.The Relative Value of Money

The Relative Value of Money

By Kevin  Financial Panther

There’s a concept that I’ve been thinking about over the past couple of years, especially as I’ve made this transition from a full-time, professional, real job, to a quasi-fake job as a blogger and gig economy worker. It has to do with a concept you could call the relative value of money.

When I think about what that means, it’s basically the idea that money you earn from one activity might be worth more to you personally compared to the money you earn from another activity.

In fact, it might be worth so much more to you that you’ll opt to spend your days earning money in that manner even if it means you’re making less money from an objective standpoint. This concept has really come into clearer focus to me over the past few years and I think it helps explain why I’ve made a lot of the work decisions I’ve made.

One of the weird things I’ve done consistently over the past few years is doing pretty low-level side hustles using sharing economy and gig economy apps. From an objective standpoint, it really didn’t make much sense for me to do all of this stuff. At the peak of my lawyer career, I was making $300 or more per day from my salary, obviously more than enough to live very comfortably.

And yet, even though I made all of this money, I still chose to spend my spare hours doing silly things like delivering food to people on my bike and selling stuff I found in the trash.

The common criticism I’d get was that doing this stuff was a waste of my time. The better use of my time would be to focus on my job and continue to progress in my legal career. Eventually, I could try to become a partner somewhere or just do something to continue to increase my salary, or at least to increase my prestige.

In truth, that’s probably what I should have done, at least if we’re looking at pure numbers. I could obviously make much more money as a lawyer than I could from all of the stupid things I was doing. But the few bucks I made doing my random gig stuff felt so much more valuable and rewarding to me compared to any dollar I earned from my regular paycheck.

The thing I’ve learned to value more and more is control over my life. I suspect that’s something a lot of people on the path to financial independence value too.

The money I made from my day job, however, was the exact opposite of control over my life. I had to be at the office at a certain time, do things that other people told me to do, and basically, plan my life around my job. It made me feel trapped.

A dollar might have the same objective value no matter how you choose to earn it. But how you personally value that dollar is another matter. I think that’s worth thinking about.

Thinking About The Relative Value Of Money

One of the podcasts I listen to pretty regularly is Tropical MBA, which I highly recommend you listen to if you’re the entrepreneurial type looking for some help and motivation.

To continue reading, please go to the original article at

https://financialpanther.com/the-relative-value-of-money/

.Should You Always “Protect The Principal?”

Should You Always “Protect The Principal?”

By Khe Hy   the creator of RadReads

Elon Musk was nearly broke in 2008, borrowing money from his homies to cover his rent. “About four months ago, I ran out of cash,” he stated during his divorce proceedings. His brother Kimball confirmed his precarious position, “Oh yeah. [He’s] in debt. More than broke.”

And then-girlfriend, Talulah Riley remarked on his physical condition: “I remember thinking this guy would have a heart attack and die. He seemed like a man on the brink.”

Yet six years earlier, Musk had personally pocketed a whopping $220 million when eBay bought Paypal. How on earth could he possibly end up in such dire straights? Why didn’t he protect the principal?

We all grows up with aphorisms that define our relationship with money. You’ve all heard folksy phrases like “Money doesn’t matter” or “If you have to ask the price, you can’t afford it?” And when it comes to protecting your baseline, even farmers know that you shouldn’t “eat your seed corn.”

Yet despite having hundreds of millions in the bank, Musk chose to put the principal at risk – every ** penny – because he didn’t want to pick a favorite between Tesla and SpaceX. He told Bloomberg’s Ashlee Vance:

“If I split the money, maybe both of them would die. If I gave the money to just one company, the probability of it surviving was greater, but then it would mean certain death for the other company.”

Putting all the principal on the line has paid off famously for Musk. But would that work if you had a smaller amounts of assets in the bank? Yes, protecting the principal seems like prudent strategy. But it can also be a self-limiting strategy when it comes to changing careers, becoming an entrepreneur and investing.

We should all lose our brokerage account passwords

In my money coaching practice, I ask my clients “If I stole 15% from your investment accounts, would you notice?” There’s the rare “Hellz yeah” from the penny-tracker whose multi-tabbed spreadsheet monitors the movement of every Latté. However, most clients wouldn’t notice this larceny for a handful of reasons.

