Why You Should Read Our Archives

November 2, 2011 10 Comments

"More money, more headaches." Go away.

 

Because most personal finance sites are garbage. One popular one is written by a 32-year old guy who admits to being 40 pounds overweight, yet gives diet and exercise advice.

Another of our favorites (damn, we wish we could link to these) is written by a guy who displays his negative net worth on his site. He lives in a rental house, is busy trying to have additional kids he can’t afford, and loves to tell people where they can cut corners in their own lives.

It’s like the blogs written by mothers who dispense advice on how to raise children, even though their own children are only 5 and 3 years old and the blogs themselves consist largely of pumpkin spice latte recipes and craft projects. (Okay, here’s a link.) If someone’s going to dispense “mom advice”, shouldn’t it be a mother who’s actually performed the fundamental task of motherhood: turning kids into productive and responsible adults?

These other sites have nothing to do with their ostensible topic of concern, be it personal finance or motherhood. They’re about sharing stories, baring souls, and finding love and acceptance among like-minded commenters who use exclamation points injudiciously. (Excellent post!! Great job short-selling your house!!!)

What makes Control Your Cash different is that we’re coming from a position of knowledge. Not necessarily intelligence, just knowledge. We know what works and what doesn’t, through plenty of real-world trial, error, and common sense, and we’re willing to share our findings with anyone who can read. We’ve lived hand-to-mouth, figured out that we didn’t like it, and learned how to build wealth instead. (Hint: it had nothing to do with reducing our energy consumption or renegotiating student loans that we shouldn’t have taken out in the first place.)

If you want to build wealth, buy assets and sell liabilities. Heck, our entire site could be reduced to those 4 words and you’d still learn more here than you would most other places.

If you don’t know what an asset is, it’s something that helps you build wealth. A liability, as we define it, does the opposite. That doesn’t mean to live under a bridge, eat at soup kitchens, and put every penny you earn into Apple stock. It means to live your life dynamically, acknowledging that certain expenditures can’t increase your wealth (although they might increase your non-monetary quality of life), while others can.

We live in a big, wonderful, abundant world, whose potential we as a species have barely tapped. Our planet consists of the same raw materials it had 4000 years ago, when we were living in mud huts, never traveling farther than we could walk, and having all our teeth fall out as a matter of course. Forced personal conservation is the very opposite of the mindset that got us to where we are today. You know, a place where we have exponentially more knowledge at our fingertips than even our parents did – essentially free of charge, no less. Where you can travel across the world for a few days’ wages. Where diarrhea is a mild inconvenience, rather than a childhood death sentence.

Sorry to go Anthony Robbins on you, but hear us out. Living for the express purpose of spending as little money as possible is barely living.

Stop preoccupying yourself with combining multiple errands into one trip and only shopping on double-coupon Wednesdays. Instead, examine what’s in your 401(k). Track its value over the course of a few months and figure out whether you can do better yourself. Take an hour to understand how the whole thing works. Read financial statements of publicly traded companies and buy undervalued stocks instead of complaining. Start your own business, and spend a few hundred now to save tens of thousands down the road. Implement 100% painless changes that will only positively impact your life, and save you real money in the process.

Instead of an emergency fund that isn’t intended to grow, take a calculated risk and put that money in an investment. Leverage it in real estate. Even the cheapest functionally sound home you can find can attract a tenant who’ll make your mortgage payments for you and let you enjoy tax benefits that non-landlords don’t even know about.

There are a million ways to reduce costs. Just ask the sages who think that it’s worth it to encourage you to waste time making your own detergent. Or inconveniencing yourself by turning off the air conditioning and fanning yourself instead. Or our favorite, improving your gas mileage via

pulling out (your) car’s seats (except the driver’s!), ash trays (sic), speakers, radio, sound deadening material, interior trim “and anything else not integral to the vehicle’s driving ability.”

(That can’t be true, right? That has to be a goof. Someone posited that, as ridiculous as it sounds, in the hopes that someone else would post it and a gullible tertiary party, we, would cite it.)

However, as many ways as there are to reduce costs, there are at least as many ways to increase revenue. To concern yourself with the left side of the ledger, rather than preoccupying yourself with the right side.

Are you playing to win, or to avoid defeat?

