Financial Samurai

One of my favorite business school classes focused on Emerging Market Economies.  We read C.K. Prahalad’s book called, “Fortune At The Bottom Of The Pyramid“, which basically described how entrepreneurs were finding cost effective ways to serve the poorest people in the world and also be profitable.

Conventional business wisdom states that one must go after those consumers with the deepest pockets and the highest propensity to spend.  Prahalad argues that we have a social responsibility to help the other end of the spectrum improve their living standards and not be afraid of going bust in the process.

One of the keys that came out of helping the poor in emerging markets is the concept of micro-lending.  Micro-lending is a fascinating concept which essentially pools together the funds of people in usually small communities, and lends out those funds to a select few.  Together, a community is able to help each other more impactfully than if they were separate.  What’s also very interesting is that the tighter the community, the lower the default rates compared to conventional banks because everybody feels a deep sense of responsibility.

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Twitter is a truly amazing platform.  I’m impressed with how some can literally Twitter all day and not get tired.  There is definitely an addictive element to Twitter which makes the program so alluring.  There are a ton of announcements of self greatness which I am very fond of reading for some reason.

Twitter Love Examples:

* “I rock because I created an awesome commercial about my product!”

* “My stock picks are up huge and outperforming the markets!”

* “Check out my net worth, killing it up 10%!”

* “Take a look at my new Gravatar picture!  What do you think?  Ain’t I cute?”

* “Happy birthday to me!  Come celebrate with me over on my site!”

* “Thanks!” -> What?  “Sweet!” -> What? “Cool!” -> What? Read more…

“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 Read more…

I don’t talk much about my finances, but I will tell you that I’m in the process of refinancing a couple mortgage loans down by 1% each.  The interest savings is tremendous, making me very positive about consumption trends going forward as 10 other people I know are also refinancing.  It behooves you to at least call your local bank and check their latest rates.

It does make me wonder with the strength of the stock markets lately, how the bond market can still be so frothy to provide such record low interest rates.  Do remember that the higher treasury bond prices go, the more yields fall.  Could there really be deflation on the way?  I highly, highly doubt it but the bond market is telling us otherwise.

To humor our minds, lets say there is deflation on the horizon.  What would you do with your spending habits?  You’d probably stop consuming due to the assumption that whatever it is you want to buy will be cheaper in the future.  As a result, you’d hoard cash and de-leverage.  Bingo, that is exactly what plenty of folks are doing, including myself.  This self perpetuating mentality is very damaging to economic progress.  In addition to delaying consumption, you will probably seek ever higher yields.  With the 30 year treasury yielding 4% right now, it sure looks like a buy compared to only 2.85% on the 10 year.

When talking about deflation, keep in mind that money is simply a medium of exchange.  The more money currency you have, the better as the strength of your currency improves vis a vis the goods and services which it can buy.  Frugality really is en vogue again, and I just can’t wait until Samurai September when I spend the whole month buying nothing!

POSTS THAT CAUGHT MY EYE: Read more…

May retail sales drop 1.2% or the most in 8 months as more and more people turn to personal finance bloggers for frugality advice!  I’m pretty certain nobody has ever come up with this statement, but think about it for a little bit.  Why is it that the public should take personal finance advice from BusinessWeek, for example?  The articles are written by relatively well-paid writers who are on a mission to report the news.  They do a fine job at that, but perhaps not as fine a job making things visceral like the personal finance community.  What’s more personal than a real person like Jeff delivering pizzas to get out of debt?  Not much!

It’s very hard for the mass media to compete against a team of personal finance bloggers such as the Yakezie.  We’re real life people responding to comments and putting ourselves out there.  There’s a two-way street with us.  If I were Editor in Chief of any mass media publication, I’d go out and hire an bunch of influential personal finance bloggers and put them on my payroll.  $75,000 a year will do or perhaps $150,000 a year if you want us to write an article a month exclusively for you.  By doing so, the Editor will inject new life, new readers, and therefore a wealth of new advertising dollars to the publication.

As evidenced by May’s retail sales figures, we are creating the news with our frugal ways instead of just reporting the news.  There’s a movement underway, can you feel it?  Maybe we’ll band together and talk about how we should never buy new cars again, causing June’s new car sales to dip.  Or maybe we’ll discover how amazing one person’s unsung journey is to fight poverty in Uganda and direct millions of dollars their way.  That counts for something.  Let’s make a palatable difference with the words we write.  Someone is out there listening.

Have a great weekend everyone!

Regards,

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

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

There’s a fun hypothesis saying that you are the average of the closest five people around you.  I believe this to be true, do you?  What’s interesting about the blogosphere community is that anybody with enough intention can start a website.  Some are interesting, some are not, but regardless we can all compete with the ProBloggers and the Huffington Posts of the web in our own niche way!

Alexa is a dynamic website ranking and information company owned by Amazon, which has over 40 million users world wide.  The tool bar is free, and easy to download.  The Yakezie Alexa Ranking Challenge is straight forward.  If you’re outside of the top 200,000, get in the top 200,000 within 6 months.  I can’t even name 100 sites, let alone 199,999 sites.  Can you?  If you’re already in the top 200,000, get in the top 100,000.  And if you’re already in the top 100,000, get in the top 50,000.

There are some who poo poo the Alexa ranking system, and I recognize their two main arguments:  1) The system only tracks visitors who have the Alexa Toolbar installed, and 2) There are cases where some websites with bazillions of users have a worse ranking than sites with less users.  We don’t know why, because we don’t fully know what goes into the calculations.  It may be because readers don’t visit and just read off their RSS.  That said, the Alexa ranking system continues to grow, and is the best system we got.  At least 40 million webmasters around the world think so, and there has to be something to it if Google, Facebook, Yahoo and YouTube are ranked #1, #2, #3, and #4, respectively.

Since starting this site, I’ve been rejected as a guest poster, didn’t even get responded to, let alone make it as one of the 7 finalists for one site’s staff writer tryouts, denied admission to a personal finance blog network, and even got my first carnival submission rejected.  But through all the rejections, I took comfort in my friend, Alexa, who is always by my side motivating me to keep going.  I’m sure many of you have been rejected as well.  Here’s your chance to create our own network of powerful friends by joining in on the challenge!

BENEFITS OF BEING IN THE TOP 200,000 Read more…