Raising a Millionaire?

I recently bought the book Young Bucks: How to Raise a Future Millionaire for a great price. Since my wife is expecting, I thought it looked interesting. The book, from what I can tell, is about raising a kid with an entrepreneurial attitude. A few years ago, I would have been horrified at such a book, and my visceral reaction would have been negative, but I  have been evaluating my view of work and education lately, as I am aware of my own prospects for job advancement, and the general work situation in America.

I have started questioning the way work “works” in America right now. With a majority of Americans unhappy with their jobs, corporate greed, non-profits squeezing every last drop from their employees, and increased government hassles and regulations, a lot of people just plain aren’t happy with their current job or job prospects. Incomes and benefits are dropping. Our first inclination is usually to blame the individual job or company, so we change  jobs, but then find there isn’t much difference between faceless company A or faceless company B. The same is true of Non-Profit A and Non-Profit B. No matter where we work, it seems like we end up giving the best ideas and time we have so that somebody else benefits (whether the stockholders or institution), and we hope and pray that they give us our fair share (such as raises, benefits, etc), and don’t lay us off when the economy gets a little bad. Basically, we don’t have simple human autonomy. We move far from friends and family just to find that one perfect job, only to find it isn’t really that perfect.

Most of my friends are very frustrated with work. Perhaps it is just a little Facebook over-dramatization, but most aren’t looking for riches, but instead a job that pays fairly and gives them the autonomy to live their lives (e.g. having time with their kids, etc).

One answer to this problem is to resent business, schools, non-profits, etc, and this is the solution many people take (and that I used to take). However, I am convinced now that the answer is not resentment (which only hurts you, not the company), but starting new systems. Instead of working for a bad system, or even changing the system from within, the solution to me is to start something better and compete with the bad: Plant a new tree*. Instead of resenting the financial services sector, start a financial business that does things right and ethically. Instead of lamenting the way stores treat their employees, start a store selling something great and treat your employees right! Instead of complaining that non-profits are inefficient and always begging for money, find a creative way to increase efficiency and get more money.  One of my long-term dreams is to start an energy company that takes advantage of the “crack” in gasoline refining costs, and passes savings onto the consumer so that all the local gas stations aren’t charging the same price (how is that for real competition??). I would love to be the local supplier and station that is always 10 cents or more a gallon lower than the competition.

Ultimately, I don’t care if my child is a millionaire. I want him or her to be happy and have autonomy in life. Research shows that small-business owners are happier than average workers, even though on average, they make less money. I don’t want my child thinking that work=scraping by giving her best for somebody else. If that is what she wants to do (work quietly and happily for somebody else), then I will support that. However, I don’t want this to be the only option. He shouldn’t have to look around at adults hating their jobs and job prospects and think “that will be me someday, beaten down by the very system I am supposed to look forward to.” Whenever someone asks her what she will do when she grows up, good answers will be “in charge” and “happy.”

* – note that for some institutions, I think fixing things from inside is best, as opposed to starting something new. Religions and governments are an example where constant splitting has caused problems. There is value to unity, however not the point of virtual enslavement.

Save Money, Go Open Source (Part II)

In a previous post, Save Money, Go Open Source, I listed various open source (and free) software programs I use regularly. I like the idea of open source software on a philosophical level, in that a variety of people can participate to make a program better. However, my main reason for loving them is that they are completely free! Using open source software really should be an important part of living frugally and embracing financial wellness. Below are a few more programs that I find useful that can save you a lot of money if you use them in place of costly proprietary software:

GnuCash – I posted on Getting to Know Gnucash, but I will summarize GnuCash here. GnuCash is the equivalent to software like Microsoft Money and Quicken. It handles things like mortgages, credit cards, bank accounts, expenses, etc. You can even import Quicken and Microsoft Money files, so you can just download your information directly from your online banking sites, and reconcile it. GnuCash isn’t quite as intuitive as Microsoft Money, and is more advanced software, since it uses double-entry accounting principles, while Money is a single entry system. The former is more thorough, but more difficult to understand. I use GnuCash for business and personal purposes. It can generate handy charts to show your income versus expenses, where your expenses are coming from, etc.

PDF Creator – This is a .pdf printer, which means that you can print any document, image, etc, on your computer as a .pdf file. If you install it, you will see it listed as an option on your list of printers. Once you choose to print with it, you are given a choice to name it, assign an author, etc, and then you can save the document in any folder that you like. This is a handy way to create .pdf files!

Free Mind – Free Mind is an idea mapping software, which reminds me of those “pre-writing” bubble-like diagrams we used to do in English class. It allows you to brainstorm and generate ideas. I haven’t played around with it too much, but it looks cool.

Inkscape – Inkscape is a nice vector graphics design program. It is like Adobe Illustrator or CorelDraw. You can make some pretty cool logos and art with it, and I haven’t even begun to utilize its many features. If you design art for bulletins, newspapers, e-books, etc, this software is essential, and could potentially save you hundreds on software costs.

