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Feeling Broke: Little Things Add Up Print
Monday, 14th May 2007 (by J.D.)This article is about Psychology, Real-Life
Every weekend, I enter receipts into Quicken. Usually I feel good about this process, but yesterday’s session left me bummed. I feel broke. My checking account is down to $38.90. After I get gas this afternoon, I’ll have about $10. Meanwhile, several major expenses are looming: I have a toothache, my car is acting funny, and we’re having some plumbing problems.
At least I’m not frittering money away on comic books and video games. I’ve just had a lot of one-time expenses: $56 to have a picture framed, $40 to get two suits dry-cleaned, $28 for an oil change, $180 on a weekend getaway. We’ve also been dining out with friends quite a bit. These thing add up.
Don’t forget that I put $3,350 toward my Roth IRA at the beginning of April. It felt great at the time, and I know it’s a smart move, but now the lack of money hurts. Meanwhile, I’m continuing to save and to pay down my home equity loan.
The combined effect of all this is that I’m feeling broke. It feels like I just can’t catch up. I come this close to getting ahead and something happens. What’s the solution? In addition to reminding myself that things are fine, that I’m on the right path, that all of the stuff I share with you here also applies to me, I’ve decided to do three things.
- I will create a rough budget. (Remember: I’m not a budgeter.) Nothing fancy — just enough to plan income and expenses for the next three months.
- I’m going to build a cash cushion into my checking account. Lately I’ve been using every spare cent for saving and investing. I’ll hold a little back this month, just enough to free up my cash flow.
- I’ll also spend the next few weeks being more frugal.
These aren’t big changes, but they should be enough to improve my psychological outlook, to keep me from feeling broke. It’s amazing the difference small moves can make. I know from experience that if, for example, I had opted to wait to have my picture framed, that extra $56 in my bank account would put my mind at ease.
(In some ways, my current state reminds me of Annie, who last month wondered, “When does this all pay off?”)
May 14th, 2007 at 12:07 pm
Good action plan– particularly #2 about cash cushion. Paying down debt and investing is a good idea, but your posting is a good reminder to readers that (1) several small purchases can add up quickly and (2) unpredictable expenses can occur (I hope your dental, car, and plumbing problems can be deferred a few months…). Many banks are advertising ~5% savings accounts; start one for your cash cushion, if you don’t have one already.
May 14th, 2007 at 12:12 pm
It’s not clear above (because my editing job was too severe), but I do still have an emegency fund, and may tap it to deal with some of the unexpected expenses, especially the plumbing. The cash cushion I hope to add will just be in my checking account.
May 14th, 2007 at 12:48 pm
Forty bucks (or less) will get you a set of Rhino Ramps. Ten more bucks will get you a good-quality oil drain pan. If you don’t have a wrench that’ll fit your drain plug, I’ll send you one!
A one-time investment of $50 will enable you to turn a $28 oil change (that you have to schedule) into something that will cost you twenty minutes (probably more like 10 once you’ve done a few, and you can perform the task at your convenience) plus the cost of oil and a filter.
I started off knowing nothing more than how to perform oil changes and changing a flat tire on my car, and now I’m finishing up a valve job on my car. I was never “into” cars, but now I enjoy getting my hands dirty and performing my own repairs and upgrades. I look at it as paying myself instead of paying someone else to do the work.
May 14th, 2007 at 12:51 pm
Cash flow is our main issue, too. All our debt, including two mortgages, has been paid off. But the expenses continue. Increases in Real estate tax assessments, health insurance premiums, and homeowners insurance are closing the gap left by the items we paid off. Our cars are aging and require more maintenance. Ditto for our bodies. It’s no wonder people who have a lot of debt get into trouble so quickly.
May 14th, 2007 at 12:54 pm
I’m always amazed at:
1) How much little expenses start adding up when I stop paying attention
2) How much extra money we have when we put a concerted effort into not spending money.
For a while now I’ve been lazy — getting into the habit of buying lunch at work (about $7 per day). Then a couple times per day I wander down to the cafe and buy a soda and a cookie or some such. That’s another $5 per day, and my wife likely does the same. Then we pick up Chipotle or Subway for dinner. That’s another $12. Pretty soon between lunch, dinner, and snacks we’re spending about $30 per day.
The same thing happens with other small purchases. An occasional CD or book can quickly turn into a couple hundred bucks per month. Yikes.
