their company. The process of selling one?s business involves a mix of strategically executed procedures which achieve the desired results without sacrificing confidentiality, risk management, mutually beneficial deal structure and optimum price.

In order to achieve effective results, business owners must (1) have a clear understanding of the metrics that govern their business, (2) realistic expectations of the marketplace and (3) a group of trusted advisors, comprised of accountants, attorneys and bankers, in place to provide guidance and structure to the acquisition process.

Steps To Prepare A Business For Acquisition

In order to maximize price and present an ideal picture of your business to the marketplace, key steps must be taken so that your business is properly developed and maintained. The financial and organizational structure of your company should be transparent to a buyer, so that he or she will be assured of the value and feel comfortable in assuming ownership.

Step1: Systematize and Document Your Business

The functions and procedures in your business should be concisely identified so that a buyer can clearly understand the chain of command and how results are achieved. Written agreements with vendors, customers and industry contacts can also bring substantial value to an acquisition. Documented agreements ensure that valuable relationships are concrete and will extend into the future. These assurances create confidence for the buyer and make the company more attractive in the marketplace.

Step 2: Maintain Organized Financial Data

Many business owners are heavily influenced by tax liability. The potential trap in focusing more attention on tax liability than profit performance is that it becomes difficult to prove the true profitability of the business to a buyer. Therefore, assuming greater tax liability in the short-term can result in increased value on the income statements. In addition, profit and loss reports should be generated and reviewed on a monthly basis, the company?s stock levels should be at full value and all capital expenditures should be clearly identified and booked on the balance sheets prior to an acquisition. [1]

Step 3: Maintain Accurate and Updated Corporate Documents

Due diligence is one of the most important elements of the sales process. Diligence items include corporate, legal and tax documents that define and validate the representations and warranties of a company. Business owners should be familiar with the issues and should attend to corporate maintenance on a quarterly basis.

1) Achieving realistic price expectations. A business has value to a buyer because of its anticipated future earnings and a demonstrated successful track record.[2] Businesses that show consistent growth, positive adjusted earnings and EBITDA and reliable financial projections are able to command high industry multiples and premium prices.

2) Accurately adjusting the net owner earnings. In order to accurately determine value, the balance sheet and income statements should be re-cast and items such as depreciation, owner?s salary and interest expenses can add-back significant value. The re-cast earnings will reflect the actual owner compensation in order to determine market value.[3]

3) Understanding deal structure. Sellers should be educated about possible alternatives for structuring a deal, such as earn-outs, non-compete agreements and long-term employment contracts. These items can add substantial value when combined with the negotiated purchase price. In addition, sellers need to be aware of how business liabilities, such as excess inventory and existing lines of credit, are assumed by the buyer and how liabilities are integrated into the final asking price.

4) Maintaining Confidentiality. Confidentiality is crucial in ensuring that existing employees and clients do not become aware of a potential transaction. If the sales process is not managed and the transaction is disclosed at the wrong time, key employees and valuable customer relationships could be sacrificed, thereby jeopardizing gross revenue if the sale is not ultimately consummated. Savvy buyers will use this as a tool to lower value.

5) Securing qualified buyers. A buyer?s material ability to consummate a transaction must be verified at the start of the sales process so that time and resources are not expended on inappropriate candidates.

6) Maintaining profits and growth during the sales process. Once your business has been introduced to the marketplace, it is crucial to continue to develop and maintain growth until the transaction is fully executed. It is the performance and productivity of the business that holds value in the eyes of a buyer. Therefore, a business that begins to drop-off in the months prior to a sale will incur difficulty in obtaining optimum price and qualified buyers.

7) Preparing proper due diligence. A thorough die diligence manual should be prepared in advance of bringing a business to market. Inaccurate or incomplete diligence materials can destroy buyer confidence and cause a deal to collapse. A seller must be able to defend the representations and warranties they assert during the sales process.[4]

8) Seeking professional guidance and consultation. Sellers should realize that it is nearly impossible to efficiently manage a transaction without the assistance of accountants, lawyers and bankers. These trusted advisors should work in tandem to help sellers achieve the desired results while limiting personal exposure and liability.

Last year while big lenders like Countrywide collapsed and Wall Street took a beating on mortgage-backed securities, smaller banks weathered the storm pretty well. These guys seemed pretty stodgy while the market was racing along, home values were zooming, and investors were chomping at the bit to jump into the latest negative-amortization mortgage structure. But slow and steady wins the race, as it turns out. Smaller banks wouldn't touch this stuff with a ten foot pole. They looked like luddites a couple of years ago, but they're looking pretty smart right now.

When I started this website I funded it with the backing of Partners Bank of Texas, a small Houston based private bank with assets of less than $200 million. Last year Partners was acquired by Texas based Sterling Bank. Sterling is somewhat larger than Partners - with assets of around $4 billion - but they're very small when compared to, say, Wells Fargo, which has assets of around $600 billion.