CamStudio – CamStudio is a program that allows you to record your actions on your computer screen, which means you can make videos of what you do on your computer. You can also record audio while you do it. You can save the output as various video file formats, so you can post your efforts on You Tube, etc. This software is very helpful for individuals who are making software or computer-related video tutorials. I haven’t used it too much, except to test it, but there is a lot of potential here.

This round of Open Source programs isn’t quite as broadly useful as the last round. The last round included some major programs (like OpenOffice) that help us with common tasks (like word processing). However, these FREE programs I have just listed will help make your life easier!

Getting to Know GnuCash (Part I)

One of my goals this year is to develop both a personal and business budget, and keep better track of my books. When I went looking for software to do this, I looked first at open source sources. The option I decided on is GnuCash.

GnuCash is an open-source (i.e. free) accounting software package for individuals and small-businesses. I am beginning to use it for both business and personal purposes, to keep track of income and expenses. I wouldn’t call it super-intuitive, but for someone like myself with decent knowledge of computers, it is fairly straightforward. GnuCash is a double-entry accounting system, which means that for every debit you record, you have to have a credit somewhere else (for example, when a check is deposited in the checking account, it has to be debited from another source, i.e. from income). The same is true of all payments. For example, if I pay a credit card off, the amount also has to be entered into the checking account section. This is helpful for keeping good books, tracking income and expenses, and doing taxes later.

The first task I had to do was to set up and reconcile all of my accounts. This was time-consuming, because I have money spread out at various places in order to  get the  best return. This includes a good number of credit cards. Since I started this in January of 2009, I had to do a little calculating to reconcile the various accounts. I actually enjoyed it, because by using GnuCash, I am actually learning how to use double-entry accounting.

Gnucash seems to have a lot of features, many that I will not use at this point, but it meets my needs for the basic things I need to do right now. I hope to learn more as I move along.

I am a big believer in open-source software. It’s free. Period. And the quality of much of it is very good, and getting better by the day. In our current recession, I am surprised that more businesses aren’t using, and supporting the develoment of, open source programs.

Why I Don’t Really Notice the Economic Downturn

Financially, I may be a little better off this year than last year. I am not bragging, or gloating, because I know it could be fleeting, but I am stating the reality that living frugally and financially sound has its benefits. However, before I begin this post, let me say that the main reason I am doing okay is that I have a job. No amount of frugality would make up for a lack of a job, so obviously frugality has its limits, but I think my point remains the same.

Let me provide a few details of what I am talking about. I started getting into finance in 2002. I just got out of graduate school, and had little money, and few job prospects in the area where I grew up. I could have moved across the country, but I was tired of being away from any meaningful support network. I started subbing, and I also learned I had to save money in any way I could. One of the first things I did was conserve energy whenever possible. I turned the thermostat down in the winter, and up in the summer. I began hypermiling to save gasoline, before the term was even widely used. I refused to buy a big car or SUV when everybody else was getting into them. I shifted most of my excess money into high-interest online savings accounts, instead of relying on local bank accounts with paltry returns. I lived with my parents for a few years, saving thousands on rent, and when I did get an apartment, it was a nicely-sized cozy place, not some expensive condo I could hardly afford. I opened quite a few credit cards, but promptly paid them off, getting them mainly for the rewards (yes, I make money off of credit cards). I have always bought generic if possible, and shop at Aldi for most of my groceries these days. When we bought a house last year, we bought one that we could afford, choosing the one that was built solidly, with a newer roof and furnace, and that was in a nice neighborhood 2 blocks from my work. I buy most of my books, music, and furniture used.

Now, I may seem cheap, but I really am not. I buy things when I really want them. I give money to charity, and allow myself to do all sorts of fun things. Here is how I view it: I save money on certain things so that I can have money to do the things I really want to do. For example, I keep the house at 64 in the winter so I pay less money to the gas company, because I would rather use that money for books, family things, or my Y membership. The 40-50 dollars I save each month on energy pays for my Y membership.

Again, I am not bragging, but rather pointing out that I have done for years what many Americans are now being forced to do: be financially responsible. This is why I personally hardly notice the bad economy, because I am not going from the “high life” to something closer to reality. I have been responsible for years. In fact, I am doing a little better this year because energy prices are significantly lower. Maybe the real issue is that I never truly felt the benefits of the recent boom. For example, I didn’t borrow against an over-valued home. The only real thing I notice is that my mutual fund is about where it was when I opened it. Not cool, but it hasn’t really affected me.