May 14th, 2007 at 1:07 pm
I can totally relate to this.
In my budget is money that I put aside every paycheck for savings. Some is long-term (retirement) savings, and some is just savings (higher-interest account). For a long time I always felt bad about having to pull money out of savings to cover normal expenses, but then my wife pointed something out to me. She told me that we put extra money into savings when we have it so that it is a cushion for the months that we appear to come up short. As long as the expenses that came up weren’t frivolous, I no longer feel bad about pulling that money out of savings to cover a temporary shortfall.
May 14th, 2007 at 1:17 pm
A one-time investment of $50 will enable you to turn a $28 oil change (that you have to schedule) into something that will cost you twenty minutes (probably more like 10 once you’ve done a few, and you can perform the task at your convenience) plus the cost of oil and a filter.
You know, this is an excellent point. When I was in college (and for a little while after), I did my own oil changes. I even used to change the brake pads on my car. Someplace along the way, I got in the habit of taking the car in to get everything done. That’s crazy. I should at least do some research to see what’s involved in doing some of these simple tasks on the Focus. Thanks for the prompting, John.
May 14th, 2007 at 1:28 pm
Wow, I love when I am thinking about something them I read a post on it here a few days later. I have been feeling poor the last few weeks because I’m having a bunch of annual and one-time expenses all hitting at the same time. I understand that when amortized over the course of the year I am only really paying a small amount per month, but the fact that they are lump sum payments that have been hitting all at once makes me feel like I’m spending WAY too much money. My sirius radio annual subscription renewed, then I had doctor co-pay and car maintenance (I do myself). I’ve also been eating out more often for celebratory reasons. The perfect storm of rare events is making me feel like I’m spending too much money and not saving any. I can definitely relate and thanks for writing about this.
May 14th, 2007 at 1:29 pm
You’re right about one thing: Little things do add up. However, they add up a lot quicker when you are overspending on the little things. Don’t spend $56 to have a picture framed. You can get one from a resale shop or garage sale for usually under $5.00. OR you could buy one of those plastic pre-made designs for about$10.00 - $15.00. Who spends $40 to get two suits dry-cleaned? Shop around and use coupons. Again a coupon will help free you from the burden of a $28 oil change. $180 on a weekend getaway? Stay home. Same with “We’ve also been dining out with friends quite a bit.” If you insist on being so willing to give your money away… There will always be someone there to gladly accept it.
May 14th, 2007 at 1:34 pm
RE: Checking account cushion.
Great idea. Here’s what I’ve done in the past.
1) Deposit from your savings a cushion of exactly $1,000 and then immediately subtract it out of your bankbook. Operate as if the money is not really there. This is very helpful for when those things come up; you’re covered automatically and never overdraft.
2) Afraid this math trick won’t fool you and you’ll just spend it? Go to your bank and open a little savings account with $1,000 and connect it to your checking account. You can do immediate transfers of $100 or so when you need it either on the internet or at an ATM or at a branch. This keeps the money segregated so its not as easy to just spend it. When you get paid, put the money right back so that you have $1000 again.
Either of these tactics are helpful for two reasons. First it helps you maintain discipline on monthly expenses, but reduces stress if you have to go over temporarily. Two, although you’ll be missing some interest from the $1,000 tell yourself you’re saving ~12% interest on the money you’d have to borrow from a credit card to make ends meet.
PS - You should keep a real emergency fund of 3+ month’s expenses somewhere else like a money market mutual fund or ING or CD or whatever you like. Random small monthly over expenses are not emergencies!
May 14th, 2007 at 1:46 pm
I don’t like having to take money out of savings to cover my Visa bill, but I don’t stress about it. I don’t compartmentalize my savings, so some of it is for emergencies and some of it is for large one-time expenses like car repairs and insurance. When I have to take money out I just remind myself that that’s part of the reason I put money in in the first place.
May 14th, 2007 at 1:49 pm
Be careful what you call a one time expense. I have to get my oil changed several times a year.
If you get Health Care Flexible Spending Account you can use it to smooth out medical expenses. You can even get reimbursed for expenses greater than the amount you have put in so far in the cear.
I always put FSA transactions on credit card because you can get reimbursed before the bill it due.
I am unfamiliar with your options if you are self employed.
May 14th, 2007 at 2:15 pm
J.D. do you track your networth on this site? Is it possible for you to move some money over from your emergency fund?