**This article is featured in the Baby Boomers Blog Carnival One Hundred-seventeenth Edition**

**This article is featured in the Carnival of Financial Camaraderie #7**

Filed Under: Capitalism, Economics, Education, Entrepreneurship, Estate Planning, Finance Tagged With: , , ,

Too big to fail. Too small to succeed.

August 12, 2011 1 Comment

A new adjective to describe the size of our government: gynecomastic.

Stock recommendation coming. But first, a rationale.

You might have noticed that there’s no disclaimer on ControlYourCash.com, the absence of which is yet another feature that sets us apart from almost every other personal finance blog.

There are at least 2 reasons for this. We never included a disclaimer because if you’re stupid enough to lose money on an investment just because we recommended it, that’s your problem, not ours, and we’re willing to argue that in a court of law should it come to that.

We hate the very fact that we had to mention that, which indirectly explains our other reason for the lack of a disclaimer. If we were to act out of defensiveness, submitting to the framework devised by the lawyers who run our nation, that would make us complicit in the problem. It’s the same reason why every time either of us checks into a hotel room, the first thing we do is take a pair of nail clippers and remove that sticker on the blow dryer that tells you not to immerse it in water. Along with the smaller sticker that proclaims that the state of California has determined that the cord is poisonous, therefore you should wash your hands after using it. That we’ve attributed the power of reason to a fictitious political entity, and that most people don’t seem to notice or mind, augurs horribly for the future of a nation in decline and an ostensibly free people.

So here’s the aforementioned stock recommendation. Well, more of an industry class recommendation. Stay the hell away from community banks and invest in the big ones. Because not only are the latter “too big to fail”, but their being too big to fail necessitates that the former must be too small to succeed.

Main Street Bank is, soon to be was, a small commercial and personal lender in the suburbs of Houston. Main Street is a modest little $45 million business (modest as bank sizes go) that’s about to go out of business.

The company’s financials are fine. It’s not being swallowed by a corporate raider and chopped up asset by asset. It didn’t lend more than it could afford to, nor is it the victim of executive malfeasance.

Does Main Street have a lot of bad loans? No. Main Street’s default rate is 31% below average. (That is, better than average, because defaults are bad and you want the numbers to be low.)

Main Street’s business largely consists of lending money to independent businesspeople who use the loans to buy equipment. The equipment ideally enables them to sell more of whatever it is they sell, or do so more efficiently, thus resulting in increased profits, which means the bank gets its loans paid back and everyone’s more successful than they were before the arrangement began.

Unless, of course, the federal government orders Main Street to stop lending so much. Not unlike the absurd CAFE standards for fuel economy, the government has decided what Main Street’s portfolio should consist of. 90% of Main Street’s loans go out to small businesses. The feds have determined that 70% of that outstanding money ought to be loaned out elsewhere.

Title IX is a federal mandate that require colleges to offer as many women’s sports as they do men’s. Ignoring that men like sports more than women do, the inevitable result is that most colleges just end up dropping enough men’s programs to get the numbers to match. In much the same way, Main Street honored the Federal Deposit Insurance Corporation’s orders by lending out less money. One fewer lender in the neighborhood means less choice for the suburban Houston small-business owner, which means the remaining lenders can raise rates and high-five over the handicapping of a competitor. Meanwhile, Citibank not only could “borrow” $45 billion from taxpayers, but practically had that loan forced on it by a complicit executive branch.

If you’re an investor, what are you going to invest in? Main Street was closely held by its founders and not open to independent shareholders, but the principle is the same for dozens of other banks. Given the choice between a bank ordered to shrink by the federal government, and another one ordered to grow by same, an investment in which has bigger potential?

Main Street’s CEO put it best:

“The regulatory environment makes it very difficult to do what we do.”

First, again we’re attributing human failures to institutions. It’s the regulators, actual people in the employ of the government, who are making it difficult for Main Street Bank to accept deposits and lend out money. And ultimately forced it to return its banking charter.
Given how many politicians of both parties have uninspiringly described the ongoing interminable financial crisis as benefiting “Wall Street over Main Street”, well, today’s story about a dying bank is ironic on a level that even a congressman should be able to understand.

Thanks to Robin Sidel of The Wall Street Journal for basically doing all the prep for us.

