I’ve alluded to it a few times, but after more than half a year staying away from corporate consulting I’ve decided to hop back on board. I’m going back to the world of stale coffee, cubicles and Outlook (and no Gmail) once again.  Oddly enough, it wasn’t so much the money as the “street cred.”  What do I mean?  I mean that banks won’t look at you twice when you want a mortgage if you’re a freelancer without a couple of years of steady income.  I’m not unhappy renting – not at all.  But I do want to have options to buy into the Florida market, which is seriously underpriced (and therefore good for buyers), and I don’t want to have to explain how my net worth, large amount of liquid assets and good credit score should be enough to let me buy a house.  I want to have a nice little biweekly check to prove I have a “stable” job with a good company – which is apparently what the banks want to see.   So I’m back in for at least three months for some more consulting.

Returning to the workaday world should be interesting, if nothing else. Having worked in New York for almost 12 years, and not having worked in the south in about 15 years, I’ll be interested to see what corporate life is like.  My guess?  Corporate life is corporate life – hard, strained and full of politics.  I’ll hope I’m wrong, but if I’m right I’ll be glad I’m a consultant and not an employee.

Your Home is Not an Investment – Don’t Treat It Like One: I couldn’t agree more. The idea that the place you live is an investment – let alone the most important one in most people’s portfolios – drives me crazy.  Your home is a place to live, not an investment.  If you profit, great, but don’t let that be a reason to buy it.

When To Give Up A Side Hustle: Frugal Dad doesn’t say so, but I suspect he might be talking a little bit about blogging in response to the reader question. I’ve thought of dumping this blog more than once, especially since the financial returns have slipped during 2009… but I still enjoy writing and reading comments, so I keep at it.  It’s tough sometimes, though.

Taxes Must Go Up Eventually: Taxes will go up. There is no other way the debt will be reduced in the long run. Get ready for it. All of the spending today WILL be paid for, and unlike the happy-go-lucky Laffer curve days, nobody believes it’s going to come from taxes on increased growth.

How we travel to cities for $1000 per person (all inclusive): I was skeptical about the title, too, but these are some good – and detailed – tips on taking an inexpensive (not cheap!) vacation.

Are Depression-Era Values Back in Style?: HIS NAME WAS ROBERT PAULSON! If I notice a post referring to Robert Paulson, I link to it. And yes, I still doubt dumpster-diving is “en vogue” yet, except if you call freecycling dumpster-diving. People (including me) are foolishly prideful about taking other people’s trash. Sometimes I’d like to, though, especially now that I live in a neighborhood full of millionaires.

A few more good links:

• Budget Planner On Sale For 10% Off
• The Psychology of a Layoff
• Microsoft Office Only $9.95!
• How to Organize Your Garage
• How to Find a Virtual Assistant
• WT Direct $150 Bonus Promotion

And congrats to Madison! Our Baby Girl is Here!

I also participated in Carnival of Personal Finance #212: Independence Day Around the World Edition | Darwin’s Finance

Photo by moriza

linklings, back on the chain gang edition

Update:  Here’s the show itself!

blog talk radio with ask mr. credit card

I got an email from a fellow alumnus of my university asking for help in finding a position on Wall Street. The first thing I replied was – of course – that I had left New York and now lived in Florida, so his attempt at networking would be virtual instead of meeting in person. My second point was that this was not the time to be finding work in New York as an inexperienced graduate of a small public university in the southeast.

I’ve spent enough time around young people to realize that they dream big. When you are young, you are invincible and old people are pathetic losers. Everything is possible and the only reason you’ll fail is that you haven’t been hitting LinkedIn or Facebook hard enough. Well and good – perhaps that is the truth, and perhaps that may be the way to go in the future.

