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May 21, 2012

posted May 23, 2012, 4:12 AM by

    This year is coming to a close.  This class has been incredibly helpful I have learnt so much in this class. Lets start with all the finance terms I learnt. I have heard a lot of terms like Gross, Net, and Bonds, but I have never really known what any of that meant. But, lets move onto the more real world things. 
    First of all, I learnt a lot about credit cards. That is the first thing that I think I will really hold on to for a while. I didn't now any of the little things about credit cards. The little things like how much money credit card companies can make through interest. I always thought that the money that was not payed off at the end of the month just carried over and that was it. Knowing these things is very important. If I didn't know about the large amounts of interest, I would be in debt so fast!
    The next thing that I am really going to remember is everything we learnt about regarding investing. I really had no idea how to invest before this class. I also had no idea what bonds, indexes, or mutual funds were.  I feel like investing is going to become very important for me.  I really don't think that I will be getting a lot of money from my job, so, It will be nice to have my invested money there for me.  

    So, as the year comes to a close, I will probably continue to track my expenses over the summer and into the future.  I have taken so much away from this class and I cannot wait to apply it to the future. 

May 18, 2012

posted May 21, 2012, 2:11 AM by

    Inspired by the talk we had last class with Mr.Thomas, I decided to research investing in real estate. I looked up, "best places to invest in real estate." I discovered Investopedia's 4 factors to look for when buying real estate.

1) First was Price to Income ratio. Basically, you need to look at the average income of the area and compare that to the price of the homes. So, if the price of the house is above this norm or, the price of the house does not fit with the norm, then it is a good time to buy houses.  This suggests that property value has overcorrected, and it is a good time to buy. 
                In my personal opinion, this make little sense. If the house is more expensive, why would you buy it. Maybe what is suggested is that the house price will continue to go up making owning the home more profitable. But, from what we have learnt, you are not to buy an asset when it is high. You should buy it when it is low and sell when it is high. 

2) Foreclosures.  It is best to buy in places were foreclosure rates are falling. This suggests that the local economy is improving. 
                In my opinion, this doesn't make sense either. I get that it is good that the economy is improving, but then again shouldn't you buy where there are a lot of foreclosures and just wait it out? Im not actually sure...

3) Price to rent ratio. 
    " We looked for places where the difference between the annual cost of renting or buying was small. That can be a double-edged sword for investors, since this means that current purchase prices are attractive now, but that rents could fall in the future. However, rents may be high now relative to the purchase price, so the property might generate income quickly." 
                I do not understand this. I think that the author just said, "the rent could fall, or the rent could rise." 

4) Home value appreciation.  This factor suggests that you should look at area where the value of the homes are increasing because it is more attractive to buy homes in a relatively strong real estate market. 
                In  this segment, the author wrote, "It is more attractive to buy homes...." I think it is important here that the author did not say that it was better buy in a strong real estate market but rather was very vague.  

    So, after reading and reviewing these factors to look out for, I find that I don't agree with most of them. This could just be that I am looking at the topic with no outside understanding. I am just looking at it with the knowledge that I have thus far. I also found the following chart. I find it interesting how most of the best places to buy are in california.

May 16, 2012

posted May 17, 2012, 2:34 AM by

Cutting Costs Continued!!!! (Entertainment and eating out edition)
     This  is something that I am worried about. I know that I say now that I will not spend a lot of money on these things but I am probably wrong. So, i looked up some ways to save money on entertainment.

1)Take A Stay-cation: This is awesome. Ever since I learnt what a stay cation was, I wanted to do one. This spring break, my family went on a stay cation (or rather stayed...). It was so much fun. I enjoyed it so much, I got to see singapore in the point of view of a tourist and I had a blast. I would love to go on another stay cation. I hadn't thought of this before, but yeah, this would save me a lot of money.

2)Wait for movies to come out on DVD before watching them: This does not make sense to me. How is it cheaper to buy the DVD for $20 then buy a movie ticket for $7 bucks. Even if you buy popcorn and soda. That would come to about 11 bucks. Maybe there is something more I am missing here. But, to me, this suggestion seems illogical.