This crisis was caused in part by Wall Street, and in part by poor government policies, but folks, we residents of Main Street had a major role in this too. Quite frankly, I think we don’t know what matters any more. It used to be that the people in a house were what mattered, and as long as a family was together, a house was truly a home. Now, it is the house itself that matters, and without a big house, life has no meaning, so people bought houses they knew they couldn’t afford, and mortgage brokers seemed more than willing to give them these shaky loans. Now that people are defaulting on these loans, some are shocked, truly shocked. Shocked? Please. Basic, sound financial principles tell us that someone making 30,000 a year cannot afford a 500,000 house. My basic sense tells me not even to look at a house that costs 1/3 of that! The same is true of credit card debt. Do the credit card companies try to squeeze us dry? Yes, and I am happy new regulations are coming. However, do the companies come to our home and make us use their cards at gun point? No. What is the best way to get back at the credit card companies? Don’t use their cards, or if you do, spend within your means so you can pay off the cards without interest. I have a great relationship with my credit card companies: I don’t pay them interest and they pay me rewards.

So basically, making sound, financial decisions for the last 6 years has allowed me to weather this current downturn, and given me the tools to deal with bad economic situations. I may not be making millions of dollars investing in bubbles during the booms, but I am better equipped to increase my wealth slowly over time.

Shower on Someone Else’s Dime (with Free Shampoo)

Water was included in the rent at my old apartment, which meant I didn’t really give much concern to my water usage. Now that we have a house, I am more aware of our water use, and how much it costs. We got our first bill today, and the price wasn’t too bad. Just recently, to save money (and wear and tear on our bathroom), Jennifer and I decided that we would try to shower on someone else’s dime whenever possible.

No, I am not referring to sneaking into the neighbors’ houses. I certainly don’t mean taking a bath in the rain barrel. And I am definitely not referring to avoiding showering all together.

What I am referring to is showering at the gym or at work. Jennifer and I go to the YMCA about 4 times per week, and we both need showers after we are finished. Considering that the average shower uses about 20 gallons of water, this means that showering at the YMCA we are saving 640 gallons of water a month.  This would typically be a second shower for me, since I shower at home before work. However, on days when I am off work, I typically wait until after finishing the YMCA to shower for the first time, which means that for most of the summer, and on weekends, I am not showering at all at home. Also, most schools have gyms, and locker rooms. I am sure, if you were really cheap (and the school understanding), you could use their showers in the morning before work, when nobody is around. I haven’t done it, except to use the shower in the coach’s office after playing basketball, but I know a teacher who did it every morning to save himself money.

You may be saying, “come on David, you pay for the Y! It isn’t free!” Yes I do pay. However, I pay my regular fee regardless of whether I use their water or not. I can either pay my YMCA fee, and pay for 640 gallons of extra water a month at home, or I can pay my YMCA fee, and let the Y absorb the cost of 640 gallons of water. You may also say, “but if everybody does this, then the Y will just raise prices, smart guy.” This is true, if a lot of people used it, and from my experience, they don’t. I have never observed anybody using the showers while I am showering. Never, except when my buddy would work out with me occasionally. Most people still prefer their own showers to saving the money. So the point of this paragraph: don’t join a gym just for the showers, but if you already pay the fee, take advantage of the showers.

Finally, I mentioned free shampoo. When I travel, I always take all the shampoo from the hotel room before I leave. We have quite a collection of tiny shampoo bottles now. What a better way to have free shampoo and body wash to keep in the gym bag to go with the “free water?” Oh, and I am aware that this shampoo often comes with a 100 dollar room, but like above, you are going to pay the 100 dollars anyway…so go ahead and take the shampoo (but leave the towels, that is stealing!).

Yes I am cheap, and with this suggestion, probably need cheapscates anonymous, but I do have extra money to show for it.

Save Money, Go Open Source

When I bought a computer in 2004, I didn’t know much about open source software, and so when I ordered my computer I bought quite a few products I knew I needed, including Microsoft Office and Paint Shop Pro. I since have discovered “open source” software, that is, free software in which the programming code is made available so that individuals can collaborate on the effort. The result is often quality software that is completely free. Currently, there is a lot of open source software of a mixed quality. Some is good, some is difficult to use, but that is true of paid software too I guess. Below are some open source software programs that I use regularly. I tell you what paid product they replace, as well as strengths and weaknesses of each product.

OpenOffice.Org – This is the office suite that is similar to Microsoft Office, that is backed by the Sun Corporation. The programs I use the most are Writer (like Word), and Present (like PowerPoint). If you can use MS Office, you can figure out OpenOffice.Org. I use it at work and at home. One nice feature (among many) is that Open Office exports to .pdf files with the click of a button, which is good for creating e-books and other projects.

When I buy a new computer, I won’t be buying MS Office, saving hundreds of dollars. The only weakness of Open Office that I encounter is that sometimes when it saves as a .doc file, or other Microsoft file, it doesn’t always look perfect when you open it in a Microsoft Office application, which could be a problem if you are creating a file for someone else’s consumption (but there is always the .pdf option). There is a version of Open Office marketed to professionals called OxygenOffice, which is basically Open Office with a bunch of extra fonts, templates, and things not included in the regular Open Office. It too is free.