In the past I've relied on companies like USAA ($68 billion in assets) and Wells Fargo, but Sterling is my go-to bank now. USAA is the financial institution dedicated to serving current and former members of the military community, and I've been a member for over twenty years, starting when I was a cadet at the United States Military Academy. I still appreciate their great customer service (although some of their lending practices have annoyed me). But even though I have a military connection with USAA, at the end of the day I'm just a number. No one knows me there. They put my data into a computer and it spits out an answer.

But when I talk to Sterling, I'm sitting across the table from the guy who is gonna make the decision. And I like that. When I trying to get this website funded I spent almost a year jumping through hoops for the guys over at Bank of America ($1.7 trillion in assets) and the venture capitalists wanted me to sign away my first born. But at Partners (now Sterling) I got to sit across from someone and pitch my idea; and the woman who I talked to was the same person empowered to make the decision.

I'll still shop the big boys for the plain vanilla deals I'm considering. But when I'm looking at some more challenging opportunities in this crazy market - raw land and multi-family - my first stop is Sterling. Real estate investing is all about relationships, and smart investors know that their reputation can be one of their most valuable assets.

If you place a charge of $5,000 on your credit card and only make the minimum payment each month, the chart above shows you how long it will take you to finally pay it off and how much interest you’ll end up paying.

- Edwin, CashTheChecks.com

This is not a political blog, but perhaps I am a bit cranky after losing electricity and water for 5 days, so I will let this one slip by.

So here goes:

Image source: http://codenameblogtastica.blogspot.com/

…. he killed a helicopter with a car, and then he walked bare-foot on broken glass, and then he fired a few people, and then he suspended whatever that was going on and proceeded to Capitol Hill to beat the crap out of bad dudes and to rescue the economy.

Oh wait… it’s McClane not McCain you idiot. Oops! it’s probably the uncanny similarity between the looks of Mr. Willis and Mr. McClane Mr. McCain that confused me.

I don’t mean any disrespect, but I had to get this out because I actually had a dream of John McCain hanging “suspended” upside down in New York’s Central Park right above a huge pile of money (that looked like it was about $700 billion). I woke up a little scared and then realized that it’s because I read about David Blaine’s stunt before going to sleep last night - while I was being constantly bombarded by television commentary on McCain’s suspension of his campaign (or whatever - didn’t look much of a campaign anyways) and the $700 billion bailout.

You can imagine the kind of maverick-ish impact Mr. McClane Mr. McCain is having on me.

Anyways, with that out of the way, there is something else I need to say. It has recently come to my attention that some people don’t really know how many zeroes are there in a billion! That calls for a little bit of elaboration on the numbers you might hear in the next few months.

$700 billion = $700,000,000,000

300 million = 300,000,000 (as per Google search, the actual number is close to 301,139,947 - go figure what this number is)

Now, $700,000,000,000/300,000,000 = $2333.33 per person

As per 2006 tax figures, there were 135,660,228 tax returns filed.

Now, $700,000,000,000/135,660,228 = $5159.95 per tax return

Some other numbers to put things into perspective.

For the year 2007, AIG CEO’s (Martin Sullivan) monetary compensation was $13.9 million ($13.9 million = $13,900,000)

Earlier this year, most people I know received economic stimulus payments that ranged between $600 and $1200

It's a rhetorical question, I think.  Or, maybe not.  If I have already decided the answer, does that make it rhetorical.  Because here's the answer:  absolutely not.

Several months ago, I wrote a post about the wonder juice, Mona Vie.  It's a juice made with acai berry and other exotic sounding things that you couldn't possibly grow yourself.  You see, you would have to get the magic seeds from the depths of the Brazillian rain forest.  Ever wonder why the most healthy things in the world only grow in the far reaches of Brazillian rain forests and Himalayan mountain tops?

Anyway, I analyzed the business plan offered to those wishing to be part of the Mona Vie pyramid.  Er, I mean, take advantage of the exciting business opportunity.  Looks to me like it is possible to make some money.  Of course, I don't wish to view all of my friends and family as sales prospects.  So, I guess I wouldn't be successful.

Not surprisingly, the comments were one of two things.  Either it was someone telling us all that Mona Vie cured their high blood pressure, insomnia, baldness, made them taller, grew back their amputated leg, etc.  The other type of comment was that Mona Vie made them broke, ruined their marraige, caused them to be impotent and friendless.  Tragic, really.

So, I guess I shouldn't be surprised that it was that same post that instigated my first bit of hate mail.  Here's the email that I found in my inbox this morning:

"It seems that before you question the business of Mona Vie that you would at least find out what pv means.  Hey, here's a concept why don't you drink it for a month and then make your claims.  How long do you have to take vitamins before feeling any difference?  Do vitamins help lower your blood pressure because that is what Mona Vie has done for my mother.  Don't ruin it for everyone else who can benefit from the nutritional value of Mona Vie."