Some know that the monthly and quarterly movements don’t matter (and that the best investors are those who forget that they even have an account).

Others (especially those with kids) may have lumpier expenses (i.e. tuition, life insurance, summer vacations) that obfuscate any linearity of cash flows. And finally, there’s also the avoiders, who explicitly choose not to know.

If you’re investing, your assets bounce around (sometimes a lot)

So if we accept that one’s net worth will bounce around, why is it that when faced with a life transition, our anchoring bias kicks in. In the same way we anchor to our “buy” price in refusing to sell a stock or home that’s lost some value, when we change careers we anchor to an imaginary red line. We protect the principal.

The longer I’ve been an entrepreneur, the less I care about protecting the principal. And it’s not because I’ve made more money (in fact, I haven’t.) I recently received an email from a concerned and puzzled RadReader about my decision to stay in the red — to fund RadReads out of my savings. Having been in similar shoes, he wrote:

How do you reconcile the values of independence and duty to family with not breaking even for so long. I believe that I owe it to my family to run my business at a cash profit every year, even though I could afford not to turn a profit for a while.

As he continued, I could relate to the tension between my own fulfillment and the sense of duty I have (particularly as the sole breadwinner) to my family:

To continue reading, please go to the original article at

https://radreads.co/protect-principal/

.You’re Thinking About “Financial Security” The Wrong Way

 You’re Thinking About “Financial Security” The Wrong Way

By Khe Hy the creator of RadReads.

“Nah, I’m going to wait a year.”

Every winter, my hedge fund manager friend stares at a new set of golf clubs, almost buys them, and then punts until the following year. Why? His three kids are self-sufficient adults, his fund’s doing well, and he’s not a big spender. But he’s got a nagging fear. A fear that one day he’ll be broke. And so, the golf clubs will have to wait. He’s waiting to reach an elusive goal: financial security.

Having spent 15 years on Wall Street, I’ve grown accustomed to these successful folks who are “bracing” for their worlds to come crashing down. They’re smart, humble, and often from modest roots.

They believe in “The Number,” a mythical amount in their bank account where they can stop worrying. But The Number never arrives.

Money Messes With Our Minds

Money is notorious for causing smart and rational people to make questionable decisions. Let’s start with the definition of financial security. We’d probably agree that it means the ability for you (and your family) to acquire shelter, food, clothing, and healthcare. Or more bluntly, to survive — no one wants to put themselves and loved ones in danger.

Think about the word survival. As I type it, my palms are getting sweaty and my heart rate is increasing. Survival triggers our threat-detection response,which has done wonders for us as a species from an evolutionary perspective, but may have outlived its usefulness in our modern society.

Think about your last major screw up at work. Did you think that you might get fired? Did you feel like your survival was at risk?

One of the benefits of modern society is that covering your basic needs is a pretty low bar. I’m going to go out on a limb and say that if push came to shove, many RadReaders’ survival would not be at risk.

I know what you’re thinking “Well, what if I got fired? I could end up broke and on the street.” That’s probably unlikely. Many of us could move into our parents’ places; or we could significantly downsize our homes/expenditures, and get a job that provided health insurance.

Many of those things sound unappealing. Moving in with mom and dad at 38 is not particularly crushing it. But it does meet the minimum threshold of our “ability to acquire shelter, food, clothing, and healthcare.”

Why’s this so confusing? Besides the fact that our threat-detection reflex impairs decision-making, we often confuse financial security and what I’ll call a life well lived.

To continue reading, please go to the original article at

https://radreads.co/youre-thinking-financial-security-wrong-way/

.What Do I Want My Money to Do For Me?

What Do I Want My Money to Do For Me?

Posted September 1, 2019 by Ben Carlson

Sometimes branding is everything in life.

Life insurance didn’t take off until they changed the name from death insurance.

Escargot sounds more appealing than eating snails.

Global warming might be more concerning to more people if they called it planetary destruction or something that’s not so warm and fuzzy.

Budgeting probably has the worst branding of any topic in the personal finance realm.

Most people HATE budgeting.

They hate the idea because it feels restrictive. They hate the process because it makes them afraid to admit where are their money is actually going. And they probably hate the word because budgeting doesn’t sound like something that’s fun to try.

