Category Archives: Economy

Budgeting on Variable Income

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The three main things that need to be taken into account are:

  • Definite Expenses
  • Estimated Income
  • Savings required to cover deficiencies between Income & Expense

Defining Expenses

  • Write down all non-variable monthly expenses (e.g. Rent, Utilities, Insurance, etc.)
  • Estimate all recurring variable expenses for the month(e.g Food, Fuel, etc.)

Add these together and multiply them by 1.10 -1.20 to provide yourself with a buffer  in case of any upward fluctuations of variable expenditures. Excess at the month should be saved  or split between discretionary spending and savings, with only 10-20% going to discretionary, at most, the remaining 80-90% saved.

Estimating Income

  • Average your past 6-12 months of income. Avg. Inc. = (Total income/months)
  • If possible also average your highest and lowest monthly levels of income. H&L = ([Highest + Lowest]/2)
  • Average both of these numbers to come up with a good estimate of your monthly income. Est. Inc. = ([Avg. Inc. + H&L]/2)

* You can also add in quarterly averages, if you’ve seen a recent change in your income up or down, such as change in employment status.

Savings

Take 10-15% of your estimated income and try to save it, and any excess after your budgeted expense, for handling monthly deficiencies. You can use a portion of this as discretionary spending, or rainy day fund, to help maintain your personal happiness. Also, set a baseline for a buffer in your bank account, which you can check against, say $200 dollars, and you can raise this as you progress.

*You don’t have to place it in a savings account, the interest rates are horrible currently anyways, just so long as you try not to overuse these funds.

These techniques aren’t perfect, but they do provide a very good starting line for determining how much you can reasonably spend per month. I used these basic ideas as a set of tools, slightly modified for my personal usage, and managed to pay off $1800 in student loans and save ~$1200 on a variable income that ranged between $500-1400 over 13 months. My average monthly expenses were $400 and my average monthly income was $750. I also managed to maintain a fairly consistent spending, about $50 month, on entertainment.

Computer Issues & A Few Ideas

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For everyone who waited for something Tuesday and Thursday I’ll apologize. I ended up doing a clean install trying to get my burner to work Sunday evening, because I wanted Windows 7. So, instead of doing anything productive I spent my time on my computer searching for everything to get it back into working condition and coming up with ideas for posts, improving some products, and just flat out re-evaluating my own purposes.

It’s sad to here that Steve Jobs is stepping down, but maybe whoever takes over while he’s gone will start making improvements to their fringe products like iTunes. Just the other day I was using it, as it is my default player, and I realized that Window’s Media Player had a better user interface, though slower and not as pretty. In WMP, if you want to listen to an album by itself all you have to do is double click on it’s art or right-click on it’s title and select play. iTunes doesn’t have this it takes at least 2-5 clicks and some search through different menu’s to get to play just an album, that’s quite a disrespectful use of the the user’s time.

In other news, people have started to look at the education bubble that we’ll be facing in the next few years. John Robb’s article “Industrial Education” has caused a stir, “There is reason to believe that costs of higher education (direct costs and lost income) are now nearly equal (in net present value) to the additional lifetime income derived from having a degree.” I like how he’s done this because his analysis comes toward the same view as my posts from early last year on Social Perception and Personal Economics of education where I discuss the topic, but he also comes up with some great ideas on replacing it.

That’s all I have to say this morning, I’ll be back in a few days with new posts, now that everything is back in working order.

Blogs, Books, and Tools For Money Management

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The majority of what I’ve learned about managing my finances I have learned in the past few months. I’m going to list some of the major sources that I have used and are solid sources of personal finance information. So I’ll list some blogs that are good for this, some of my favorite books on the subject, and some sites that can help you manage it.

Blogs –

Get Rich Slowly – This is the best blog on personal finance that I have found. J.D. goes over so many different topics and various projects  that this is one of the biggest repositories for personal finance tips, tricks, and information.

Wise Bread – This blog is written by multiple people so there isn’t the same connection as with J.D. The topics can range widely from the writer’s experience and the quality is sometimes lacking. Good information it’s Lifehacker for finance.

Books –

The Richest Man in Babylon – This book is astoundingly in how simple it is too understand and it’s approach of using a story to achieve an osmotic effect with it’s information and your mind. It teaches multiple lessons in how to handle your finances while also having an underpinning in humility. A great read and also a classic from the 1920’s

Rich Dad, Poor Dad – This isn’t necessarily dedicated towards personal finance so much as street wise thinking on finance. This book isn’t to be taken literally but it does off plenty of good advice for business, and investing outside of the stock market. It makes it on the list because of these facts.

