- Dora the Explorer is singing about cocaine. Is that why my kids have so much energy? #
- RT @prosperousfool: Be the Friendly Financial “Stop” Sign http://bit.ly/67NZFH #
- RT @tferriss: Aldous Huxley’s ‘Brave New World’ in a one-page cartoon: http://su.pr/2PAuup #
- RT @BSimple: Shallow men believe in Luck, Strong men believe in cause and effect. Ralph Waldo Emerson #
- 5am finally pays off. 800 word post finished. Reading to the kids has been more consistent,too. Not req’ing bedtime, just reading daily. #
- Titty Mouse and Tatty Mouse: morbid story from my childhood. Still enthralling. #
- RT @MoneyCrashers: Money Crashers 2010 New Year Giveaway Bash – $7,400 in Cash and Amazing Prizes http://bt.io/DDPy #
- [Read more…] about Twitter Weekly Updates for 2010-01-16
Twitter Weekly Updates for 2010-03-13
- Getting ready to go build a rain gauge at home depot with the kids. #
- RT @hughdeburgh: "Having children makes you no more a parent than having a piano makes you a pianist." ~ Michael Levine #
- RT @wisebread: Wow! Major food recall that touches so many pantry items. Check your cupboards NOW! http://bit.ly/c5wJh6 #
- Baby just said "coffin" for the first time. #feelingaddams #
- @TheLeanTimes I have an awesome recipe for pizza dough…at home. We make it once per week. I'll share later. in reply to TheLeanTimes #
- RT @bargainr: 9 minute, well-reasoned video on why we should repeal marijuana prohibition by Judge Jim Gray http://bit.ly/cKNYkQ plz watch #
- RT @jdroth: Brilliant post from Trent at The Simple Dollar: http://bit.ly/c6BWMs — All about dreams and why we don't pursue them. #
- Pizza dough: add garlic powder and Ital. Seasoning http://tweetphoto.com/13861829 #
- @TheLeanTimes: Pizza dough: add lots of garlic powder and Ital. Seasoning to this: http://tweetphoto.com/13861829 #
- RT @flexo: "Genesis. Exorcist. Leviathan. Deu… The Right Thing…" #
- @TheLeanTimes Once, for at least 3 hours. Knead it hard and use more garlic powder tha you think you need. 🙂 in reply to TheLeanTimes #
- Google is now hosting Popular Science archives. http://su.pr/1bMs77 #
- RT @wisebread 6 Slick Tools to Save Money on Car Repairs http://bit.ly/cUbjZG #
- @BudgetsAreSexy I filed federal last week, haven't bothered filing state, yet. Guess which one is paying me and which one wants more money. in reply to BudgetsAreSexy #
- RT @ChristianPF is giving away a Lifetime Membership to Dave Ramsey’s Financial Peace University! RT to enter to win… http://su.pr/2lEXIT #
- RT @MoneyCrashers: 4 Reasons To Choose Community College Out Of High School. http://ow.ly/16MoNX #
- RT @hughdeburgh:"When it comes to a happy marriage,sex is cornerstone content.Its what separates spouses from friends." SimpleMarriage.net #
- RT @tferriss: So true. "Nearly all men can stand adversity, but if you want to test a man's character, give him power." – Abraham Lincoln #
- RT @hughdeburgh: "The most important thing that parents can teach their children is how to get along without them." ~ Frank A. Clark #
Saturday Roundup
- Image via Wikipedia
Congratulations to Claudia for winning the $100 Amazon gift card.
This week started with my wife getting sick and ended with her passing it on to me. I hate being sick.
On a positive note, Tron is out this week, and is on IMAX 3D at a theater near me. I get to share a piece of my childhood with my son this afternoon.
Best Posts
When a guy named Dragon says, “Hold my beer a second,” you know something badass is about to happen.
Michael Moore’s Cuban healthcare lies propaganda is too much even for Cuba. Apparently, they are afraid the proles would revolt if they saw how good the ruling class has it in comparison to the 150-year-old rat-hole hospital the peasants are forced to use. But hey, it’s free!
I could think of worse ways to get laws passed than Last Man Standing. It would at least put a stop to frivolous crap that hurts everyone.
I had an eBay seller try to screw me once. I had access to a number of skiptracing tools at the time. When I sent him his phone number, his girlfriend’s phone number, his parents’ phone number, his place of employment, and all of those address, I got my refund the next day.
ChristianPF has a post on buying bulk herbs and spices. Not all spices can be stored for long, even in the freezer.
