On Thursday August 26 at 8:39pm, M and I made this (M did most of the work):

A beautiful baby girl! It’s been a crazy/amazing/exhausting week. All the qualifiers you can think of—good and bad—seem to fit into this new stage of life they call parenthood. And throughout the whole time leading up to her birth there’s been one idea that’s helped get over all the conflicting emotions that she brought with her:

Stupider people than me have babies all the time and they seem to get along just fine. We’ll be OK.

And really, when times get really tough and you start to doubt everything you think and do, this idea keeps coming back to me and giving me faith that we can be good parents. Despite the piercing cries for no apparent reason. Despite the lack of sleep. Despite the times when M and I stare at each other in the middle of a meltdown and wonder, “Now what?”

Despite all of that, we can do this. And we can do it better than most other people—even if we don’t always feel like it. We’re lucky: we have families that love us and are there for us. We have parents that are still together over a combined 60 years later. We are well educated and have a pretty decent idea of what you’re supposed to do to successfully raise a baby. We have all the books (too many, actually). We have siblings that will do whatever it takes to help us out. We have good insurance that covers a large majority of the hospital expenses. We have a nice cash pile of savings just in case we need it.

We have way more than your average person does when they embark on parenthood. We basically have a head start and as long as we give it our best shot we will be OK.

I can’t tell you how comforting this idea is to a new parent. If you’ve had a kid, you know what I’m talking about.

How this Relates to Money

The fact that you are reading a blog about personal finance means you are already way ahead of the money game. That you even know something called “personal finance” even exists means you know more about managing your money than 90% of the people out there.

But you probably already knew that. The reason this “stupid people” concept is so important is because it can apply to so many other things in life. Want to start a business or get some freelance income? Dumb people do that every day.

Want to get a different job in another field? You know dumb people at your work that have done just that.

Thinking of learning a new language but think it might be too tough? Doesn’t Ted in accounting know Swahili?

Think it’s impossible to become an expert at Excel or some other piece of software? You know the drill.

Confidence is such an important part of accomplishing something or doing something well and knowing that dumb people do it all the time should give you some faith in yourself that you can and will achieve your goal.

Now go out there and do something incredible like making a baby—odds are you’ll do just fine.

Image by Jerry M.

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How much money do you need to call yourself rich? Thanks to Obama’s tax proposal, we don’t have to wonder much longer. His plan is to make the Bush tax cuts permanent for everyone except the “rich.”

So if you make $200,000 or you’re a couple that makes more than $250,000, congratulations! You’re in the top 2% of earners in this country and that means you’re rich!

Unfortunately, that means the tax cuts won’t expire for you and you’re tax rate will go up to either 36% or 39.6% (from 33% and 35%).

This has been in the news a lot and apparently there is TONS of debate going on about Obama’s plan. As usual, it has to do with party lines. Democrats say that the national debt is so out of control that this needs to be done. Republican think that the tax cuts should be extended for everyone, even the top 2%. They say that small-business owners will be affected and the economy as a whole might lurch (even more) due to the tax increase.

And I just don’t get it: why is this such a big story when so few of us are impacted?

From the NY Times:

Analyses from the Joint Committee on Taxation and the Tax Policy Center, a nonpartisan research organization, show that less than 3 percent of filers with small-business income pay at the top two income tax rates, and many of those are doctors and lawyers in partnerships.

I’m not naive, I know that these types of studies and committees can be very biased, but even if that number is 10% or 20%, that still means that a small minority of Americans will have to pay more taxes. And not just higher taxes—just what they used to pay before the tax cuts were put into place. So it’s not like taxes are going up for them, they’re going back to where they were.

As you can tell, I don’t make anywhere near $200,000 (though I’m working on it), so it’s easy for me to dismiss this whole issue and act surprised that it’s such a big deal.

What I don’t understand is how this isn’t a much simpler issue. If you had Americans vote on it, I would expect this to be resolved rather quickly. Everyone that makes under $200,000/$250,000 would be like “yeah raise taxes, I don’t care” and that would be the end of it.

Right?

The government needs money to run itself and the national debt is getting out of control. We need more money so why not take it back from the people who have oodles of it in the first place?

