When I was in my twenties, I hardly used to think about insurance other than what I needed for my car. Now that I’m in my 30s (though barely), I’ve become very insured. When you’re young and invincible, insurance seems like an after thought. It’s one of my bigger regrets that I didn’t tackle my insurance needs earlier. One word - Disability. But before we get into that, let’s go over all the insurance that I have personally chosen to carry and pay for (and you should too). Each of these could be a topic unto themselves.
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Happyrock has great post on what our cars say or don’t say about us. Personal finance bloggers are sometimes obsessed about cars or rather obsessed about not being obsessed with cars. I’ve decided to share a picture of what my car looks like. However I’ve decided to have a little fun with it. I’ve done a little research and have included the cars of some of the other personal finance bloggers. Most of these pictures are generic pictures I obtained from the web that may not be reflective what the actual cars look like. I tried to match actual color when I could.
Featured are Flexo from Consumerism commentary, Mapgirl, 2millionBlog, Blueprint For Financial Succes, FiveCentNickel, and HappyRock. I would’ve like have included more personal finance bloggers, but these are folks I could quickly determine what they drove. Continue on to see who drives what.
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In the business world, investment decision are often made based on WACC or the Weighted Average Cost of Capital. Simply stated this is the cost of money for a company. It reflects both the cost of equity to shareholders, and what it costs a firm to borrow money. For a company this is easy to understand. The cost of borrowing is simply the interest that has to be paid to lenders. A simple definition for the cost of equity is the dividend return (with growth) that equity holders require. A company is then able to evaluate business decisions based on WACC. If an investment generates returns in excess of WACC, it’s a worthwhile investment. If a company can borrow at 5%, and get a return of 10% that company has effectively made 5% from nothing.
Most individuals, apart from aging rock stars such as David Bowie, do not have the same kind of easy access to capital markets. We do not have a WACC as it’s conventionally thought about. What we do have is our abilities and our time, both of which are quite valuable. Like many other personal financial bloggers, I feel conflicting pulls from wanting to save money and do things myself, and thinking my time is valuable. But how do I measure the value of my time? What is my WACT, Weighted Average Cost of Time?
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As golf season kicks into high season here in the Northeast, I’ve decided to review my hobbies not just because they are important part of anyone’s budget, but because they’re important part of everyone’s life. I’ll be the first to admit, I have some expensive hobbies. However unlike some other personal finance bloggers, I don’t preach just having cheap hobbies. It’s great if you can have cheap hobbie, but sometimes hobbies choose you and not the other way around. However, I do think there are ways to minimize costs.
Golf
Equipment and green fees are expensive. However, I think most golfers are better off not spending a ton of money on top of the line equipment. Buy used when you can. A club that costs $100 a new can be had for $10 used. Especially if you’re a hacker like me, the club is most likely going to be chipped after a few holes. I may be the exception but I’ve never purchased a club as I’ve been lucky enough to get hand me downs, first from my brother and then later from a friend. Green fees in the Boston area are expensive easily running $40-50 for good but not great course. Besides playing at cheaper courses, the other thing to take advantage of are late afternoon/evening rates that some courses offer. Estimated Yearly Cost: $700 (for 15 or so rounds at around $45/round) + $100 for equipment. Golfers who belong to country clubs can easily spend in excess of tens of thousands per year on member fees.
Skiing/Snowboarding
Like golf skiing or snowboarding is expensive because of both equipment cost and use fees (lift tickets). Travel costs then take another big bite out the wallet. Few people are conveniently located near a ski slope and as result transportation and lodging can be substantial. Good thing I snowboard much less than I golf. Though I’m a much better snowboarder than golfer - that’s more of statement on my golf game as I’m pretty bad snowboarder. Used equipment makes somewhat less sense here given the more fitted nature of ski equipment. Only the actual Skis, and Snowboard really make sense to buy used. Boots should be personally broken in, and be the right size. The cost of lift tickets are hard to avoid. Besides owning a Jeep and taking advantage of Jeep appreciation day (2 free lift tickets), it’s not that easy to score free lift tickets. However if you really do ski alot, a season pass can make sense.
Videogames
The best days of playing video games are well behind me. Most of my gaming took place on Apple //c. I currently own a Wii, but don’t play it all that much. Gaming as far as cost $/hour is quite cheap. That may be reflection of the large denominator. Playing games take alot of time, and the actual cost of any given video game is low. For example a standard action video game might cost $60, but deliver 60 hours of playing time. $/Hour is pretty a good rate. If you buy and keep alot of video games, the costs can add up. However if you instead buy used, and play quickly, and resell the game, the actual cost of a video game be quite low. As low as $10-$15 a game depending on how long you keep the game. Given that games are just software, there’s really no need to own a Game CD/DVD new. Of course the real cost of gaming is time. Like any Hobby , playing videogames takes time. However given the number of folks who have died in Asia from not stop gaming, the time suck nature of video games is quite apparent.
Cooking/Entertaining
I enjoy entertaining and cooking for friends. I definitely do not do this as often as I’d like, and less often than I used to. While I’m always happy to spend the money, entertaining friends can be quite expensive. I will be the first to admit much of this is my fault. Since I cook on a irregular basis, I end up needing to buying excess ingredients that often go to waste. Some of this is related to packaging size, but much of this is due to bad estimations on my part. If you’re going to entertain be accurate with the guest count, and don’t buy too much food. You want enough for leftovers, but you don’t want too much in leftovers.
Blogging
This is my one hobby that doesn’t cost anything beyond what I already own, a computer and internet connection. Like gaming, it’s a big time suck. But unlike video games, it’s actually a productive use of time.
I should post the update on my IRA on a more regular schedule. I t’s been almost 2 months since my last update Given that I’m posting it now, I’ll set my IRA update schedule to the end of each month. As you can see not much has happened with my IRA monies. The only “major” item is that I purchased more shares of AMAT. Even though the company beat earnings expectations for Q2, the company also issued lower sales expectations for Q3. Wall Street cares more about tomorrow than what happened yesterday, and rightly slow. However, I see the pull back as a buying opportunity. Applied Material is the type of company I want to own in the long run. It’s a leader in its industry, Semiconductor Manufacturing Equipment, and is solidly profitable. Currently it’s valued at trailing PE of around 16 and a forward PE of around 16. It’s PEG is 1.09. For those who aren’t stock watchers. PE is price to earnings ratio. So if a stock trades at a PE of 10 that means it’s price is ten times it’s earnings for a calendar year. If that stock has earnings of $1/year per share, it’s price would be $10. PEG is more complicated, but simply stated a PEG is the ratio of the price to growth. The higher the PEG, the higher the expectations for growth. Here is an article that goes into more detail in explaining what PEG is. A PEG of 1 implies that the price has fully valued growth. At 1.09, AMAT is currently fairly valued. As I aspire to be like Warren Buffet, I rather buy a good company at a fair price than a poor company at a good price. A good company is more likely to pleasantly surprise. I also like the fact that AMAT has diversified into the solar power industry.
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