Tag Archives: personal finance

Venn Diagram your work-life balance

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This is a very simple idea but I like it.

The second good idea is to use a Venn Diagram to improve your practice and/or your life. Basically, the circle on the left is your ideal practice/life. The circle on the right is your current practice/life…

The amount of overlap determines how happy you are. Drummond says if the overlap is 60% or more, you are likely very happy and unlikely to burn out. If it is 20% or less, watch out! You are very likely to burn out very soon.

The first good idea, by the way, is to create a “transition ritual” between your work and personal lives. I like that idea to, and have actually been doing it for many years without having such a good name for what I was doing.

bill negotiators

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I just learned of two companies that will negotiate with your cable company on your behalf, in exchange for a share of the savings. Shrinkabill.com and BillFixers.com.

There should be a lot of business opportunities out there like this because we have so many subscriptions and bills now and they are so complex and screwed up. Beyond utilities, you have screwed up medical bills obviously. Shopping around for homeowners and car insurance periodically can really pay off. Then there are simple repairs and maintenance that can lower energy and water bills. Property tax assessments can sometimes be challenged successfully. Mortgage and other lending terms can be negotiated, and if companies are not willing to negotiate they can be refinanced or consolidated. And yet most of us are too busy to spend time doing all this. It wouldn’t make sense to take time off work to do it, and we don’t want to give up our limited family and leisure time. But if there are businesses out there who will do it for you and it puts a little money in both your pockets that wasn’t there before, it’s a win-win.

 

how to think about human capital

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Here is a Morningstar study on how to think about your personal human capital in investment and retirement planning decisions.

Financial assets such as stocks and bonds are only one component of an investor’s total economic worth. Other assets, such as human capital, real estate, and pensions (e.g., Social Security retirement benefits) often represent a significant portion of an investor’s total wealth. These assets, however, are frequently ignored by practitioners when building portfolios, despite the fact that they share common risks with financial assets. This paper provides evidence that industry-specific human capital, region-specific housing wealth, and pensions have statistically significant exposures to different asset classes and risk factors. Through a series of portfolio optimizations we determine that the optimal allocation for an investor’s financial assets varies materially for different compositions of total wealth. These findings suggest that narrowly focused portfolio optimization routines that ignore human capital and outside wealth are insufficient, and that a holistic definition of wealth is necessary to build truly efficient portfolios.

stupid advice for 20 year olds

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Here is some really stupid advice for 20-somethings, making the rounds as a viral email apparently:

People who are saving in their 20s are people who don’t set their sights high. They’ve already dropped out of the game and settled for the minor leagues.

Your 20s are not the time to save; they’re the time to gamble. $200 a month isn’t going to make the dent that a $60,000 pay raise will after spending all those nights out networking.

When you’re 40, you’re not going to look back on your 20s and be grateful for the few thousand you saved. You’re going to be full of regret.

You’ll regret the experiences you didn’t take, the people you didn’t meet and the fun you didn’t have because you were too worried about a future that came and went.

Well, I just turned 40, so let me think back to my 20s. I was a particularly clueless 20-something in many ways, but somehow I built a career, saved some money, and had a lot of fun too. There were big expenses and small expenses. The big expenses were housing and transportation. I controlled the big expenses by living in small, cheap places and having a small, cheap car (and later, no car). That left me plenty of money to save, and plenty of pocket change to have a little fun. I am glad I had fun – I have no regrets, other than maybe having a little too much fun and getting behind the wheel once or twice when I shouldn’t have. I certainly don’t regret the “few thousand” I saved back then, which gives me and my family some piece of mind 20 years later. So that’s the advice I would give 20-somethings, if they ever thought they needed my advice – pick a profession, build a career, save, live in a small place, go car-free if you can, make some friends and have some fun. When you turn 40 you will like where you are.

risk and investing

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This blog is about looking at possible futures, not necessarily profiting from them. But of course, who doesn’t want to do that if they can? It’s not just about short-term profit, it’s about building a nest egg which is your personal resilience against whatever events the future holds. A nest egg is also about your personal choice to defer some happiness now for the possibility of greater happiness later.

This book looks promising to me. The author breaks risks into “inflation, deflation, confiscation, and devastation”. I haven’t read the book, but presumably he offers portfolio suggestions to deal with these risks.

Since I’m on personal finance today, here is a grab bag of other related topics and links.

One thing everyone can and should do right away is minimize how much the financial industry steals from us in the form of fees. Index funds are one way to do this. The case to go all-index is incredibly strong, but in case you don’t want to take my word for it, Vanguard makes the case every year. If you are the type to dig into numbers yourself, S&P has a free online data set here. Finally, this Economist column mentions a number of smaller startup companies that are providing some competition to the big banks and their ridiculous fees. Among them is TransferWise which says it allows people to transfer money abroad much cheaper than they have been able to in the past. I haven’t tried it yet.

Mr. Money Mustache Strikes Again

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My last post on Mr. Money Mustache has proven to be popular. Now he’s back with everything you could want to know about home energy efficiency. For example, how to monitor you energy use:

The Efergy Elite Combo system comes with a very small wireless clamp that sits permanently around the main input wires in my circuit panel and measures power consumption right down to the watt with 10 second resolution. You set it and forget it. This power consumption is then displayed on a wireless unit in my kitchen and also logged permanently online, where I can review graphs from my phone or computer…

By watching the display, I can see how much power it takes it takes when the fridge kicks on, or when I run the dishwasher, or flip on a bank of lights in the kitchen. It also helps me find phantom loads: when you think everything is off, but your household consumption is still over 100 watts, something is wrong. I tracked down three faulty smoke detectors that were burning over 5 watts each and replaced them with units that use under 1 watt. Then I discovered that my Yamaha amplifiers burn 25 watts each if you leave them on, even when there is no music playing. This was bad, because I was often forgetting them overnight.

The benefit of the Efergy is its ability to measure even direct-wired devices: alarms, dishwashers, your central a/c system, or the unwanted pipe heater that the previous owner installed in your crawlspace to prevent frozen pipes.. but then left on for 12 months of the year regardless of temperature (which would cost you $1902 per decade, in case you were curious).