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I’m Back From My Break October 16, 2006

Personal finance requires a commitment to learning and a life long commitment, if you want to be financially free. So while I haven’t posted in a while, I kept up with my personal finance education. I’ve been busy working on keeping up to date on my budget, income statement, and balance sheet.

Since the last post, I’ve joined an investment club for young and aspiring millionaires, updated my net worth statement, and focused on work. My portfolio (401k, investment accounts, and bank account) was fairly flat when I last wrote, but the stock market has come back and is close to breaking 12,000.

Hope to catch up with you all soon!

$15.4million Dance Lessons vs. My $70/hour Lessons August 3, 2006

I saw this article in today’s Wall Street Journal about an investment banker at HSBC Hong Kong who paid $15.4 million for eight years (half of the amount up front) to secure unlimited Latin dance lessons from 15-time world Latin dance champion Gaynor Fairweather of the UK and her Italian husband, dancer Mirko Saccani.

Mimi Wong, a 61-year old widow claimed she was “looking for the last bit of glory in life.” Her extravagances are nothing new to Hong Kong, where there is said to be no shortage of big spenders. However, an Argentine dance instructor offering lessons there at a more modest rate of $70 per hour commented, “It’s just ridiculous. No one could actually take enough lessons to make it worth it.” Never mind the costs, dancing is serious business in Hong Kong and Wong is known for seeking perfectionism at any cost. She is now in court suing her instructors for the return of her prepayment following an embarrassing and threatening incident she suffered at the hands of Saccani at a mock dance competition. According to court documents Saccani shouted at her to “move your arse” and called her a “lazy cow” in front of fellow dancers. After this incident Wong came to realize the money involved for her lessons was “stupid,” “crazy” and “completely out of hand,” leading to a further falling out between them. Soon thereafter, she won a court order to freeze her instructors’ bank accounts. Although the publicity surrounding her obviously isn’t good, HSBC is standing behind its top Asia banker. A judgment in the court case is expected later this summer and in the meantime Wong is paying a new instructor $21,000 per month.

I know people can do what they want with their money, but this seems to be a case of ‘out of touch with reality’. I’m sure this banker has the means and money, but that’s a lot of lessons for 8 years. And at 61 years old, she’d be 69 years old by the end of her ‘lessons’.

I also took dance lessons with my fiancee before getting married so we look like we know what we’re doing. It was another wedding expense that I hadn’t anticipated, but it was well worth it. We had a friend who knew an incredible dance teacher who has been in those Gap clothing commercials a few years ago and in movies such as “Mona Lisa Smile” with Julia Roberts. He gave us the friends rate at $70 an hour. We had 6 lessons which was perfect for our first dance preparation. It was one more thing I didn’t have to worry about on the day of our wedding. It was well worth it in our minds. But then again, maybe that’s the way the super rich, like Mimi Wong thinks when she agrees to a $15.4million dance lesson…until she realizes that she paid enough money to feed a starving country.

The Wedding is For the Bride So Should She Pay for Her ‘Portion’? July 27, 2006

Weddings are great, but we all know that the bride is the focus of the weddings. If that’s true, what are bride’s costs vs the groom’s costs? I was reading the NY Times article about rising costs of weddings, and some additional costs in some weddings now add up to a lot. The one example that was given was that one bride wanted to release butterflies at the reception ($10,000 cost), but unfortunately, when released, they flew into a light installation that burned them and hundreds of them fell on the dance floor. It would’ve been a pretty sight in theory, but would you spend $10k on butterflies for your wedding? According to the NY Times, the average American wedding now costs $27,852, almost double the $15,208 spent in 1990, according to a study by the Condé Nast Bridal Group.

I’ve been happily married for three years. For our wedding, we spent $26,421, just under the average wedding today. I revisited our spreadsheet and my wife broke out the wedding costs between his, hers, ours. Here’s the breakdown:

I didn’t even notice that there was a breakdown, but it made me think about this. We both split the costs, so it didn’t even occur to me. When couples get married, everything is a joint cost, but there’s so much more to get for the bride:

For the groom:

Everything else you either own already or can borrow from someone (cufflinks, etc), and tell your groomsmen to wear their own black suit. Our joint expenses included the music, photographer, rehearsal dinner, invitations, marriage license, venue. So to answer my own question up above, to be fair, the wedding costs should be split equally, unless the parents want to impress their closest 200 friends (which didn’t happen for our wedding, thank god!). But brides need to think about so much more to look good for the groom. But if she’s looking good for the groom, shouldn’t the groom pay for it all? Now I’m talking in circles, but you get the idea.

