It only takes about one minute and think of all the paper you can save!
Go to YellowPagesGoGreen and provide your address and information to opt of receiving those pesky phone books (they would always just pile up until I had about 3 or 4 when I would finally say too much and throw them in the recycling bin). After all, when was the last time you used a phone book for its intended purpose? (I have used my to stand on to reach the top shelf most recently) You can find better and more up to date information on the internet most of the time anyway 
So when can a recession (perhaps?) and decreased consumer spending can be a good thing? When it means great deals! In the event that stores can’t sell their inventory, they lower the prices on items (basic supply and demand–less people spending money means prices must decrease to compensate). Being a big fan of online shopping and bargain hunting I have been keeping an eye on various websites waiting for a good sale.
Last week (despite my do-not-buy-new-things-and-keep-saving-to-invest) I made a purchase at Martin & Osa (only shopping the sales section). M&O is a subsidiary of American Eagle. AE’s clothing is a bit below my “age appropriate” range, but I think they have well made high quality clothing (and I know some people who work in their corporate offices, so I also like to patronize my friend’s businesses)–so I had been wanting to buy something from M&A for a while now. I went in the store a couple of times in the local mall, but the prices were a bit more than I like to spend and they sale selection was pretty picked over (as most chain stores in malls tend to be on weekends).
I ordered some clothing (pictured below) and I got a great deal. In part because they had a lot of stuff on sale, but I also googled for coupons and found a 20% off offer. And I qualified for free shipping. So all said and done I spent $112.
My favorite purchase was definitely the brown silk dress. All of the clothing felt a bit thin (I think they are supposed to be light weight for summer, but it was raining here when the packaged arrived), but overall everything felt well made. The shipping was prompt (and free) and you can return things for free (either in store or via the free shipping return label enclosed with your order). So all-in-all I was really happy with everything I purchased for just over $100.
Martin & Osa Casual V-Neck Top
Martin & Osa Silk V-Neck Sweater (purchased in black)
Martin & Osa Silk Dress
Martin & Osa Crewneck Top (purchased this top in white and heathered grey)
Part of the reason I chose to open my IRA at ShareBuilder was that there has been a stock I have been wanting to purchase but didn’t want to shell out the whole purchase price. Hence part of the appeal of ShareBuilder was that you could buy dollar amounts of many stocks including Berkshire Hathaway. For those of you not familiar with this stock, it is probably best to begin with a history lesson.
History Lesson
Warren Buffet is one of the more famous investors. In February, Forbes magazine listed him as one of the world’s richest people with a fortune around $62 billion. He is known for his value investing and finding great companies, as well as being frugal (he lives in the same house he has lived in since the 1950s, despite his increase in wealth). He was an entrepreneur at a young age, and consistently looked for opportunity. He is known for his sense of humor, and one of the things I like best about him is that he worked his way into his role and values quality and hard work. I really respect him and admire. Berkshire Hathaway is the company is founded and is now CEO and majority shareholder. You can find out more about him via wikipedia here.
Picking a Stock
So obviously I am a Warren Buffet fan. Part of the reason I like him so much is that he truly tries to find great companies and real value in stocks. He believes that you pick companies for the long term–great companies that will grow shareholder value over time (I am currently Built to Last
which talks about characteristics some of these types of companies). His company, Berkshire Hathaway started as a textile manufacturing company in Omaha, Nebraska; now the company deals largely in insurance and investments.
Berkshire Hathaway stock has averaged a 21% return over 42 years. (much more impressive than any index fund). The stock climbed to be the highest priced stock on the NYSE, climbing up to almost $150,000 per share (the stock has never split)! Berkshire class B stock (BRK-B) is 1/30 the amount of real Berkshire Hathaway shares and is currently trading around $3,800 or so.
So why did I want to invest my IRA in Berkshire:
- I like the company’s values and business (and Warren Buffet of course!)
- Since the company invests and owns shares in lots of other companies, it is kind of like a mutual fund and you get built in diversification
- Using ShareBuilder I could essentially buy shares I wouldn’t normally consider in a normal brokerage account (since I am investing smaller dollar amounts even buying 2 whole shares of the BRK-B was a bit more than I could contribute to my IRA for 2008–the limit is $5,000)
- The 21% return sounded much better than an index fund
- And the shares have gone down a bit in the last few months, so are a bit of a “deal”
I am really happy with my choice and I am excited to own a little bit (even if it is a fractional bit) of Warren Buffet.