3) Only eat out once a month: This is going to be difficult for me I think. I am going to get annoyed with cooking and am going to want to go out. I will have to resist this temptation. Restaurant costs could really add up to be too much for my budget. This leads to the next tip.

4) Find recipes for your favorite foods: This refers to finding restaurant food recipes. This can be cheaper. So I guess what I should take away from this is to make home made meals. But, if I follow the idea of just eating rice, then this shouldn't be an issue. But, we will see how well that goes. Maybe if i get a roommate, I can just get that person to cook for me!!!

5)Watch out in local newspapers for free events: I went to a few free, concert in the park type events. I can't say i really enjoyed them that much.  I mean, it was ok... But i guess you get what you pay for. I didn't pay anything so I guess its not top notch entertainment. Maybe if there is a free event that is of a different genre it would be more interesting. But, beggars can't be choosers.

6) Ask if you really need it: This is going to be hard for me. I don't normally shop often but when I do, I buy a lot of things. Especially when it comes to yo-yos. I have somewhere between 30 and 40 yo-yos. I only actually consistently use about 5 or 10 of them. So, I unnecessarily spend money on yo-yos. This is going to have to stop. I need to ask myself if I REALLY NEED another yoyo. 

Now, I need to apply all the ideas that I have talked about in the past blog posts, and rework my expenses. If I follow these idea, I might be able to cut my costs back even more. I CAN DO THIS!!!!!!!!!

May 13, 2012

posted May 15, 2012, 6:14 AM by   [ updated May 15, 2012, 6:14 AM ]

    I have realized by now, using this project, that I will have to cut costs like crazy when I get out of college, and probably during college too. So, I looked up ways to save money. 

1. Hang Laundry on Lines: I would see how this would save money. There is less money being spent on electricity because you are not running the dryer constantly.  I don't know that this would be practical for me because I would be living in an apartment.

2. Skip Starbucks: Coffee is the official drink of techies. This is going to be difficult. I will probably drink coffee a lot in my line of work. They suggest instant coffee that is a lot cheaper. I think this is do able. 

3. Nix Net flicks: I don't know what this is so it won't be a problem not using it...

4. Cut the cable: I feel like i may miss cable if i get rid of it. But, I can see how it could help cut costs. I think that I should at least try this out and see how it goes. I do have other things to do besides watch TV.  I could yoyo instead!!

5. Reduce phone expenses: I could cut costs here by not using any of the extra phone options like call waiting. I always have my phone on me so i don't think there is a real need for somthing like that anyway.  I, for sure, cannot be without a phone though. Whatever i do, i cannot loose my phone. I can cut down soon overseas calls easily though, by using Skype to call my mom and dad. 

6. Buys a Non-New car: This is not an issue at all. I didn't plan on getting a new car anyway. This was to be expected. 

7.Shop at a thrift store: This is not a problem either. I wear black all the time so as long as I can find black clothing, then I will be fine. Some black shirts and a pair of jeans will be fine. I don't need to have fancy clothes for being a theater technician. 

8. Drink More Water: I will be drinking a lot of coffee so, this might be a little difficult but i think i can live off of water and coffee!! I don't usually drink soda anyway. 

9. Give op the Gym: I don't need a gym to work out. I can go running. I can work out at home with no equipment. I think I can manage without a gym membership.

10. Get your news online: This refers to canceling newspaper/magazine subscriptions. This will be difficult because I like to buy science magazines.  I will just have to go online and read these things then. I guess that is do able.  I already read other things online like The Onion. 

All of the things mentioned are do able in my opinion. It might take some work and a little bit of sacrifice but until I have some extra money, that is the way it will have to be.

May 9, 2012

posted May 13, 2012, 7:12 AM by

    I asked my mother about all the houses that she bought right out of college. I asked her if she actually made a profit from the houses she owned. She said that she was able to make a profit off of a good amount of the houses that she owned. This surprised me because She didn't really own them for a long time. I find it hard to believe that something like a house could go up in value over a 2 years.  I thought that you would have to own the house for longer. 
    My father said that when he sold his condo after 2 years, he was also able to turn a profit. I knew that these things were appreciating assets but i thought you needed to own them over a long period of time; something longer then 2 years at least.  Is this an anomaly? Can one turn a profit on a house after owning it for a short period of time? 