It was sent from the catering department of a golf course.  I wonder if she's slipping some acai berries into the fruit tart.  Lucky golfers.

We’re nearly midway through December already. That means 2009 is just around the corner. In the spirit of the new year, I’d like to ask:

What are your 2009 Financial Goals?

Here are mine in order of importance:

1. MAX OUT my wife’s 401(k). We haven’t maxed out her 401(k) in years. The market’s down so it’s the PERFECT time to get back into the habit. The IRS raised the employee contribution limit to $16,500 for 2009. My wife gets paid twice a month so that means she will be contributing $687.50 per paycheck. Wowza!

On top of that, she’ll also get a generous employer-match of 75% of the first 6%, or 4.50%. The employer-match should easily put her over the $20,000 contribution mark for the year (and maybe even closer to $25,000 if we get profit-sharing).

2. Recommit to our budget. I know, I know,…we should already be doing this. However, I got kind of lazy and complacent and haven’t stuck to our budget. We make decent money so it’s really silly of us not to using our income wisely. We do save money each month but we could do a lot better with some discipline.

3. Continue building up our emergency fund. Our efund is nowhere near where I’d like it to be. So, the third goal for 2009 is to get it to $10,000.

Those are my financial goals. What are yours?

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From Seeking Alpha’s Sound Money Tips . . .

” . . . Don’t put originals wills, trust instruments, or powers of attorney in a safe deposit box. Instead, keep these in a fireproof safe at home or at your attorney?s office.

Why? When someone dies, a safe deposit box may be sealed for weeks, which could result in result in delays. You might even have to spend money securing a court order to open the box. Further, and here’s the Catch-22: the will’s executor will not be able to get to the box without the will that shows that he is indeed, the executor, resulting in headaches and delays.

So, just to be clear: Don’t put original copies of legal documents in a safe deposit box if they will be needed by anyone who cannot gain access to them. As we said before, feel free to put copies of legal documents in the safe deposit box . . .”

Good info. Of course, if you don’t have a will, that’s your first priority!

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The “Big Three” automakers Ford, General Motors, and Chrysler, and the United Auto Workers union, traveled to Washington today to ask for a bailout.  They asked collectively for $34 billion, but some estimates suggest that they would actually need almost four times that.  Let’s just say that the banking committee wasn’t whipping out its checkbook.

Whether they actually get the bailout or not doesn’t change the fact that they shouldn’t be getting it in the first place.  Bailouts help the few at the expense of everyone else, and encourage the recipients of the bailouts to come back for more.

A bailout of the auto industry will save a few jobs for a little while.  OK, it will save a lot of jobs for a little while.  But in the long run, a bailout reduces everyone’s standard of living.  It’s interference in the free market, and causes a misallocation of resources.  It’s a misallocation because the market has already given the company the thumbs-down, in that the company has not been able to deliver a product profitably at a price that the market is willing to pay.  A bailout says to the market: “You’re wrong.  This company deserves to stay in business.”

In the absence of a bailout, here’s what would happen to a failing business under free market competition:

1. The common stock investors (if any) lose their investment.  Investors higher up the food chain get only part of their investment back.
2. The assets are sold at fire sale prices, usually to a stronger competitor seeking to increase its market share.  The bidding is competitive.
3. Some, or many, of the workers may not have jobs after the company is acquired.  The ones that do continue to do what they do, perhaps more cheaply.  Others don’t, but they can now enter another field and be productive.
4. The inefficient, inferior company goes away, and the efficient, superior company gets stronger.
5. We all win because the resources have been re-allocated efficiently, as a result of what we, the customers, have already said we want:  less of the failing business’s products, and more of the succeeding business’s products.

When the failing business appeals to the powers that be for a bailout, and it is granted, here’s what happens instead:

1. The failing business stays in business, despite the fact that it doesn’t deliver its product as efficiently as its competitors.
2. The workers keep their jobs, perhaps at above-market wages, despite the fact that this situation is not sustainable by the free market.
3. The people footing the bill (us, mainly) don’t have that money available to us to purchase the products we want.
4. We all lose because the resources have been re-allocated inefficiently by force, against what we, the customers, have already said we want.  We instead get more of the failing business’s products and less of the succeeding business’s products, and have to pay for this situation to boot.

Society functions most efficiently when its members are free to enjoy the fruits of their labor as they please.  From all I can see, society enjoys Toyotas and Hondas more than it enjoys GMs and Fords.  Why should we forced to pay for products we don’t enjoy?