GIMP – This is a graphics editor similar to Photoshop. It is rather powerful, and once you get past its slightly confusing interface, you will see how powerful it is. Photoshop is still more powerful, but for what I need, GIMP is fine, and saves me the hundreds of dollars that Photoshop costs.

Scribus – Scribus is a publisher, similar (but not nearly as easy to use) to MS Publisher. I find using Open Office Writer much easier to use than Scribus, although the former is not technically as powerful a publishing software as Scribus, but it is much easier to use. I will probably use Scribus more in the future.

Firefox – Quicker and more innovative than Internet Explorer, I browse with it 95% of the time, except when a website requires IE.

WordPress – There are a lot of free blogging sites out there, but WordPress is an open source software that you can either host on your own website (like we do), or else you can blog with it with someone else hosting it (like at WordPress.Com). It is free regardless, and extremely powerful. I prefer it to other platforms.

Filezilla – For those who run a website, this is a nice open source FTP client (sending files from your computer to your web host).

Audacity – Last, but definitely not least, is Audacity, which is an open-source audio file creation and editing software. I have heard a lot of praise for it from people who should know, and I have produced a few podcasts and songs using it.

To go “open source,” you may have to give up some familiarity with current software, and perhaps relinquish some power, but in general, making the switch to these open source software programs will save you quite a bit of money, with few hassles. Some people make the leap to full open source and ditch Windows…I am not there yet! Also, if you run a business, you may want to seriously explore using open source software. Our school uses almost all open source stuff, and saves a LOT of money in licensing fees.

Making Money with Credit Cards??

Here is an idea that you won’t hear very often: you can make money from credit cards. In fact, standard wisdom is that you should only have one credit card for emergencies, and you should shred all old cards. This wisdom is probably good advice for many Americans, but nonetheless I make money from credit cards, and you can learn how to make money with credit cards. However, if you are responsible, you can actually make money from credit cards. Since I first got a credit card back in 2002, I have made over $1000 in rewards, and paid $0 in interest. So how is it that when thousands of Americans are paying way too much money to the credit card companies, I am making money from them?

Basically, it is a combination of rewards cards and responsibility. I have cards that get me 1% cash back on all purchases. Another gets me 5% cash back at grocery stories, gas stations, and  pharmacies. Yet another gets me 5% worth of reward points back on restaurants and movies. Still another gets me 2% cash back on utility bills, and 5%+ back at certain special merchants. I also have one that gets me 3% worth of rewards points at Amazon.com. Oh, and there are the business cards too: 3% back at restaurants, home improvement, and office stores, and 5% back on internet services purchases. Yes, I have a lot of credit cards, but contrary to popular belief, having a lot of credit cards doesn’t hurt your credit score. Now, if you carry high balances on your credit cards, that hurts your score.

Here is the way I look at it: if I spend $100 in groceries, paying with cash gives me $0 back, whereas if I pay with my Cash Plus Card (unfortunately, it is no longer offered for new customers), I get $5 back. It may not seem like a lot, but if you spend $100 on groceries a week, then using a credit card with rewards like this is able to earn you $260 a year.

Below is how to use credit cards to make money. Note that to get some of these cards you have to have established credit. Also, it is wise to not apply for all the cards you want at once, since applying for many lines of credit at once temporarily lowers your credit score (for about 6 months).

– Look for reward cards, and apply for the ones that you think you will use

– Only apply for cards that don’t have an annual fee

– Use the right credit card for the proper purchases (i.e. use the gas rewards card when you buy gas)

– Pay off your balance on-time, every month, so that you pay no interest or late fees

– Pay your credit card bills online. If you have 5 cards, paying for envelopes and stamps adds up.

Be responsible. This only works if you do not treat your credit cards as free money. If you don’t spend within your means, this is pointless.

– Look for offers of 0% introductory interest rates. This way you can pay off your balance slowly, keeping the money in a savings account until the end of the introductory period, earning even more money. Make sure you actually save the money and have it to pay off the balance after the introductory period is over.

– If you must carry a balance (emergencies, etc), apply for one low interest credit card (with no annual fee), and only carry balances on that card, but not on reward cards, which often have high interest rates.

Let me reiterate: this method is only for those who are extremely responsible with credit cards. If you pay interest, get levied late fees, or spend more than you otherwise would, you will actually be spending more money than you are going to make on rewards. Since the average American credit card debt is around $10,000 it is clear that this method is not for everyone. In fact, the best way you can save money if you currently have a lot of credit card debt is to pay off the debt you have; don’t even begin to use this method until you have paid off your other cards. Nonetheless, this method is effective if you can make it work.