Which way would you vote? I’m curious if people out there not making “rich” money would still vote to keep the tax cuts for the rich. If so, I want to hear from you. Why? Is it because you think you might get to that level at some point and don’t want to pay those taxes? Wouldn’t you be so thrilled to get to that tax bracket that you wouldn’t care about paying a little more in taxes? I remember when I moved up from the lowest tax bracket to the next lowest and I was all excited: more money meant more taxes, sure, but it still meant more money.

I really want to hear from people on this because my goal is to understand. If you’re going to spout Democrat/Republican party lines, please don’t bother me. If you want to try to explain it to me like I’m a five-year old, then please do because I’m stumped.

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I’ve read a lot of books about investing, and the general assumption that’s made for long-term investors is that the market will return an average of 8% per year. Some people get greedy and punch 10% into their compound-interest calculators, but if you look back far enough at the history of the overall market, you’ll find 8% is a much more accurate average.

Besides, it’s better to lower your expectations in case you’re wrong. When you’re 75 and out of money, it won’t do you any good to whine that your math was wrong.

The difference between 8% and 10% (and over time this is a HUGE difference), however, will rarely have anything to do with how good we are at picking stocks or knowing when to buy and sell them. As this Yahoo Finance story says, it’s all about luck. The article’s subtitle says it all: Start early, save aggressively, and hope.

A study by Ibbotson Associates found that the amount of money you make in a given 30-year period changes dramatically.

For instance, $100,000 invested in 1946 would have grown to about $1.15 million in 1976, but the same amount invested in 1976 would have delivered about $2.27 million in 2006.

If you’re lucky, you’ll be alive during a 30-year period where the stock market in general has “a good run.”

It might be pretty scary to think that your retirement is more dependent on luck than on your stock-picking prowess or your ability to re-balance your portfolio every year. But hey, that’s investing for you.

Even Warren Buffett hints at the important role that luck plays in our lives, and he’s one of the greatest stock pickers in the world.

Beyond Investing

The more I thought about this, the more I realized that luck plays a HUGE role in our lives. And that’s kind of scary. What if you work hard, do your best, say all the right things, make all the right moves, and you don’t get any luck coming your way? What if you’re struck with insurmountable bad luck that keeps you from improving yourself and your life?

It’s a depressing thought.

When I look back at the jobs I’ve had and the bosses I’ve had, I consider myself incredibly lucky. They have each contributed to my growth as a person and as an employee—I wouldn’t be where I am today without them.

For example, three years ago I was working in publishing at a job I didn’t really like. But my co-workers were awesome and my boss was the best. The job made me realize that I needed to get out. So I did: I got a job as a writer (thanks mostly to this blog) for a company that was starting a new site that taught people how to invest.

That situation propelled me into something totally different: first as an ad copywriter (which is/was awesome) and then a position as a product manager. If I would’ve applied for a job anywhere else as a product manager back then, I would’ve gotten laughed out of the room—I didn’t have any experience and I didn’t even know what that was. But because of some of the work I’d done in my own projects (this blog included), I had a teeny little sliver of experience in my background.

And my bosses had faith in me. So they took a chance and gave me a shot—without that chance I would’ve been let go a long time ago.

I was lucky.

What Can We Do?

The cliché phrase here is to be ready to receive good luck. Just like a minor-league baseball player has to be ready to take advantage of getting called up to the big leagues to make the most out of the opportunity, that’s what we all have to do.

We need to be in a perpetual state of readiness.

Or as a guy on MTV once said, “If you stay ready, you ain’t got to get ready.”

Image by kaibara87

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Welcome to the August 16, 2010 edition of the Carnival of Money Stories! There’s no better way to learn new ways of saving or making money than by hearing how other regular people like ourselves are doing them. Think about it: business schools are obsessed with case studies and lawyers use previous “stories” to cite precedent to make their cases. In short: what other people have done in the past and how they’ve done it is crucial.

With that, here are the most crucial stories for this week’s Carnival:

Investing

Big Cajun Man presents The Good Wine: A Personal Finance Parable posted at Canadian Personal Finance Blog. Wine and retirement should both get better with age, but sometimes things are a little “off.”

