Tuesday, December 18, 2007

Interdimensional Blog Moved

People Who Suck Enough To Read My Blog:

The new URL is http://altdimself.com/blog/. Please update your bookmarks and RSS feeds accordingly.

Friday, November 9, 2007

ADA: Finance Is Like A Simile

Alternate Dimension Andy (ADA):

Good personal finance habits are like eating your vegetables: you can know that it's good for you. You can know that it's something you need to do. It's not always fun and sexy. But if you want to be healthy, it's something you just have to do.

No, wait, that sucked. Good personal finance habits are more like a diet. Peeps complain, "I'm sooooo fat. OHGODI'MFAT!!! I wish this situation would resolve itself!" But listen up, bitches: you gotta exercise and eat right, and that's it, plain and simple. You can't wish away your problems; you actually have to work at them.

Dammit, no. That example makes me a hypocrite. Okay, let's try this: Finance is like an automobile. It's a very complex machine, but if you want to use it to your advantage, you really don't have to learn that much. But it does require some learning. And there are both safe and unsafe ways of handling it. And it requires maintenance, and gas... like, you have to take care of it and shit. And sometimes it bursts into flames, but if you waste your life worrying about that shit, you're not going to have a very happy life. Better to at least learn the basics, though.

Pathetic. Slashdot-post-worthy. Let's come up with a good one: Finance is like a delicate apple tree sapling. You have to plant it and take care of it, but when it grows up, you have free apples for life. FOREVER. Until the tree dies. But, like, if you want to, you can take some of those apples and plant them and get more apple trees, you can do that too. Yes, okay, excellent. And some people want to come onto your property and pick apples and shit, even if you're all, "TRESSPASSERS WILL BE SHOT SURVIVORS WILL BE SHOT AGAIN LOL." So take care of that tree!

What a fucking waste. If you can go back in time to un-read that, please do, then just skip to this one. This one will be the crown jewel of personal finance similes. Ready? Okay, finance is like a simile: it's like a metaphor, except that it uses "like" or "as."

Sucked. Money management is like learning to use a spreadsheet. Most people think they'll never have to do it, and that it looks hard. But then one day, they learn how and they're all, "Oh, wow, that wasn't that hard." And then they've enriched their lives because now they know how to use Excel.

No. Also sucked. Personal finance is like a blog: if you don't post for months, people will still probably read it. Just get some articles out there, and it'll sort of take care of itself. But it's way, way, way, so much fucking better if you blog regularly. I mean, if you really want to succeed, you have to set up a schedule.

How about this? Watching your finances is like Super Mario Bros. for NES. It looks hard, but then you meet someone who knows what they're doing and you're like, "What? There's fucking warp zones?" And still, the game is kind of hard, but it sure did help to learn from someone who knew what she was doing.

Jesus, no. Okay: your portfolio is like a D&D party. You can't just have all wizards, 'cause at low-levels, you'll blow all your magic missiles on the first encounter. Then what? Probably get slaughtered by a goblin. A fucking goblin, for Christ's sake. And if you have all rogues, sure, great, sneak attack the fuck out of shit, until you fight a golem (amirite???). And at high levels with only fighters? You may as well get a t-shirt that says, "I AM A FUCKING WUSS." You need a balanced party.

Yeah. Your portfolio is like a D&D party.

Monday, July 23, 2007

Free: Zecco

Alternate Dimension Andy (ADA):

As I mentioned before, Skeletor is being beaten out by brokerages that do not charge $25 per trade:
  • Scottrade charges $7.00 per online trade.
  • Charles Schwab charges $12.95 per online trade.
  • TradeKing charges $4.95 per online trade.
  • ShareBuilder charges from $4.00 to $15.95, and may have a subscription fee involved.
  • Zecco charges $0.00 per online trade.
Hm. Typo? No. Zecco actually charges zero dollars and zero cents for an online trade. There are restrictions, natch, but for someone like you or me, it will almost always be $0.00. They make their money with ads and margin interest (which I'll talk about in a future post).

ADA, there's way more to it than just how much these brokerages charge per online trade. You have to do your own research and a cost-benefit analysis and all that. I'll give you some of what I came up with when I was doing research:
  • Scottrade has a decent user interface and lots of products: stocks, bonds, mutual funds, etc.. $7.00 is not steep, but you can definitely do better.
  • Charles Schwab is expensive, but if you're doing well, it may be worth it. The fact that you can do all your banking and all your investing from the same site is a bonus. It's also a very usable site, considering how powerful it is.
  • Trade King gives me warm fuzzies. It's a very simple site with almost as many investment vehicles as Charlie. It's much less expensive than Schwab. It has a beautifully sparse UI, which makes this self-proclaimed usability expert all tingly.
  • Sharebuilder's monthly subscriptions are, in my mind, bullshit. For my taste, they also charge a bit too much for commissions.
  • Zecco has been described in the media as "The MySpace of online brokerages." Considering the horrible user interface and overwhelming ads, I would say that that is a spot-on assessment. The blogs suffer from a problem I've talked about before. What bothers me the most is that there is that they only offer stock and options trades online; if you want to buy a mutual fund, you have to send them something in the mail.
    But no-commission trades? Huge deal.
So, if all you want to do is trade stocks, I invite you to try Zecco. I have a feeling that if they grow, they will clean up their user interface and offer more investment choices. In the meantime, if you want to take advantage of other investment options, I think TradeKing is the way to go.

