Sushi Money

The tech-mania is amazing to watch.   I’m a reformed early adopting tech-junkie who loved the latest gadgets when they first came out.  Heck, my first computer was a disk swapping Macintosh I picked up new-in-the-box in 1987.  That little machine changed my life- mostly for the better.  I subsequently bought a Powerbook laptop and a host of other Apple accessories until about 1998 when I couldn’t stand spending the money any more.  I went to the PC and have never looked back in terms of cost and interoperability.  Don’t get me wrong, I loved the Mac and may still get another when the time comes.  But my Windows machines have done a fine job for me over time at a lower cost.  Now, what I should have done back in the ’80’s is buy some Apple stock.  Every couple of years I would say that… I should have bought…. I should have bought… and here it is 2007 and I still haven’t owned a share in all that time.  Of course I never bought Wal-Mart in the early 1980’s when a friend recommended it to me.  Or the time I spent on a treadmill with another friend in the early 1990’s who really liked Starbucks and Microsoft.  But I did own Cisco for a while!  Around 1994 I bought several hundred shares… I knew they would be a great company… but those shares went away after liquidating some funds for family reasons.  I once looked at what they’d be worth now… that was not a good thing to do.  I look back and see that many opportunities presented themselves.  And many other things that I “consumed” along the way.  Somewhere in the last 7 years I got serious about my future and buckled down, and have made decent progress toward my retirement goals.  We all learn lessons- now I’m just trying to learn them a little faster, with less pain in terms of opportuntiy cost!

So where am I going with this?  I WANT AN IPHONE!  Okay, not really.  Well, yes really but I’m not going to get one.  I tried explaining all the cool things it does to my wife.  A raised eyebrow and a quizzical look told me she didn’t get it.  Or maybe she did, but thought half a mortgage payment was a little much for a neat little gadget that we don’t really need.  “What’s wrong with the phone you have?”  “Ummm… well… nothing I guess… but… “  Realistically, I’m a little more patient these days, or maybe a little more realistic?  I know at some level that the prices will come down, the bugs worked out and other products will come along that I’ll like just as much.  So I’ll wait to see how it all works out.  Our phone plan is now up however, and we are month-to-month with our current carrier.  I’m anxious to find a lower cost alternative… alas, it won’t be with the iPhone.  The plans sound great, but forking over $500+ for the gadget is too rich for me.  Hmmm… maybe Santa will be good to me this year…

This week we are trying to catch up… at home with cleaning and bills, outside with weeding and landscape care, and with the budget!  It’s amazing how fast you can spend money if you’re not careful.  Eating out is an incredible cost to the family budget.  I recently examined what eating out would cost for a family of three for a year… breakfast, lunch and dinner at average restaurants with bills for a single family meal ranging from $18 to $29.  It totaled over $27,000 for a year!  That’s an amazing number, and although we don’t eat out that often, we do eat out two or three times a week.  Just adding up those costs would probably make me cringe.  I had neighbors a few years ago that did eat almost every single meal at restaurants.  They said the enjoyed it, and didn’t like to cook at home.  I wonder if they understood the true cost of doing so?  Another area we need to watch is buying prepared meals at the grocery store.  Some of those meal packages are quite expensive, and effectively is like “eating out at home” based on the cost.  We are all so busy that finding time to “cook from scratch” can be a challenge.  I was discussing the issue with an aquaintance recently, and she told the story of a woman who was struggling to save for retirement as well as her child’s future education costs.  But she loved to dine out and didn’t see it as relevant to her savings and future goals.  But when asked if she was willing to sacrifice her child’s future education needs by eating out each day, she stated that she never thought of it that way.  Perhaps we simply need to examine the context in which we rationlize our spending.  What are we giving up in the future to save time, or enjoy doing something today?  It’s not easy to see a future goal as a tangible reality… but when it comes to saving, investing and achieving financial goals for retirement, we must try to understand how our actions impact our future needs.  What we do today affects how we may live tomorrow.  Of course, the trip to the new Cabela’s store the other day didn’t help my goals very much!  But every day is new… and catching up to achieve my future goals is something I’ll continue to work towards.  We can always do better, just like the Wal-Mart slogan…