Hackers and Painters – I recommend this book not in it’s entirety, but for one essay that is contained within. You can read this essay entitled “How to Make Wealth” at Paul Graham’s website. A much different approach than what we have been ingrained with.

Tools –

Mint – My personal web tool to help chart my monetary flow. I find it fitting for my lifestyle in that it is simple, it easily connects, and implements multiple security measures. Pluses, SMS, nice tagging feature, allows you to break down bills into their subsequent parts, and handles almost any form of monetary trade, from checking, credit cards, and savings to stocks and loans.

Wesabe – This in the personal finance blogging arena comes out on top. It has community support, allows your to set goals, and update manually to keep it balanced. * I had issues with it miscalculating my credit card and telling me I had $245 on the black rather than $70 in the red so it was screwing the debit/credit balance of by $300 .

Geezeo – Another community connected online management tool. This comes out on top in the user happiness it seems. As far as I can tell, it lets you do what the other two do but it seems to be a more complete package haven’t actually used this but I may look into it.

Spreadsheets – Nothing like handling all the pertinent details yourself. Though this isn’t as easy as the others and will take some time out of your day I would at least recommend knowing how to do this either by hand or using software such as Excel, Quicken, Google Spreadsheets, etc.

Some Inspiration From The Web

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A man’s wealth comes not from what he carries in his wallet but, what he carries in his heart.

So we’ve all dealt with and continue to deal with the volatile markets of this past week and likely to come back next week though more subdued. Most of us are still probably a bit worried about what’s going to happen in the coming months. I don’t think we should focus on that it’s just not good for general mental health, though we should all be knowledgeable about what is going on around us. I feel like providing some positive inspiration and news for such a down time.

How to Overcome the Fear of Failure – Success Soul This isn’t just about personal failure though it focuses on solidifying oneself. This is something for everyone, we all have our personal pillars that we rely on so that we can keep standing even when we are weak. If our pillars are weak they won’t be able to support us when we fall so we all need to fight the fear and buckle down for the coming months.

What Does it Mean to Be Rich? – Get Rich Slowly A good analysis of what rich is and what it may be. He describes a really interesting situation that he went through recently that makes you think. Even if you feel poor, infact, you may be richer in comparison to the majority of the world?

The Best $20 You’ll Ever Spend – Get Rich Slowly This post is directed more towards people who want to build their knowledge through networking. This is great for people seeking to become independent of the workforce, start a business, or just become a better leader. This is honestly the simplest way’s to enrich you mind of working strategies and new ideas, it’s also inexpensive.

Is All This Paranoia About a Startup Depression Justified? – The Next Web This is an honest explanation of the positive aspects of the collapsing Web 2.0 arena. If your interested in where the boom tech sectors(e.g. Web 2.0, Clean Tech, etc.) are likely to go, this is a great example of what is going to happen during the coming months.

Lastly the story of a sheriff in Cook County, Ohio that is standing up against banks to help people stay in their homes. He’s refusing to do instant foreclosures and giving the families 120 days of leniency.

We’re In A Death Spiral, But There Is Life Here

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We all know that the economy is collapsing shouldn’t be any surprise to any person paying even the faintest bit of attention. Lately, there have been quite a few people instilling fearing with headlines, e.g.(NYT and Robert Scoble). I’m getting sick of all the fear mongering so I’m going to post some positive and inspirational links.

“The only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. ” ~ Franklin D. Roosevelt

Franklin D. Roosevelt’s First Inaugural Address is still one of the most inspirational speeches to have been given by a president. I beg you to listen to his words or read them as they bear wisdom that may help us turn this situation around. Just look at that jewel above and how the media channels are spouting fear to the masses.

A Responsible bank CEO speaks out about the bailout, the CEO of BB&T discusses 14 points that don’t make sense about the bailout. This may be tinged with a bit of fear but, atleast there are some banks that didn’t deal in the illogical financing, that got us into this mess. We need to find more banks with this kind of respectable handling of their customers’ money.

Today, the seeds of the next big thing are being planted, this is provision for inspiration. It is providing the knowledge of what has happened in the recent recessions and their outcomes. We all have the ability to build the next big thing, don’t quite your day job but, most definitely don’t stop trying to redefine the world of tomorrow.