It’s also a topic that doesn’t get enough play in the financial advice arena.

There is plenty of advice out there about markets and investing.

There are plenty of blogs about paying down debt and saving money.

There are very few people who give advice about how to spend money.

Most people assume budgeting is about saving money but it’s really about how you choose to spend your money. One of the better books I’ve come across on the topic is You Need a Budget by Jesse Meachum. Jesse does a wonderful job of re-framing the budgeting conversation.

He made three points worth highlighting:

Design your financial life around your priorities. There’s an old adage that personal finance people use that goes something like this: if you want to know where your priorities lie, take a look at your checkbook and your calendar. We might have to update this to say banking app instead of checkbook but you get the idea.

Meachum rightly talks about the importance of prioritizing your spending:

Without a budget you have no way to prioritize your spending. You often don’t even know where your money is truly going. You may stress about not being able to afford what’s important to you while you simultaneously spend on things you’d willingly nix if you could see the trade-offs. That’s the beauty of a (good) budget: it lets you see exactly how your spending affects the rest of your life.

The goal isn’t necessarily to track every expense down to the last penny. But you should have some sort of spending plan that takes into account your priorities, needs, and current financial circumstances.

To continue reading, please go to the original article at

 https://awealthofcommonsense.com/2019/09/what-do-i-want-my-money-to-do-for-me/

.How to Use the Compounding Technique to Reach Success

How to Use the Compounding Technique to Reach Success

By Sim Campbell

Imagine this: a wealthy man gives you two choices. He will gifts you a million dollars in liquid cash right now…or a penny doubled every day for 30 days. Which one would you choose?

“I’d take the million…gimme, gimme, gimme!”

I can see you salivating right now. But…not so fast.

Wouldn’t you rather consider the penny?

“C’mon. It’s just a penny.”

Ah… that’s where you’re wrong.

It’s just a penny – but that’s all you usually start out with. If you took the choice of the penny doubled every 30 days, you’d be a multi-millionaire at day 30. To the tune of 10 million dollars to be exact. Do the math if you doubt it.

“But that’s not possible!”

But it is possible. It’s the only thing that’s possible. It’s the slight edge.

The Subtle Power of the Slight Edge

The book The Slight Edge by Jeff Olson describes how small, seemingly insignificant choices have a massive impact on us down the line. He uses the example of the penny to get his point across sharply.

Continuous actions over time lead to vast advantages…or disadvantages. This “edge” is the differentiating factor between those who blow life wide open and those who find themselves getting tossed about like a leaf in the wind.

You see, our actions don’t occur in a vacuum. They build upon past actions of a similar nature.

You start with one. One becomes two. Two becomes four. So on and so forth. It gets easier to build off of a foundation.

This is how habits such as discipline are created.

Because of this…the slight edge is great! But – it works in the opposite direction as well. If you indulge in bad habits and self-destructive behavior, you will find it easier to do those things over time.

Your successes and failures compound on each other.

But here’s the thing: this is so subtle. By the time you realize what has happened – your results are already evident.

This is why success is not an accident. Sadly, failure is not an accident either. In fact, they’re separated by a fine line. The line is what you do or fail to do consistently over a given period of time.

 The Importance of the Slight Edge

To continue reading, please go to the original article at

https://wealthygorilla.com/compounding-technique-reach-success/ 

.15 Personal Finance Rules to Live By

15 Personal Finance Rules to Live By

The following is a guest post from Marc at VitalDollar.com.

Have you ever wondered what separates those who are successful financially with those who are not? Have you felt like your income should allow you to live a much more comfortable life than what you are experiencing?

Personal finance doesn’t have to be complicated. There are a few basic rules that you should follow, and if you do that, everything else falls into place.

This article covers some of the most basic and most powerful financial rules that should impact your everyday life.

1. Spend Less Than You Earn

Arguably, the most important financial rule is to spend less than you earn. Regardless of how much money you make, it’s impossible to get ahead if you’re spending it all. Even worse, you could be going backward and accumulating debt if you’re spending more than you earn.

Lifestyle creep is when your spending increases at the same rate as your income. Ideally, as you progress through your career your income will rise. If you’re able to minimize lifestyle creep and keep your expenses at the same level, you’ll be able to save and invest the excess.