There are lots of ways to save money while having fun with the family.  I’d love to hear of the different things families do to save money on entertainment.  We spent a day at Six Flags amusement park this week… and boy was it expensive!  I had not been there for over four years, and the prices are incredible.  How about a hamburger, fries and a drink for $12 bucks!  A $10 drink cup that offers free refills for $1.  Five bucks for a chance to win a large stuff toy… one throw with a football or basketball.  And of course, when we first arrived parking was $15.   You can save on $45 tickets by using Coke can coupons, or stopping at grocery stores that have partnership agreements.  Ours were $30 for adults with a free child ticket.  We went with relatives for the day, and just splurged.  But some of the more cost-conscious attendees had the right idea:  Bring a picnic basket and leave it in the car… then get your hand stamped and walk out of the park to eat.  Or drive somewhere to a restaurant and return to the park.  But they take advantage of our laziness… the walk from the park to the car is very long!  If you want to park closer it costs $20 or more.  So next time we’ll take food in the car, and walk a little more.  But it was a fun day… the rides and waterpark were great, the kids had fun, and we all were exhausted when we got home late at night.

We also go to major league baseball games during the year.  Just a few, but it can be really expensive if you eat at the park.  How about an $8 beer, or $7.50 nachos?  We pack our own peanuts, snacks, juice and water… then have a beer or something at the park, but not much more.  Other than that, we try not to eat out too often… but the last two weeks with relatives visiting, that rule went out the window.  It’s back on the budget starting tomorrow!

Kept very busy last week, and then we took a three-day weekend camping and boating with relatives.  We took a trip to a lake a few hours from home, and enjoyed the water, and hanging around the fire at night.  It was really nice to just relax and enjoy some time away with good food and fun with the kids.  We really don’t have to spend a fortune, and can find many fun things to do not far from home to enjoy visiting together.  We had a 6-year old, an 11-year old and a 17-year old with us, and they loved the trip.  Life passes too quickly to not enjoy the time we have with family and friends.   I realized I’ve only seen my brothers a few times in over the past few years, so I was glad we could get together.  I watched my son run around for hours catching fireflies, and putting them in plastic bottles for home-made flashlights.  Roasting marshmellows and making “smores” put a smile on the kids faces.  And then at 5:30 one morning… “Rise and shine!” came the call from the 6-year old as he peeked into our tent… with a growly reply of ”Go back to bed!” from Dad who didn’t go to sleep until after midnight!

But gas prices are pretty dang high for tourist travel, especially in areas where the gas stations have a monopoly on prices.  On the lake we visited the boat marinas were charging almost $4.00 for a gallon of fuel!  I filled up before hand and didn’t have to purchase at that level.  But driving somewhere is about twice as expensive these days than it was just a few years ago, so we’re glad we can find nice places within a few hours drive.  And we always find more things to do than we realized.  Even so, I was struck by how depressed some of the rural areas were for people who live there.  Many smaller towns are no longer growing, and they lack business growth to provide jobs for local residents.  Tourist areas that are “out-of-the-way” are not receiving as many visitors either.  I’ve been studying Family Economics recently and was suprised that in my home state rural poverty rates are much higher than metropolitan poverty rates in the larger cities.  I thought it was the other way around, but after driving through the country this weekend it makes more sense.  And where do the younger folks go for jobs?  Not in the smaller towns… they have to find places that provide education and a good future, and that’s usually near the larger towns and cities.   But technology provides opportunity, and even in some of the small towns I noted “eBay Drop-off” stores that some people have used to start their own businesses.

And how about that move on GE today?  I can’t pretend to know why at this point, but the company has been making some good moves shedding businesses that don’t contribute to their goals for growth.  I’ve thought GE was undervalued for several years now, and purchased shares accordingly.  It will continue to be a long-term position for me, and I like to think it will double over the next five years.  Either way, I like the dividends and reduced taxation.  Yet all of that pales in comparison to the “value” of spending time with family.  It’s just not something one can quantify.  But it is something we can do…

“Four things come not back: the spoken word, the sped arrow, the past life, and the neglected opportunity.”

                                                                                                                     Omar Idn Al-Halif

That’s a pretty good maxim for saving and investing… especially in one’s family.