When most people ask about setting up their 401k and which mutual funds to pick the easiest answer is to choose index funds. Since most people don’t actively manage their retirement accounts (most people just direct deposit and forget about it, they aren’t interested in following the ups and downs of the stock market) this is probably some of the best advice an average joe can receive.
Yes, it is true there are many mutual funds that can outperform mutual funds.
However, if you aren’t paying attention the churn (buying and selling stocks that is) can have all sorts of fees and interest associated that aren’t transparent by just looking at the annual rate of return.
In addition as fund managers can change, so can performance. Index funds tend to track with the market (which for the most part always trends upwards over time) and have very little churn (so fees and hidden taxes don’t eat away at your gains).
When ever you think about an investment it is super important to take fees into consideration because they can have a big impact on your returns.
Take for example my recent ShareBuilder IRA…..
Even though my investments are relatively small compared to many people (you have to start somewhere right?) I have been trying to do lots of research and make careful selections of each stock that I want. As I said previously, I opened a ShareBuilder account for my new IRA. I have elected to do the automatic investment plan (just like a 401k you put money in every month and it can be invested in the stock or your choosing–even if you can only own a fraction of the stock). Since I have the basic account there is a $25 yearly fee, and $4 per month commissions. This results in $48+$25 = $73 in fees every year (assuming you pick one stock per month to invest in). You can also elect to use the basic plan which charges $12 per month, or $144 year, but you can pick 6 stocks every month–which gives you a lot more diversification. Since I am only investing $5000 per year, $144 is only about 3% of total gains. Although, if you have a regular ShareBuilder account (which also works out to $144/year) the $25 fee is waived (you still have the $48 in purchase commissions if you deposit into the account monthly). While I really want a Foliofn account at $29 per month ($348/year) ($209 per year if you subscribe to their yearly plan) it is a bit more than I want to spend on fees (but like ShareBuilder it allows you to invest in stocks in dollar amounts, but does allow unlimited free trades twice daily)–although perhaps it is better than ShareBuilder which charges you $9.95 to sell any investments.
Thinking through all these fees and how they affect your returns is more complicated than it should be!
I read somewhere that the amount you spend as overhead on your investments should be less than 2% of your total capital. That means if you are only investing $5,000, you shouldn’t spend more than $100 on investing newsletters, brokerage fees, account fees, etc. That means that even for 1 year of an IRA I am going to be over paying in fees 
— now by year 2 if you contribute another $5,000 (the maximum contribution) your fees will be make a little more sense. Overall I still think ShareBuilder makes the most sense for me since I am just starting my IRA. I am considering opening a regular investment to waive the $25 annual fee on my IRA and invest a little bit of money with low commissions.
But all these fees certainly are certainly having an influence on my decisions!
Wherever you choose to invest, whether it is your employer’s 401k plan or your own little brokerage account, make sure you do research and factor in the fees associated with your investment. This will have an impact on your gains, and depending on how actively you manage your portfolio, should influence your decision about which vehicle makes sense for you. And for those of you that know very little about finance, I would still suggest index funds as a great start for your investments.
I recently came across this article in the WSJ: The Declining Value Of Your College Degree. It says:
College-educated workers are more plentiful, more commoditized and more subject to the downsizings that used to be the purview of blue-collar workers only. What employers want from workers nowadays is more narrow, more abstract and less easily learned in college.
To be sure, the average American with a college diploma still earns about 75% more than a worker with a high-school diploma and is less likely to be unemployed. Yet while that so-called college premium is up from 40% in 1979, it is little changed from 2001…
I thought this was really interesting, especially because it ties some of these effects to outsourcing and globalization. I know from my personal experience that I often use to outsource projects overseas where I can do them cheaper, years ago before telecommuting was a viable option I would have likely chosen a local junior contractor to do that work.