May you piss off Skeletor in all investments you make.

Sunday, July 22, 2007

ADA: Commissions Kill

Alternate Dimension Andy (ADA):

I have a math problem for you. Fun, huh?

Suppose you want to buy 100 shares of Horace's at market price, $10. How much will it cost?

As usual, whenever I ask a stupid fucking question like this, I'm trying to trick you into giving an obvious answer that is wrong. So, if you said, "Fuck you Andy, I'm not doing your math problem," you were right!

At first, it sounds like 100 shares that each cost $10 should go for $1000. But no, that would make too much goddamn sense. Instead, when you want to buy and sell shares of stock, there's usually an extra fee involved. This fee is called a commission.

Here's how it works. You call up your broker, Skeletor, and say, "Yo, dude, I AM IN NEED OF STOCKS PLEASE." And he's all, "I will hook you up." Skeletor looks at all the active trades going on at the exchange (probably the NYSE, in your case), finds someone selling the stock you want and handles all the bullshit that goes on with the trade. After some blackbox voodoo, you are the proud owner of the shares of your choosing.

But Skeletor does this for a living, not out of the goodness of his heart. I mean come on, he's fucking Skeletor for Christ's sake. So in addition to whatever you paid for the shares, Skeletor charges you an additional commission for facilitating the trade. These days, commissions for phone orders are usually in the neighborhood of $25 - $40 a trade.

It's super-sucky that this shit happens per-trade. I mean, if you wanted to buy those 100 shares at $10 every week, and the commission was $25, you'd end up spending an extra $1300 a year. Bullshit, I say!

But a-ha! The very same technology that makes this interwebal personal log ("ibalplog," I believe it's called) available to my millions of readers can be used to facilitate these trades. After all, the stock exchanges are all run by computers, and we don't need as many human eyes and pieces of paper to make trades happen. Computers handle it for us.

Nowadays, in addition to phone trading, you can also make your trades online, via an online discount brokerage. Usually, these charge more in the neighborhood of $5- $15 a trade. Skeletor is fucking pissed about this shit.

I'll talk more about these brokerages in another post, but here's a list (in no particular order) to peruse for the time being:
Skeletor hates them all.

ADA: Don't Take Advice From the Newspaper

Alternate Dimension Andy (ADA):

Now you're all, "Sweet! I'm totally gonna make a hojillion effing dollars in the stock market!" and I'm all, "Sweet! How?" then you're all, "By following all the hot tips in Money Magazine!"


I want you to stop and think this through. What is Money Magazine's ultimate goal? Or Fortune? Or Forbes? Or the Wall Street Journal? Mad Magazine? Ans: All of those publications are owned by businesses who want to make money.

How do they make money? Ans: They sell ad space; the larger their readership, the more they can charge. (They also sell magazines or newspapers, but the points I'm about to make apply to all media, even free websites and television shows.)

How do they increase their readership? Ans: With cover stories like "Stock Picks So Good They Will Fuck You Up For Life," not cover stories like "Research and Due Diligence Are Key."

In reality, financial journalists are doing research; they're not intentionally lying or anything. But:
  • the journalists don't have a crystal ball.
  • if a journalist did have a crystal ball, she likely would not be making her money as a journalist.
  • if a journalist can't find anything with a really predictable trend (hint: nothing is predictable in finance), she's still obligated to write an interesting story.
  • if a journalist actually finds a good stock and gives a SWEET PRO TIP, her story will be indistinguishable from the filler.
Kinda sad, I know. You wanted the mags to be all sexy. Sorry.

Consider this too: suppose that one morning you open the newspaper to the business section (see how much credit I'm giving you ADA? I've assumed you're literate!) and read an editorial or some shit that says, "Horace's has announced plans to sell their products in France, goatee capital of the world; OMG BUY NOW." Holy balls! Sounds like a good time to go out and buy some shares of Horace's!

Of course, this was announced in the newspaper, and there will be lots of people who have read the same editorial. They'll want to buy too. (In Economics, that's called an increase in demand. When demand increases and supply remains the same, price increases. This concludes this month's installment of Facts You Already Clearly Understand.)

And pretend you were on the other end: you own shares of Horace's when they make this announcement. If the announcement means that Horace's is 50% more valuable (thereby making the shares 50% more valuable), would you sell your shares for anything less than the new price? (Ans: No.) Hell, even if you didn't think the shares were more valuable, the fact that you know a lot of people are going to be trying to buy it might be a good excuse to overcharge.

