Blink And Blink Again

It’s safe to say that before you began reading this post, you had no idea you were blinking.  Blink, blink, blink.  Whatcha going to do about it now that you are aware of your fluttering eyelids?  My guess is that your memory will last as long as a gnat, and you’ll forget as soon as you finish reading this post.

It’s amazing how we can blink roughly 36,000 times a day and not even be aware.  Yet, if we were to be consciously aware of our need to blink, we’d probably drive ourselves mad.  How great it is that our bodies protect ourselves from insanity by doing the things for us we have no desire of doing ourselves.


Sun Tzu’s Art of War Applied to Your Battle Against Debt

“Every battle is won before it is ever fought.”

This was the infamous line said by Gordon Gekko in the popular 1987 film Wall Street. Derived from Sun Tzu’s Art of War, a 2400-year-old Chinese text on military strategy, the teachings of this tactical mastermind have proven useful in various aspects of present-day life besides warfare.

Although Sun Tzu’s Art of War is studied most religiously by military commanders, political leaders, and corporate executives, the concepts are scalable to conflicts as minuscule as your struggle with debt. Like in war, where the objective is to overcome the enemy resistance, it is everyone’s goal to conquer their personal debt.

Debt is the bad guy. We are the good guys. The road to financial independence is a righteous path where we’ll have multiple encounters with debt – a merciless obstacle that seeks to consume us. Luckily, an old man from many many years ago jotted down some powerful advice that may serve the purpose of securing a victory against debt.

Universal Debt Teachings

The Four Different Ways To Spend Money By Milton Friedman

The reason why Warren Buffet is so great is because he’s able to distill the most complicated financial topics into very simple terms.  Lucky for us, there is someone like Warren in the economics world.  Regular reader, Investor Junkie who disagrees with the government’s unemployment insurance extension, but agrees with the cessation of rising taxes, highlights a fantastic video by the great economist Milton Friedman about four different ways of spending money.

Professor Friedman’s examples are simple and perfectly to the point.  In an environment where we are spending other people’s money on someone else (deciding how other people’s tax dollars are spent), we don’t maximize the value of the dollar because we simply don’t have much at stake.

Professor Friedman highlights that people spending someone else’s money on others is a “distributor of welfare funds.”  Strong words with a certain amount of truth wouldn’t you agree?  In “The Ultimate Solution To A Fair Tax Policy In America”, I discuss the concept of limiting the voting ability of the 47% of non tax paying Americans on raising taxes for the other 53%.   Don’t worry, voting rights for everything else is status quo.  The reason why I suggest this rational solution is because it makes sure the country isn’t overrun by those who have their cake (don’t pay taxes) and get to eat it too (enjoy the benefits).

One can easily see an America where 90%+ of citizens don’t pay taxes and stick it to the 10% rich because it’s rational to look out for your own interests.  It’s up to balanced people who believe in equity to continue fighting for those who perpetually get unfairly blamed for our economy’s problems.  It really is ironic, because if everybody studied hard in school, volunteered their time to help others, and were self-sufficient (doesn’t have to be wealthy), America wouldn’t have nearly the amount of problems we have now!

The 4 Ways Of Spending

1) Spend your own money on yourself.

2) Spend your own money on somebody else.

3) Spend somebody else’s money on yourself.

4) Spend somebody else’s money on somebody else.

Readers, do you agree or disagree with Professor Friedman’s thesis that the 4th way of spending is the worst way of spending?  If you do agree, why do you think people feel it’s OK to spend other people’s money as they wish?


Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

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Should I Refinance Now? Does A Bear Poop In The Woods?

You guys know that the one and only data point I track religiously is the 10-year yield right?  Well, after the 10 year yield dipped below 2% as of 1/20/2015, I went to the bank with a buddy of mine to go see how much money we could borrow. The wiry banker sat us down like a loving couple and asked us to go through our finances at which point I kindly stepped out of the room and let him go first. Five minutes later, he came out with a grin on his face, so I curiously went in.

He proceeded to tell me some curious news.  “Look here Sam, you can borrow up to $1.5 million dollars at a 5 year fixed rate at 2.25%!”

Holy moly really?  You mean little old me, just like that can borrow that much money at that low of a rate?  “So what’s the catch?”, I ask.