Ultimately, how much you keep is far more important than how much you earn. Someone with a $50,000 income can wind up in a better spot than someone with a $500,000 income based on how much is spent and how much is kept.

2. Know Where Your Money is Going

Establishing a budget is common financial advice. A budget gives you control over the way your money is spent, which helps you to make the most of the money that you have.

While budgeting is important, it’s equally important to track your expenses. If you’re not tracking your expenses, you won’t know if you are truly sticking to the budget.

Knowing where your money is going is a critical aspect of managing your money wisely. If you haven’t budgeted or tracked your expenses in the past, it can be an eye-opening experience.

When you see how you are really spending money, you’ll probably be able to quickly identify a few areas where you’re spending too much and could easily cut back (with a little bit of discipline).

3. Avoid Impulse Purchases

Most people spend their money based on emotions. Impulse buys can be small things (like picking up a few items when you’re checking out at grocery store, or it can be bigger things like a timeshare.

Large impulse purchases can obviously have a damaging impact on your finances, but even the small purchases add up.

To get control over the small impulse buys you can commit to grocery shopping with a list, and sticking to the things on your list.

For larger purchases, get in the habit of waiting at least 24 hours (or longer, if possible) before making a buying decision. When you take time to evaluate the purchase based on all of the factors involved, you’ll often find that you don’t really want or need that thing that you almost bought. You’ll reduce buyer’s remorse and keep more money in your pocket.

To continue reading, please go to the original article at

https://www.freemoneyfinance.com/2019/07/15-personal-finance-rules-to-live-by.html

.Here’s A Really Unique Way To Own Gold

Notes From The Field By Simon Black

September 5, 2019   Bahia Beach, Puerto Rico

Here’s A Really Unique Way To Own Gold

Last week we dove into a series about different ways to own gold. And I explained in that first article why it’s a great idea to own physical bullion-- gold you can hold in your hand.

With physical gold, there’s no middleman standing between you and your wealth. And when properly stored, it’s very difficult for some frivolous creditor or out-of-control government agency to steal it.

When it comes to physical gold, I explained that I prefer gold coins over gold bars.

Gold bars are completely non-uniform. A typical 400-ounce gold bar (like the ones you see in the movies, or that you imagine are stacked up in Fort Knox) could weigh as little as 350 ounces, or as much as 430 ounces. They’re all different.

On the other hand, 1-ounce Canadian Gold Maple Leaf coins are generally all the same. They’re uniform… minted and crafted to the exact same standard.

The uniformity of gold coins like the Canadian Maple Leaf makes them much easier to buy/sell.

If you want to buy or sell a gold bar, it has to be weighed and assayed with special equipment first. But if you want to buy or sell a Maple leaf, it’s simple-- because the coins are pretty much all the same.

Now, there’s one special sub-category of gold and silver coins that are worth mentioning: collectible coins.

Collectible coins, just like Canadian Maple Leaf coins, have value because of their gold or silver content.

But collectibles also have additional value for their rarity.

Whereas the Royal Mint of Canada produces new Maple Leaf coins every single year, no one can go back in time to mint more Venetian gold ducats from the 14th century.  There are only a fixed number of those coins in existence.

Because of that, collectible coins sell for a significant premium to the value of their gold or silver content.

This concept of ‘premium’ is an important one: ALL coins, whether a rare coin or a bullion coin like a Canadian Maple Leaf, generally sell for an additional amount above the gold price.

That’s because, unlike a gold bar which is simply poured into a cast (and rather unevenly at that), a coin has a lot of craftsmanship that goes into the minting process. It’s more expensive to produce, therefore it costs a bit more.

That premium can be between $20 and $150 per coin.

To continue reading, please go to the original article at

https://www.sovereignman.com/investing/heres-a-really-unique-way-to-own-gold-25537/

.More Money, Less Happiness: When Money Makes You Miserable

More Money, Less Happiness: When Money Makes You Miserable

By  Michael Laurence    August 2019   

Money, the conventional wisdom says, doesn't buy happiness. Modern psychology seems to back this up, with studies suggesting that beyond an income of $75,000, money doesn't make you any happier.

This conclusion is simultaneously obvious and counter-intuitive.