May 14th, 2007 at 2:37 pm
Wait, J.D.! John’s comment makes it sound like “20 minutes plus the cost of oil and a filter” is vastly cheaper than your $28.
In my experience, it’s not. Unless you change your oil already, it might not make sense to switch over.
I changed my oil every 3000 miles over the 10-year, 160,000-mile life of my truck.
High-mileage, non-synthetic oil is about $3.60 a quart. Oil filters run between $4 and $10. If I recall, I usually paid about $6.
My truck took 5 quarts, so oil and a filter ran me nearly $26 after tax. I saved $2 per oil change. Maybe I got higher quality oil and filters, but the price was roughly the same.
At 15,000 miles/year and 3,000 miles/oil change means 5 changes a year. At $2 per change, that’s a tidy $10 saved per year. That’s 5 years to pay off the ramps and drip pan. Another year if you need to buy an oil filter wrench.
Further, and I’m guessing that your $28 oil change is from some Jiffy-Lube-style joint. I’ll bet that there are plenty of local mechanics or dealerships that will change your oil for about $20.
May 14th, 2007 at 2:43 pm
It’s easy to feel down when you get a couple of things all come at once. And I am in the same boat this month. But this is the time to remember (and look back) at past months and all the great leaps and bounds you have made in changing you financial position
May 14th, 2007 at 3:08 pm
I’m not a very good budgeter myself. In fact, I suck at that particular task. So rather than beat myself or constantly worry about things, this is the solution I’ve hit upon which works surprisingly well. I’ve got multiple checking accounts at different banks. Each account has a different, specific purpose. I have one “Bill Paying Account” into which I have a set amount deposited on each payday. It is solely from this account that all non-house related expenses come from. I never touch it for anything - it’s all automated so no bills are late and there’s always money there. Every few months, I log in and clear out any extra money and put into investments. I have one “Household Account” into which, can you guess?, I have a set amount deposited. My housemate similarly has his contribution deposited and then all household stuff (food, laundry, rent, etc) comes out of this. I also get money automatically deposited into my Roth, then into my education savings fund, and whatever’s left gets put into my “Spending Money” account. Now I can spend what I want, knowing that all bills are covered and that basic savings/investments are also covered. Anything not spent when the next paycheck hits gets shuttled into savings. It may sound like a lot of work, but it has solved a whooooole lot more headaches that it’s ever caused for me.
May 14th, 2007 at 3:13 pm
Just hang in there. Lot of good books at your local library, all free, and you can give em’ back. Or walk, or a bike ride, or perhaps there’s some much needed repairs around the old homestead.
Not all entertainment costs money.
May 14th, 2007 at 3:37 pm
I’ve thought of doing my own oil changes for some time now. The only thing that has prevented me is that I really like having my car looked at by professionals. For instance, I’d never think to change my air filter if it wasn’t part of those checks. Maybe I should change my own oil every other time.
May 14th, 2007 at 4:37 pm
Second attempt at this comment, it didn’t come out right the first time I wrote it. But for what it’s worth — I found the budgeting approach described in Your Money or Your Life extremely helpful.
They have you use your records of spending (and income) to form a realistic estimate for each item in the budget; and then for each item evaluate how in balance with your values it is and how you would like it to change.
For me, there were two a-ha! moments in the process. Firstly, using spending records identified a lot of so-called one-off expenses that actually recurred a lot. Computer equipment; home maintenance; and so on. And secondly, the values-based adjustments give permission to increase items in the budget. I found this enormously freeing in turning the budget from a straitjacket into a guide rail. I didn’t make many increases, but just knowing that I could made all the difference.
(And as an aside, it was the phrase “cash cushion” that first brought YMoYL back to mind. I forget the details, but remember it as having a very good chapter on the various levels of emergency funds. Makes me want to dig it out for a re-reading now.)
May 14th, 2007 at 4:49 pm
I agree. I think the problem lies in a few too many meals out and a weekend getaway (luxuries) than unexpected expense. I am frequently guilty of the same thing. Why not set aside a monthly amount for “entertainment” expense(meals out, mini vacations, etc.), set it aside in an envelope in cash at the beginning of the month, and then do not go out after the money runs out. In some months, you might find you actually save money from the envelope.
May 14th, 2007 at 4:59 pm
Yeah, I could (and will) cut back on dining out. The weekend getaway is an annual trip we make with a group of friends, and I had budgeted for it. We actually spent less this year than we usually do, so I don’t feel like that blew the budget. But the dining out has a lot to do with it.
