Live Real, Now

The no-pants guide to spending, saving, and thriving in the real world.

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Be Happy With What You Have…

Life

…or you will never be happy.

An emoticon with a smile. For more emoticons i...
An emoticon with a smile.

A newer car, a bigger TV, a nicer house, a fancier phone, better tickets, more friends, more gadgets, more toys…more, bigger, better…whatever.

It’s all a disappointment.

Nothing on that list will provide happiness.  If that is your goal, you will spend your life miserable.  It’s not possible to buy happiness, either directly or indirectly through the accumulation of “stuff”.  A purchase may fuel your ego or trigger endorphins, but it is all temporary.  There’s no sustainable happiness in the “high” of the latest purchase.

The search for stuff pales in comparison to the search for meaning.  Find your passion and follow that. Chase that to the ends of the earth, and come back feeling fulfilled.  Feel something that will last longer than the drive home or the next product release.

Find contentment.  At some point there is a satisfying level of “enough”.   More than that, you feel empty.  Less, envious.   Find enough and stop there.   Find the level that allows you to do the things you need to do and some of what you want to do.  Find your balance point and be happy with it.

Living life constantly disappointed that you don’t have more is a sure way to live life disappointed. How do you find your balance point?

Also, have you started the Happiness Challenge?

Twitter Weekly Updates for 2009-12-05

Misc

  • Guide to finding cheap airfare: http://su.pr/2pyOIq #
  • As part of my effort to improve every part of my life, I have decided to get back in shape. Twelve years ago, I wor… http://su.pr/6HO81g #
  • While jogging with my wife a few days ago, we had a conversation that we haven’t had in years. We discussed ou… http://su.pr/2n9hjj #
  • In April, my wife and I decided that debt was done. We have hopefully closed that chapter in our lives. I borrowed… http://su.pr/19j98f #
  • Arrrgh! Double-posts irritate me. Especially separated by 6 hours. #
  • My problem lies in reconciling my gross habits with my net income. ~Errol Flynn #
  • RT: @ScottATaylor: 11 Ways to Protect Yourself from Identity Theft | Business Pundit http://j.mp/5F7UNq #
  • They who are of the opinion that Money will do everything, may very well be suspected to do everything for Money. ~George Savile #
  • It is an unfortunate human failing that a full pocketbook often groans more loudly than an empty stomach. ~Franklin Delano Roosevelt #
  • The real measure of your wealth is how much you'd be worth if you lost all your money. ~Author Unknown #
  • The only reason [many] American families don't own an elephant is that they have never been offered an elephant for [a dollar down]~Mad Mag. #
  • I'd like to live as a poor man with lots of money. ~Pablo Picasso #
  • Waste your money and you're only out of money, but waste your time and you've lost a part of your life. ~Michael Leboeuf #
  • We can tell our values by looking at our checkbook stubs. ~Gloria Steinem #
  • There are people who have money and people who are rich. ~Coco Chanel #
  • It's good to have [things that money can buy], but…[make] sure that you haven't lost the things that money can't buy. ~George Lorimer #
  • The only thing that can console one for being poor is extravagance. ~Oscar Wilde #
  • Money will buy you a pretty good dog, but it won't buy the wag of his tail. ~Henry Wheeler Shaw #
  • I wish I'd said it first, and I don't even know who did: The only problems that money can solve are money problems. ~Mignon McLaughlin #
  • Mnemonic tricks. #
  • The Wilbur and Orville Wright Papers http://su.pr/4GAc52 #
  • Champagne primer: http://su.pr/1elMS9 #
  • Bank of Mom and Dad starts in 15 minutes. The only thing worth watching on SoapNet. http://su.pr/29OX7y #
  • @prosperousfool That's normal this time of year, all around the country. Tis the season for violence. Sad. in reply to prosperousfool #
  • In the old days a man who saved money was a miser; nowadays he's a wonder. ~Author Unknown #
  • Empty pockets never held anyone back. Only empty heads and empty hearts can do that. ~Norman Vincent Peale #
  • RT @MattJabs: RT @fcn: What do the FTC disclosure rules mean for bloggers? And what constitutes an endorsement? – http://bit.ly/70DLkE #
  • Ordinary riches can be stolen; real riches cannot. In your soul are infinitely precious things that cannot be taken from you. ~Oscar Wilde #
  • Today's quotes courtesy of the Quote Garden http://su.pr/7LK8aW #
  • RT: @ChristianPF: 5 Ways to Show Love to Your Kids Without Spending a Dollar http://bit.ly/6sNaPF #
  • FTC tips for buying, giving, and using gift cards. http://su.pr/1Yqu0S #
  • .gov insulation primer. Insulation is one of the easiest ways to save money in a house. http://su.pr/9ow4yX #
  • @krystalatwork It's primarily just chat and collaborative writing. I'm waiting for someone more innovative than I to make some stellar. in reply to krystalatwork #
  • What a worthless tweet that was. How to tie the perfect tie: http://su.pr/1GcTcB #
  • @WellHeeledBlog is giving away 5 copies of Get Financially Naked here http://bit.ly/5kRu44 #
  • RT: @BSimple: RT @arohan The 3 Most Neglected Aspects of Preparing for Retirement http://su.pr/2qj4dK #
  • RT: @bargainr: Unemployment FELL… 10.2% -> 10% http://bit.ly/5iGUdf #
  • RT: @moolanomy: How to Break Bad Money Habits http://bit.ly/7sNYvo (via @InvestorGuide) #
  • @ChristianPF is giving away a Lifetime Membership to Dave Ramsey’s Financial Peace University! RT to enter to win… http://su.pr/2lEXIT #
  • @The_Weakonomist At $1173, it's only lost 2 weeks. I'd call it popped when it drops back under $1k. in reply to The_Weakonomist #
  • @mymoneyshrugged It's worse than it looks. Less than 10% of Obama's Cabinet has ever been in the private sector. http://su.pr/93hspJ in reply to mymoneyshrugged #
  • RT: @ScottATaylor: 43 Things Actually Said in Job Interviews http://ff.im/-crKxp #
  • @ScottATaylor I'm following you and not being followed back. 🙁 in reply to ScottATaylor #