Well look at that market go!  Some really aggressive moves the past few weeks.  I’m keeping busy with visitors… my brother and his family returning from overseas.  It’s nice to visit with family- especially when you haven’t seen them in many years.  He’s a very aggressive saver, investor and sometimes trader… and he follows more stocks than I do.  What he also does very well is put away 15% to 20% of pay in his retirement accounts.  All his investing and stock market smarts pales in comparison to the simple act of putting money away each month for retirement.  Did you see Jim Cramer on Conan O’Brien last night?  I don’t normally watch the show, but was up working on research for classes when he was introduced as the next guest.  It was an interesting look at someone who… well has a very interesting life.  He’s not a big guy by any means, and I was suprised that he seemed a little withdrawn, perhaps even shy.  He makes up for that with his energy of course, and even said he’s a little crazy.  What he also said was that you’re not going to become rich investing and trading in the stock market… and savings is the key to having a lot of money.  How’s that for a guy who makes his living recommending stocks?!  And you never really know when you’re going to need a little extra money.  We were ahead this month on our budget, and planned to splurge a little… and then the cat came in yesterday morning with a broken foot.  Go figure… the Vet bill will erase our little surplus for the month in a heartbeat.   A good example of how an emergency fund is necessary in case something happens we’re not prepared for. 

Do you think you’re pretty smart financially speaking?  Or at least comfortable with most financial issues that affect consumers?  Well the fact that you’re reading this article says that you’re way ahead of most people in America.  Financial literacy speaks to the knowledge and experience one may have regarding personal financial management and practices.  It is an increasingly important issue in our society because we continue to empower people to take control of their future financial well-being…  those who do so have the ability to provide financial wellness for their families, their children’s futures, and security in retirement.  Each year we learn of new financial products and tools available to consumers to improve their financial future… Roth and traditional IRA’s, the new Roth 401(k), even regular 401(k)’s… brokerage and mutual fund accounts, credit scoring, credit card use, 529 plans… on and on.  Twenty years ago, many of these products were not available, especially to younger members of society.  Now college students are offered credit cards at every turn, and credit scores are used for approval of every type of loan origination.  

The strength and advantage of these tools is in opportunity and choice.  We have the ability to establish brokerage and mutual fund accounts, retirement accounts and so much more… technology has enabled the individual to make decisions and choose actions previously unavailable except to many professionals.  But this choice comes at a price… one that requires informed decision and knowledge, and the cost of admission is the time we spend learning how to function effectively within the sphere of financial choice.   Just think of… almost everything we do financially requires knowledge.  There are as many ways to “learn” as there are people perhaps, but I like to think of three primary ways:

1.  First there is “book learning” or academic knowledge.  We can read, study, examine and devour as much information as possible from books, the internet and other people. “Book learning” is important because it is one way we can learn from the knowledge, experience, mistakes and success of other people.  We can read and think about how things function or the most efficient way to do something.

2.  Next there is training… “OJT” or on-the-job training, systematic training, specific programs and how-to sessions, hands-on practice, etc.  Training is very helpful because it provides practice, rehearsal and reflecting on how things can be accomplished effectively.  We also learn from other people through training or discussion.  Mentors can help us reflect and understand in different ways, and training allows us to “play house” without potential hazards or pitfalls, and without the hardship of failure.  Certainly training encompasses academic learning as well as the third type of learning:

3.  Finally, there is Experience.  Perhaps no other tool or method of learning something is as effective as personal experience.  When we find success with something we do… we remember it.  When we see failure, we remember that.  Our mind, body and spirit remember the things we learn from our own experience in the world.  That’s how babies and children learn.  They kick, crawl, mimic, toddle, and walk and run with one experience providing knowledge and understanding as leverage for the next.   They babble and learn language through practice and observation… through their experience they receive feedback to modify behavior over time.  Without experience, we would not understand the give-and-take of life, and what works or does not work for us.  We must have experience to learn, to understand and to succeed.   Yet experience, or “just doing it” can also be a difficult way to learn.  Some people do not learn in any other way, and they go from experience to experience, sometimes back-tracking or falling down, and sometimes taking shortcuts or succeeding without really knowing why.  I would submit that learning only by experience is not the optimal method of learning, but on the contrary can be hazardous to both personal and financial well-being over the long-term.   Some people are unwilling to look at other ways to learn, but I believe we must be open to learning in as many ways as possible. 

“Experience keeps a dear school…. but fools will learn in no other.”   Benjamin Franklin

So where am I going with all this?  I’m advocating a position for increasing financial literacy in society, especially among children and young people.  Everything we will do in our lives revolves around the use of money in one form or another.  The ability to take control of our lives and futures hinges on the use of money.  The ability to “choose” our way in the world and the education, career and lifestyle we desire revolves around the use of money.  For those who disagree, and believe the use of money is not important to their life I say “good for you… wait a few years.”  The use of money itself is a lifestyle choice- in that I agree.  But money is simply a tool like any other resource in our life.  In and of itself, it does not bring happiness or misery.  Yet its use as a tool may or may not bring happiness depending on the choices one makes when using it.  But having it means we have the ability to choose in far more ways than not having it. 

