AskDong

I was reading BusinessWeek at the Gym. One of the perks of going to gym is I catch up on bunch of magazines I like to read, but don’t have time or the inclination to read all the time. Having gym membership is like having a subscription to Fortune, BusinessWeek, and Entertainment Weekly. There are other magazines at the gym, but those are the ones I read. My last workout was dedicated to BusinessWeek and the bench press.

BusinessWeek reviewed The Billionaire Who Wasnt, a biography of Chuck Feeney. Chuck Feeney may not be be common name, but most of us are quite familiar with his enterprise. Along with his partner, Robert Miller, Chuck started Duty Free Shopper, the ubiquitous Duty Free shops that we find at airports worldwide.

Apparently until he was outed in the 90s with the Sale of Duty Free Shopper, Chuck has been giving millions of dollars anonymously via Atlantic Philanthropies for the greater part of the last quarter century. In many ways he was the innovator of “giving while living” which is all the rage these days. Chuck Feeney besides being a world class philanthropist, he’s also known to be model of modesty and humility. He flies Economy, and buys his suits off the rack, according to anecdotes told of him. Chuck Feeney is the type of person we should all strive to be.

So what does the library have to do with this post you may ask? I thought about buying the book at Amazon.com which is being released in October, but I decided to the give the Library a shot first. I didn’t even have to leave my home. I recently signed up for the Boston Public Library’s online system.  I got my pin last week in the mail. Using my pin, I was able to put a hold on the book for when the library gets delivery of the book.  I found myself luckily in the pole position with first dibs on the book.  Whenever the the book gets in, I’ll drop by the Library on my way home from work and pick it up.  As convenient as Amazon, and free.

Frugality is often thought of being able to say no to things that one wants.  I want to eat out at restaurants. Being frugal is denying myself that pleasure.  Being able to restrain yourself from things you want is a important part of being frugal.  However, there is a deeper frugality.  The ideal way to be frugal is to actually want less.

Wanting less is difficult.  Most people are ingrained with natural tendency to want more.  We want more food. We want more house.  We want more cars.  How do you go about wanting less? I believe the strongest argument and most compelling reason to want less is a desire for simplicity.  This desire for simplicity is an over arching theme in many personal finance blogs.  JD at Get Rich Slowly indicated this to be one of his goals in a book review he had of Voluntary Simplicity. The Simple Dollar reflect Trent’s quest for simplicity in it’s name.

While I never had the debt trouble that either JD or Trent may had in the past, I struggle with simplicity more. I’m a “wanter.” I want things. I manage to be relatively frugal because I’m pretty good at good restraining myself, but I still want. I know despite not being a zenBuddhist that to not want is to have.  I strive to get there.

This week one of the next steps I had for Mary Ann in her MoneyMakover was to establish an Emergency fund. Most experts including personal finance bloggers think they’re a good idea. I do as well

• JD Tells us how and why we should start an emergency fund.
• All Financial Matters tells us how an emergency fund can save us thousands a year

However just because it’s a good idea, doesn’t mean an emergency fund is without controversy as well. For instance Free Money Finances asks if establishing an emergency fund has priority over paying debt?. And even if the firm decision to establish or grow the fund, there’s question of how much you need. Lifehacker.com tells us how to calculate what someone needs given their expenditures.

Now that you know what you need, how do you save for it?

• Amanda at Young and Broke gives us creative ways to start an emergency fund.
• Frugal for Life gives 10 Ways to Save for An Emergency Fund

If you already have enough saved in your emergency fund, compare yourself with others who’ve taken MyMoneyBlogs’s poll. Is it too much as The Tao Of Money Making might think? Still have questions about emergency funds? Money Smart Life let us in on everything you wanted to know, (but were afraid to ask).

My personal feeling is that a large emergency fund is critical for younger people with fewer asset categories. Someone who is 40 with a house, brokerage accounts, 401ks, IRAs, and other assets still needs an emergency fund, but can also be more creative with funding a longer term emergency horizon with both sales of assets, a home equity line, or as Advanced Personal Finances suggest the Roth IRA. Someone in their early 20s usually doesn’t have those options. Having an emergency fund is what allows the younger person avoid using a credit card for emergencies and therefore establish a better financial footing.

p.s. Some of the articles linked are older, but emergency funds are a classic concept.

