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January 14, 2009

Ramit Sethi: What To Do With Your Money

This is a video of Ramit Sethi from Iwillteachyoutoberich. He’s a personal financial hero of mine. In this video Ramit talks about what to do with your money in this economic downturn. It’s short and to the point. Take some time off your busy day and watch this video.

- I’m still here

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January 12, 2009

Personal Finance Lessons From Robinson Crusoe

Personal Finance Guru in the Raw

As some of you might have known, I have just finished reading “Robinson Crusoe.” Robinson Crusoe is a tale centered around an Englishman who was stranded on a remote island. He ended up living on the remote island for about 28 years before fortune have him “rescued.” I can’t help but notice that we can learn quite a few personal finance matters from Robinson Crusoe’s time on the island.

Lesson 1: DIVERSIFY
While on the island, Robinson was forced to grow his own food, dry his own raisins, tame, and raise his own herd of goats. One time or another, savages threatened his crops and livestock. Robinson ended taking most of his goats and moving them deep inside the forest, keeping his goats in two separate places. Therefore reducing the chances that his livestock would be diminished in an attack. Many of you may know this as “putting your eggs in different baskets.”

Just like Robinson and his livestock, we need to be just as smart with our assets. By diversifying our assets we can make sure that when (notice I said WHEN not IF) something goes wrong, not all of your assets will be jeopardized. So make sure you keep your goats separated.

Lesson 2: BUDGETING
Okay, Robinson Crusoe lived on a remote island for 28 years. He learned how to budget the hard way. Robinson had to make sure that his crops, livestock, ammo and rum last as long as it can. Some things are replenishable some are not. Of course in his case, its not really a budget as much as it is provisions. But, all in all, it works the same way.

Budgeting is the key to any solid personal finance foundation. Many people hate it but you know what? It’s a necessity. To be aware of our finance situation, we need to know where the money is coming out and where it’s coming in. I know many of you don’t even want to think about budgeting, let alone keeping track of your spending to start finding out your budget. Well lucky for you AND me, There’s a thing called Mint.com. Through Mint.com, you can register your credit/debit card (don’t worry it’s safe) and Mint will automatically analyzes your purchases to create a budget for you. All this without you lifting a finger. I’ll go over Mint.com at a later post.

Lesson 3: PATIENCE
Once again, 28 years on an island. All by himself. In the first half of the 28 years, he was able to tame wild goats and breed them. Robinson understands that his herd of goats would not be ready until there’s a substantial amount of kids. So he waited few years and with time, his herd to grew to a size where it can sustain Robinson and provide goat meat for years to come.

Patience is key in Investing. In my humble opinion, investing long term is the best type of investing. It has been proven that long term invested funds out-perform any actively traded one. After all, patience is a virtue.

Lesson 4: AUTOMATION
Believe it or not, Robinson figured out automation. Yes, the story takes place hundreds of years ago, but that doesn’t mean he can’t automate. Although Robinson’s “automation” is borderline slavery. In his last 3 years on the island, Robinson managed to rescue a savage from his own kind from being sacrificed and eaten. The savage pledge his life to Robinson. So Robinson taught him everything he knew about farming and crafts. Pretty soon Friday (that was the savage’s name) was able to take care of the goats and Robinson’s crop while Robinson focuses his attention somewhere else.

Of course slavery is never a good thing. If it’s any consolation, Robinson treated Friday very well. Now-a-days, we have technology to help us. With automation we can make the process of savings, investing, and even paying bills very easy. Unlike old school manual saving, I dare say, no discipline required.

- I’m still here

By a student for the students

Archive for the ‘personal finance’ Category

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January 14, 2009

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January 12, 2009

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