Evil Interest

Finance

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?

Debt

 

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.

—

* Yes, it’s a real word**.  It means a twenty-fold increase.

** No, I did not know that yesterday.

 

The Best Financial Advice I Ever Received

Finance

Read through any financial book, newspaper, magazine, or blog and you’ll find no shortage of advice.  It seems everyone has their own opinion on what you should be doing with your money.  One book tells you to invest in real estate.  Another says index funds.  Another says tax liens.

After awhile it can become pretty frustrating trying to figure out what exactly is the best course of action.  If all these experts have different opinions, whose advice do you trust?

Personally, the best financial advice I ever received didn’t come from a financial guru.  It didn’t come from a personal finance book or magazine.  It didn’t come from the Wall Street Journal or the New York Times.

It came from my dad.

I was probably about eight or nine years old and I was sitting on the floor playing with my Star Wars action figures while he sat in his chair flipping though a trade magazine.  Out of the blue, he asked me for ideas on what kind of products he could sell for extra income.

Being an 8 year old boy the only things that came to mind were whoopee cushions and magic sets.  But that wasn’t exactly what my dad had in mind.

“Why do you want to sell stuff anyway?” I asked him.

“To make extra money.  Gotta keep food on the table,” he replied.

“But you already have a job.  Just ask for a raise or something if you need more money.”

My dad just shook his head.  And then he sat me down and gave me the best financial advice anyone has ever given me.

“Mike, my boss doesn’t give a damn about me.  He cares about himself and his own job.  If it helps him to have me around then that’s good for me.  But if he decides he’s better off without me, then I’m gone.  That’s the way it is.  It will be the same when you get older and get a job.  You’ve got to look after yourself because no one else is looking out for you.  You can’t rely on your boss, or the government, or anyone else to help you look after your family.  You’ve got to take the bull by the horns and do it yourself.”

Now, my dad wasn’t a financial guru.  In fact he was practically broke when he died.  Several years after we had our talk his company decided they could hire someone younger to do his job for a lot less money and they laid him off.   Several attempts at entrepreneurship failed and he ended up burning through the family savings while racking up debt.