Tyler Durden’s 8 Rules of Innovation, will help you if you decide that you want to redefine the future. “Your life is ending one minute at a time,” so you better go do what you want before your time runs out. This interpretation of  some of most notable quotes from the book and movie are remarkable.

I hope that they people have read this find this at least a small distraction from the turmoil around us. We need to have solidarity in our lives not instability. Surround yourself with people who can speak honestly about the current environment but still provide us with the strong front that we need.

Our Childrens Economy: Social Security

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The United States is growing ever closer towards bankruptcy and we just keep piling on more and more debt. People don’t blame Bush it’s the law of compounding interest and providing too many services. One of the more pronounced services that is out there is Social Security. I find that it is quite possibly the largest disservice for the future of the country.

Social Security is the funds that are taken automatically from workers pay for retirement funding, unemployment,  disability, spousal and children, and widow benefits. All of these, except for the retirement, unemployment, and widow benefits, were not part of the original bill and the widow benefits have changed from lump-sum to the continued monthly payments of the deceased spouse. The original bill proposal was highly controversial in and was opposed because it would result in the loss of jobs. However, some said that this was an advantage as it encouraged the elderly to retire, opening positions for the youth.

The problem is that now the elderly are working longer and are less encouraged to leave, resulting in harder positioning for the younger generations. The fact that this pay comes from the workers who should be the younger generation means that this is impacting their future coverage. The average age of workers is also beginning to go up and at ~15% per worker and at a 5.8:1 worker/retired we are slowly sliding into a Social Security deficit; projections show that the ratio will drop to 3.1:1 meaning that we won’t even be providing half the coverage that’s promised.

While researching this, I discovered that the Social Security spending for the ’07 Fiscal Year was $580 billion, this is annualized process that increases every year. Honestly, we’re worried about the government spending $900 billion just once, sure it was on bad loans, but it’s actually going to help stabilize the country while we prepare for the long run. Social Security is ripping off the future generations to pay for it’s promises.

I propose that we introduce a retro-active grandfather clause that will reduce the rates of which people are accustomed will be receiving.  You reduce funding to anyone who was born since January 1, 1963(45 years old as of 1/1/09) to 70% of what they where promised once they reach 67, regressing the rate by 5% for every subsequent year until age 35. Anyone between the ages of 35 and 30 shall receive 25% and anyone below 30 will recieve nothing.  We have this bill continue until the year 2100 and direct excess funding towards the federal deficit. I would not have a problem having the tax remain in my wages so long as it is going to help sustain the state of the country in the future. This isn’t even as drastic as what we need but, it is an initial idea to help us get it started.

This is just my two cents on my subject, and in fact this would actually be excluding myself(19 years old). Though it wouldn’t matter there is nothing left for my generation or future generations, either way. Please leave some comments on what you think of this subject.

Following The Green

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ComputerWorld posted an article that greatly disturbs me. In the article, it shows the growth of CS courses after a steady decline from the ’03-’04 school year to ’07 and how many are switching majors from business. It also mentions that students were making a similar swap back in the late 90’s towards tech.

Bryant said he expects that the troubles on Wall Street will likely influence some students to switch majors in the coming months from business to other fields, including computer science. He also urges caution to those students.

These students are obviously in it for the green, they followed it to business and now that it collapsed they’re following it to the next big thing. What we need are people passionate about what they do, not people that are only passionate about money, key examples abound in the Financial Sector right now. I think we should find people who actually want to do these jobs, and not just for the money.

With the economy as weak as it is, if your a small company it’s going to be even more important for you to find passionate people, just read Jason Calacanis’ latest post (recommend signing up to his mailing list), excerpt below.

3. Firing the average people: Again, it’s totally politically
incorrect, but I highly recommend firing anyone who is good or
average. Startups are an Olympic sport and every slot on your team is
critical. You wouldn’t put a “good” swimmer in a relay, would you?
Don’t have one in your startup. Fire the good and replace them with
the great. ~ Jason Calacanis

You know who are probably not going to be average, the people who are passionate about what they are doing. The passionate employee may spend more of their personal time on learning more about they’re area, and be willing to take a pay cut to keep they’re position.

So we need to find a way to deter people from following the money, in the next few years we will see a large rise in un-passionate employees in the Tech Industry. This will hurt companies that invest in people that only got into the area for the cash. What happens when the cashflow slows, or another bubble happens, and how can we stop them now?