When I arrived in New York almost 12 years ago, I had the experience and skills to make most companies swoon – an MBA, experience working in the world’s most insane market (Russia) and hardcore Big 4 experience. I didn’t have to network – doors opened up for me without asking. From day one in New York I earned more than I spent – and I spent a lot. But four things happened that changed things forever: 1, the dot com meltdown; 2, Enron (and Sarbanes-Oxley); 3, the real estate market collapse and 4, the end of Wall Street as we knew it.

I always suspected the good times wouldn’t last forever. Money was insane in the late 90s and early 2000s. If you had the basic skills and some half-hearted charisma, you’d go far. When the four crises hit, things went south – you suddenly needed more than to be a well-spoken grad of a southern public university.

Right now you can’t get in with a good firm unless you’re willing to accept a reduced lifestyle. Times are tough. Nobody wants – or needs – to hire a fresh-faced grad at a premium price. Grads are a dime a dozen, and the only people being hired are people who are willing to suck it up now in hopes of a future reward. I wasn’t one of those people. I bailed on the high-cost-of-living, low-quality-of-living lifestyle. Would I have bailed if I was younger, or single? Probably not. New York is the Mecca of single, young American lifestyles. But now I couldn’t think of a single reason to stay.

What could you tell a young person today? Stay in New York at a deflated salary, living in a horrible neighborhood and struggling out a difficult existence in hope of future returns? I probably would. Why not? There’s time enough for the suburbs in the future. But it’s sobering to get an email from a young college grad and realize that for them – today’s grads – the fun times and glory days that some of us had in the dot-com years and shortly thereafter are gone, and gone for good.

Photo by David Paul Ohmer

getting a job on wall street, circa 2009

Foreclosures on homes happen for a variety of reasons. Maybe the homeowner lost his or her job.  Maybe they overextended themselves on the mortgage.  Maybe they have a health crisis that sucked up their life savings.  The homeowner could be an honest, hardworking person forced by circumstances to default, or the homeowner could be a bum.  Anything is possible.

Yet the reaction by the bank holding the mortgage often seems to be “if the homeowner can’t pay $3000 per month, let’s seize the home and resell it to someone who will pay $2000 per month.” Perhaps that is the best way for the bank (or whoever lent the money in the first place) to admit that they made a mistake.  But maybe it’s just that the bank wants to punish someone who can’t pay the full amount by giving their property to someone who can’t pay the full amount either.

If I had a job paying $50,000 per year, and the company determined that someone else could do it for $30,000, I’d argue that I have some advantages over a new guy – I know people at work, I don’t have to be shown where the copier is, etc.  If I was a homeowner about to be foreclosed on, I’d argue that the bank should keep me on at a new, lower rate because I have advantages over a new buyer:  I already live there, my stuff is there, and most importantly I am physically there.  A new buyer might take months to find, and during that time the house would sit empty.

Should banks work with existing homeowners? What if the homeowner was stupid and overextended himself or herself when buying the property?  What if the homeowner had a medical disaster (cancer or some similar problem) that made payment difficult?  What if the bank has no realistic hope of selling a foreclosed property for more than a fraction of the home’s (old, pre-bubble) value?  Would a widespread move toward simply reducing mortgage payments set a bad precedent for the lending industry?

I know that if I make a contract to pay a bank $2000 per month on a mortgage, I shouldn’t expect them to reduce that to $1000 if I fall upon hard times. I wouldn’t expect them to raise it to $3000 if I got a raise at work.  But with communities being emptied out and foreclosed properties sitting empty for months at a time, wouldn’t keeping existing homeowners in their houses make sense?  It’s not an easy question to answer, because the obvious answer is “this is capitalism at work,” followed shortly by “if you can’t pay your debt, you don’t deserve to keep your property.”  Too many crazy mortgages were given out, but even omitting those you might see foreclosures on truly distressed homeowners.  Whether banks should have compassion or simply stick to the profit motive is a tough question in the worst cases, and I think it reveals one of the few weaknesses in the capitalist model:  human suffering for profit.

photo by dok1

would you buy a foreclosed property?

Enjoy the holiday weekend!