Source:
To Avert a Fractured Fairy Tale, a Wedding Planner, NY Times, Published: July 23, 2006

I Used to Be Drowning in Debt July 21, 2006

I used to be drowning in debt and paid hundreds and hundres of dollars (who knows, maybe a thousand?) a year on credit card interest rates. Until one day, it just dawned on me that unless I changed my lifestyle, I would not only be treading in debt but the credit cards would slowly pull me under, until one day, I’ll drown and not be able to come up to gasp for air. I’m not sure what it was, it was just a sudden decision to not spend anymore, not worry about what other people thought of me, not worry about labels on clothing. When you’re young (16-25), what matters to most is what other people think of you and being accepted…and I’m a pretty self confident guy. Now that I’m in my early 30s, I don’t think about how other people look on the surface, but who they are. I hate the idea of “keeping up with the Joneses” because that’s essentially what I was doing when I was young. I tried to keep up with the rich kids who had trust funds and bought expensive meals, went on weekend trips to Vegas, and had supposed high profile jobs.

I spend every extra dollar on credit card payments and it didn’t seem like I was making much progress. When I realized that I was paying down a $1000 on cc payments but just treading, it was time to change. Paying down $1000 and not spending anything got me back and after years and years of almost drowning, I finally was on dry land.

For many Americans who are drowning in debt who are trying to keep up with everyone else around you, stop thinking about how other people judge you. Because the you’re the most important judge of yourself, not the dude who has a BMW 650i with the 18″ rims or the 16 year old whose parents throw their child a $100,000 sweet 16 party who thinks you’re lame because you don’t wear True Religions or own the latest Botkier Bag.

Urban Financial Etiquette June 27, 2006

Want to be a socially responsible financial etiquette friend? The Urban Etiquette Handbook article, in the June 26, 2006 issue of New York Magazine has some great rules for getting along with everyone in New York. There are some personal finance related ones as well (along with my take on them):

Who pays the bill on a date?
The asker pays, unless the woman does the asking—then the man should pay. If the check’s on the table and her suitor hasn’t moved for it, a woman should allow him a one-bathroom-trip grace period. If it’s still there when she comes back, she should split the bill but is entirely free to silently ruminate about what a cheap jerk he is. (For same-sex couples, the asker really does pay.)

I’m somewhat of a traditional person, so I agree with this one. The man should always pay. However, the woman should always offer to pay, as a courtesy. Men, if a woman offers to pay, never accept her offer.

Should the wealthier half of a friendship be expected to give more-expensive gifts?
In an ideal world, no. But in the real world, yeah, pretty much. A rule of thumb: Give according to your means, not the recipient’s. If you’re the richer friend, your impoverished friends will appreciate your generosity infinitely more than a cheap trinket you purchased so as not to embarrass them. If you’re the poorer friend—and you’re worried about being outclassed—get together with other friends of lesser means to pool resources on an item of greater value. Better still, spend extra effort on a thoughtful but nevertheless affordable gift that shows you’ve actually paid attention to your friends’ most obscure tastes and interests.

I’m not sure if I agree with this one. The less wealthy friend shouldn’t expect anything from the wealthy friend. If you’re close friends, both sides will offer friendship, not tangible items, right?

How do you pick restaurants and other social activities in circles that involve widely varying incomes?
Inviting the whole gang over for dinner solves some problems—the poor people won’t have to choose between missing a credit card payment or being treated, and the richer folk get a nice meal if you’re a generally decent cook. Of course, it creates an altogether new problem: In your sensitivity to everyone’s income issues, you alone wind up underwriting the entire evening. That’s fine some of the time, but for another alternative, choose an under-the-radar, inexpensive restaurant where everyone will feel cutting-edge— self-congratulatory hipsterdom knows no class boundaries.

I’ve been guilty of paying for my friends once in a while for no apparant reason, but it’s been a while since I’ve done that. I payed for thanking my friends for helping me move recently, that’s another story. There are plenty of affordable but hip restaurants, even in Manhattan.