After reading the editorial, if you go out and buy shares right away, chances are good you're either going to get them at fair market value or be overcharged for them. Chances are quite bad that you will buy them at discount, then turn around to make a 50% profit in the next week.

ADA, you can't listen to the financial media for "hot picks"... or "hot pics," for that matter. They have failed us in both departments. Most of the time they're just trying to sell ad space. Not to mention that if a story creates a crowd, there's pretty much no way you're going to make money off of it.

You're going to have to find a different strategy for picking stocks. I hate to say it, but you may have to think for yourself.

Tuesday, July 17, 2007

MMM: Index Funds

Alternate Dimension Andy (ADA):

We've already decided that in most cases it's not okay for you to think for yourself. At least, that's been implicit in everything I've said in these posts so far. We've also decided that it would be totally sweet to find a knowledgeable expert who would invest in the stock market on your behalf.

It does sorta suck, though, about mutual funds charging 2% a year. That cuts into your profits! Or adds to your losses! If you would have made 10%, now you only make about 8%; and after inflation, more like 4.5%. LAMENESS. It would be Ninja Turtle radical if mutual funds didn't cost so much.

Well, here's a story you're gonna love, ADA. Once, there was this Leonardo-level cool dude named John Bogle. One day, he did a backflip into Foot Clan headquarters (a company called Vanguard), and said to The Shredder (the finance industry of corporate America has its roots in secret ninja clans of recent Japan), "You may know ninjitsu, but I soooo know it better than you." Well, the actual words he used were probably more like, "If I just made a mutual fund that copied an index, we wouldn't have to hire people to manage it; it would manage itself; I could charge, like 0.5%."

"Half of a cent on the dollar!?" Shredder screamed. Shredder was fucking pissed about that shit, but eventually he decided to let Bogle give it a try. When it worked, and Bogle's fund did better than most of the funds on the market, Shredder was all, "No fucking way."

Quoth Bogle: "Way." Then Raphael, Donatello and Michaelangelo came back-flipping in, and they all gave each other high-fives and ate pizza. It was quite rad.

See, in addition to charging customers less (thus increasing their profit), Bogle also realized that lots of mutual funds were falling way short of the indices to begin with. Add to that the fact that they were blowing money on shit like advertising and stock trading commissions, and it's sorta unsurprising that Bogle rocked so large.

The real story is actually even more interesting than I've told it here, though it is woefully lacking in the TMNT-metaphor department. And the metaphors don't suck as much (since Bogle actually worked for Vanguard, wasn't a ninja, etc.).

Still, you get the gist.

Monday, July 16, 2007

ADA: Peeps Be Watchin' the Stock Market

Alternate Dimension Andy (ADA):

So maybe you bought a couple shares of that goatee wax company. Good for you. Your fucking medal is in the fucking mail, fucker. Seriously, though, good for you. And maybe you have OCD, and maybe you spend your days tracking every movement of the company's stock. Perhaps you call up the company, just to hear Horace's voice on the phone.

And yet, through all this, you wonder: How'm I doing? Not in a profound, life improving way, mind you. Just in an Is the grass greener? sort of way.

You are not alone. I mean, in the profound way, yes you are. Please stop calling Horace. But in the "wanting to make sure you're doing it right" way, you're definitely not alone.

A couple of big companies (Standard and Poor and DOW) have asked the same question and come up with a pretty darn good answer: indices.

The idea goes like this: there's all these companies out there. If we picked, say, the 500 that were worth the most, and we invested the same amount in each of them, how much could we expect to earn? Even sweeter idea: what if we listed a whole bunch of companies by industry -- raw materials, technology, healthcare, etc. -- so that we could see how well stocks in a particular industry were doing, relative to the average?

That's all an index is: a benchmark. A penis-measuring contest. A way to remove the FUD that you are small, and that the dudes around you know it. Now you don't even have to buy a Hummer to compensate; you can just know that you're doing fine.

There are whole bunches of indices, but the two you'll hear about the most are the S&P 500 and the DJIA. The S&P 500 is put together by Standard and Poor. It's a measure of how well the top 500 blue chip stocks (a company that has a long record of profit is a "blue chip") are doing. The Dow Jones Industrial Average (The Dow, DJIA) is a measure of the top 30.

So if you're wondering how your stock is doing, you can compare it to the Dow. If the Dow has, over the past year, gone up 10%, and your stock has gone up 12%, you're "beating the market." If the Dow has gone up 10% and you've gone up 4%, I'm sorry to say that you're below average... but, erm... size doesn't matter or something?

Anyway, it's nice to be able to grade yourself. Perhaps now, you'll leave Horace alone?

Sunday, July 15, 2007

ADA: Stuff Costs More Than It Costs

Alternate Dimension Andy(ADA):

I was thinking of Wal-Mart underwear the other day. (If you're not creeped out, please read on.) There's plenty of places to get cheap underwear, but at Wal-Mart, you can get a six-pack of tighty-whiteys for, like seven cents. On the upside, you don't have to spend much on underwear. On the downside, well...