The same is true of things like subsidies, unions, tariffs, import quotas, regulation, price control, and antitrust actions.  All of these things ultimately reduce our standard of living because they interfere with people choosing how to enjoy the fruits of their labors.  John Pugsley’s book The Alpha Strategy explains why these all hurt our standard or living in an exceptionally clear way.  It was written at the end of the Carter administration but the explanation of these phenomena still holds.

I expect we’ll get more of the same, but it will cost us all.  Who’s next in line for a bailout?

Here is an excerpt from an interesting article I read a few days ago:

Says Anthea Butler, an expert in Pentecostalism at the University of Rochester in New York: “The pastor’s not gonna say, ‘Go down to Wachovia and get a loan,’ but I have heard, ‘Even if you have a poor credit rating, God can still bless you ? if you put some faith out there [that is, make a big donation to the church], you’ll get that house or that car or that apartment.’ ” Adds J. Lee Grady, editor of the magazine Charisma: “It definitely goes on, that a preacher might say, ‘If you give this offering, God will give you a house.’ And if they did get the house, people did think that it was an answer to prayer, when in fact it was really bad banking policy.” If so, the situation offers a look at how a native-born faith built partially on American economic optimism entered into a toxic symbiosis with a pathological market.  …

“Narratives of how ‘God blessed me with my first house despite my credit’ were common. Sermons declaring ‘It’s your season to overflow’ supplanted messages of economic sobriety,” and “little attention was paid to … the dangers of using one’s home equity as an ATM to subsidize cars, clothes and vacations.”

Read the rest of it here.

In addition to Wall Street, it looks like the faith business also needs a little more scrutiny. Apart from that, I am always surprised at how gullible people can be when it comes to being sold out divine rhetoric.

If we keep up with this even God will need a bailout someday!

Finally, God helps those who help themselves, for everybody else there is Mastercard everybody else needs to clearly understand the meaning of the words “deliquency” and “foreclosure”.

Since reading some comments on my last post, I had been thinking about what this whole deal with “personal finance” is about; is it about making the most amount of money? or is it about saving the most amount of money? or is it about spending the least amount of money? or is it about reducing stress due to money matters? or is it about this obscure concept called “financial freedom”?

The more I think about it, the less specific I get about possible “correct” answers to that question. In fact, looking back at my life, it seems that at different times, a different answer suited me depending on my financial and personal situation at that time.

What came out of this thought process was the realization that personal finance is not just about “maximizing money” - as I used to think earlier - and like most people probably think about it.

It’s not about maximizing. It’s about optimizing.

Given a financial situation, personal finance is about making the best of that situation. Sometimes it means trying to make as much money as you can, and at other times it means trying to make your money work to make you more efficient by reducing your stress, and at some other times it means that you save every penny to make sure that your children don’t inherit your burden of debt.

There is nothing wrong in trying to “maximize money”, but it is important to realize that, depending on your personal situation, there are costs (in terms of stress and time) associated with trying to do that.

Examples are numerous (but vague and difficult to explain) in this area, but a simple one would be to think of a job in which you are paid overtime. Every extra hour you work might mean that you will become richer than the previous hour, but it does not mean that you would be stress-free - or that you would be able to devote enough time to your family. If you overdo it, it wouldn’t be too hard to make yourself and your family feel miserable even with the extra money you earn.

Working your ass off for a few extra bucks might be a good idea when you are a bachelor with hardly any cares in the world, but if you are a family man, then you might be better off by working a little less in lieu of spending a little more time with your family. Now, just because you gave up that little extra money to spend time with your family or to reduce your stress, it does not mean that you are careless or frivolous with your personal finances. In other words, just because you chase every penny, it does not mean that you are an epitome of financially astute people.

In general, for the sake of the betterment of the whole universe and your own self, try optimizing your money instead of maximizing it. It also helps to reevaluate our understanding of “personal finance” in perspective of our changing personal situation and revise our money-chasing efforts accordingly.

Duh!

Fidelity offers Age-Based 529 investments. Just pick a year.

The best time to save for your children’s college tuition is when your child is born. A small investment now will help them cover their college costs in the future. Say you invest $10,000 when they’re born. Assuming a 12% annualized return, it will grow to about $80,000 by the time the kid’s 18 years old and ready for college. $10,000 investment to pay for $80,000 in school costs? Not a bad price to pay for college at all.

Watch out though: You don’t want a bear market to challenge your kid’s future. You’ll want to secure that fund as cash as the child gets older. Use an age-based 529 investment to save for college.

Age-Based 529 Plans automatically adjust from aggressive (mostly stock investments) to conservative (mostly bonds and cash) as the child comes closer to their project college years. All you have to do is pick a projected year and the fund will handle the rest. The downside is that you pay a bit more in management fees since it’s an actively managed funds. The upside is that you get to spend more of your time playing with your kid instead of balancing their investments.

Sponsor: Brohans Video Blog - It’s Like Binary Dollar. Except you don’t learn anything.

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