What’s the best way to split the check in a group?
At a group meal, an equal split should be the baseline expectation: It falls to those who ordered more-expensive dishes to offer to pay more, not to others to pay less. Failure to partake in the appetizers or the wine can be cited as a reason to cut one’s contribution only if there was some socially sanctioned reason for declining (veganism, Islam, pregnancy). If you just got the soup and you don’t think that’s fair, well, think about whether it’s “fair” to make your friends eat dinner with a buzz-killing cheapskate.

This one’s a pet peeve of mine. I’ve witnessed too many times when a friend of a friend joins in a dinner and leaves less than they owe. On top of that, they duck out early hoping that no one will notice! If you’re among friends, it’s ok to do that as long as you acknowledege that you’re short $10 or something. My philosophy is that it eventually evens out among friends.

So do you have any other financial etiquette rules? Do you agree with the NY Mag’s etiquette rules?

Source:
The Urban Etiquette Handbook, from New York Magazine

Splurging on Sushi, Bad for Budget I know June 22, 2006

After seeing a couple of interesting articles this week, on the “sushification” of America and Tokyo’s Tsukiji market, I had a craving to go to my favorite sushi bar in NYC. I don’t go often, but when I do, I tend to splurge on sushi. I’ve been fortunate to have great sushi from a young age, so I can’t bring myself to go to less expensive sushi restaurants. Sushi tends to be either really fresh (i.e. expensive) or just ok (i.e. cheap and not as good quality). For me, splurging on sushi is worth the cost. I’ve had mediocre sushi and got food poisoning or came away disappointed. I know it’s bad for the budget but for the rest of the week I’ll be making up for it by cooking.

It seems as though there’s a sushi boom out there. Did you know that there are thousands of sushi restaurants in Russia? In the USA, there’s now a sushi counter in Wal-Mart! Compared to the $500 chef’s selection dinner at Masa in Manhattan, my once-every-two-month sushi splurge won’t break my bank account at $35/person.

Are there food splurges you must have?

Sources:
~ The sushification of America, The Atlanta Journal-Constitution
~ Shrine to the sea, Chicago Tribune
~ Japanese Restaurants in Moscow

Generation Y Entitled To $50,000 Per Year Jobs? May 13, 2006

Saw this article in the New York Post about how Sen. Hillary Rodham Clinton lashed out at the instant-gratification generation, saying young adults “think work is a four-letter word.”

“Kids, for whatever reason, think they’re entitled to go right to the top with $50,000 or $75,000 jobs when they have not done anything to earn their way up,” the Dems’ 2008 White House front-runner said.
…
“A lot of kids don’t know what work is. They think work is a four-letter word,”
…
“We’ve got to send a different message to our young people. America didn’t happen by accident. A lot of people worked really hard. They’ve got to do their part, too.”

Gen Y’ers (born between 1978 and 1986), are in a culture that has a premium on instant gratification. Instant consumerism is said to be part of the Gen Y life. Is this generation raised to treat debt as a normal part of life? Rob Frankel, author of The Revenge of Brand X stated:

“Boomers bought stuff because they needed it; X’ers buy because they want it. Gen Y is less rooted in traditional social mores and ethics. They are easier targets, because they have grown up in a culture of pure consumerism. They’re more likely to buy because they see buying as a part of life.”

Generation X (born between 1965 and 1978) may be the ones who started feeling entitled to certain standard of living, but I think it’s unfair to label all Gen Y feeling entitled to $50,000 jobs right out of college. But seeing shows like My Super Sweet 16 makes me wonder about the Millenial generation (or whatever the generation after Generation Y is called). Is our society doomed to debt?

Source:
HILL SCOLDS LAZY GEN. Y
By IAN BISHOP, New York Post

How to Raise Spoiled Kids: Sweet 16 Party April 28, 2006


We all are trying to save on monthly costs, cut tax costs, or spend less to gather enough for a major purchase that has meaning in our lives, such as a home, college tuition, retirement, or emergency expense (at least those of us in the personal finance blog world and responsible spenders). I’ve been able to cut out $290 per month and counting, without noticing any difference in my lifestyle. But when I read about MTV’s ‘Super Sweet 16′ show about super-spoiled 16 year olds, I get sick to my stomach. I mean, all the effort by parents working and saving money for a secure future goes down the drain thinking about kids who throw temper tantrums because they want a party that will cost upwards of $200,000, goes down the drain. This behavior by children starts with the parents. One parent who is on the MTV show says:

“If you can afford to have a grand celebration, then why not,” said Dr. Kothapalli, who immigrated to the United States from India in the mid-1980’s. “It’s the American way. You work hard and you play hard.”