As an abstract principle, most us acknowledge that money doesn't buy happiness. But, at the same time, we all want more of something material — a nicer house, nicer vacations, the ability to live in a certain neighborhood or eat at fancier restaurants — that we think would make us happier. (If you're J.D., you think maybe season tickets to your favorite team might make you happier.)

So, we're left with a conundrum. Or, rather, a series of conundrums: Does income in excess of $75,000 make us happier? And if not, why not?

When Money Makes You Happier

In answer to the first question, I believe that all else equal — and as we'll see below, this is a huge qualifier, as things are rarely equal — more money generally makes you happier.

To be clear, money won't solve every problem. If you're lonely or bitter or angry, for instance, more money won't make you any happier. But just because money doesn't solve every problem doesn't mean that money won't solve any problems.

Money can make many things easier, or better. With more money you can:

Build a nest-egg.

Pay off your house or car.

Go on more vacations.

Have more kids.

Be a stay at home parent.

Eat better food.

Retire early.

With more money, you can do any number of other things that people enjoy and that make them happier. And if you're a victim of systemic poverty, more money can change your world.

As much as we pay lip-service to the idea of money not making us happy, it often does, and it's okay to admit this. It doesn't make us materialistic or greedy to want retirement savings, a nicer home, a paid-off car, or a trip to Europe.

When Money Makes You Miserable

Assuming that you buy the premise that (in theory) more money should (generally) make us happier, it raises the question of why (in practice) income beyond $75,000 annually doesn't make us any happier.

I think the explanation for this seemingly irreconcilable conflict is that most people spend the extra income poorly. Most people use money ways that make them less happy.

To continue reading, please go to the original article at

https://www.getrichslowly.org/more-money-less-happiness/

.8 Common Causes of Debt — And How to Avoid them

8 Common Causes of Debt — And How to Avoid them

By Tim Lemke

Debt plagues millions of Americans every day. It is such a common problem that many of us don't even think twice about what we owe, or how we landed in such a predicament.

The simplest explanation is that debt happens when you spend more than you earn. But it's not actually that simple when real life steps in. Unexpected events, bad planning, and even a decision to pursue an education can leave you facing big debt that may take years to pay off.

By understanding some of the main causes of debt, we can make better financial decisions in avoiding it. Let's take a look at some of the worst offenders.

1. Medical expenses

Medical costs have long been one of the leading causes of bankruptcy in the United States. Even those with health insurance are not immune to medical debt. An illness, injury, or health condition can cause bills to quickly accumulate.

The Kaiser Family Foundation found that three in 10 Americans report that they or a household member have had trouble paying medical bills in the past year — 58 percent of which were affected in a way that had a major impact on their life. More than 60 percent of respondents claim their savings were wiped out. Another 37 percent turned to credit cards.

It's not easy to predict how your health could change in the future. Actually, it's almost impossible. But putting certain safeguards in place can help mitigate the risk of financial ruin.

Health insurance is the first step. And while premiums can be expensive, facing an illness or injury without that coverage would be infinitely more devastating. (See also: The One Question You Need to Answer to Choose the Best Health Care Plan)

It's also critical that you build an emergency fund. This savings cushion should ideally cover six months' to a year's worth of your living expenses. If the worst happens, you'll at least have something to fall back on. (See also: 7 Easy Ways to Build an Emergency Fund From $0)

2. Loss of income

Losing a primary source of income can severely hurt your bottom line. Maybe you were laid off or fired, or had a sudden decline in revenue for your business.

Maybe you needed to stop working to care for a child or older relative. Or perhaps your health took a turn, and you were forced to retire early or drop to part-time employment. When something like this happens, it's easy to find yourself overwhelmed by bills and expenses. Debt can quickly follow.

One of the biggest safeguards you can establish for yourself, again, is an emergency fund. Ideally, this fund can sustain you while you try to replace your lost income. Is your emergency fund as big as it should be?

It's also key that you try to live well below your means at all times, even when money is good. This means spending more on "needs" and less on "wants." This way, even if your income drops unexpectedly, you'll find it easier to get by at your current lifestyle without dipping into that emergency fund or creating new debt.