“Zero points, and $2,500 in closing costs.  But don’t worry, we are giving you a $500 credit for being a preferred member, and frankly, if you guys both take out loans, I’ll throw in another $500 credit,” said the banker.

“Done!  Where do I sign?, I ask as I think about the new Audi R8 I plan to buy with just $150,000 of the $1.5 million.  Or maybe I should be more conservative and spend $100,000 on the new 2015 Porsche 911. Or actually, I heard the 2015 BMW M4 is coming out for only $75,000 this fall.  With all the money “saved”, time for a bachelor’s trip somewhere fun!  (I’m still thinking to myself here).


5 Money Habits I Learned That Will Never Make Me Rich

Here’s an insightful post from Allan from The Philippines.  He shares with us his story about growing up poor and working his way up.  It’s always great to read about international perspectives.  Hope you enjoy!

They say we are creatures of habit. This is especially true when it comes to money. When the going gets tough, it is easier to resort to what’s comfortable. When that happens, your own money habits take over. The only question is – will your money habits get you through and make you rich?


Money Habit # 1 – Playing with money

Learning my money habits started when I was still a young kid playing outside the house on a sunny afternoon. The first money habit I learned was playing with money. Yes, literally. But not with actual money. My friends and I would play games betting on carefully folded cigarette packs looking like play money. A red Marlboro is worth PhP 50 (US 1$). A green local brand “Champion” cigarette is PhP 5 (10 cents). A Philip Morris cigarette pack is worth PhP 100 (US $2).

It was all play money then. And it was easy to get. I only need to wait for my father to finish his cigarette pack and I’d be on my way to earning my (play) money for the day. Sometimes, we even played with coins, taking turns and rolling them on the floor like a dice. Playing with money was fun!

Somewhere between playing with other kids and being conscious on what’s cool, I learned that money can buy me things. But since we were poor, I had to make do with my worn out clothes. After some time I’ve already outgrown it so much, I already looked like Winnie the Pooh.

It’s not so much about other kids having better clothes. It was more because I was not able to play outside as much as the other kids. My mother would always remind me to do my house chores. Wanting to go out and play instead, I would reason out “how come the other kids are not doing any chores?” To which my mom lovingly responded,

“Because we are not like them. They can do whatever they want because they are rich. We are poor. ”

That was the first time I realized we were different from other people. We were poor. I began to notice how worn out my clothes and shoes are. I remember even going to school with no shoes on.

That’s one lesson I took to heart. If you don’t have money, you are poor. If you are poor, you need to work to have some money.

Money Habit # 2 – Working for money

The Good Times Are Back Again – The Indulgent List Of Things

A top 0.01% income earner's yachtLook around.  What do you see?  I see packed buses, traffic jams, busy open houses, expensive restaurants with only 9pm seatings, and friends finding new jobs again.  Double dip recession?  I don’t think so.  With the Dow over 10,500 and the S&P 500 over 1,020, it’s as if last year was just a bad dream.

Yet, it is exactly during good times, when we must be more diligent about our finances. It’s so easy to forget how bad things were and stray.  Rather than spend more money, save more money during upswings so that we can spend more money during downturns.

When times are good, it’s not necessary to spend more money to create any sort of additional fulfillment or pleasure.  We’re getting paid more, the opportunities for promotions are greater, and the demand for our services surpass our supply.

In essence, we feel good because we feel wanted again.  It’s when a downturn hits when money can help balance the mood out a little with some retail or food therapy, or maybe even a vacation.  In essence, spend money counter-cyclically for better returns.


Sometimes Saving Money Is About Principle

For the past two years I’ve taken the bus to work after driving for 7 years prior.  The company removed our free parking benefits and I wasn’t about to pay $350/month to park in a garage just 5 miles away.

I have a love hate relationship with the bus.  When it’s raining, and I have to stand outside shivering, I hate it.  When the bus skips my stop every so often, I hate it.  When the bus driver slams on the brakes a couple feet away from the stop light and we all go flying, I hate it.  When the bus is packed like sardines, but there are some very attractive riders I need to squeeze next to, well, I guess it’s OK.

My VIP Pass aka monthly bus pass costs $60, while taking a cab to and from work costs $30.  Hence, the cost breakdown is simply $60 for a bus, $350 for parking, and $600 for a cab every month.  Out of principle, I wasn’t going to spend 5-10X more on transportation if I could just ride the bus.