May 14th, 2007 at 5:24 pm
Sorry you’re feeling this way. Sometimes this kind of feeling will spur me into that little extra bit of frugality I need, but it’s definitely not a feeling I would like to feel every day.
May 14th, 2007 at 5:26 pm
We all seem to be forgetting about the ‘i’ word: INFLATION. Have you compared the price of something you bought last year to what that same item would cost this year? Hasn’t all our gas, food, energy, insurance, taxes, clothing, dining out prices gone up? Experts state the rate of inflation in the USA is at 6-8%. The government always leaves out food and energy when they figure the rate. Duh?
Has your salary gone up 7% this year? Are your investments paying you 7-8%? Didn’t think so.
You are not doing anything wrong. It’s the economy. We have to recognize this and then make changes and adjust. We have to do more of the work/repairs ourselves, look for bargains and do with less.
Just my 2 cents.
May 14th, 2007 at 5:28 pm
This whole get rich slowly is a joke…$3,300 in an IRA ha! Get real you are going to be poor your whole life investing like that. You have to take risks, build buisnesses, make real investments. Investing in mutual funds is for lazy people trying to get rich without thinking. If you spent the time it took you to write that fancy article about investing in your ira in researching stocks you you would be way…better off. Sure…your going to take losses and you arent going to get rich over night…but when has ANYONE gotten rich from mutual funds. NO ONE! PERIOD END OF STORY. Stop trying to make money without thinking…please..
May 14th, 2007 at 5:33 pm
I know the feeling–I had a 200 car repair this month, the first one I’ve ever paid for (recent grad, parents previously took care of major car expenses). Besides extra gas for a road trip, a mothers day present, and a couple contributions to relay for life type things for friends… Really minor things, but I’m new to budgeting. It costs almost $15 to do all my laundry? How lame…
Dining out is very expensive, but it’s also incredibly enjoyable to me. One of my downfalls, really. Even cooking a “good” dinner is a bit pricey.
Anyway, your plan is solid, as you seem to be well aware.
When I’m feeling broke, I just try to live cheap for awhile and it balances
May 14th, 2007 at 5:54 pm
Hey Bro
This post hits close to home! I certainly can relate to your tooth ache (have 3 that need major work - self employed, no insurance) and that “broke” feeling although there is money in the bank…errr….mutual funds…lol
Keep chipping away, you’ll get past this too!
Don
May 14th, 2007 at 6:15 pm
I know the feeling of being broke. An idea you might want to try for keeping dinner low cost is to have a potluck and have others bring food, drinks or dessert. Have a movie night or play games (Pictionary is always fun) to keep a social night close to home. My husband and I limit our dining experience to once a month. It’s so easy to be tired and just go out.
May 14th, 2007 at 7:37 pm
yup, i know how you feel. I think it’s just the state of being a responsible saver combined with being aware of cash flow.
so many people just whip the plastic out when they run out cash until the next payday.
that and sometimes there are more expensive months, and times of the year, than others.
i feel like we have been cutting it to the bone since January, but that’s mostly because so many expenses are incurred Jan-May (you name it, tons of bdays, tax atty, property taxes, home maintenance, higher utility bills).
but then i look at our balance sheet and that helps me.
also don’t minimize the impact that our culture has on how you feel; it can be easy to feel like you are “broke” in terms of cash flow when you look around you and everyone is driving nice cars and spending lots of money.
May 14th, 2007 at 7:45 pm
Well, sometimes you have to deal with expenses like these. I at least hope that the money you spent on the framing and the dry cleaning reflects the price after using a coupon of some sort. The oil change seems a bit high in price, unless they did various other things to service your car. In your local pennysavers, coupon mailings, etc., you should be able to find coupons for less expensive oil changes. Also, even though the oil change people recommend an oil change every 3,000 miles or so, you can do just fine at 5,000 (or so) intervals. Just check your oil to make sure you have enough, and you’ll be fine for another couple thousand.
I know pretty well about “feeling broke,” particularly in the summers. My last paycheck for the school year is June 1, and pay doesn’t resume until October 1, so I have to live on whatever I’ve stashed away, plus whatever money I make during the summer. I’m hoping to have $1,000-$2,000 remaining in October to put into a Roth IRA, but we shall see. The summer has a way of making “extra” money disappear.
