The DVD Rental Method to CD Investing: The Only Way To Achieve Max Yield

When we first bought our $1,200 HDTV six years ago, we told ourselves never to go to the movies again until we watched enough DVDs to pay for the purchase.  Every time we went to the movies, we’d have to pay on average $20 for tickets.  A promise was made that only after we watched 75 DVD rentals ($1,500 bucks in movie tickets saved – $300 for Netflix fee), would we treat ourselves out to the theater. We reached our goal within two years, and in the four years afterwards we’ve only gone to three movies!

We realized that once we went through the initial 6 month waiting period for the latest movies to come out on DVD, all was fresh again.  We’re now programmed to watch movies with a 6 month lag, bringing us the same opening night excitement.  The annoyance of someone sitting right in front of you in an empty theater and jabbering away is no more!  Furthermore, a 52″ screen and six point surround sound system sure helps replicate the big screen experience!

THE DVD RENTAL METHOD OF CD INVESTING

How To Apologize For An Error? Martyr Yourself!

If there’s one thing I’m consistent at, it’s making some stupid error at least once a year. One of the classic errors happened my first year out of college. One of the IT guys and I were good friends, always winding each other up and cutting each other down. He sent out a department-wide e-mail saying the systems would be off for the weekend, therefore nobody should bother coming into work.

Instead of clicking “Reply”, I mistakenly clicked “Reply All” and wrote, “Isn’t this why you have a job? So you can fix my computer and we can work all weekend? Who hired you anyway?!” As soon as I sent the e-mail, paralysis took hold.  I was mortified!

With my head tucked low, I immediately walked into my supervisors office and apologized profusely. “I am a complete bumbling idiot! I can’t believe I was so careless and stupid. I’m such a fool. Please forgive me!” I think I may have shed a tear, but I don’t recall exactly.

To my surprise, my manager laughed, and told me not to worry about it, and to go back to my desk. “No big deal Sam, don’t be too hard on yourself!  Didn’t realize how much you enjoyed busting people’s chops!”

Phew, bullet dodged.

DARN, ANOTHER ERROR

What Would You Do With $8.5 Million If You Won The WSOP?

Tonight’s the night we find out who wins the World Series of Poker Main Event! The showdown is between Darvin Moon with 59 million chips and Joe Cada with 136 million chips.  Despite the chip differential, players know that things can turn quickly in heads up poker.  Anybody with enough patience, and a good amount of luck can win!

I’ve imagined winning the WSOP countless times. Each time I ask myself two questions:

1) If I had to choose between winning and only getting the WSOP bracelet or losing but receiving the prize money, which would I choose?

2) What would I do with $8.5 million bucks?!

The answer to question #1 is easy. I’d take the money for sure!  I’d then use $10,000 of the prize money to have a jeweler craft an exact same replica.  It must feel unreal walking around as the champ, but I’d rather have financial security any day.

The answer to question #2 is a little bit harder, but much more fun! First of all, we can painfully reduce the $8.5 million by 50% to get our after tax proceeds.  $4.25 million is still a lot of money, but gosh darnit, that sure sounds a lot less than $8.5 million!

Grab Bag: “How Do You Deal With A Horrendous Day At Work? My Client Is So Unfair!”

 A reader e-mails in, “FS, I’ve just had one of the worst freaking days of the year today at work. I’ve been busting my butt for this one client for the past 6 months, and when it was time to do their semi-annual review, we actually got worse in their ranking. To add insult to injury, they also provided some negative feedback, and I’ve known this client for so long. I thought we had a good relationship. I’m so mad because I’ve spent double the effort on them this year, and went backwards. They aren’t even a big client! What would you do? Thanks, Frustrated.”

Hi “Frustrated”, I’m sorry to hear about your situation. I’ve been there before, many of times, and all I’ve wanted to do was give up and yell. What’s important is to NOT act emotionally. Go for a walk, grab a drink, and take some deep breaths before you e-mail/call the client or discuss the issue with your manager. Too many times, people write things they don’t mean in the heat of the moment and end up regretting their actions. You must go about this in a rationale manner.

5 Suggestions For Handling A Difficult Client:

Property Makes People Think Irrationally

Over at a new found site called ” The Writer’s Coin,” the 28 year old personal finance writer questions whether he should buy this house if he only has 13% down. Mind you, he has been giving personal finance advice for a couple years now, and is even a guest poster on mega-site Wisebread, which Financial Samurai may one day contribute to. Honestly, I felt like I was watching one of those Holiday Inn commercials reading his post. A guy would provide some great advice and become a medical doctor because of his one night stay at the hotel chain. But what about the next night when he has to sleep at home?

WC’s question got me thinking. If someone who has been disciplined enough to write about money matters still can’t see the fallacy of buying a house with only 13% down, why are we so weak when it comes to housing? Do people just blindly fall in love with something and disregard every financial principal?  Doesn’t seem like WC has much more saved up than 13%, because who says “13% down” anyway? Why not 10%, 15%, or 20%?  Heck, back in the good old old days, people paid 100% down.

How did we come to this pitifully low downpayment standard in America? Probable explanation #1) It’s the Madoff Syndrome aka greed! “I want this, and I want it now!” and #2) The Nesting Syndrome.  There is a tendency for those in a long term relationship who want children to buy a place. I don’t even have to read WC’s about page to guess he’s planning on getting married or having kids. For the guy specifically, the itch seems to start at 30, if not sooner. The desire of owning our own castle and showing we’ve “arrived” is strong. 