On the downside, those pairs aren't going to last longer than a couple of wash-wear cycles. On the downside, you have to shop at Wal-Mart. On the downside, they're not very comfortable undies. On the downside, they were made by children who worked their fingers to the bone for enough money to buy broth.

But hey, cheap underwear!

My point is, there's a hell of a lot more to how much those underwear cost than the price on the package. How much does it "cost" you to have to deal with shopping at Wal-Mart (perhaps in your dimension, you're not a self-important douchebag who thinks Wal-Mart is trashy; if that's the case, I salute you)? How much does it "cost" to not have to itch your junk all day 'cause the undies are balling up under your scrot? How much does it "cost" emotionally to sleep at night knowing you've contributed to Wal-Mart's international labor practices?

It's not just about underwear either.

I know. Sit back and hold on. This is gonna get wild.

I assert (as do many thousands of economists, so don't even try to prove me wrong) that every single choice you make has a cost. Which car to buy, which house to buy, where to work, which job to take, which brand of goatee wax to recommend to a friend... they all have a cost.

Consider the example of buying a car. I assume that in your dimension you're a liberal, know-it-all hippie who wants to buy a Prius. How much does a brand new (for the sake of argument) Prius cost? Look it up; I'll wait.

Obviously, it's a trick question. You'd probably end up buying a brand new one for about $23,000, but that's not what I'm asking. Consider all of these factors:
  • A hybrid has many more moving parts than most cars. This means that there are more things that can go wrong with the car. In turn, this can mean that you spend a lot more on repairs over the lifetime of the vehicle.
  • A hybrid uses a lot less gas than other cars of the same size; while you're paying more for the car itself, that's partially offset by the money you'll save on gas.
  • Because it's burning less gasoline, the hybrid is polluting less. As a green liberal nutjob, I'm sure this is your currency; it doesn't matter if the car costs $1000 more, since you'll be decreasing your impact on the environment by so much.
  • A Prius will make you popular with the ladies.
  • Maybe someday, you'll be driving down the highway, and a Prius-specific missile will blow up your car, killing you. It's a cost you wouldn't have incurred had you been driving, say, a Jetta.
Natch, some of these costs are ridiculous. But you gotta admit, even a "maybe" is a cost.

Now, not all of these costs are currency costs. Some of them are just opportunity costs and added risk. "Cost" isn't always about money.

How much does it cost Google to give all their employees such totally awesome benefits?
  • They're paying a ton of money for 401(k)s, health insurance, ping-pong tables, catered lunches, on-site laundry, a beautiful facility, etc. All told, I guess (based on the 0.00 units of information I have) that Google spends about three times an employee's salary on that employee.
  • Because they're in the San Francisco Bay Area, an expensive place to live, they spent more on their facility than they would have in another locale.
  • Because they're in the San Francisco Bay Area, a place where people want to live, they are able to pick and choose their employees from the best of the best.
  • Because they pay well and offer amazing benefits, they are able to retain employees who are the best of the best.
  • Because they have the best employees, they are able to make amazing software that makes them a market leader in search and online advertising.
I guess the real question is, how much does it cost Google not to retain their amazing employees?

How much does it cost you to sit at home doing nothing all day?
  • You're not spending any money on food.
  • Let's pretend you're not spending any money on gas, garbage, water or electricity.
  • You could be working out, reducing future medical bills.
  • You could be watching a movie, entertaining yourself and adding time to the internal "countdown to psychological meltdown" clock.
  • You could be talking to your mom, reminding you that you love her, so that in forty years when she kicks it, you won't feel as bad about the frequency with which you called her.
  • You could have a job, you lazy ass.
In future posts, I'm gonna talk a lot more about how much stuff costs, but I hope you understand my point: monetary cost isn't the only cost; sometimes stuff costs more than it costs.

Saturday, June 9, 2007

MMM: Mutual Funds

Alternate Dimension Andy (ADA):

That stock market shit is nuts. I mean, there are thousands of stocks to pick from, and each of those stocks has about, oh, a kajillion factors that could make it a good or bad pick.


My first instinct is, "Christ, I wish there were someone who was not a fucking moron who would just pick stocks for me." Yeah man, that'd be nice.