Credit

Julie Sherrier presents Is my new frugality anything like yours? posted at Taking Charge. Will these five new behaviors evaporate after the recession or will people learn their lessons?

Net Worth

GrrlScientist presents Free Money? posted at This Scientific Life. The saga of trying to clean up some unfair black marks on an otherwise solid credit report.

Joe Plemon presents Create Your “No” Policies Before You Need Them posted at Personal Finance By The Book. It’s important to have “the talk” about as many topics as you can to avoid weird situations like this one.

Silicon Valley Blogger presents Tracking Your Personal Net Worth posted at The Digerati Life. Interesting notes on the importance of anonymity in a world where everyone likes to share their net worth online.

Housing

Jeff Rose, CFP presents Dave Ramsey FPU 12 Real Estate and Mortgages posted at Jeff Rose. Get an inside peek at Dave Ramsey’s Financial Peace University and what he thinks about real estate.

J. Money presents Think You Could Live in a Houseboat? posted at Budgets Are Sexy. Living on a houseboat does seem pretty sweet, but I’m sure the reality isn’t as appealing…

Ryan @ CML presents How to Stage Your Home For Sale posted at Cash Money Life. Ryan has some good tips on what worked for him when he staged his home before putting it on the market.

Shopping

Madison DuPaix presents Back-to-School Shopping Tips to Stretch Your Budget posted at My Dollar Plan. Madison’s tips were impossible to follow when she was a kid, but now you can and should follow them.

Unclassifiable

FMF presents Something I Like: Applebee’s 2 for $20 posted at Free Money Finance. You have to give credit where credit is due: Applebee’s 2 for $20 is a pretty sweet deal.

PT presents Maintaining a Car Past 100,000 Miles posted at PT Money. PT just pushed his car over 100,000 miles and he has some tips on how to help you get this much use out of your car.

Images by derekGavey, Andres Rueda, respres, schizoform, DerrikT

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Brad Marley, who provided a great guest post on parenting last week interviewed me for his site, so if you’re curious to learn more about the mystery man behind this site, check it out.

I think I come off rather well, although it was interesting thinking about these questions because it made me realize a couple of things:

1. I really love books and haven’t been reading enough of them lately
2. Being interesting is very hard, but incredibly important

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I got a question from a reader and I really don’t know how to answer it, so with his permission I’m putting it up here to see what you all think.

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I’ve gotten some emails from readers asking to write a few words about Ramit’s Earn1k course so they can get my impressions of it. So today I’m covering one of the topics he emphasizes early on: failing fast.

Here’s how most of us expect to start making money on the side:

1. Brainstorm ideas of what to do
2. Create a list of 20 ideas
3. After much harrowing thought, narrow down to five
4. Think long and hard about which one of those five is “the one”
5. Pick out the “winner” and don’t stop until you’ve succeeded
6. Keep trying
7. If you fail, try doing it a little differently
8. Try again
9. Keep Trying
10. You can do it!

Ramit doesn’t roll like that. First of all, he won’t cheer you one like a self-help guru—he’ll tell it like it is and then leave it up to you to make it happen. If you are lazy or expect it to be easy, it’s your own damn fault.

Persistence is a great quality to have, but sometimes it isn’t the smartest. And when you’re starting a freelance business (or even a real business), it’s crucial not to overdo it on the persistence. Unless you are very clear on the type of life you want to lead (freelance interior designer) and aren’t willing to compromise, then you’re going to have to learn to fail fast.

That means making the following sequence happen as quickly and efficiently as you can, so you can repeat it over and over until you find something that works:

1. Brainstorm ideas
2. Choose one
3. Test it
4. If it fails, move on to the next one
5. Repeat

First of all, that sequence is shorter. Second, it’s much more efficient that knocking your head against the wall until you start to see some progress. You’ll wind up exhausted, frustrated, and dumber than when you started. But it’s important to understand that the odds of our first idea being wildly successful are very small. How many times have you heard a successful entrepreneur tell a horror story about a colossal failure in their past? It happens to everyone—at least the successful ones.

Failure isn’t something you might bump into—it’s something you most definitely will crash and burn into. So you have to be ready to get out of the fire and start over instead of trying to salvage the burning wreckage.