To continue reading, please go to the original article at

https://www.wisebread.com/8-common-causes-of-debt-and-how-to-avoid-them?ref=seealso

.Adding Value

Adding Value

Adam M. Grossman  |  September 1, 2019

NIKOLA TESLA was a brilliant inventor, with nearly 300 patents to his name. He also had some unique habits. Among them: Every night, before he sat down for dinner, he would ask his waiter for a stack of 18 napkins. He would then use them to carefully wipe down his silverware.

Even at the Waldorf Astoria hotel, where Tesla lived for decades and where the silverware was presumably clean, Tesla insisted on this time-consuming process before every meal.

The first napkin, and perhaps the second, might have ensured a somewhat cleaner set of utensils—and it probably gave Tesla, who had contracted a debilitating infection as a child, additional peace of mind. That’s what economists would call positive marginal utility. It served some use.

But beyond that, it’s hard to imagine that all that additional cleaning and scrubbing contributed much. It just took time. That’s called negative marginal utility. It consumed time without adding any value.

When it comes to managing your finances, I suggest looking at things through this same lens.

The financial world, unlike more scientific fields, is full of uncertainty. In many situations, additional effort won’t get you any closer to a better answer—just as wiping down the silverware for the 18th time won’t make it any cleaner.

This notion strikes many folks as counterintuitive. When we were children, we were taught to work hard—and indeed, in most endeavors, additional effort does yield a better result. But in the world of finance, it’s more nuanced.

Historically, when people talked about personal finance, they focused primarily on investment-related questions—which way the market was going, which stocks were hot and so forth. For years, these kinds of questions received the lion’s share of attention from both experts and everyday Americans.

 But research has shown that time spent on these questions often isn’t time well-spent.

Stock picking, market timing and economic analysis rarely yield positive returns. What’s worse, these activities also tend to leave investors with higher investment costs and bigger tax bills.

To continue reading, please go to the original article at

https://humbledollar.com/2019/09/adding-value/

.What To Know About Probate

Probate 101: What You Should Know About Probate (or Avoiding Probate)

Jessica Sillers   Sep 3, 2019

When you’re grieving, a complicated legal and financial process is the last thing you want to deal with. But often, that’s exactly what happens when families go through the probate process after losing a loved one.

Understanding the probate process can help keep you from getting caught by surprise.

Who takes charge of a will after someone dies? What happens if someone dies without a will? Is there any way to avoid a lengthy probate process and pile of legal paperwork?

We’ll break it down for you.

What Is Probate?

Probate is the legal process of administering a person’s estate after their death. If you have a last will and testament, probate will involve proving that your will is legally valid, executing your instructions and paying applicable taxes.

Having a clearly written will is one way to make the probate process easier on your loved ones. After all, your will doesn’t only specify who should inherit what. It also designates who you’d like to take care of your kids if both parents were to pass away, plus the executor who should fulfill the instructions in your will.

If you die without a will, the probate court will rely on your state’s intestate law to figure out how to distribute the person’s stuff. (You know how Prince’s heirs had trouble inheriting his assets because he didn’t have a will? Yeah, like that.)

Terms to Know

Legal proceedings often involve terminology that can be overwhelming when you’re already dealing with a lot. A few useful probate terms to know:

Decedent: The deceased person whose estate is going through probate.

Executor or personal representative: The person in charge of carrying out the instructions in the will.

Administrator: A court-appointed executor, if someone dies without leaving a will.

Intestate: A case where someone dies without a will.

Intestacy: State laws determining how to distribute such estates.

Letters testamentary: A document from a probate court authorizing the executor to start carrying out the will.

Notice of probate and notice to creditors: Notices that the executor has to submit, in writing, to the heirs (“interested parties”) and creditors.

Small estate affidavit, summary probate and/or summary administration: Documents or processes that can allow you to skip or shorten certain aspects of probate (i.e. distribute property without a lengthy court process). Estates below a certain value (depending on your state) are eligible for this.

Step-by-Step Guide to Navigating Probate Court

Your probate experience will be determined by your own state laws, but here’s how the process generally goes.

Step 1: Open Probate

An executor can’t jump right in and start passing along family heirlooms and inheritances. The first step is filing a petition with the probate court to open the process and “prove” the will. Until that happens, they’re not allowed to distribute or discard any property.

To continue reading, please go to the original article at

 https://meetfabric.com/blog/probate-101-what-you-should-know-about-probate-or-avoiding-probate