It's called a mutual fund. Here's how it works:
  1. You put money into the fund. (This is an intentionally-vague black box, but the precise "hows" are left for a future post/ as an exercise for the reader).
  2. A fund manager uses that money to buy stocks, bonds, futures, and whole bunches of other shit. Exactly what she buys is determined by the type of fund.
  3. Based on how much you put in, you are given a percentage cut of the mutual fund. So, if you put in a total of 10% of the money into the fund (you'd have to be rich as hell to do it, but let's just pretend), you'd own 10% of the fund.
  4. You can cash out at any time. If the overall value of the fund has gone up, then so has your share.
Why this is rockin' awesome:
  1. The mutual fund is automatically diverse. I'll talk more about what that means in the future, but the short version is this: you're not putting all your eggs into one basket.
  2. Someone else is doing all the work for you. All you have to do is give them your money.
What is not rockin' awesome about this scheme:
  1. The mutual fund manager, believe it or not, is not doing this out of the kindness of her heart. Indeed, she's probably taking a cut of about 2% of the total fund for herself every year. If the fund is worth 100 hojillion dollars, she keeps about half a hojillion dollars for herself every quarter. FUCKED UP, RIGHT
  2. Because you don't have all your eggs in one basket, you're less likely to make a shit ton of money. On average, over the long haul, you'll probably make a little bit of money every year.
Precisely how to choose a mutual fund is a task far beyond the scope of this post. I will say that I recommend against choosing one solely because it has a cool name.

There's a lot more to know about mutual funds, and I'll probably talk about that more in the future. For the time being, just know that they exist, and that they're a good way for a typical investor to invest safely.

Yes, even a jackass like you, ADA.

Free: Bankrate

Alternate Dimension Andy (ADA):

There's another website in the tubal internets that I want to tell you about. It's called Bankrate.com. What is it? Well duh, it's a website that lets you look up bank rates and shit.

If you want to know where to get the best rate for a 1-year CD, check out Bankrate. Want to know what an average mortgage payment is for someone with your credit rating buying a $200,000 house? Bankrate. Want to know how much term life insurance should cost you? Bankrate.

Think about this: there are a whole bunch of banks and insurance companies out there that make money by charging interest, fees, monthly payments, etc. A lot of them get away with murder. If you take the first mortgage you're offered, you could end up paying many hundreds of dollars more per month, for instance.

Now, zag with me and think about it like this: pretend you'd never bought a banana in your life. Also, pretend that there are two grocery stores within a block of your house. So, you walk into one grocery store and see that bananas are on sale for $550 a bunch. You'd have to be crazy to buy them at that price, but even if you didn't know that was a terrible price, you'd be crazy not to go to the other grocery store and compare prices, since you're spending so much money.

In this day of interwebal communications, doesn't it only make sense that you should shop around before you spend hundreds of dollars? You know, just to make sure that shit is on the up and up? That's what Bankrate is all about. Of course, if you're a fucking moron, you can just stick with the first offer that comes your way.

Also, they have whole bunches of articles about personal finance, written by people who (unlike me) have a fucking clue as to what they're talking about. Imagine that!

Hope you love it. Cowabunga, over and out.

Thursday, May 17, 2007

ADA: You Need a Goal

Alternate Dimension Andy (ADA):

I think we may have gotten a bit ahead of ourselves, here. I mean, I'm telling a starving man how to cook a steak. What the hell good is this stock market info if you're still spending most of your excess money on debt? (You are doing that, right?)

It's just a road map, ADA. Please calm down. Lower your voice.

I'm telling you about these things 'cause the more you know about them now, the better you'll be able to make good decisions now.

Still, I've put the horse before the cart, taught you to run when you were still learning to crawl, and subjected you to a host of other cliches. I have to give you a clearer road map so you can understand why you should give a shit about the stock market.

You need to do two things today:
  1. Determine what your ultimate goal is in the arena of personal finance.
  2. Plan for that goal.

Very Exciting Example

It is my goal to retire by the time I am 55 with enough money in savings that I can earn my pre-retirement salary for the rest of my life. How do I plan on doing this?
  • First, I will aggressively attack my debt. By putting a little extra into my student loan payments, I aim to be debt free within five years.
  • Meanwhile, I will invest as much as I can into my 401(k), making sure I'm taking full advantage of my company's matching plan.
  • Once my debts are paid off, I will take the money that would have once gone into paying off my loans and invest that into my retirement and savings.
  • I will also set aside a little bit extra from every paycheck which I will use to invest aggressively. This, of course, after I've maxed out my yearly contributions to all of my retirement plans.
Some things I'll do that will help:
  • When I need a "new" car for myself, I'll buy a used vehicle and pay with cash. If I can live without a car, I will.
  • When it comes time to buy a house, I'll pay down at least 20%. I will pay off my house as quickly as possible, paying off at least an extra $100 a month beyond my minimum mortgage payment. I will not buy a house until my student loans are paid off.
  • I will go to graduate school to increase my earning potential (and [just as importantly] to get a better job in the field I love). I will bend over backwards to find funding for grad school: fellowships, scholarships, etc. I will not go to graduate school until I've paid off my undergraduate loans.
  • I will stick to my spending plan. This is not negotiable.
  • I will encourage my wife to save aggressively as well. We will both live simply and never beyond our means.
  • We will not have kids unless they are free. (Yes, I'm kidding. We won't have kids unless someone pays us.)
  • If I can get a job at Google, where they'll match up to 60% of your annual paycheck in your 401(k) plan, I will do that.
Some reality checks:
  • As far as being debt-free within five years goes: I can wish into one hand and... Damn, I'm just full of cliches today.
  • Aggressively saving for retirement might not actually work if I'm not taking home enough to pay my rent.
  • Waiting for grad school 'til loans are paid off: not sure that's necessary. It might even hurt me, since I'd be missing out on a couple years of higher earning potential.
  • My wife doesn't like being convinced. She is the boss, you see.
  • Kids are -- I was surprised to learn -- somewhat expensive!
  • Google does not give jobs "all willy-nilly." Indeed, there is very little willy or nilly involved in their recruitment process. That's why it's such a super-awesome place to work; they want the best and the brightest to want to stay with them. Still... a boy can dream.
So, ADA, I'd like you to do something similar for yourself. If you have a blog, we could even call this a "meme!" True or false: this is exciting enough to make your genitals tingle.