This Is Not Easy

Part of this is that we’re programmed to want to seem persistent. Few of us actually are, but if we quit after encountering some difficulties that makes us feel like quitters. And in our society, quitters are synonymous with losers. And losers suck. And none of us want to suck. Unless that’s your freelance idea—sucking—in which case my advice is to fail fast so you can move on to the next one.

An Example

Say you want to get a new job. You’re an accountant and you want to be a newspaper writer because you’ve always liked writing, you read a magazine article that makes it seem like your dream job, and you’ve had your head in the sand for the past few years.

You could find a job with a paper, quit your old one, and live it up. Right? A few months later you realize you’ve made a big mistake: newspapers are dying, the pay is crap, you haven’t written anything since that story about the sock and the drawer in first grade, and you’re only eating pasta and butter for dinner these days on account of the shrinking bank account.

What do you do?

You could “try harder” and “get better” to see if that makes a difference (it won’t). You could keep at it for a few years to “get some experience,” falsely assuming that once you do you’ll be able to command a higher salary. You could sit down one day and say to yourself, “I don’t care about money—I just want to be happy. I’m going to keep at this and somehow make it work.”

Which is fine, but it’s not very smart. Here’s how you should’ve done it:

Find a freelance/part-time position at a newspaper. Or even an internship. You do it while you still have your accounting job. Do you like it? How does the pay project if you did it full time? Do it for a month or two and after that make an executive decision: keep trying or kill the experiment?

You kill it and move on to the next thing—now you’re failing but you’re failing smart. What then? You start your own blog. One of the articles you read during your experiment talked about how blogs were making a lot of newspapers irrelevant. So you start your own and you write as much as you can, learn, and try to get better. A few months later you ask yourself again: is this worth doing? is it helping me reach my goals? I would hope the answer would be “yes,” since blogging is awesome and can only help you out in the long run.

But if it doesn’t, you kill it and move on to the next thing.

What This Has to Do with Ramit’s Course

Failing fast one of the pillars of the Earn1k course. Without it, you wouldn’t get very far. Even Chris highlights how important this is in his Empire Building Kit.

The key is that you have to fail smart and you have to fail fast, which means you have to put your idea through a rigorous process that will leave no doubt in your mind when it comes time to move on to the next thing. The last thing you want to have is a bunch of regrets about the newspaper career you could’ve had.

So to sum it up: fail smart, fail fast, and move on to the next thing. If you do it right and you’re persistent you’ll eventually find a winner.

This post was included in the Carnival of Financial Planning and the Carnival of Money Stories.

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This is a fantastic guest post from Brad Marley—it’s funny helpful, and you can tell he’s been paying attention. Brad is a technology PR professional in the suburbs of Detroit. When he’s not getting his PR on in his cubicle, he likes to golf and watch the Detroit Tigers. He’s currently trying to get his two-year-old to watch a full inning with him.

I couldn’t help but notice that Carlos is fretting over the imminent arrival of his first newborn. So I decided I would offer to try and ease his fears about soon being the sole caretaker of a tiny human being that will depend on him for everything, by sharing how his life will change when el niño arrives.

And, of course, by “ease his fears” I mean “feed his terror.”

After all, I’m also a father.

Here are five things that you can expect:

1. No More Sleeping In I was never a morning person. But that quickly changed when my first daughter arrived and started waking up at 6:30 on Saturday mornings. Who knew TBS plays back-to-back-to-back-to-back episodes of Saved By The Bell this early?
2. Jealous Of Friends With No Children Remember those spur-of-the-moment trips to the movies? The unplanned weekend getaways with your wife? Forget them. You have to put them on hold until the kid goes away to college, or gets pissed off at you for cramping their style and moves out at 16. Whichever comes first. For now, live vicariously through the friends who still have a life.
3. Hours Between Their Bedtime and Your Bedtime Are Gold I have never been so fiercely protective of a two-hour window than I am of the one between the time my kids go to bed and when I go to bed. Do not call or text me after 8. I will be relaxing on the couch.
4. You Will Begin To Understand How You Drove Your Parents Crazy My two-year-old loves to sleep in. When I have a difficult time  rousing her in the morning, I flashback to my Mom yelling at me to get out of bed because it was noon. I used to hate it when she did that. But now I understand. Sorry, Mom.
5. Getting Finances In Order Might Finally Take Precedent My wife and I were by no means standing on the edge of a financial sinkhole when our first baby arrived. But we realized that if we didn’t want college and other expenses to take us by surprise down the road, we should get our financial house in order. It still isn’t perfect, but having set up ROTH IRA’s and 529′s now will only lessen the financial stress down the road. And the little peanut lying in the crib was the impetus.