One thing the article does emphasize is the importance of passion, ambition and specialization. The article talks about one man who works doing “catastrophe bonds” and is so specialized that he has consistently seen his salary grow (and this has not been the case for other educated employees who have seen their market rate decrease over the last several years). This is a very important lesson for younger students to work hard and strive to hone their professional skills. While I can’t speak to the value of specialization (since I just tend to focus on hiring the smartest people I can with the right attitude), I can speak to looking for ambitious and hard working individuals.
The other key takeaway from this article is that there is no such thing as job security. Having worked at large corporations you often hear misguided employees say things like their position is great because of the “security”. But having eliminated positions and seen big branches and organizations close down, I know that these ideals are more of a falsehood than reality. When you think about your job you should not focus on stability as a driving factor. Steve Pavlina wrote a great article on why you should not get a job. I agree with him, you should try to find something you are passionate about and focus your energy on that–start your own company or join a startup–just don’t be complacent and fall victim to false security.
I have always thought that the reason places like Google catered food was because it was a nice perk for the employees. A year ago I would have never thought that I would be advocating this practice for all start-ups. So how did I change my mind? Let me tell the story.
Not all that many months ago we were working towards a deadline (for those of you new to this blog I work at a phenomenal startup, Delve, where I lead the engineering organization) and we started ordering dinners to provide an incentive for people to stay late. Food would arrive between 5-6pm and most people would stay until 7 or 8. Almost everyone ordered meals. When people might normally leave around 6, we found most people staying at least 1-2 hours longer than they had in the past because of the dinners (part of this was the guilt trip that if you order food you really ought to be staying late).
One day we were pushing against a tight deadline and the whole team was planning on getting up to go to lunch. So I said “Hey guys, let’s work through lunch and I will go pick up food for everyone.” The team was excited by this and everyone stayed through lunch (and later dinner) excited by the lure of free food. We decided to keep doing lunches for the next couple of weeks until our milestone.
We were able to hit our deadline with ease (something that we thought was unlikely) and it quickly came apparent that these meals were drastically increasing our productivity as a team. Of course part of it was because people were working more hours, but lunches had a much bigger impact than dinner ever did.
Why was free lunch so important? Well our team would all go pick up or eat lunch together. Even if it wasn’t the whole team it was usually more than 2-3 people, and that is a lot when we only have a 10 person team. By moving lunches in the office everyone would stay. Everyone would work through lunch and even though they were eating at their desks, people would eat together and socialize a little bit (we sit in an open space so it is easy to visit one another without getting up). Not having people leave the office to go pick up food made a huge impact on our productivity as a team.
So after our glowing success I considered suspending the program (since getting food from restaurants isn’t always cheap). However when I started working the economics, I reconsidered:
Developer Salary: about $75k or $35/hr
Average cost of a meal: $20
Cost savings in 1 year: $15 * 5 days * 48 weeks (assuming 4 weeks vacation) = $3600
With two meals: $7,200
over a team of 10: $72,000 or about 1 full time developer
So even though the meals are an increased cost, I believe that doing them is giving us close to the benefit of an extra head.
Although besides the cost benefit it also makes the developers really happy. They always talk about free meals being a great perk of the job. I also thinks it helps team unity since people spend more of their social time together as a team (lubricating relationships and making collaboration more efficient).
I would strongly suggest that you try it in your office with your team–at least for a while before a milestone and see if it works for you. I would have never believed it made this much of a difference if I hadn’t seen the impact with my own eyes (we have been doing this for about 9 months now with much success).
If your employer offers a 401k, then by all means you should make sure you are contributing (this is particularly good if they match your contributions, since that is basically free money you are missing out on if you don’t participate). If you don’t have a 401k though, you should definitely have an IRA (and yes, you can have both a 401k and an IRA–a Roth IRA in particular–but you have to meet certain requirements and not everyone is eligible). One of the best things about leveraging your retirement account is the tax benefits (and you miss out if you don’t have one of these accounts). In many ways 401ks are easier for people–the money is deposited pre-tax (allowing you to earn interest on the income you normally pay as taxes) and each individual can select from a set of investment vehicles (usually stocks, funds, bonds, and money market, but the actual options depend on the 401k itself). IRAs are a specific type of account where people can deposit after-tax money and allow those investments to grow tax deferred (or with Roth IRAs tax free), and some people can get a tax credit for their contributions (this means you can earn additional interest on money you would normally pay as tax).