Other good reading:

Bank of America $25 Bonus for Using Online Bill Pay
12 Tasks for Your Mid Year Financial Checkup
Save Your Money By Paying Yourself Last
The Price You Pay for Pride and Prejudice
Planning To Declare Financial Independence
Book Review and Giveaway: Happier
Happy Financial Independence Day
Wealth Creation: Is it a Myth?
The Pros and Cons of Joining a Local Food Co-op
Rule #3: Stop Wasting Time.
Detroit & the Recession: An Inside Look Part II

linklings, our land edition

One of the things I come back to again and again in my conversations with family, friends and colleagues is that there is no way to waste money on good health. Organic food can be pricey. A gym membership can be expensive compared to working out at home. Vitamins or medications can be burdensome. But if you can spend your money on one thing in this life, don’t let it be education, or your family, or your belongings. Spend it on health.

Warren Buffet is 78 and the second richest man on this blue dot. Do you think he’d be getting the accolades for wealth and investing acumen if he had died at 42? Maybe. Many rich people have died young. Many poor people have died old (and unlamented). Wealth and health have long been completely unrelated. I’m sure every one of us knows old poor people and young rich people, and the opposite, and many variations. But age has long been seen as a virtue, at least as valuable as wealth.

But the key question is: would you rather be old and moderately well to do, or die fabulously wealthy at a young age? I doubt many of us would wish to live a highroller lifestyle and die at 40 versus living a moderate middle-class lifestyle and dying at 80. Health is, in a sense, the ultimate prize.

If you consider a long life a valuable thing to pursue, it’s doubly amazing that so many people don’t bother. I pursued my career at the expense of my health for the best part of my twenties. I wasn’t thinking about life in my sixties – it was my money and I wanted it now. How many times have you told yourself that you’re just too busy at work to take some time to exercise?

I don’t exercise as much as I should. Four years ago I was running competitively, lifting weights 3-4 times per week and eating a 90% vegetarian diet – I was in the best shape of my life. But work, kids and life got in the way and I slid waaaaay back on the health scale. It’s easy to do, and if you’ve ever gotten in shape you know how simple it is to slide back. But that’s no excuse. Your health is the only thing – other than your mind – that you can control in this life.

Don’t neglect your health. I lost 100 pounds (actually a bit more) and it’s possible for anyone. Remember that your health is worth more than all the money in the world. Just ask someone who’s not healthy, and you’ll get a straight answer.

Photo by ~ggvic~

there is no cost to good health

If I was going to search deep within my (financial) soul I’d admit that most of my money decisions are based on fear. Fear’s a negative word, and I don’t think that in this case my decision making is always a negative process.  I am often quite happy with the result.  A great example has been my investing philosophy.  A little more than a year ago I got nervous about the direction the market was headed.  I took about a third of my retirement accounts’ total out of the market and put it into cash.  Good fear, right?  That chunk of my retirement savings would have been wiped out.

But after a year, I’ve only redeployed about a quarter of that third. You could make the argument – and I do, to myself – that holding onto cash is a defensive position.  Nothing about the current propped-up-through-stimulus-and-bailout money situation of the US economy should encourage a reasonable investor to get back in…should it?  Yet again and again we’ve seen these market drops come back.  So some of my reluctance is fear-based.

I’ve written about the reasons why I don’t talk about real estate investing. I said I don’t like “investing” in a primary residence, I don’t much about real estate or the business of real estate, and that the New York market – where I lived until recently – was too competitive.  I should have added that it usually seems like BIG chunks of money are needed for real estate investing.  Fear of investing in big chunks keeps me diversified in the stock market (index funds, right?) and keeps me afraid of real estate.

Fear of wasting money is good, certainly – but at least as far as investing goes, some fear and uncertainty are necessary to have any sort of reward. I’ve always dreaded a doomsday that seems unlikely to come – a final day with money and then a penniless dawn.  It could happen, of course – but with the ability to make more money (which I have) and good health (which I hope to continue to have) and a supportive family, it seems that I won’t face that doomsday.  So the fear is something more than trivial but also less than a doomsday event.

