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?”)
This article is about Psychology, Real-Life
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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.
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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?
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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?
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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?
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