As I am learning more and more about investments and getting the most out of your money I have been thinking about the role of retirement accounts and how they play into your overall money strategy. An IRA your income can grow faster with tax benefits and it is just like a regular investment account (you can buy stocks and mutual funds and the account has the same set of fees as a normal investment account). So this means you want have a regular investment account and an IRA account (or other retirement account). You should put as much as you can in your retirement account (because of the tax benefits)–that means as much as the government allows (for most of us that is $5,000 for 2008) or as much as you can afford (since in order to realize the tax benefits you shouldn’t withdraw the money early–which means you don’t want to put money in there you may need in the short term future).
The other important thing to think about has to do with the fees where you open your IRA. Since most stocks in there you may want to hold for the long term and not actively manage, there are certain sites that are better than others. You really have to investigate and weight factors like monthly/annual fees, cost per trade, and account minimums. For example, ShareBuilder allows you to make small monthly contributions and put that money into shares (they also have no minimum)–this is great for people just starting out to begin investing in stocks. This was the route I went, since I just started my IRA and have only this year’s contribution so far. [BTW I have a link where you can get $25 free for opening and account so email me if you want one] The new investing tool I am really excited about also has an IRA account option. Foliofn charges a monthly fee though, so I think that will eat too much into my profits until my IRA gets a little larger so I might rollover my ShareBuilder IRA there in a year or two. There are many others though, so do your research and find one that will work with your goals and plans.
As for what I am buying with ShareBuilder? That is what I am trying to figure out and will be updating in the coming weeks with my progress and decisions.
BTW, as promised here is what I ended up making at the bbq this weekend:
Tomato, Mozzarella, and Basil Tart
2 yellow onions thinly sliced
1 pint of cherry tomatoes, sliced in half
2-3 oz of fresh mozzarella
3 Tbsp of Parmesan cheese
fresh basil
ready-made pie crust
2 Tbsp balsamic vinegar
3 Tbsp of extra virgin olive oil
1 egg + 1 Tbsp milk for egg wash
Preheat the over to 350 degrees.
First put 2 Tbsp of olive oil into the pan. Cook the onions, stirring occasionally, until they are caramelized about 15-20 minutes. Once they are caramelized stir in the balsamic vinegar and remove from eat. Allow the onions to come to room temperature.
Coat the tomatoes with the remaining olive oil and season with salt and pepper. Roll out your pie crust to form a 8-10 inch circle. Spread the onion mixture over the pie crust leaving about 1 inch of space from the edge. Sprinkle the Parmesan cheese on top of the onions. Next sprinkle the tomatoes over the mixture and fold over the dough to form an ornate crust around the tart. Brush the crust with the egg wash. Bake for 30-45 minutes or until crust is crispy and golden.
Cut up the basil and mozzarella. Remove the tart from the oven and add mozzarella and basil on top of the tart. Let stand 5-10 minutes until cheese is melted. Cut with a pizza cutter and serve.
It turned out pretty well and I am definitely going to make it again (although it only fed about 4-6 people). I think it would also work well with goat cheese instead of mozzarella, and I think you could leave out the parmesan cheese if you wanted to cut calories. Puff pastry would also be a nice alternative to pie crust.
I also made a truffle mac and cheese penne pasta that didn’t turn out particularly well (so I won’t bother posting my recipe). One of the guests brought an orzo salad, and next time we go to a summer bbq I think I am going to try my hand at one of those. My next dinner party is in the second week of September and I am cooking for 4, so I need to think of something to make then….if you have any suggestions or good recipes let me know
I really need to get better at entertaining. I aspire to be more like Martha Stewart but with less pastels and more zen. I kind of miss cooking, and while I don’t spend money on eating out I find my simple meals like fruits, vegetables, and freezer meals tend to be more economical and efficient during the week. Perhaps I will find time to cook this weekend (and maybe even take a picture of it!).
