Beating Broke

Personal Finance from the Broke Perspective

Personal Finance is a Life Skill

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ChristianPF posted a very thought provoking article a while back.  In it, he talks about how spending money wisely is a life skill.  The choices that we make in spending our money are the root of how we live our lives and can bleed through into the businesses that we run or work for.  Basically, the way that you spend money is a very important.

I think I would take it one further.  Not only is the way that you spend your money a very important skill, but, as the title of this article states, the entirety of your personal finance management is a life skill.

Schools all around the world concern themselves with teaching children life skills.  Skills like writing.  Reading.  Wood Working.  Mathematics.  Science.  And even Cooking (0ne of my favorites).  Perhaps personal finance isn’t as important as things like mathematics, writing and reading (the three Rs), but I would argue that it’s just as important (or more so) than the rest. I would argue that personal finance is a life skill.

Improper management of your personal finances can lead to some pretty dire circumstances in your life.  You can find yourself falling into a trap of revolving debt and upside-down mortgages.  Too easily, you can find yourself making the choice between ramen and gas to go to work.  And yet, people continue to put personal finances aside as something that isn’t all that important.

Over the last decade, I’ve spent my time learning many of the tenets of personal finance management.  Even with the knowledge I had gained, it was a very difficult trip to take.  I started as close to the bottom as I cared to get.  I’m still a long ways from the top, but I’m getting there.  And most of that is owed to learning to manage personal finances properly.

Take the time today to learn something about taking care of your finances.  Teach it to your children.  Teach it to your friends.  If we all learn a little bit more each day, week, and month, we can turn our situations around and help more people.  The more people we help with this, the less likely that our economy will ever find itself in this situation again.

4 Frugal Ways to Keep Young Kids Busy During Christmas Vacation

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During a typical year, children get two weeks off school during Christmas break, often a week or so before Christmas and a week after.  However, if Christmas falls on a weekend, and if your school scheduled vacation as my son’s did, you will see kids who don’t get out of school for Christmas vacation until December 23rd.  That leaves them with almost two weeks of vacation AFTER Christmas itself, a time that is pretty low on excitement.  (It is so much easier to have a week off before the holiday because there are so many activities for the kids to enjoy.)  You could very likely end up with bored children, especially because all of the activities of Christmas are over just a few days into vacation.

However, there are plenty of frugal ways to keep the kids, especially your preschool and elementary school kids, entertained during the Christmas vacation.  Consider the following activities:

  1. Have a family play.  Take out the dress up box and let the kids come up with a play to perform for the family.  If your children are old enough, you can largely stay out of the picture and let them decide on a story, props, stage directions (even if the stage is just your living room).  Smaller children may need a bit more direction and assistance from parents.  If the kids are stuck for story ideas, they may want to act out what happens in one of their favorite stories.
  2. Check out your local library.  Our local library has plenty of activities for kids during the holiday including a movie viewing night, family story hour, and a Lego building activity.  In addition to activities, most kids will enjoy spending an hour or two at the library reading books and choosing books to check out to read at home.
  3. Visit a public museum.  Many museums put up special holiday displays such as holidays around the world and Christmas decorations throughout the years.  Most kids love all of the lights and decorations that go with the holiday, so take the time to visit your local museum and enjoy the display.  Afterwards, at night, take the time to drive around and view all of the colorful holiday lights and decorations on neighborhood houses.  If you have a house in your area that goes all out with the decorations, make sure to visit that one.
  4. Let kids stay up late.  My kids need their sleep and have an early bed time.  However, during the holidays, we relax the rules a bit and let them stay up later one or two nights a week.  Perhaps they can stay up to watch a favorite show that they normally can’t view because it is past their bedtime or you could play games with them.  Either way, they will be delighted to stay up later than they are usually allowed to.

There are simple things you can do to entertain your young children without spending a lot of money.  Employ some of these tactics, and you will hopefully avoid the common vacation chant, “Mom, I am bored!”

The Case for Buy and Hold Investing (#AAPL)

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I’ve always been a proponent of the buy and hold method of investing.  If you’re unfamiliar with the concept, it’s basically the method of buying a stock (or bond, mutual fund, etc) and holding it forever.  Well, maybe not quite forever, but certainly for as long as you don’t need any liquidity.  For most, that’s pretty much right up until retirement.

I’ve been playing at investing for many years.  Over a decade.  To say that I’m successful would be stretching the truth just a bit.  I remain a buy and hold method advocate however.  Let me give you a couple of examples.

My investing history goes a bit further back than this example, but these are both examples from when I got a bit more serious about investing.  But, also a time when I was still very new to real investing and learning the world of investing the hard way; by trial and error.

Let’s start with what could be one of the strongest reasons why you should do your research, pick a stock, buy it, then hold on to it.

Buy and Hold AAPL

In October of  2000, I bought 3.95 shares of stock in a company you might be familiar with.  Apple Computers.  (AAPL)  For those 3.95 shares, I paid a grand total of $47.25 (including $5.98 in trading fees).  The stock had recently split, so the price was down.  As an IT professional (or at least a future one at the time), I was pretty familiar with Apple and thought well of the company.  I bought the stock with the idea that it was a company that I liked, and wasn’t likely to disappear.  That’s about the extent of the research I had done.  Back then, I invested with a company called BuyandHold (define irony, eh?)  but I mostly invest in stocks through Sharebuilder and Kapitall today.

Somewhere around April of 2001, I began thinking that I really should be buying stocks that paid a dividend if I wanted my portfolio to grow.  Note: I still believe that the majority of your portfolio should be giving you income in the form of passive income (e.g. dividends).  At the same time, the Apple stock that I had purchased not only didn’t pay any dividends, but it’s price per share really wasn’t going anywhere at all.

Of course, all of this was before the coming of the iPod, iPhone, and iPad.  Those didn’t come around until a few years later.  At the time, Apple was just a computer company that made some pretty cool machines, but not much else to speak of.  On May 1st, 2001, I sold my entire position in Apple for a grand total of $47.25 (after $2.99 in trading fees).  If you do the math (I have), I sold it for a profit… of $0.29.  Yep.  Not even thirty cents.

But, that’s not the lesson.  Here’s the real lesson.

In 2005, riding the success of the iPod, iPod Shuffle, and iPod Mini, and the iPod Nano, the stock of Apple began to rise. And then they released the iPhone in 2008.  And the iPad in 2010.  And their stock has never looked back.

The Buy and Hold Lesson:

If I had held on to those 3.95 shares of AAPL, and reinvested the dividends that Apple began paying in 2012 (bringing the total to 3.978 shares), they would be worth $2227.83.  The difference?  $2180.58.

It’s no small amount.  And a painful (to the wallet and ego) lesson.

Of course, hindsight is 20/20.  There was no way, back in 2001, that I could have possibly foreseen the successes that Apple would have nearly 5 years later.  But, if I had stuck to my buy and hold policy, and not worried about the details, I’d have a better looking portfolio now.

What about you?  What stock did you sell that you shouldn’t have?