Wealth Building for Idiots

Inspired by JRL

The best way to get rich is to have someone leave you a big wad of cash, stashed away in some nice warm tax haven someplace far far away from the IRS. The second best way is to have someone leave it to you here in the US.

For the rest of us the only realistic way is to obtain it on our own. This is done by saving and investing. That’s it, the whole secret of dieing rich, save and invest. The only way you’re going to do this, is to accomplish the first part, first. That is to save, and the only way you’re going to save is to spend less than you make. That’s why you hear so much about getting out of debt.

Debt is negative savings. With debt you’re paying someone for the benefit of using their savings to buy stuff you want. If step one to building wealth is to save then step 1a is to get out of debt so you can save. I would advise getting out of all debt, by paying it off, as fast as you can. It doesn’t matter if that debt is tax deductible, take a look at how much of a deduction you get verses what credit costs you, verses what you could have received by giving the money to a cause you care about. You might be surprised how that looks once you do the math.

Savings means cash. Write that down, or repeat it to yourself till it sinks in. You need cash and you need more cash than you think. Do you have an emergency fund? How much is it? Could you live off it for a year or more? Could you get by without needing to raid your investments if you had to?

How much cash am I talking about? That depends on how much you need to live. Do you live comfortably on $1,500 a month? If you do then $18,000 is a good start with enough extra to cover contingencies, add an extra $5,000 to $10,000 to that figure for a rainy day fund. If you can’t live on $1,500 then adjust that number higher, for most middle class Americans I suspect the number is closer to $3,000 a month. So that’s $36,000 plus $10,000 or $46,000 or more.

Quit stammering the word “but”. I have a reason for this. Simply put: Life Happens. There is no worse time to get hammered by life than when you’re not prepared financially. If you’re setting on what amounts to about a years gross pay, you’re going to be able to stick it out through some tough times, without having to sell off assets at a potential loss.

There are different ways to handle your cash reserves. One thought is to stick it into a money market fund. Another is to stick it into a bank account. My personal thought on this is never stick it in a bank account unless the account is of the online variety that is paying a very competitive interest rate, preferably above inflation.

My advice is a two fold approach. First you have the $3,000 a month you need to live off for a year. Take that money $3,000 at a time and buy a 1 year CD from a good online bank that is offering a decent rate on the first day of every month. January 1^st you have a CD that becomes payable. The same thing happens in Feb, March, April, etc for an entire year. If you need to live off your savings each month you have an income stream to use.

The second step is take your $10,000 or rainy day fund and stick it into an account you can get at relatively quickly, that is paying a high interest rate. Most likely this will be someone like ING or Emigrant Direct or one of the many on line banks. The benefit to this is if you need a chunk of cash you can get at it to pay for an emergency that is too big to handle out of your normal budget.

This looks like its going to be a two part post so that’s all for this weeks installment. Next time I’ll take on investing. I will say if you work for a company that has a 401K plan that they contribute to, you need to maximize their match so you can get all the free money from them that you can. If they do dollar for dollar match to 3% then you need to do the same 3%.

Bleg, Well Sort Of

I decided to add a section of “Resources for Free Thinkers” on the side bar. If you have additions that you believe should be there, please either email them or post them in the comments.

Please be sure to provide me with:

1. The name of the resource
2. html link for the resource

I can’t link it if I can’t find it.

As a side note; anyone wishing to publish a post here is welcome to do so. All I ask is that you email it to me and that it be mostly “clean” and somewhat interesting. What I mean by clean is not laced with profanities, vulgarities etc. Agreeing with me is not a requirement, so Bill, for example, could send “Top 10 Reasons GWB is the Closest Thing to Jesus” and it would get published. It would get mocked to be sure, but I would do that in the comments, like everyone else. If you decide that you like being a regular blogger, I’ll set you up with access and you can post on your own.

If you’d like a link for your blog please link me on your homepage and let me know you’d like the same.

Thanks

Look into the Mind of a Trader

If you’ve ever wondered how a technical stock trader looks at the markets you really should check out Jamie’s Eye of the Trader. He does a good job tracking his trades and posting on both the wins and losses. His blog is worth checking out if you're at all interested in learning about trading the markets form from a technical analysis stand point.

Even if you’re not into the market right now, following the method he is using is a good way to learn. So check him out and if you have questions be sure to ask. Those of us who trade, are willing to share hints on how to do it, and we’re always interested in learning more ourselves.

Pre-Garden Time

The Gurneys seed order showed up yesterday. So its time to get the plants started inside. This year we’re going to grow our own tomatoes from seed again. They did better than the ones we bought from the local greenhouse. We’ll be growing the broccoli from seed again too.

Mrs Ipsa loves beets. This year she wants to try a new kind. This seems like foolishness to me. Every year that we’ve been married that she tries any variety other than Detroit Reds, she is invariably disappointed. This year we’re experimenting with Forono beets. We’ll see how she likes them.