**This article is featured in the Carnival of Personal Finance #323-Better Late than Never Edition**

Filed Under: Capitalism, Economics, Entrepreneurship, Investments Tagged With: , , , ,

“Your health is the most important thing.” Uh-huh.

July 15, 2011 13 Comments

Every d-bag in this picture (the "d" stands for "dirt") thinks he or she is rich.

A few weeks ago, the popular personal finance meta-blog Yakezie held a contest for students, asking them to define richness and answer related questions. Even though our studyin’ days are long in the past, we decided to write an essay anyway and modify it for you folks. If this doesn’t spur some comments, nothing G-rated will.

Do you think becoming rich is easy or hard in America?  Please explain your viewpoint.  
What is rich to you?  Is it a dollar amount in the bank, a lifestyle, or perhaps even a state of mind?  
The United States is the richest country in the world.  Will there always be poverty?

In the fashion of a corporate customer service department, let’s answer these questions in the order in which they were received.

Becoming rich in America is easy – maybe not easy in absolute terms, but the qualifier “in America” implies that we’re to compare getting rich here relative to getting rich elsewhere.

In the vast majority of the world, getting “rich” means capitalizing on influence and heredity. The most motivated, diligent, dedicated Kyrgyz camel tender or Mozambican copper miner can’t get rich in any meaningful way that we in the Western world understand the term. The opportunities for entrepreneurship just don’t exist elsewhere, for the most part.  The opportunities for joining the governmental apparatus and perpetuating it abound, however. (But only if you’re connected.) And while the United States still has its share of nepotism, red tape, political maneuvering and corruption, it’s nothing compared to what goes on in the rest of the world.

Your humble blogger has a slightly different perspective, having been born and raised elsewhere and only arriving in the United States at the age of 25. When I did I had no money, nor did I have any connections – unless you count the hotel waiter I’d met in Miami a couple years earlier who let me crash on his couch when I first emigrated*. My dreams were modest, but they were distinctively American: make enough to achieve financial independence, ideally on my own and without having a boss breathing down my neck.

So what is rich to us? You’re not going to hear us give some bromide about it being health and good friends, or any of that crap. This isn’t a box of Kashi cereal. If non-monetary criteria are what make people rich, then everyone’s rich, and therefore no one’s rich because “richness” loses its meaning.

“Rich” as we define it means not having to worry about worrying about money. It means having assets that routinely outpace liabilities. Beyond a certain level of subsistence, that’s all anyone can hope for. If you gross $100,000 a year, spend money on everything you could possibly want and need and have $20,000 remaining at the end of the year, and can apply that to the following year’s assets, you’re rich. If you make $5 million and have a $6 million hooker-and-heroin habit, you’re poor.

Will there always be poverty? Again, it makes all the difference in the world whether we’re talking in absolute or relative terms. Our poorest acquaintance lives far more lavishly than John D. Rockefeller ever dreamed of. She can communicate across the world instantaneously. She can control the temperature of her dwelling with the press of a button. She can travel at speeds that the richest people of previous generations couldn’t fathom. For pennies a day, she can ensure that her teeth will stay strong and not fall out of her head. She can eat thousands of calories daily without having to spend time doing the backbreaking labor of growing the food herself. Or even cooking that much of it.

So yes, there will always be “poverty” in the sense that someone will be at the bottom – even though that bottom has risen throughout the history of civilization and will continue to. Is that a bad thing? Not if the alternative to having some at the bottom is to have everyone at the bottom. It’s important to remember that everything is transitory. The vast majority of people in the lowest quintile of income don’t stay there long: it’s more a function of the point a “poor” person’s at in his or her life – just out of school for instance, or unmarried and pregnant with one’s sixth baby – rather than a permanent condition of status. Both Control Your Cash principals were poor by any modern definition at 19. And are probably rich by most people’s definition a couple of decades later. We wouldn’t have changed any of it to have lived under circumstances where the opportunity to fail and be poor wasn’t available.

*No, it wasn’t the follow-up to a torrid homosexual tryst. Just because a guy sets foot in Miami doesn’t mean he’s gay. You people are perverts.

**This article is featured in the Yakezie Carnival-Best of Yazekie this Week**

**This article is also featured in the Baby Boomers Blog Carnival One Hundred-second Edition**

Filed Under: Economics, Healthy Living, Making Smart Choices, Personal Finance Tagged With: , , , , ,
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