I started out in life believing I didn’t need to worry about money, but just find a job or career I really enjoyed, and the rest would fall into place.  I was absolutely right… to a point.  What I learned (through experience) was that what I loved or really enjoyed was adventure, exploration, learning new things, and employing my knowledge and abilities in many different ways.  What I also learned was that money really helps you do those things.  I also learned my choices and desires changed over time.  I could not see at age 22 that twenty years later at age 42 I would desire a home and lifestyle for my family and children that provided current and future financial security.   Maybe I should have looked that far ahead, but who does so in their 20’s?!  Did I understand what I was doing when I purchased my first home?  Absolutely not… even though I made a valiant effort to read a few books.  Did I know what I was doing when I opened my first brokerage account (or second or third)?  Nope.  Did I know what I was doing when I bought my first car?  Double nope.  What could have helped was greater financial literacy and knowledge…   but it just didn’t “seem” that complicated then.  I think it is a lot more complicated now.  For those at the lower ends of the socio-economic spectrum financial literacy can make a world of difference for financial management, savings, spending, credit and debt.  I believe more people will be helped economically if we can educate them to using money in productive ways, and avoiding negative behaviors surrounding the use of money.

Today there is an article on from Yahoo/CBS Marketwatch where a recent study indicates that Few Consumers Really Know Real Estate.   The article talks about how conumers are not really prepared to make knowledgeable decisions regarding real estate.

David Berenbaum, executive vice president with the National Community Reinvestment Coalition, states that “Purchasing a home is the single most important financial transaction of your lifetime, and most people are ill prepared today for that transaction.” “We need to ensure that the laws and the disclosure requirements are very clear and actively enforced.”

I would also submit that we need to educate consumers better in every area of personal finance, not simply real estate.  To that end, many States and organizations have begun programs to help educate the younger members of society.  Many state education requirements now include personal finance management as a class for high school seniors.   And many college programs incorporate financial literacy as electives or other classes.  When I think of my youngest son… he won’t be heading to college until around 2020, and I wonder how different the world of personal finance will be.  If the past twenty years have been any indication he will have a lot to learn!  And I’ll keep learning as well… hopefully not always the hard way.

     Okay then.  The market has been down a few days with concern over interest rates, economic growth and potential inflation… bond yields have been rising… and?  Well, isn’t that what markets are supposed to do?  Yes, but it doesn’t make you feel any better to see portfolio values decreasing with the Dow losing over 400 points in a few days.  So normally I just don’t… watch the portfolio decrease in value that is. Instead I look at trends, and if there are a few stocks with a shorter investment horizon I’ll see if I can capitalize on how the trends may or may not affect that particular stock. There is a lot of churn in the markets, especially as institutions and other large investors move through various sectors.  Without that turnover and cyclical events within the economy we would have no market… no movement or financial strategy to work through.  What the heck am I talking about?  I think just the fact that markets go up, they go down, but over time… they grow.  Lots of folks have jobs and specializations in the financial sea of economic progress, and I’m glad there are folks who have made a career out of managing investments for others. 

     I’m not a trader… I don’t sit day after day and react to market swings buying and selling securities and bonds, so I have the comfort of time and a little wider perspective.  If bond prices fall, well then yields rise.   Stocks and securities in one investment may go down, but with proper asset allocation other securities may rise.  With falling values, the market presents opportunities.  It’s healthy for the market and necessary.   We’ll just have to see how far this goes, but volatility may be the watchword in the next few months.  International markets have outpaced much of the U.S. market growth the past couple of years, and that “frothy” speculation has to settle down at some point.   The Chinese market has been selling off lately as well, especially amid the product safety concerns in recent months over many of the Chinese imports such as toothpaste, pet food… who knows what else.  Today we read that the Chinese have fired back at U.S. product safety claiming that health products and raisins (?) imported from the U.S. do not meet Chinese safety standards… Huh?!   Don’t you love it when politics and economics come together?   As one who has spent a lot of time in Asia, including Hong Kong, I can tell you that food and product safety standards are nothing like they are in the U.S.  Quality controls and manufacturing standards are far more advanced in the U.S., Canada, Australia, New Zealand, Japan and Western Europe, and far stronger than most other countries around the world.   Our investment and securities market standards are also far ahead of most other nations as well.  We have much stronger regulation and the checks and balances that serve as the foundation for the primary and secondary markets.   I do keep a portion of my investments in the international markets, but the bulk of my portfolio is carried on board the U.S. economic ship of progress… and  I have a lot more faith that we’ll navigate successfully through the rough economic waters over the years ahead.