May 14th, 2007 at 10:03 pm
Tony–
Yes, you can get a frame for $5, but finding a frame that fits a particular picture can be like hitting the jackpot, depending on whether the print is a standard size. There’s also the question of matting a print, which is sometimes necessary for a non-dorm-room look.
For some people–people who really like to decorate–I think that learning to mat prints yourself is a good solution. (The mat is the border between the print and the frame.) If you have the equipment and you know what you’re doing, you can make the mat yourself, any width you want, and then it’s a lot easier to use a used frame. But that requires an upfront investment.
One thing I’ve learned this last year is that trying to live on nothing at all is a little bit like trying to lose weight by eating nothing at all. Moderation is the key, even to budgeting; sometimes you have to *wait* for even the most reasonable purchases, but that doesn’t mean you can live on canned tuna and spaghetti noodles.
May 14th, 2007 at 10:17 pm
Shawn, my friend, people get rich investing in IRAs *all the time*. Do a little bit more demographic research. . . find out who rich are, statistically speaking.
You have good points about building businesses, but I would suggest that you make and keep your first million before you start slamming other people for their $3300 investments. I’ve done business with a lot of multimillionaires in my line of work, and I’ve never seen any one of them take the tone about saving and spending wisely that you did in your post.
May 14th, 2007 at 10:43 pm
Small matters might overcome us if we don’t consider it. It’s like an ant that can do you no harm if there is only a few. Considering a huge number will surely overwhelm us.
May 14th, 2007 at 11:41 pm
I’ve started maintaining a balance in my current (checking) account of about £200. It helps that it this account has a competitive rate of interest. Anyway, it makes me feel much richer than before, even though I’m spending and saving the same amount of money.
May 15th, 2007 at 2:45 am
“…..Investing in mutual funds is for lazy people trying to get rich without thinking….”
Not true. I have VHGEX and VTRIX from Vanguard and they have been going like gangbusters. I looked at the last five years in growth and particularly at the last quarter of 2001. Any fund or stock that held it’s value during that time, or actually (italized if I could)increased it’s value marked it as worthy of consideration.
I went heavily international after seeing that our domestic economy was losing value due to more money going out of it then coming into it.
May 15th, 2007 at 4:37 am
My wife and I usually maintain a good float in our checking account that we actually as part of our savings account - the extra few pennies in interest we could earn if it were actually in our savings account isn’t worth the peace of mind we get from knowing we won’t be overdrawn or forced to transfer money to pay bills.
And actually, we just transfered our usual 10% from my wife’s paycheck into our main savings account, which means that it alone is now equal to 3 months of living expenses for us. What a great feeling to know it alone can keep us going for a while.
May 15th, 2007 at 5:03 am
Oh, I hear ya on this post. I was about to post something similar on the GRS message board.
In my case it was unexpected dental issues, 2 car insurance payments, Mothers day, annual BBQ in addition to starting siphoning asset builder contributions.
In order to avoid it next year I’ve started personal escrow acct’s for things like the BBQ and car insurance. A type of envelope system through my bank. Maybe your car repairs/health costs could fit into something like this. They are semi expected events that you never know when they’ll happen, but for sure they WILL happen.
May 15th, 2007 at 5:53 am
Shawn,
You don’t think folks get rich from mutual funds?
My father’s a millionaire. All he did was live below his means and put his savings into mutual funds and 401ks
I like your book that you have, 30-40 returns every month. Now if it was that easy, why arent the big firms doing this?
Oh yeah, that’s right. There’s some special system that exploits loopholes or missing information.
Sadly, economic theory and something called the efficient market hypothesis doesn’t have your back.
Folks, put your money in indexed mutual funds.
May 15th, 2007 at 5:59 am
shawn said:
…Investing in mutual funds is for lazy people trying to get rich without thinking…
I say:
I’m lazy, I want to (eventually) get rich without thinking and I’m invested in mutual funds. Sounds like I’ve hit on the perfect strategy.
May 15th, 2007 at 6:06 am
Excellent post and like most other commenters, I can totally relate.
Even though I have an emergency fund with $5,000 sitting in it, a “traditional” savings account with exactly $1,000 in it for minor emergencies (never had one, but you never know), and a checking account with enough for the bills plus a little padding, I feel broke as a joke. Every last cent not dedicated to one of these accounts goes to debt repayment and my retirement fund.
The thing that seems to keep me on track though is charting my overall net worth. I do this religiously on the first of every month and watching the curve trend up month after month seems to be enough to keep me going.