Love Your Colleagues Thirty Minutes A Week

Everyday, we are inundated with e-mails. I personally get over 300 a day, and other colleagues I’ve heard get 500.  Despite many of the e-mails being largely irrelevant, or impersonal given the blast distribution trend, it’s worth responding every once in a while with a “Thank You” and a recognition of what they’ve sent.

Most of the time all the emailer wants is for someone to respond and recognize their work.  How many times have you proceeded to review your e-mail AFTER you sent it, just so you can relish in what you’ve said?  Yesterday, I spent about 30 minutes consciously responding to about 12 e-mails which I normally wouldn’t have responded to, and it felt good.  Furthermore, I sent out another quick 22 e-mails of congratulation for those who got promoted to celebrate their success.  All replied, and were extremely appreciative.

Is There a Shadow Government In America?

Who's Behind The Shadow Government?

Who's Behind The Shadow Government?

After reading several of my favorite sites out there, I’m beginning to wonder whether there is a shadow government running America.  The “Cash for Clunkers” program will cost the US tax payer $3 billion to graciously put 700,000 people who drive beaters into cars costing 5-6X more.  Yay, there’s a one time boost to August US auto sales due to hundreds of thousands of people who can’t afford new cars (according to the 1/10th rule)!

Over at DINKS Finance, I’m reminded that the income limit for Roth IRA contribution for single people is $105,000.  So they’re telling us after saving a party-throwing $6,000 bucks, the moment you make over $105,000 you can no longer contribute?  Too bad for you 29 year old grad students out of business school with a median income of $105,000.  Oh yeah, and all you doctors who spent 8+ years of your life AFTER college and those bagillion hours studying, so sorry!  The government isn’t willing to help you save for retirement.  No soup for you!

Do Higher Taxes Lead To Socialism In America?

Someone once said, “nothing is certain except pressing the reply all button by mistake and taxes.” How true the saying as we face rising taxes under the new administration.  Supposedly 32% of Americans filers pay ZERO TAXES!  I doubt this statistic sits well with the other 68% of files who pay taxes.   I also doubt the percentage of non-tax payers could be that high, but either way, even 15% is a lot.  The good thing for high income earnings is that the highest marginal tax rate has come down by almost half  since the 70’s.  Furthermore, generally if you are paying no taxes, your adjusted gross income is less than $8,350 as a single, or $16,700 as a married couple.   Wouldn’t you rather make more money and pay taxes than make little money and pay nothing?

Given we don’t blog for a living, and several readers asked me this afternoon “whether I think higher taxes lead to Socialism in America, Yes or No only”, my answer and thesis is therefore: “Yes, higher taxes do lead to socialism in America.”

Get Rich In September & Buy Nothing!

Valuations Gone Wild

Valuations Gone Wild

I declare September frugality month  If I’ve learned anything from my 20+ years working, it’s that September and October are generally dicey months for people’s fortunes. 9/11 wasn’t good, neither was last September 15th when Lehman declared bankruptcy.  Since 1928, studies show that September is by far the worst month in the calendar year for performance at minus 0.7%.  Sentiment turns on a dime, and when markets rally 50%+ into the months of September and October, our risks are greater than our rewards.

The stock markets are close to record highs in 2015, and volatility is back.

Even if the markets continue to rally and we aren’t fully invested, we still win because the labor market tightens, wages go up, and job security increases.  That said, I plan to spend money on nothing except for food and shelter this September.  No clothes, no new gizmos, no unnecessary strolls to the mall.  September is austerity month, and I’m going to bank all disposable income away!  Who’s with me?

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Updated on 2/8/2015. Let the bull market continue!

BusinessWeek’s 10 Best Places To Own Property

Honolulu, HI

Honolulu, HI

BusinessWeek

comes out with a Top 10 list of best places to buy vs. rent.  This is their formulation in their words:

“To create a fair match-up between owning and renting, we calculated ownership costs assuming a fixed 30-year loan for 100% of the purchase price with no down payment. If they had instead decided to factor in a 20% down payment, owning would have been the cheaper option for the top 10 metros on our list.”

The problem I have with this list is that I don’t see the words “Honolulu”, “Newport Beach,” “Malibu”, “San Francisco”, or “Paradise”! Everywhere one wants to live is expensive, and everywhere one doesn’t really prefer to live is cheap. Things are cheap for a reason, and real estate is no different.

Think about prime real estate sitting a top a triangle. The triangle’s base always gets wider as demand continues to grow.  Meanwhile there’s only one prime location.  Is it no wonder why Realtors always talk about “location, location, location”?  You can also think of your sub-prime location as an inverted triangle ready to topple over.  Only a very few want to buy, and the supply is overwhelming.

During this real estate correction, you’ve seen expensive areas such as San Francisco correct 15-20% from the peak, however, drive out 1 hour east and places such as Antioch and Pittsburgh have gotten crushed by 40-60%.  If you’re an investor, focus on places where you’d actually see yourself willing to live in.  After all, if you wouldn’t want to live in your property, why would someone else?

A similar purchasing analogy can be made with cars.  You may think that someone buying a limited production Lamborghini Gallardo Spyder for $210,000 is foolish with his money.  But, after one year later, he’ll sell that Lambo for more, or at the least recoup more than if he had bought a brand new Ford Expedition for $48,000.  Obviously this example is extreme here, given most don’t have $200K to splurge on a car, but you get my point.

Things are cheap for a reason. Only if you have the financial means, and are already living in one of these 10 cities should you consider buying.  Otherwise, just focus on buying or renting in that tropical paradise in the best location possible.

Read more to see what paradise cities lie in BusinessWeek’s Top 10 list!