Piggybacking?  I thought I understood most financial credit and loan practices, but this one was new to me.   People with poor credit scores who anticipate needing a major loan such as a mortgage, can rapidly improve their own credit by riding on the credit history of people they don’t even know.   I was suprised this was possible, and there are even companies who specialize in helping consumers do this!  Apparently it’s not technically illegal, at least yet.  And some people are even making a decent monthly income by letting other people use their excellent credit history.   I never thought about letting others become “authorized users” on my credit cards… too much risk there for me.  But in this case, it’s carefully set up so that the “authorized users” are not given credit cards or access to any personal information.  But once designated as “authorized users” they receive the benefit of years of good payment history on those particular cards.   In a few months time, someone with a poor credit score can rapidly raise their scores to qualify for better loans and rates.  Seems pretty shady from my perspective… a mortgage lender wants to know the true and accurate credit history of a potential borrower.  All financial risk decisions and mortgage origination is based on the premise that they have accurate information… or at least as accurate as possible.  In this case, they are not getting a true picture.   What if someone with really poor credit history gets a loan based on great scores that only recently jumped up?  Maybe those borrowers shouldn’t have loans… if they default it costs the industry, and indirectly other consumers, for the cost of that default.  I suspect the practice will change with revised trending by the credit scoring companies.  They could simply add a trend of credit scoring to see how the credit scores changed over time.  If a credit score history was at consistent levels for a long period of time, and then jumped up rapidly in the months before a consumer applied for a loan, that would raise some eyebrows or prompt further investigation.   Or they could shorten the period of time that an “authorized user” benefits from based on the credit history of the original card-holder.   I wonder what other practices occur out there that I have no idea about… probably many!  In the world of money people become very creative.

For more information on piggybacking, the article on Yahoo from the AP is an interesting read: Piggybacking Roils Credit Industry. 

*** UPDATE – June 11, 2007 ***

It seems the piggybacking scheme is not lost on Fair Isaac Corp after all…  the company who began FICO scoring has decided that as of September 2007, adding someone to your credit card agreement as an “authorized user” will no longer benefit them with your entire credit history.  The change will not affect “joint users” but a joint account holder is equally responsible for the debt whereas an authorized user is not.   Should be interesting to watch how the credit scoring industry changes over time.

Some good news on the street today as CNN/Money reports the Economy Hits the Sweet Spot.    Consumer spending continues unabated, and both the job market and manufacturing data are showing improvement.  Of course that depends how you read it, but unemployment remains at 4.5%, which historically is pretty good.   Much of the job growth is coming in the service sectors such as health, education, hospitality and leisure… can you say Boomers?!  That will be a continuing trend as our “service economy” expands.  At the same time however, CNN/Money also reports that Incomes See First Drop in Two Years.   It hardly seems measurable, but the Commerce Department reported a 0.1% drop in U.S. incomes… perhaps more importantly it was the first since August of 2005.  Related to the service sector growth?  Maybe, but analysts have tied the income drop to “unusually large bonuses and the exercising of stock options” early in the year.  Ok… if they say so.  Oddly, consumer confidence is up for the month of May, even with high gas prices.  The standout weak area is housing of course.  Still a lot of supply and less demand, yet builders keep building to ensure their foothold in key areas remains strong.  I think it will take 2-3 years to work through the housing issues.  The subprime mess has resulted in tightened credit lending standards, and there are many potential buyers that simply are not finding the financing they had counted on.  There’s no time like now to maintain that credit rating, especially if you’re in the market for a home the next few years.   It seems we are walking in the sweet spot, oscillating back and forth with mild inflation and a still growing economy.  I certainly prefer this market climate to that of a few years ago when nothing seemed to appease investors.   On my desk is a little notepad calendar with thoughts for each day.  For the life of me I don’t know what it’s called, who wrote the quotes or even who makes it… I tried searching to no avail (if anyone knows please tell me!).  There are some great quotes, and with apologies to the author, whom I will cite when I find out his/her name, here’s a good one for the day:

“We look at what is going on around us, and we size up our prospects.  Will we make it?  But the best information you have is not national economic reports or even the company newsletter.  It is your own approach, and it starts with two simple beliefs:  you can get the job done, and you can show others that you can get the job done.”