But his words still echo with me today.  I harbor an inherent mistrust of corporate America and the knowledge that no matter how well I perform my job I could be let go without warning if they decide to send my job overseas to India or the Philippines.

But my father’s words also fill me with a need for independence and the need to build multiple streams of income to protect myself against the loss of one.  Without that little speech all those years ago I might not have learned how to make websites to supplement my income.  And I wouldn’t be progressing toward my ultimate plan of quitting my day job so I can focus solely on my own business while having the freedom to spend more time with my family.

Most importantly, I have goals and a plan to reach them.  Without that I would be like so many of my friends who march off to work day after day with no real sense of power or purpose.

What about you?  What was the best financial advice you ever received?

Written by Mike Collins of http://SavingMoneyToday.net

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Sunday Roundup: Reddit Rocks

Misc

Enthiran
Image via Wikipedia

Friday was my biggest traffic day, ever.   Mike‘s guest post, Brown Bagging Your Way to Savings, went slightly nuts on reddit.  For a few hours, it was in the top 10 on the front page, generating more traffic every half hour than I normally see in a day.  That was fun.

In other news, my kid is in the #2 slot for wrestling the heavyweight slot on his wrestling team.

30 Day Project Update

This month, I am trying to establish the Slow Carb Diet as a habit.   At the end of the month, I’ll see what the results were and decide if it’s worth continuing.   For those who don’t know, the Slow Carb Diet involves cutting out potatoes, rice, flour, sugar, and dairy in all their forms.   My meals consist of 40% proteins, 30% vegetables, and 30% legumes(beans or lentils).    There is no calorie counting, just some specific rules, accompanied by a timed supplement regimen and some timed exercises to manipulate my metabolism.   The supplements are NOT effedrin-based diet pills, or, in fact, uppers of any kind.  There is also a weekly cheat day, to cut the impulse to cheat and to avoid letting my body go into famine mode.

I’m measuring two metrics, my weight and the total inches of my waist , hips, biceps, and thighs.   Between the two, I should have an accurate assessment of my progress.

Weight: I have lost 25 pounds since January 2nd.   That’s 3 pounds since last week.  17 more to meet my goal for February.

Total Inches: I have lost 14 inches in the same time frame, down 2.5 since last week.

Best Posts

J. Money has launched an awesome new project called Love Drop.  Once a month, they go make a huge difference in someone’s life.   Wise Bread interviewed them yesterday.

Tip: Use the word “solved” in a google search to find the answers to tech problems.

If OMG and Awesome got drunk and made a baby with Optimus Prime, Arnold Schwarzenegger and Cobra Commander’s nastiest fantasies, the offspring wouldn’t be this good. Holy crap.  Major cheese alert.

Q. Why do some business lobby hard for excessive regulation in the name of protecting the environment or forcing people into decisions they disagree with, only to turn around and lobby for waivers to those regulations once they are passed?  A. Because it’s not about the environment or health or giving-a-crap.  It’s about the money.  When an established company pushes for regulations, it’s to keep upstarts from entering the market.  Regulations add barriers to entry.   Anybody who’s trying to force you to do something for your own good has a product to sell to meet that “need”.

LRN Timewarp

This is where I review the posts I wrote a year ago.  Did you miss them then?

Have you ever given any thought to the idea that debt is a social disease?  It’s taboo, you usually didn’t do anything nice to get it, and it’s hard to get rid of.

In case I haven’t made it obnoxiously clear, I’m more than a bit of a geek.  The post I wrote about D&D and personal finance should make it more obvious.

Carnivals I’ve Rocked and Guest Posts I’ve Rolled

Medical Costs and Choices was included in the Festival of Frugality.

How to Save Money On Anything was included in the Carnival of Personal Finance.

Mike from http://savingmoneytoday.net presented Brown Bagging Your Way to Savings, which is the post that went kinda nuts on reddit.  He also hosted my post, Resisting Temptation.

Thank you! If I missed anyone, please let me know.

Get More Out of Live Real, Now

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Have a great weekend!

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