The arrival of the Gurneys order brought to light an unfortunate over sight of someone in the Ipsa household. Apparently someone forgot to place the Johnny’s order, after it had been carefully prepared. You will be glad to know that starting tonight, I am being allowed to sleep inside again.

How are your garden plans and seedlings coming?

Discrimination Lawsuit

An atheist was quite incensed over the preparation for Easter and Passover holidays and decided to contact the local ACLU about the discrimination inflicted on atheists by the constant celebrations afforded to Christians and Jews with all their holidays while the atheists had no holidays for them to celebrate.

The ACLU jumped on the opportunity to once again pick up the cause of the downtrodden and assigned their sharpest attorney to the case.

The case was brought up before a learned judge who, after listening to the passionate presentation by the ACLU representative, promptly banged his gavel and said, "Case dismissed!"

The ACLU lawyer stood up and objected to the ruling and said, "Your honor, how can you dismiss this case? Surely the Christians have Christmas, Easter, and many other observances. And the Jews--why, in addition to Passover, they have Yom Kippur and Hanukkah ... and yet my client and all other atheists have no such holiday!"

The judge leaned back in his chair and simply said, "Obviously your client is too confused to know about or for that matter even celebrate the atheists' holiday!"

The ACLU lawyer pompously said, "We are aware of no such holiday for atheists--just when might that be?"

The judge said "Well, it comes every year at the same time--April 1st!"

The Death of a Tennessee Preacher Man

There has been a lot of speculation over the women that shot her preacher husband. Police say it wasn’t over infidelity. You can read the news story here.

I have it from a good source that what really happened was this:

About this time last year a couple in Selmer Tennessee had a lot of potted plants, and during a recent cold spell, the wife was bringing a lot of them indoors to protect them from a possible freeze. It turned out that a little green garden grass snake was hidden in one of the plants and when it had warmed up, it slithered out and the wife saw it go under the sofa. She let out a very loud scream.

The husband who was taking a shower ran out into the living room naked to see what the problem was. She told him there was a snake under the sofa. He got down on the floor on his hands and knees to look for it.

About that time the family dog came and cold-nosed him on the leg. He thought the snake had bitten him and he fainted. His wife thought he had a heart attack, so she called an ambulance. The attendants rushed in and loaded him on the stretcher and started carrying him out.

About that time the snake came out from under the sofa and the Emergency Medical Technician saw it and dropped his end of the stretcher. That's when the man broke his leg and why he is in the hospital.

The wife still had the problem of the snake in the house, so she called on a neighbor man. He volunteered to capture the snake. He armed himself with a rolled-up newspaper and began poking under the couch.

Soon he decided it was gone and told the woman, who sat down on the sofa in relief. But in relaxing, her hand dangled in between the cushions, where she felt the snake wriggling around. She screamed and fainted, the snake rushed back under the sofa, and the neighbor man, seeing her laying there passed out tried to use CPR to revive her.

The neighbor's wife, who had just returned from shopping at the grocery store, saw her husband's mouth on the woman's mouth and slammed her husband in the back of the head with a bag of canned goods, knocking him out and cutting his scalp to a point where it needed stitches. An ambulance was again called and it was determined that the injury required hospitalization.

The noise woke the woman from her dead faint and she saw her neighbor lying on the floor with his wife bending over him, so she assumed he had been bitten by the snake. She went to the kitchen, brought back a small bottle of whiskey, and began pouring it down the man's throat.

By now the police had arrived. They saw the unconscious man, smelled the whiskey, and assumed that a drunken fight had occurred. They were about to arrest them all, when the two women tried to explain how it all happened over a little green snake. They called an ambulance, which took away the neighbor and his sobbing wife.

Just then the little snake crawled out from under the couch. One of the policemen drew his gun and fired at it. He missed the snake and hit the leg of the end table that was on one side of the sofa. The table fell over and the lamp on it shattered and as the bulb broke, it started a fire in the drapes.

The other policeman tried to beat out the flames and fell through the window into the yard on top of the family dog, who startled, jumped up and raced out into the street, where an oncoming car swerved to avoid it and smashed into the parked police car and set it on fire. Meanwhile the burning drapes had spread to the walls and the entire house was blazing.

Neighbors had called the fire department and the arriving fire-truck had started raising his ladder as they were halfway down the street. The rising ladder tore out the overhead wires and put out the electricity and disconnected the telephones in a ten-square city block area.

Time passed. Both men were discharged from the hospital, the house was re-built, the police acquired a new car, and all was right with their world.

About a week ago they were watching TV and the weatherman announced a cold snap. The husband asked his wife if she thought they should bring in their plants for the night.

She shot him. End of story.