Me too, man. Me too.

Thursday, May 10, 2007

MMM: The Stock Market, Part 2

Alternate Dimension Andy (ADA):

The stock market is much more complicated than a flea market to facilitate the trading of parts of goatee wax companies. In fact, in the real world, there is not a single "goatee wax and wart remover" company that sells stock. (I'll talk more about this in a future post, "MMM: Starting a Goatee Wax And Wart Remover Company.")

For starters, there are dozens of different types of companies: automotive, software, oil... even comic book companies.

Plus, "the stock market" isn't even an actual place. There is a place where stocks are traded; that's called a "stock exchange." The stock exchange you're probably most familiar with is the New York Stock Exchange (NYSE). Worldwide, there are hundreds of exchanges. When people talk about "The stock market," though, they're just talking about the activity that is buying and selling stocks.


The most important thing for you to know about the stock market is that it's risky. If you put money into the stock market, it's not going to grow at a fixed, predictable rate like your savings account. One day, a company's stock might go down 20%. A company might go out of business, making your shares worthless. If you put all of your money into the stock market, you might very well lose it all.

Why on earth would rich people put their money into the stock market, then? 'Cause there's an even better chance that your shares will gain money. Not only that: on average, they'll gain money even faster than if they invested it in something else. Bonds and other investments typically bring in between 6 - 7%. The stock market, on the other hand has, over the long haul, averaged about 10.5%.

Asterisk. Footnote. Bullet point.

It is not the case that a given stock is guaranteed to bring in 10%. It's just the case that the whole market will, on average, over many years, return about 10%. So... if you put $d into the stock market, then waited n years (where n is at least 20), in the end you'd probably have about $d(1.10^n).


Some years, you might go way up, some years you might go way down. What's even more nuts is, this "10%" number isn't even for individual companies. It has to do with the market as a whole. Like, if you added up the value of all the shares of stock, then a bunch of years later, added up the value of all of those shares of stock, the number would be 1.1^n times larger. But for an individual stock, the numbers could be much more whack. Hella whack, even.

There is another downside to spending your money on a stock: it doesn't put cash into your pocket. If you want to cash out of the stock market, you have to place a "sell" order and wait for someone else to agree to your price. If there aren't a lot of people trading the stock, you could be waiting for weeks.

Some companies are all, "That's bullshit, yo! People who own part of this company should get a paycheck!" So, every so often, they send those people money. This money is called a dividend payment.

Coca-Cola (NYSE: KO), for instance, pays out dividends every quarter (three months). Usually, they pay out about 0.5% of the share price. So, if you bought a share of Coca-cola for $100, Coca-Cola would send you a check every three months for $0.50 (along with a note that said "DON'T SPEND IT ALL IN ONE PLACE LOLZ!").

What's particularly awesome about dividends is that you can still cash out on the stock. So in the Coca-Cola example, you'd still be able to place a "sell" order and get your $100 back. (Well, sort of. Once Coca-Cola pays out that $0.50, the shares are worth $0.50 less 'cause the company is worth slightly less. But for the sake of simplicity, let's just say you could sell the stock for your $100). Over time, while the shares are increasing in value (as most stocks tend to do), you're receiving dividend payments.

A possible way to be totally rich: buy d dollars worth of shares of a dividend-paying stock every week when you get paid. Do so for 30 years. If we assume that the dividend stock grows at an average of 8%:
  • You'll own about $6413d in shares of the company.
  • You'll receive dividend payments every quarter for 30 years.
  • At the end of those 30 years, every year, you'll be getting back $32.07d every quarter (about $2.46d every week) forever.
Forever, ADA. Think about that. Free income forever. You can give it to your kids or starving kids in Africa or kids from space. You could even give it to some dude from an alternate dimension who gave you financial advice.

Think about it.