    I have often asked me dad what his best investment has been. He keeps giving me the same answer. He says that I am his yes investment (not my brother, just me :) ).  I don't see how this could be. My parents spend so much money on me, how is that a good investment? He has to pay for school, clothes, shoes (lots and lots of shoes), vacations, college, and so on.  I guess that if I took care of him when he is older (which i will), he would get his money back. But still, i am practically as money eating as a hummer car. 

    When i asked my dad and mom what their REAL best investment was, they both answered Phillip Morris.  Phillip Morris is a tobacco company. My parents both have investments with them because they both at one time, if not still, worked for Kraft and Kraft was bought by Phillip Morris.  They said that it is unfortunate that so many people smoke but it has made them a lot of money.  Phillip Morris's P/E is 17 and is currently at $86.15.  So, this company has done very well for my parents. 

    They said that i now know more then even their investment bankers. They now refuse to tell me anymore things about their finances and investments. I guess i have to find other things to blog about now. 

May 7, 2012

posted May 9, 2012, 6:24 AM by

I talked to my parents today regarding pensions and a few other things. First, my dad, he gets a pension. It is from Kraft foods.  He has worked for Kraft for 26 years. So, this allows him to have a pension. He can access it at the age of 65.  My dad also worked in the Military but not long enough to be eligible for a pension.

My mom gets two pensions.  The first one is from Kraft foods.  She worked there for 13 years.  She is allowed to get her pension at the age of 62 but she would only have part of the pension. It would be reduced. If you accessed it at the age of 65 she would get the full benefit. This might be necessary for people who really need the money. 

The second pension is from Morton. My mom worked there for 5 years. This seemed like a short time but it was just enough time that she got a pension. That’s pretty cool I think. It is a nice safety net for my parents.

They said that the money they are going to get from a pension is not really that much and they are not relying on it to live on. They both have 401Ks and other saving. This is what they are planning to live off.  My father said that their saved money is 80% stocks and 20% property. They own 3 properties right now.

Then, as I started asking questions about ponzi scheme my father got annoyed and asked my if Tupperware is a ponzi scheme. So there is a question for you. Also he wanted to know if Avon was a ponzi scheme. I don’t even know what that is.

Inspired by what we did in class, I also asked my parents how much money they think they can live comfortably on assuming they don’t have to pay for college or houses or anything. My mom walked out of the room saying she had absolutely no idea. I then went on to my dad. He gave me the answer $100,000 a year.  I don’t know if that is reasonable for my dad because he likes to shop a lot; especially furniture and art. So, considering he is a collector of those things, I think that his answer should have been a bit higher.  My mom, overhearing my dad’s response, said “yeah sure, that.” So, she went with $100,000 too. Their answer is huge compared to what I had originally said in class. Maybe I should rethink my $45,000. 

May 3, 2012

posted May 7, 2012, 6:16 AM by

Last class we talked about money allocations.  The rule of thumb that we have been using is that you should put your age in bonds. So, if I were 30, I would have 30% bonds and 70% stocks.  We talked about different circumstances that can change this.  For instance, if the person who is asking for advise on their allocations has low income and no pensions, they should probably have more bonds. This is because they are not as financially safe.  If this person had a safe job and a pension, they could take more of a risk in the stock market.

Feeling inspired by the project we are doing in class, I asked my parents what they did for housing after college.  First I asked my dad, during graduate school he rented an apartment with 2 girls.  He rented this apartment for 2 years. Next, he rented an apartment for 5 years. After that, he moved to New York and rented a house and an apartment for 18 months each. After that he moved to Chicago and bought a condo for $167,000 for 2 years.  After that him and my mom bought a house for $290,000. They still own this house.

My mom bought many more houses then my father. First she rented a carriage house for a year. Then moved to New York were she rented an apartment for 4 years. After, she moved to Michigan and bought a house for 2 years, then a condo for 2 years and another condo for 2 years.  After that she bought that last house with my dad.

I was actually really surprised by this because I didn’t think it was normal to move around that much. Also I was surprised by how many houses my mom bought. Most of them were for a short amount of time too. I wonder if it would have just made more sense to rent over such a short period.  So, is that normal to buy that many houses? She sold them after she moved, but still, is that normal?

