The Smartest Advice I Ever Got: Personal Finance
finance.yahoo.com
finance.yahoo.com
I have heard this story about Intel, Microsoft, Yahoo, kitchen floors, new cars, and masters degrees. I bet at least 50% of the US GDP has been attributed to selling great growth stocks too soon -- or rather, to a friend of a friend doing so.
Sadly, we don't have any great stories about people cashing out of leveraged positions in Enron ("Have I ever told you about my negative four hundred thousand dollar house?").
Much of modern life involves trading freedom of one form for freedom of another.
Only if you have space to store them. If you could buy nonperishable consumer staple futures at similar discounts, it would absolutely be worthwhile; but if you make a practice of saving $10 by buying a dozen boxes of cereal when they're on sale and then having them sit on your shelves for the next six months... well, you're probably paying far more than $10 for the larger apartment/house which gives you the space to store said cereal boxes.
Yeah, but I bet they're a hell of a lot less miserable.
Not sure how you would prove that, but I figure you take average happiness rates and add a bit because of the increased stress the money brings.
Poor: Unable to make enough money working to sustain your lifestyle
Middle-class: Must work to sustain your lifestyle
Rich: Work not required to sustain your lifestyle
That implies that there are two ways to becoming rich, either you can make boatloads of money, or live below your means and create a savings that sustains you. I didn't come up with it, but I try to live by it.
Now that's a dangerous heuristic. Never purchase a house, car, education, or medical treatment, except with cash?
"Never go into debt unless your benefit from whatever you buy using the debt exceeds the cost of the debt."
Examples:
A house generally appreciates in value. Usually worth going into debt.
A new car. Unless you gain somehow from having a brand new car (e.g. you're a movie star), you can get most of the value from a used car and avoid the massive value decrease.
A computer. As a hacker, you need your computer to create. Having a computer lets you make wealth that wouldn't be possible without one.
An education. Hopefully improves your ability to create value by teaching you new and interesting things :)
That's the kind of stupid debt the quote is talking about. If you can't save up $1500 to buy a good computer, you probably don't want it bad enough.
(i.e. it's approaching $5/gal in CA)
Surely you're not suggesting that people should take out loans for gas?
Maybe a better rule: borrow so your consumption fluctuates less than your income, but always save twice what you think you should and borrow half what you think you can, to account for how stupidly optimistic people are in the presence of easy money and compound interest.
pithy, I'm going to steal this if you don't mind. I like it a lot.
And even in a normal economy, I don't know about the house: going into debt basically means selling your soul to "the man". For the rest of your working live, you will be a docile, scared cubicle worker, because you can not afford to lose your job (bank would take the house, huge losses). Doesn't seem worth it to me.
"I started working as a freelance makeup artist in 1980, and I worried that I didn't have enough money. My father told me I'd just have to figure out a way to make more money. So I started looking through the Yellow Pages and calling agencies, magazines, photographers - anyone I could offer my services to. I'd work for free until I proved myself."
-Bobbi Brown, CEO of Bobbi Brown Cosmetics
Your example illustrates why I find their position unreasonable. Designers can get away with refusing to do spec work when their portfolio speaks for itself and they want to keep doing the same kind of things they've done before. But encouraging less experienced designers to refuse spec work is holding them back.
It is 1986. You buy yourself an IBM PC. You are using MS/DOS and say "This sucks. It isn't even as good as operating systems from 1960." You're a computer expert so you know that the technology is pathetic. You do some business research and find that out that the company making this MS/DOS product didn't even have the in-house expertise to build it itself. They bought it from another company!" You call your broker and find out that this "Microsoft" company is publicly traded and selling for a very lofty price/earnings ratio. You smell blood and say "I want to short 100 shares of Microsoft."
I sure hope he didn't do it, but he seems to have such bad karma, who knows.
Once you've lived through one, you'll find it easier to tell.
Baron Rothschild was big on it :p