May 15th, 2007 at 10:33 am
“I’m lazy, I want to (eventually) get rich without thinking and I’m invested in mutual funds. Sounds like I’ve hit on the perfect strategy.”
Key word is trying but will never get there because of fees and inflation.
“Sadly, economic theory and something called the efficient market hypothesis doesn’t have your back.” Yea I studies that in business school…all B.S. why arent the big firms doing this because they are managing BILLIONS size effects overall performace on your porfolio…if all you did is reasearch 1 or 2 option trades for an entire month you could easily make 40% on a small porfolio…what you didn’t learn that in business school?
May 15th, 2007 at 12:05 pm
I feel this way sometimes - like we are broke (we are far from being broke) b/c we are focusing all our energy on paying off debt and living differently from our friends and most of the normal people in the world. My father-in-law was down for a visit this past weekend and he was, somewhat, concerned about us b/c my husband and I were talking about what we could afford and could afford and he seemed to have a hard time understanding our mind set. I also think that those of us who are trying to live within our means and to live outside the consumerist box sometimes feel like we don’t fit it with the rest of society. All those advertising messages that we each receive every day add up.
May 15th, 2007 at 12:15 pm
Now that I’ve read the comments I wanted to add another thought about dental work. I have a friend who is a good dentist and he and I were talking about the number of folks who don’t have health or dental insurance and how that is causing those folks to forgo dental work until it gets too bad and then the work is much more expensive. My dentist friend was telling me that he often works with people who don’t have insurance and they work out a pricing and payment arrangement that gives him a fee that is higher than the insurance reimbursement for the task (dentists and doctors accept lower insurance reimbursements b/c accepting insurance payments drives more business to their doors) but not as high as the ‘full price’. My friend mentioned that a lot of doctors and dentists are getting more creative and flexibile on payments and pricing because so many more people don’t have insurance.
May 15th, 2007 at 12:37 pm
I think Shawn owes to us to post ALL of his recommendations in advance for 6 months. That way we can tell if he’s right or if the people that have decades of data are right.
May 15th, 2007 at 4:56 pm
Ted I have had one strategy that has produced 98% winning trades for 3 years…but I charge for this $200 a month for access to this info
There are awsome investments strategies like this out there in almost every market but most people are too lazy to go out and find them for themselves. Thats what separates the poor investors from the rich. I suggest for newbie investors to read rich dad poor dad. It changed my life many years ago.
May 15th, 2007 at 4:56 pm
“Sadly, economic theory and something called the efficient market hypothesis doesn’t have your back.” Yea I studies that in business school…all B.S. why arent the big firms doing this because they are managing BILLIONS size effects overall performace on your porfolio…if all you did is reasearch 1 or 2 option trades for an entire month you could easily make 40% on a small porfolio…what you didn’t learn that in business school?
——————
Shawn, this makes no sense. The world economy is many trillions. Are you trying to make some point about economies of scale impacting gains?
If so, it’s pretty thin.
Secondly, options trading is risky, and many investors don’t even qualify.
For those who wonder what he’s talking about, for any particular stock and period of time, there are options called PUTS, where you are betting that a stock will fall, or CALLS, where you are betting a stock will gain. As an example, if you buy a $2 2month call on a $40 stock, then you are making a bet that the stock will rise higher than $42 in 2 months. If it goes to $45, then you make $3, if doesn’t rise above $42, then you loose your $2.
The price of PUTS and CALLS are set by the market, and in most cases, they end in the market’s range, and you get nothing. In a few cases, you’ll make out like a bandit.
But I agree with Ted. Show us which options to buy Shawn, if it’s so easy.
May 15th, 2007 at 5:35 pm
I’m not going to post trades here I don’t even know if thats legal…what im saying is it’s so much easier to make 40% return on $200 than it is on 2 billion dollars. I suggest reading a quote from Warren Buffet “If I was running $1 million today, or $10 million for that matter, I’d be fully invested. Anyone who says that size does not hurt investment performance is selling. The highest rates of return I’ve ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that. .” Market liquity plays a major roll in this. Try buying one or two options a month with 2 billion see how sucessfull you are hehe (it cant be done because of market liquity). Anyways I’m just here to do is open your eyes that good investments exist an the rich utilize them everyday. I know what I’m saying is sounds too good to be true when I started out these investments didn’t make sense to me either. I can see you are new to these kinds of investments I just hope people will continue thier education on investing and look for high yielding real investments and stop being lazy and handing thier money over to funds that basically line thier own pockets with money from fees. But one of the pervious posts what correct if you want to make little money and not think investing in index funds are a good way to go even Warren Buffett agrees on this.