It’s no mystery that hearing this from parents results in kids like the one who says:

“We both want to lose three pounds,” said Priya, who received a Mercedes convertible and an assortment of diamond jewelry for her birthday. Her sister’s graduation gift package included a Bentley, diamonds and two homes in India.

“I was really surprised,” Divya said, “because I was only expecting a Bentley and one house.”

If you want to instill responsible money habits in your kids, they need some wisdom from parents about finance before they can become responsible citizens of the world, not to be wasteful. How sad when we are in a world where most people are dealing with poverty, environmental disasters, war, and energy crisis. I hope these parents who are raising these kids come to their senses.

Source:
MTV’s ‘Super Sweet 16′ Gives a Sour Pleasure
NY Times
By LOLA OGUNNAIKE
Published: April 26, 2006

MTV: My Super Sweet 16

Men Aren’t Giving Women Credit on Money Issues March 14, 2006

There’s an interesting article on men, women, and money over at CNN.

The gap between the financial issues that people care about most and what their spouses think they hold important may not be the Grand Canyon. But some couples will need an awfully big bridge to get across it.

For instance, our survey found that only 27% of men believe their wives think having the right investments is very important. Yet nearly half of women say they do care (approximately the same proportion as men).

Likewise, only 45% of men say that having cash stashed for emergencies is very important to their spouse vs. 67% of women who believe it’s crucial.

Women come much closer in gauging what matters to men. If anything, they tend to give guys too much credit, believing their husbands care more about paying off debt and saving for big purchases than men actually do.

When asked about their family’s income, both men and women say they earn more than their spouses believe they make, according to a study by Jay Zagorsky, a research scientist at Ohio State University. Overall, Zagorsky found, the typical husband says his household earns 5% more and is 10% wealthier than the wife says, while the wife reports that the family owes about $500 more than her husband says.

There’s a huge gap on money issues with men and women. It seems true with some of my friends and with my parents. My father never gave credit to my mom with managing money. He thinks that she doesn’t know anything about saving and only knows about spending. It’s partly true, but he’s also not helping the situation by not allowing her to learn about managing personal finances. As a result, my mom has no experience or knowledge on investing or retirement funds. He figures that he should worry about bringing home the money while she should take care of the family. It’s old school, and he’s worked hard to give the family a comfortable life financially, but at the expense of my mom’s knowledge with money. I think it’s a tough balance, but we should all encourage eachother to learn about money, so when emergencies arise, we’ll be better prepared.

Source:
Men, women…and money
By Pat Regnier and Amanda Gengler

A Craigslist Post on Relationships and Money March 6, 2006

This is one of my favorite postings I’ve seen on Craigslist related to relationships and money so here it is for your enjoyment.

Why this woman cares about a man’s money

I don’t get it. Why are CL men always complaining about women not paying for dates or judging them based on how much money they have? Who are these women? I have never met women like that. I am not friends with or related to any of these women.

Let me lay it out for you: I do care about how successful you are, however you define that in your own mind. But I don’t care about it more than any other area, and I don’t care about it for the reasons that you think:

1. Your ego
I am successful. With my career and my investments and my assets. I have a prestigious job. I am ambitious and I work hard. I have accomplished a lot at a young age. And I want a man who is not the least bit threatened by that! I also want a man that I can look up to and admire. It is only natural for me to want you to be bigger and taller and stronger and yes, at least a smidgen more successful than me. We are both more comfortable that way. It is only practical that we be reasonably well matched.

2. Our relationship
The two biggest reasons why relationships break up are sex and money. And having more money is not the solution. I just want it to be a settled issue. I want you to be happy and fulfilled in your chosen field and able to manage your money well. I never cared about this until I had a serious relationship that was ruined by his business failures and bankruptcy and lack of direction and constant stress about money. I would rather have a man who manages a modest income in a healthy way than a man who makes six figures and is hounded by debt and consumed by financial stress.

3. Our future together
I like to set goals and accomplish them. I am always working to be the best version of myself in all areas of life. Life is all about learning and growing, at least to me. So naturally, I am moving forward in the area of finances, career, etc. I don’t want to leave you behind. If we want to consider a long-term relationship, we need to make sure that we have similar or at least compatible goals, and that we can support each other towards those goals, rather than undermine each other’s progress.