April 30,2012

posted May 2, 2012, 2:28 AM by

So, I watch a lot of cartoons, which is weird because I’m 17 but whatever, they just recently started airing some new commercials.  They are sponsored by Prudential, which is a financial company.  It’s a pretty interesting series. It is called Cha-Ching. Its goal is to educate children about money.  There are a bunch of them educating kids about saving money, keeping emergency money, entrepreneurism, and much more.  Here are a few:




There is even one that teaches kids about putting money into a bank so it can grow. I think that is pretty incredible. If you think about the average Cartoon network audience, that is pretty young.   They are teaching kids starting at a really young age. I wonder if this series of commercials is actually affecting the spending habits of children. If this is actually helping kids learn they would be so much better prepared for the future, Especially if they start saving money that young.


April 25, 2012

posted Apr 28, 2012, 8:25 PM by   [ updated May 6, 2012, 8:34 PM ]

Today we started to work on phase 2 of out big finance projects! This phase, I think, is a lot easier then the first phase. There are fewer parts, so there is less research. I will need to save up a while lot of money to buy the house I am looking at.  But, this is good prep for the real world.

So, I found this finance blog called Get Rich Slowly and it was very helpful. There was an article called How Much Do You Spend On Housing. This was helpful because it let me know what other people were paying for houses in different parts of America. There were a lot of comments that were different housing prices in different places.   Some of these people are paying really low rents too. Someone living in Durham, NC is paying about $500 a month on rent. It seems like London is really expensive though. Will writes:

I think most people reading this can count themselves lucky that they don’t live in London…I do. Renting the cheapest 1 bed flat I could find costs me £760 per month (~$1200). Add in to that council tax and utilities and it breaks the £1000 ($1585) barrier.”

Its kind of interesting to compare different prices from all over.

This blog was named "Best Blog Of 2011" by Time Magazine and the "Most Inspiring Money Blog" by Money Magazine. I think this is because the writing is not promoting "get rich quick plans". That is kind of why I like this blog. There are so many "get rich quick" schemes that don't work,  so this writing is telling it like it is. He is sort of letting you know that there is no quick way to get rich. I find it interesting that a lot of the money bloggers were once in deep debt but then found a way out and are writing about their experiences. I think that gives people hope. 

April 23, 2012

posted Apr 25, 2012, 6:47 AM by   [ updated Apr 25, 2012, 8:32 PM ]

There are so many options. I know, from this class, that I will invest in a US stock market index, a international index, and a US bond index. But, I don't know if I should buy them separately or in a fund that will buy all three AND rebalance them for me, like the target retirement fund we talked about last class. I feel like that is the best idea considering I will be busy with school life and might forget to rebalance. I wouldn't want to forget to rebalance either because then i might miss out on buying stocks or bonds when they are low.  That would be a horrible missed opportunity. So, I think that with that inherited money I was talking about earlier, I will purchase Vanguard's target retirement fund product. 

I think that I will also advise my mom to buy this product. She would for sure not check her investment or rebalance. So, this would be a great idea for her. 

Changing focuses now, we started phase 2 today. I think phase 2 will be pretty easy. I know that i will be tight on money so i will be taking public transport. So, all i need to find is the cost of a month or yearly transport pass. Next, we have to figure out food cost. Fist of all, when you are working on a production, the meals that coinside with rehearsals are provided. So, if i am working, which i hope i will be, lunch and dinner will be provided. That leaves breakfast. One meal costs a lot less then 3 meals. 

So, my friend has an amazing idea that I think i will steal.  The goal is to save as much money as possible so, I will buy a rice cooker and a large bag of rice. That way, whenever i am hungry, I can just make some rice. I am already used to eating rice all the time because I live here. So, I could save a lot of money later in life by doing this.  Buying large bags of rice is not very expensive. Buying in bulk is good. So, I would save a lot of money this way. If i every become tired of this, i could use some of the money that was saved to go out to eat, or order in.  My dad decided that if this is what i want to do, he will buy the rice cooker for me! what a deal!!

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