Sunday, May 6, 2007

ADA: Cavemen Want Your Bling

Alternate Dimension Andy (ADA):

Back when human beings really were cavemen -- that is, when human beings literally lived in caves -- competition was pretty stiff. Among males, we wanted all the women, all to ourselves. Among females, we wanted the best man possible to look after us and our babies. We all wanted the tastiest cut of meat, the best hunting grounds, the best atlatl, etc.. Back when we were cavemen, we would maim and kill one another for such privileges.

Nowadays, we're cavemen who are stuck in a modern world. We still have all the caveman urges: "I must kill;" "I must eat;" "I must care for my baby;" "I must fuck;" "I must look after my family/ tribe;" "I must appease the gods." But now, we're educated, we have a society that urges us to control ourselves.

But we're still cavemen.

Among us are some cavemen who would do anything to make themselves the strongest; in today's world, these cavemen measure their strength by wealth. They're not the wealthiest, but they're willing to do anything to get there. They're willing to predate on their own species to get to the top. (FUN TIP: Once they're at the top, they'll do anything to maintain it, so it's a never-ending struggle.)

Those people, ADA, are why everyone needs to give a shit about money. Some are predatory lenders who will trick you into a mortgage you can't afford. Some are huckster salesmen who convince the elderly to put your retirement savings into an investment that doesn't really exist. Some own mining companies, and are willing to risk the lives of people with families (their own employees) in order to make a few extra bucks. Some aren't even willfully malicious; they just create great products that you spend your money on instead of, you know, saving for retirement.

How do we protect ourselves from these people? There are two well-known ways:
  1. Never trust anyone who wants your money.
  2. Know the ins and outs of finance.
Among people who opt to protect themselves, most choose the first method. I think it's the wrong one. When protecting yourself from the cavemen, paranoia will only get you so far. A grocery store wants your money; are you going to stop buying groceries? Do you want to live in L.A. without a car? Do you want to put your retirement money in a coffee can and hide it under your bed? Do you want to rent a home forever (and if so, how do you know that that's less of a scam than buying a home?) ADA, you're going to be faced with financial choices everyday. Don't kid yourself about inaction being the safest course.

You have to accept that greed is part of human nature; I'm not saying you're a necessarily greedy person, but I am saying that there will always be greedy people who wouldn't think twice about preying upon you. The best way to protect yourself isn't by hiding from them; it's by being good enough with a club that they'll know better than to come after you.

You're an actor, so I imagine you understand at least the basics of what I'm saying here: human beings have an inherent nature. Some elements of that nature are good: we love one another, we care for our young, we share, we mourn the dead; and some elements are evil: we lie, cheat, steal, murder, rape and torture. I am of the opinion, ADA, that if you want to live life, you have to accept these facts of human nature, and you have to be prepared to deal with them.

Watch out for cavemen, bro.

Saturday, May 5, 2007

MMM: The Stock Market, Part 1

Alternate Dimension Andy (ADA):

The stock market is one of those magical money machines (MMMs) I was talking about before. You've heard about it. There's always some boring-ass news story about the DOW dropping seventeen points (or some such bullshit). People talk about buying "shares" of Coca-Cola. There was even that unit in high school social studies about what the stock market is.

Let me just begin by saying, I totally agree with you that this shit can be boring as hell. But since I'm here to preach to you about mastering the art of personal finance, you're gonna have to sit through this anyway.

Pretend that in your dimension, a dude named Horace invents goatee wax. Since everyone in your dimension sports a goatee, Horace is bound to make a kajillion dollars, right? Other than the fact that a kajillion isn't actually a number, Horace also has to make the goatee wax before he can sell it and make money off of it.

So, Horace makes up a few batches of goatee wax and the small-time local shops put it on their shelves (it is labeled as Horace's Amazing Fun Time Momme and Poppe Shoppe Goatee Wax And Wart Remover. Oh yeah, I didn't mention before: the goatee wax is also a wart remover). Well just as fast as Horace can make batches of this stuff, it's jumping off the shelves. Some of the other shop(pe)s in town get in touch with Horace and offer to sell his wax too.

As the number of shops carrying the product grows, the demand for Horace's product grows exponentially. The goatees just keep coming. There are too many of them. It's like a zombie movie, but instead of zombies, it's goatees, and instead of shotguns, it's goatee wax.

So Horace gets an idea. "Ah ha!" he says aloud, perhaps creating an awkward moment for all the people around him until he explains, "I shall make a machine that will facilitate the easy creation of my wart-removing goatee wax!" (Everyone then nods in silent, profound approval.)

The problem is, Horace (rich though this wax is making him) just doesn't have enough money to pay for such a machine. Even though the machine would help him make the wax a hundred times faster, even though there is demand for his product, Horace just can't afford to make a machine.

Then, Horace hears from an investment bank (What's that? We'll talk about it later.). They've heard about his amazing wart-removal wax; they use it to wax their own goatees. They want to help him raise money to get his company running. Their idea: they'll sell "pieces" of Horace's company. They'll have a total of 1,000,000 pieces, and they'll sell them for $10 each. Each of those pieces -- let's call 'em "shares of stock," -- is a tiny piece of every machine, every chair, and every potted plant that Horace's company owns. In return, Horace will get $10,000,000 to build factories. He'll also use the money to hire workers, advertise, and generally get his company running.