4. Maturity
If you say that you are ready to meet your life partner and that you are looking for commitment, but you have done no planning and preparation toward those goals, I’m not going to believe you. If you are in your 30s or 40s and you are still spending all your money on toys, I am not impressed. How we handle our money says a lot about out maturity in general. I am looking for someone who has long-term goals that he is sacrificing for today. I am doing the same. Men especially, link their identity with what they do for a living. It is a healthy sign to see someone growing and challenging themselves in the area of career, business, income, finances, etc.

Here is how I handle finances with someone I am dating:

1. I let him pay for the first few dates, which is not a big investment on his part. Coffee, drinks, a lunch, a couple of dinners or movie tickets. However, I do my part to respect his budget (follow his lead, never order expensive items, etc.) I never miss an opportunity to contribute, such as leaving the tip. And incidentally, I’m sure that I invest as much or more in the form of clothes and shoes and perfume and jewelry and haircut/color and pedicures/manicures, etc., etc. It is not cheap to look the way a man wants a woman to look! I bet you that we break even at the end of the day. :-)

2. After the initial stages, I start treating and buying and splitting the check and shouldering 50% of the expenses of our time together. The only exception is if he really wants to do something that I cannot afford, and if it is worth it to him for me to be there, I will let him pay (within reason). It is the same principle as spending money on food, drinks, decorations, etc. for a party and inviting guests to join you. It’s your choice. (And I have chosen to stay home at times, if I truly couldn’t afford to go.)

3. We may buy each other little gifts or surprise each other with little gestures, but I do not allow him to spend an inordinate amount of money on me. It is not appropriate. It would create an unhealthy imbalance in our relationship. Neither of us should feel a financial obligation to each other. We should both feel at all times that if we walked away, no one was taking a greater loss.

4. On the other side of the coin, I won’t allow him to take advantage of my generosity or mooch off of me. It does neither of us any good. The price of me supporting him is his self-respect, and without that, we have no hope of a relationship (or of a rewarding sex life). Of course, things are different in marriage. It is like a business merger. We become a single “corporation.” If one of us is disabled or unable to contribute, the other takes up the slack. But while we are just dating, as a wise investor, I will not risk my income by investing it without adequate legal protection.

To the men who post on CL
To the men who complain about the “key words” that women put in CL ads, such as “ambitious” or “goal-oriented” or “established” or “financially secure”: why are you so threatened by that? If you have a job that you enjoy and if you manage your money well, you have nothing to be afraid of. You should be asking the same questions of us! Anyone, male or female, who has a consistent pattern of problems with paying their bills or with bad credit or with not saving or with living above their means should raise red flags! This is not healthy! It will create problems down the road!

I don’t care about your income
Men, let me be clear: I don’t care how much you make. It doesn’t affect me or my life. You may have a bigger house than I do or a fancier car, but you live in your house and I live in mine. When I go shopping, I bring my own bank card, so why should I care how much is in your account? If you are a man of integrity, honor, and compassion, I will be proud to be on your arm. If you are selfish, mean-spirited, and dishonest, no amount of money will get me to stay.

I don’t care about your status symbols
I have dated several millionaires (net worth, not income), and I find that they usually live thrifty, low-overhead lives. They drive used cars and wear unremarkable clothes. They spend their time working on projects, like remodeling a house, rather than looking glamorous or spending money. Far from being impressed by cars or boats or other status symbols, all that can be a red flag for me because it often means that you are deeply in debt. A few months without an income, a few unexpected expenses or losses, and the whole house of cards comes crashing down. Women, don’t be fooled by cars or Rolexes or such displays!

What does matter to me
While your income, your appearance, and even your choice of hobbies or music can tell me a lot about you, I do not base a decision to date you on these things. It would be very short-sighted of me to base a relationship on such transient things! Your income, job, appearance, fitness level, hobbies, activities, music, even politics etc. are different today than they were 10 years ago and different than they will be 50 years from now. What I really care about is your character. Who you are as a person. What makes you tick. What your goals and dreams are. We only become more ourselves as we get older.

I want to be with someone who knows who they are and what they want and where they are going. I want someone who can manage his life and is happy and fulfilled by his lifestyle and life choices. That is my definition of success.

I believe that the best relationship is one where both people were first independent, self-sufficient, and happy in and of themselves. Then, when they meet and come together to give to each other, it is a many splendored thing.

Source:
Craigslist posting
http://newyork.craigslist.org/about/best/sea/90160572.html