Does Warren Buffet fear loss? Probably not at this point – he’s old enough and seemingly content enough to be free of financial fear.  Does Bernie Madoff?  I guess now he will face his own doomsday now, and learn whether that fear should have been stronger.  How do you control fear of money?  Here are the things I try to do:

1. Remember that money is infinite. YOU may not have infinite amounts of money, but there is a lot of it out there, if you can just figure out how to get it.
2. You cannot anticipate every disaster, but you only need to anticipate one success. If you invest in a property, a billion things can go wrong – title problems, a fire, a sewage plant groundbreaking the day after you close, etc. etc.  You can’t prepare for everything.  Try to aim for success, not dodge failure.
3. Fear comes from you. Fear is not an externally-caused reaction.  Sure, we all get a jolt of adrenaline when we’re jumped by a cave bear, but you can control fear.  It’s not like being poked with a stick, where you have a reaction determined by nerves and muscle reflexes.  Fear is neurons firing off in your brain, and you can control your thoughts – they are the only thing in the world you CAN control.
4. Doomsday may come, true… but let fear of that day go. I do sometimes worry about all of my index funds and various other investments going to zero… but as I’ve often told my friends and family, if my retirement portfolio, invested in index funds that span the US market, goes to nil we’ve got bigger problems that worrying about retirement.  We’ll be reverting to a currency based on canned foods and shotgun shells.  Worry about your 401(k)’s fees, or your consumer debt with 21% interest rates – things you can do something about.  Don’t worry about the end of the world.  If the aliens come, you’re not prepared anyway.

Fear of money – worrying about its scarcity, or its disappearance – can cripple you from making more and even more importantly from enjoying life.

Photo by DownTown Pictures

fear of money

Poor Money Choices Ruined My Parents’ Life:  Yikes.  Not much positive here, except that she overcame her parents’ poor choices.

Start A Side Business in the Lazy Days of Summer:  Some excellent advice on starting a side hustle…and Why Everybody Needs A Side Hustle

• Worst Case Scenario – How Long Will Your Savings Last?
• Student Loan Rates Will Drop to All Time Low
• Interview With Mr. Credit Card On Personal Finance and Silicon Valley
• What Can You Expect to See on Your Credit Reports?
• This Seems Like a Bad Idea to Me
• Reader Question: I Don’t Have Much Savings So Can I Use Unused Credit as an Emergency Fund?

And a few interesting links from some blogs I haven’t linked to as often…

• What’s Wrong with The Millionaire Next Door:  Interesting take on a book I like, a lot.  I agree that it’s dry and drifts off into uninteresting areas – too much time wasted on the question of cars, for example.  Yet I find it’s a good book in terms of thinking about what a millionaire looks like, rather than what we might THINK a millionaire looks like.
• Emergency: This Book Could Save Your Life (Neil Strauss) – Review
• Two More Virtues of Owning a DogI’m not a dog person, but I’m always willing to listen to someone else’s opinion… I wouldn’t own a dog since that, on top of two toddlers, would seem like a terrible burden, but I understand why other people might enjoy having a dog.
• 3 Things that Could Cost You Your Dream House: It never hurts to be vigilant. Pay attention to the details.
• DIY: Getting Dirty with Square Foot Gardening: I aspire to gardening but we got to Florida a bit too late for planting anything this year, unfortunately.

Photo by Alan Light

linklings, michael jackson passed away edition

One of the things that you can – quite selfishly – enjoy about writing a blog is that it serves as an online diary for your own thoughts, hopes, opinions and ideas over time. When I started writing this blog two years ago (June 29, 2007, to be exact) I had no idea that the market was going to go belly-up for a while, that we would manage to sell our house for a (small) profit in the worst real estate environment in decades, and that I was going to be living in Florida with not one but two children.