LRN Timewarp
This is where I revisit the posts I wrote a year ago.
4 Ways to Flog Your Inner Impulse Shopper was my first bondage-themed post. I still smile when I re-read it.
My post on cheap birthday parties is something I need to read every year. The party this fall wasn’t nearly as cheap as it has been in recent years.
And finally, my Grinch post on saving money on Christmas. My secret: buy less for fewer people.
Carnivals I’ve Rocked
First Steps – Ramsey Was Wrong was included in the Carnival of Personal Finance.
A Moment of Clarity was included in the Carnival of Money Stories.
Top 7 Reasons To Trade Forex Over Other Financial Instruments was included in the Festival of Frugality.
Thank you! If I missed anyone, please let me know.
Evil Interest
Everybody with a savings account or almost any form of debt has at least a passing familiarity with interest. How many of you actually know what it is, or even how much you are actually paying?
First, some definitions.
Principal is the term used for the amount of money you have borrowed.
Interest is the rent you pay to have that money. Interest is money-rent, expressed as a percentage of the principal. If you borrow $100 at 10%, you pay approximately $10 in interest. I say “approximately” because it’s just not that simple.
There are two kinds of interest: simple and compound.
Simple interest is called that because it is just that: simple. It’s easy to understand and it’s what most people mistakenly assume they are paying. With simple interest, the interest rate is only applied to the principal, never to the accumulated, or accrued, interest.
For example, if you have borrowed $100 at 10% annual interest, this is what your balance will look like:
- At the time of borrowing the money, you owe $100.
- After 1 year, you owe 10% of the $100, in addition to the original $100: $110.
- After 2 years, you owe 10% of the $100, in addition to the original $100 and year one’s interest: $120.
- After 10 years, you will owe a total of $200.
That’s simple.
On the other hand, in addition to five more fingers, you have compound interest. Compound interest complicates things considerably. With compound interest, interest is applied to the entire balance of what you owe; both the principal and the accrued interest are included in the calculation.
For example, with $100 at 10% compounded annually:
- Year 1: You will owe $100 + 10% of the original $100, or $110
- Year 2: You will owe $110 + 10% of the $110, or $121
- Year 3: You will owe $121 + 10% of the $110, or $133.10
- Year 4: You will owe $131.10 + 10% of the $110, or $144.41
- Year 5: You will owe $144.41 + 10% of the $110, or $158.85
- Year 6: You will owe $158.85+ 10% of the $110, or $174.74
- Year 7: You will owe $174.74 + 10% of the $110, or $192.21
- Year 8: You will owe $192.21 + 10% of the $110, or $211.43
- Year 9: You will owe $211.43 + 10% of the $110, or $232.57
- Year 10: You will owe $232.57 + 10% of the $110, or $255.83
That is a total of $155.83 in interest paid over 10 years, or $15.58 per year, for an effective interest rate of 15.583%.
To throw another twist into the mix, interest is rarely compounded annually. Monthly, or even daily, is much more common. With monthly compounded interest, the annual rate, or APR, is divided by 12 and recalculated every month.
For example, using the same $100 at 10% APR, compounded monthly:
Since the interest rate is compounded monthly, we will be using the monthly periodic rate, which is 10% / 12, or .83%
- Month 1: $100 + .83% of $100 = $100.83
- Month 2: $100.83 + .83% = $101.67
- Month 3: $101.67 + .83% = $102.51
- Month 4: $102.51 + .83% = $103.36
- Month 5: $103.36 + .83% = $104.22
- Month 6: $104.22 + .83% = $105.08
- Month 7: $105.08 + .83% = $105.95
- Month 8: $105.95 + .83% = $106.83
- Month 9: $106.83 + .83% = $107.72
- Month 10: $107.72 + .83% = $108.61
- Month 11: $108.61 + .83% = $109.51
- Month 12: $109.51 + .83% = $110.42
That’s $0.42 more interest paid the first year, and that number will continue to climb each year the interest is compounded.
It gets worse if interest is compounded daily, like most credit cards. If you see “Daily Periodic Rate” anywhere in your agreement, you are getting compounded daily. This same loan, compounded daily instead of monthly will yield $110.51 owed the first year. That $0.51 might not seem like much, but imagine it on a $10,000 credit card, or a $100,000 house! And that’s just the first year. Every year after, the disparity gets bigger.
Edit: The formula for calculating compounding interest is Principal x (1 + rate as a decimal / compounding term)compounding term. So, for $100 at 10% compounded monthly, the formula is 100 x (1 + 0.1 / 12)12
That’s the downside to compounding interest. There is an upside, if you have investments or interest-bearing accounts. If that’s the case, compounding interest is working in your favor.