Of course, I love my kids. But there is no doubt that life changes completely when they arrive. But the only way to really understand what I’m saying is to, well, have them.

And, sometimes, the only way to cope with the responsibility of having them is to plant your tongue firmly in your cheek and write about it.

I hope this guide helps all soon-to-be parents out there.

This post was included in the Carnival of Money Stories over at The Financial Blogger.

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Very exciting times around here as I am ecstatic to announce that I’ve been published in a magazine for the very first time. I always wanted to write something worthy of being in a magazine, I just always imagined it would be an exposé or some piece about baseball and how awesome it is.

Instead, my very first published piece is about money. Actually, you may have already read it—Five Money Ratios to Live By appeared on Wisebread back in March. I guess an editor for US Airways Magazine read it, liked it, and wanted to put it in the magazine (which you can read online here). Sweet!

I’m adding some scans of it because that’s what people do when they’re featured in print.

Obviously, the article is longer than that, but what’s the point of scanning the whole thing in here? That’s a bit much.

On an interesting aside, I’ve already gotten one email directly because of this from someone pretty exciting (it’s not Michael Lewis), but more on that later.

Image by notsogoodphotography

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I’m tired.

It’s 5:42am right now and I don’t have to be at work for another three hours. I’m tired and I feel like I’m not getting anything done. It’s not that I haven’t made a list—oh I have a list—it’s just that my list is too long and I’m trying to get too much of it done at once.

Diversifying one’s income was one of the first things I learned when I began blogging about money—and it’s a great tip—but right now I feel like I’m overdiversifying myself, my income, and my life.

Here’s what I have on my plate right now:

• I write the Cubs Fan Report on the weekends (write most of it at night, get up at 6:30am Sat & Sun to polish up)
• I write a weekly article on Wisebread
• I try to write at least once a week here on The Writer’s Coin (used to be every day)
• I try to write once a week on Applied Analytics
• I try to write one guest post a month on another site
• I’m doing case studies for three different “clients” to drum up business for Applied Analytics
• I’m putting together my first ever product launch—the Making More Money guide, which is all about geting a raise at your current job or getting a bump by switching jobs
• I’m trying to get people to answer my super-fast survey to make the product launch awesome
• I’m going through Chris Guillebeau’s Empire Building Kit (daily emails, lessons, videos, etc.)
• I’m doing Ramit’s Earn1K program, which is basically a college course without the boring parts
• I have a full-time job
• I am a full-time husband to M, who rocks it
• I am expecting my first child in September, which is a full-time job in terms of anxiety, stress, and decision making
• We moved into our new place three months ago and there’s always stuff that needs to get done/bought
• I play two games a week on a baseball team here in the city

Damn!

Writing all that down kind of sums it up, doesn’t it? It’s pretty hard to be laser focused with this much stuff on my plate—that’s pretty obvious. But I also feel like I need to tackle it all at once before September hits, because I don’t know how I’m going to get anything done when the baby comes.

[note to self—add one more bullet: email other bloggers who have kids to ask how they did it and what tips they have for me]

I’m run down right now. The weekend, which is when I’d typically catch up on my sleep, had now become an exercise in sleep deprivation. Last weekend I took a nap in the middle of the day for the first time in years.

Fear not! I’m not just complaining here—I think this is going to be cathartic for me. Writing all this stuff down makes it pretty obvious I need to prioritize and attack one step at a time if I want to get any of this done.

First thing’s first: I’m going on vacation for a week. Taking a break is crucial and I think this is the perfect time. I can step away from the pressure of producing and publishing (and working!) and just think about these projects, where they fit in, and what I want to take on first.

You know how they say you should write posts that are useful to your readers? Well this one is useful to myself, so thanks for listening.

Image by dominiqs

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