May 15th, 2007 at 5:43 pm
I suggest for newbie investors to read rich dad poor dad.
I thought so. The “mutual funds will never make you money” viewpoint reeks of Kiyosaki.
shaun, your name links to Intelligent Market Investor.
Put bluntly, something here stinks. If you can make 30-40% monthly in the market, why are you shilling PDFs online for $39 a pop? With 75% referrals to affiliates, no less?
I’m not buying it. Sorry.
May 15th, 2007 at 5:44 pm
oh yea I never said it was easy…matter of fact its much harder trading your own account then just giving your money to a fund but the returns make the work worth it.
May 15th, 2007 at 5:54 pm
James I don’t care if you buy or not I just hope you will continue your investing education. I own many different clickbank businesses. I sell many info products other than investing info products it is a very high margin profitable business…but investing is where the big money is. People make thousands a day selling info products but I must be lying again right? Anyways best of luck on your investing endeavors.
May 15th, 2007 at 6:28 pm
I agree. We usually ignore small things and also forget that having many of those small things will slowly add up and surprise us. I’ve experienced this kind situation so many times and all it needs is a list to be aware of their total value.
May 15th, 2007 at 7:29 pm
Here we go, let’s do a little experiment:
June GE has 106,228 open interest at $35 for $1.95 per share. Each open share actually represents a 100 share increment, so that’s (106k * 100) 10 million shares for ($1.95 * 100 * 106k) $20 million dollars. And that’s just the open interest, that’s not necessarily the total options available at that price. So you can invest a HUGE amount of money in options if you are compelled to do so.
The kicker in all this that makes your argument silly is, that if you are so *sure* that the option is going to be worth that much (and therefore a worth buying at all) and you have a whole bunch of money, you can just buy the shares. You don’t make the same percentage gain buying shares as you do with options, but money is money right?
So, using GE options as an example, if you are *sure* it’s worth it, then you could easily buy a few billion in GE stock (Kirkorian does it with GM) currently at $36.64 and make at the *very least* $35 + 1.95 = 36.95 - 36.64 = $0.31 per share in about 1 month. That may not sound huge, but since such a large number of stocks *fall*, and you’d have a guaranteed 10.6% over 12 months, you’d be doing better than average.
And that 10.6% yearly is the *least* you would make for that option to have value at expiration.
So whatever economy of scale argument you are trying to make really doesn’t fly.
Finally, I actually don’t think some speculation with options is a bad idea, but it shouldn’t replace mutual funds, 401Ks, and living within your means and savings unless you are a psychic or a sucker.
May 15th, 2007 at 7:38 pm
Well, yes Shawn, we think you are lying. We think that your ‘trade information’ is complete crap, and that any actual money you make comes from convincing ignorant people to pay you for your worthless ‘info’, which makes you scum. There is no way for you to prove us wrong about you except if you were to give us access to your ‘info’, which you won’t do, so why don’t we all just agree to disagree and you can disappear for now?
May 17th, 2007 at 2:11 pm
I read this recently in a great blog
http://www.getrichslowly.org/blog/2007/03/17/the-secret-of-wealth-and-happiness/
I think the ideas here, and in other blogs, for living frugally are great. I also wonder if it’s a bit “playing not to lose” rather than “playing to win”. Focusing on the experience of debt, or of scarcity, gets you used to it, and you risk drawing more of that into your life. You have the right idea about keeping the end in mind, and you can choose to “feel” rich (because you are), whenever you want to, without spending rich, and eventually you will be “The Millionaire Next Door”. And don’t beat yourself up for treating yourself to the occasional dinner out or weekend away. 10/10 for honesty about feeling what we all do from time to time.
There are ideas for increasing income here, but they seem outweighed by the frugality tips. What would happen if you tipped the scales the other way?
May 18th, 2007 at 3:00 am
Scum? haha…I think not I’m actually the complete oposite helping ignorant people like your self discover investments many don’t believe exist…also many of my investments that i suggest to readers are brokered through financial advisors…i only charge $37 for these suggestions finacial advisors charge large percentages over years producing themselves thousands if not millions in fees…so who is the real scum?