If you save $100 per week, and manage to get a 10% return on your investment, you will have $331,911 after 20 years(with $104,000 contributed) and $2,784,424 after 40(with $208,000 contributed). That mean you will have tripled your money in 20 years, or vingtupled* it in 40 years.
That’s how you get rich. $100 per week for the rest of your life will leave you with a comfortable retirement, without missing out on life now.
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* Yes, it’s a real word**. It means a twenty-fold increase.
** No, I did not know that yesterday.
Filing Bankruptcy: Pride or Shame?
I’m a big fan of personal responsibility. If you’ve promised to do something, you should do it. With that said, it seems odd to some people that I don’t have an ethical problem with bankruptcy. For some people, it is the only option after a long series of problems.
Don’t get me wrong, it should be a shameful decision. Reneging on your word should never be a source of pride. It should be a difficult decision to make. A couple of years ago, I came very close to making that decision myself.
It should not be a reason to celebrate and it should absolutely not be a reason to behave irresponsibly. Some people don’t see a need to take care of their responsibilities because, when it gets bad, they’ll be able to file bankruptcy and make the creditors go away. They are abusing a safety net. That abuse hurts everyone. Credit card companies have to charge higher interest rates so the paying customers can cover the risk of those who default or file bankruptcy.
There is one prominent local bankruptcy attorney who files every 10 years, and has filed consistently for decades. He runs a thriving practice, so it’s not a matter of poor choices, it’s a matter of deliberately living beyond his means and screwing his creditors. He’s one of the slime-balls that give lawyers a bad name. He is one of the many who abuse a lifeline designed to save people from a life of destitution they didn’t ask for, and he does it to finance his extravagant lifestyle.
If you have found yourself buried in a debt you didn’t plan for, if life threw you a curve-ball that you are entirely unable to deal with, if you have to file bankruptcy, it’s okay. Really. When you go in front of the judge, have the decency not to enjoy it, and try to learn from the experience.
5 Ways to Change Your Spending Habits
If you keep doing what you’ve always done, you’re going to keep getting what you you’ve always gotten. One of the hardest things about getting out of debt is changing your habits. You need to break your habits if you’re going to get yourself to a new place, financially.
How can you do that? Habits aren’t easy to break. Ask any smoker, junkie, or overeater what it takes. There are a lot of systems to break or establish habits, but they don’t all work for everyone.
Here are my suggestions:
- Commit to just 30 days. I’m a big fan of doing new things for 30 days. If you can do it for a month, you can do it forever, no matter what “it” is. For just one month, don’t buy anything. I don’t mean avoid buying groceries or toiletries and I certainly don’t mean to stock up on new crap the day before your 30 day spending fast or rush out for a shopping spree on day 31. Just don’t buy anything for a month, no exceptions but the things necessary to stay alive and healthy. No movies, no games, no cars, no toys, and no expensive meals. Just 1 month.
- Switch methods. If you pay for everything with a credit card, restrict yourself to just cash. If you pay cash for everything, switch to a credit card. Breaking your long-established habits is a way to get used to spending consciously: taking the time to think about what you are doing, instead of just spending mindlessly.
- Identify your spending triggers. I can’t go into a book store and come out empty handed. So, I avoid bookstores. My wife has problems with clothing stores. A friend can’t walk out of a music store without some body piercing equipment. What are your triggers? What makes you spend money without thinking? Figure out what those things are and then avoid them like the plague…or the clap.
- Quit buying things for pleasure. Buying things makes us feel good. It sends a rush of endorphins through our bodies. The more we get that rush, the more we crave that rush, so the more we do to get it. You need to stop that. Before you buy something, ask yourself if it’s something you actually need, or if you just want a pick-me-up.
- Avoid shopping online. E-commerce sites make it far too easy to buy things at a moment’s notice. You don’t have to think about what you are doing or if you actually need whatever you are buying. You just buy. The best way too avoid them is to delete your credit card information from any site that save the information and delete the sites from your bookmarks. Whatever you can do to slow down the buying process will make it easier to avoid buying things, which can soon be stretched into NOT buying things at all.
Habits—especially bad habits—are hard to break. There is an entire self-help niche dedicated to breaking habits. Hypnotists, shrinks, and others base their careers on helping others get out of the grip of their bad habits, or conning them into thinking it is easy to do with some magic system. How do you avoid or break bad habits?