Last week I detailed how I was going to rejiggle my credit cards.  I had decided to apply for American Express Blue Cash card given the bonus structure, 5% on Gas and Groceriees and 1.5% on everything else after spending $6500.  I decided to a little more research as I had some doubts if the $6500 was done on calendar year basis or 12 month rolling basis based on when the card application was made.  Given that we’re more than mid way through September, it doesn’t make much sense for me to use a card that would only be paying 1% and .5% respectively if determination was made on a calendar basis.  My initial determination was that it was determined on a calendar basis.  I eventually called American Express directly, and the nice woman I spoke with indicated that it was done on a rolling basis. However, by this point I had already gone ahead and applied and recieved for a Starwood Preferred Guest American Express card.  Even though I did speak with someone, I still have some lingering doubts.

The annual fee ($45) for the first year is waived, I get 10,000 bonus points for just signing up, and I am eligible for another 15,000 bonus points.  Those last 15,000 points come with a big catch.  I need to spend $15,000 in the first 6 months of having the card. That’s $2500 a month which is more than I put through all my credit cards currently. I have no desire to change my spending habits as that would be a cardinal money sin. Never put the carriage in front of the horse.  I still plan on using my Chase Freedom for gas and groceries, given the high 3% payout rate on those items.  However, I do want to get those extra 15,000 points.  I’m not going to change the amount I spend, but I can change how I spend it.  I still use quite a bit of cash. In any given month, I spend about $300 in cash.  If I can convert most of my cash spending into credit card spending I should be in good shape. One area where I tend to use cash is when I settle up bills out with friends.  I can actually take advantage of those situations by collecting the cash and paying the entire bill on my card.  If I’m disciplined, I believe I can hit the goal of 15,000 spent on the credit card in 5 month.  At that point I should have 40,000 Starwood points (10,000 signing, 15,000 bonus for spending in 6 months, 15,000 just from regular accrual rate of 1 point per $1 spent).  36,000 points entitles me to 3 nights at The Westin Maui Resort & Spa, Ka’anapali which in December costs about $365/night for a total value of $1095.  If I earned all the points via spending, I would be achieve 3% payout ratio on all spending which is difficult to beat.

The New York Times had an article on the young turks populating the two room offices in Greenwich, CT. I’m both disgusted and jealous after reading the article. Quotes like this, “If you look at the really successful hedge fund managers — the Eddie Lamperts,” he says, “they’re all in their 40s now. They were probably making only low single-digit millions in their 20s.” (Mr. Hammond of Alperian), makes me want to puke. Anyone who says “only low single-digit millions,” I find absurdly out of touch with the rest of the world.

Aside from “the low single-digit millions”, the article in many ways is particularly pertinent to myself. I’m one of those “young turks: who chose not to go to business school. However, I’m just poorer, scruffier looking and badly dressed. I’m not on Wall Street or in Greenwich, but I do work in trading. In my own calculation a few years back, it just didn’t make sense for me to go. I’m not making the kind of money the people profiled in the article are making, but I’ve been lucky, and have managed to do well. My relative success is as much a function of luck (being at the right place at the right time) as much as some level of competence and an aptitude for my work. One doesn’t need to be making million of dollars to think that an MBA is unnecessary. One just needs to realize that doors might already be open, regardless of current income levels. Not everybody works just to make more and more money.

Still, MBA’s do make sense for some people, and Flexo at Consumerist Commentary covers well those points. Personally, I believe if you want a change in industry or area of work, a grad degree like an MBA makes sense. If it’s just advancement that’s not coming at the current job, then change is also necessary. That change doesn’t have to be school, it can be sometimes mean simply going to a competitor.

The NYT article is not about grad school in general, it’s about the riches that freshly minted MBAs chase, and that now new minted hedge fund worker bees receive. I won’t lie. There’s a part of me that’s fascinated by the fast life and jet set ways of the hedge fund set (we get Trader Monthly here at the office, but mostly just to laugh at), but a bigger part of me is repulsed by the rampant materialism and never ending chase for greater wealth and power. I like to think my values are a bit better than that (I hope). Still, when you look at the numbers, it’s hard not to feel some kind of pull. While the New York Times article is sensationalistic in its profile of the rich, talking about how they like to join the ranks of the uber rich, there is a deeper story.

Lost in the pomp and flash, is a story about being able to choose what we do. Many of those surveyed were quoted as wanting to do “less lucrative things like running a charity, working for the government, spending time with their families, or inventing new technologies” later in life. And when they say later in life, these individuals are talking about the ripe old age of 35 or so. Making millions of dollars before the age of 35 is not the only way we can choose what we do. Few of us have that kind of choice. However, most of us of have the choice and ability to instill simplicity into our lives, allowing for the freedom of spirit that we really crave. We might be able to get out of the rat race at the age 35, but achieving such as goal at the age 45 is reachable for many of us.