This weekend I went to the Seattle Gift Show. My goal was to review some vendors and get ideas for an online drop shipping/retail site. I must say I was pretty unimpressed. There wasn’t a whole lot of vendors and the general opinion of people in attendance is that it wasn’t worth attending anymore since people are able to drum up business online and using the internet (which is preferable in favor of paying for a booth, travel, etc.). I am beginning to think that even thought I would be a fabulous buyer and good at picking out merchandise that finding vendors and organizing it is going to be harder than I expected. You really would think these things would be easy. I mean if I made a good I would want ever potential seller to be well aware of my product and want to put it on their shelves. I think I still have a lot to learn in this area.
So right now I am a bit sour on the idea of drop shipping, but I do think there is a ton of opportunity for an online retail site. I think baby shower gifts is still a great idea and I am thinking about putting together a site to sell them. I need to think it through a bit more and write a business plan.
While I was at the show I talked to about of girls who manufacture their own lines (one did accessories like scarves and necklaces). I was highly unimpressed (maybe that is why they were *at* the show instead of being online like others). However, I got to thinking if these girls could do it I definitely could. I have so many handbag ideas and if I could pick the materials and have them made I firmly believe I could create a beautiful product. Perhaps this is a better business idea. However, I know a lot more about running an online retail business (thank you Amazon) than I do about actually producing goods.
On other notes, I think I want to incorporate my LLC so I am going to start researching the ins and outs of starting a business (some people have mentioned incorporating in Delaware and Las Vegas). I bet there is a lot to learn and I will certainly post my findings. I have also got my Kaplan GMAT book (I didn’t borrow it from the library because I wanted to be able to write in it and keep it as long as I want). I read the first chapter and plan to take the diagnostic test this week and develop a study plan. My goal is to have a concrete plan laid out by Friday.
In my search to come up with passive income sources I have come across some skeptics. If you go to the Amazon web page for the The 4-Hour Workweek
there are tons of comments doubting the value of his passive income and outsourcing in the favor of traditional hard work. I also came across an article (from Awake at the Wheel) making the argument that this is not the way a person can really become “rich”. I was actually really impressed with the author’s thoughtful argument. In particular he had some great statistics I wanted to share:
“So, for those of you who aspire to fabulous wealth, here are some eye-opening facts about the richest 1% of people in the U.S….and how they got there. According to a recent SmartMoney report of The Harrison Group’s latest wealth survey:
- The number of pentamillionaires, people worth more than $5 million dollars (excluding home value), in the U.S. has quadrupled in 10 years to 930,000
- Only 10% inherited their wealth
- 70% of big-family fortunes are less than 13 years old…it’s mostly new money created by entrepreneurs.
- 80% started their own businesses or worked for a small-business that exploded.
- Most did not accumulate the bulk of their fortunes over time, but rather in a fairly short burst after years of hard work.
- Most of this new money is generated by risk-takers for whom “wealth is a byproduct of pursuing their passion.”
- For most, money was not much of a motivator. Solving a problem or improving on something that existed was.
- Only 10% of their wealth was attributed to passive investments.”
This got me thinking, how much is it worth to focus on passive income or would you be better off to just work very hard doing something you love? Passive income seems like a nice idea, and certainly people have had a lot of success, but it is true that even with lots of passive income sources it may never make you rich beyond your wildest dreams (whereas starting your own company certainly can if you dream big enough). To be honest I am not sure which approach is better; and I want to do both (of course I seem to always want to have my cake and eat it too).
I think the interesting thing is that even though I love money, I love solving problems more. Some people are the innovators (the ones that come up with new ideas), or the creators (the ones that like to build stuff), but I have always been more of a fixer (someone who fixes something broken). I think one of the reasons I find finance so interesting is ultimately to answer questions (although the risk part is a lot like gambling and I kind of like the whole risk-reward cycle).
Here is my plan: I am super committed to my current job at a startup, and I truly believe we will be really successful (and all signs are pointing to yes)–plus I am so proud of what we have built and accomplished I can’t imagine not seeing it through until the end. Even though I have very little spare time (I do work at a startup so I primarily live and breathe my job) I am going to work on thinking through some passive income sources (obviously the interest on my current savings, but also my new little iPhone application), and I am going to devote energy to my plan to start my own company (starting with my GMAT).
This is definitely some food for thought.
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