Some of my articles about life in Jersey are strange to go back and look at:

• why I will not live in the northeast forever
• why is it called the Garden State?
• why my public library is not much of a money-saver

I have kept a journal, on and off, for about 13 years now. I can learn a lot about myself today by going back and looking at what was important to me years ago.  The blog serves the same purpose.  Emails do, too.  Writing freezes a minute in time, and by helping us understand where we came from it can often tell us where we are going.  Even pictures and videos capture your thoughts – what you took pictures of can tell a lot about what you were thinking.

I find one aspect of writing reassuring above all else. If I look back on my writing and journals and all of these records, several themes emerged (and again, I’m going back maybe 13 years in total).  A few of them were:

• I didn’t like – and don’t – working the 9 to 5 corporate employee lifestyle.
• I used to love, but grew sick of, business travel and travel in general.  Some joy disappeared after September 11th.
• I was tired of cold weather, long commutes and high costs of living – life in the Northeast.  I dreamed almost constantly of warmer weather – for health, for the sun, for the lifestyle.
• Success and increasing salary (in my corporate life) and rising consulting fees (in my contracting life) didn’t make me feel happier or that life was getting easier.
• I like reading, a lot, and have not done enough of it.  As the internet grew, my real reading dropped off.
• Getting married was a big change for someone like me who had clung to bachelorhood, but it was a minor change compared to having children.  People without children get sick of hearing this – I know I did – but everything about how I perceived the world changed when I had kids.  Not always positively, either – dangers that you hadn’t considered before you had children creep into your thoughts.

I made changes in all of these areas. I can see how I led myself there.  That’s a neat thing to see. If you don’t write, get started.  Even if you just keep a day planner, try to put some thoughts down every day (or three).  Nobody will ever understand you as well as you understand yourself, and keeping a record of how your thoughts evolve over time will become more and more fascinating the longer you write them down.

time travel writing

Have you ever bought a lottery ticket? Have you ever used a coupon? Have you ever incurred non-mortgage debt? If you haven’t ever, will you ever, just to try it? Just to see where it takes you?

I have some financial behavior that is set in stone. You do, too, I bet.  Me?  I hate debt of any sort. I can’t stand seeing money spent on “fancy” cars, even though I’ve owned several nice new mid-range cars. On the other hand, I am careless about spending money on eating out. I can spend money on big-ticket items if I think they benefit health or quality of living, but I agonize over spending smaller amounts on items I might not “need” – think “new shoes”, for example.

Most behavior is learned. Some is not. I know where I got the idea that money spent on “going out” was money well spent. I know where I got the idea that any money spent on books was money well spent, too. I also know why I think ANY debt is awful, and why I get antsy about buying expensive (but hopefully good quality clothes). Most of these behaviors were learned at a young age, and they fit in with the world view I developed as an adolescent and voila – now these money behaviors are part of what define me.

I often wonder if I will ever apply for a $300,000 small business loan, or splash out on a BMW. It’s easier to imagine the loan than the car, I guess. I drive an almost 10-year-old Pontiac because I just don’t care about cars. It has an air conditioner and a CD player, and it makes – for an old car – acceptable mileage. The loan? If I was suddenly struck by inspiration to start a coffee shop or a hardware store or something like that, maybe… but it would be so out of my normal financial behavior that even writing that seems odd to me.

Without being too specific, I spent some time a few days ago listening to a radio show from a political commentator whose political views were 180 degrees from my own. I was stunned by what I perceived as the commentator’s completely insane view of reality. Imagine trying to listen to someone try to convince you that the sky is pink. I wondered whether there was some truth in what he said, and whether I could ever pull some of that truth out and live with it. I doubt I could, in the same way that I can’t imagine suddenly strolling into an Audi dealership, ready to buy. Some behaviors and thought patterns are hard to change – for better or for worse.

photo by Q U E E F

when financial behavior becomes set in stone