Now the owners of the shares of stock -- "shareholders" -- each own a bit of Horace's company. If the company sells a lot of extra goatee wax, they'll bring in a lot of money from those sales and the value of the company will increase. So too will the value of the shares increase. If the company starts buying private jets and spending too much on advertising, the value of the shares might decrease.

Now, Horace's company isn't going to make more shares of stock. If another person wants to buy shares of stock in Horace's company, he would have to find someone who already owns shares and is willing to sell them. The buyer and seller would then negotiate a price.

That might be easy if there were only a few people who knew about the shares of Horace's stock, but that brokerage that helped Horace out before made sure there were lots of shares of the stock. Lots of people know about it. And lots of people want to buy or sell shares of that stock. Wouldn't it be nice if there were a sort of flea market people could go to to buy and sell those shares of stock?

ADA, that's what the stock market is. It's a flea market where people sell pieces of companies. I'm not even fucking kidding. But instead of just imaginary facial hair wax companies, there are all kinds of companies. Hundreds of 'em.

So how do the rich make money in the stock market?
  1. They find a company that is going to make a lot of money.
  2. They "go to the stock market" and buy shares in that company.
  3. When that company is done making money, or when they need some cash, the rich sell their shares of stock in that company (for more than they purchased the shares).
It's the basic MMM formula. Now, there's certainly a lot more to say about the stock market than just this. We haven't even scratched the surface of what a dividend is, what happens when people "go to the market," and how to use the stock market effectively. This is just the beginning, and understanding it is key to understanding most of the upcoming MMMs.

Go wax your goatee. We'll talk more about this later.

Tuesday, May 1, 2007

ADA: Rich People Have Magical Money Machines

Alternate Dimension Andy (ADA):

I know you don't necessarily want to be rich. Not much point, as long as you can eat and do something that you love (amirite?). You agree with me, I'm sure, that having more money will not, on its own, make a person happier.

On the other hand, rich peeps are kind of an interesting academic topic. How did they get so rich? How do they stay rich? Why rich peeps gots to be like that, yo?

Don't pretend that you don't love sitting around just thinking about academic shit. I know you do, dude. I know you love to just puzzle things through. Arrogant bastard that you are, I'm sure you think you're smarter than all of your starving actor friends (side note: I don't think those people are starving in this dimension). I assure you, ADA, that you are not smarter than they are, but your willingness to puzzle about the finer points of the universe's operation is an admirable quality that I hope you never lose.

Stop stroking that goatee and we'll get back to the topic at hand: how do rich people get rich?

Think about it.

I'm not fucking around, really think about it. Ponder. I want real details. Go sit in a quiet place for ten minutes and really pound away at this question.

Give up?

Answer: I don't really know. If you know an absolutely flawless formula for getting rich, I'd love to hear it. I'm not a rich dude myself. Of course, I think I have a pretty strong theory. Ready? Theory: they use Magical Money Machines (hereafter MMMs).

I have not gone off the deep end, ADA. There is such a thing as an MMM. Only, they're not called that. They're called other things with really arcane names like "The Stock Market," "Certificates of Deposit," and "Oculus Repairo." Okay, not that last one, but the other two are legit. Seriously, there's a million of these MMMs. Each MMM works a little differently, but they have one thing in common: the way the rich use them. Here's the recipe that wealthy people follow:
  1. Put money into an MMM.
  2. Wait.
  3. Slowly, the MMM spits out more money than was put in.
That's it. Seriously.

And now for the point of this message: you can use them too. Anyone with a little bit of money is allowed to use these MMMs.

Excited? Intrigued? Can't wait to learn more? Are you literally sweating bullets?

All right. Calm down. Let's just take a breather.

Here's what I propose to you, ADA. I am going to teach you magic; in exchange, you will use that magic for good. I'm going to tell you about the internal workings of dozens of MMMs, in the vain hope that you actually learn to use them. Maybe you'll actually get rich...ish.

From now on, any post whose title starts "MMM" is about one of these Magical Money Machines. Enjoy, yo.

Sunday, April 29, 2007

ADA: More on the Emergency Fund

Alternate Dimension Andy (ADA):

You're thinking about this emergency fund bullshit. You want more details: how long do I have to worry about this shit? How much money needs to be in this fund? Where should I put this money? What constitutes an "emergency?"

Well, Get Rich Slowly has an oldie but a goody of an article on this very topic. Unfortunately for you, Mr. Roth is of the opinion that you need to decide for yourself what the right amount is. I am of the much more realistic opinion that you are a moron incapable of making such an informed choice.

Sorry, ADA, just call 'em like I see 'em.

This is the paradox of choice: to the uninformed, a slew of options does not constitute a "choice." When you don't know what you're doing, when one option sounds just as good as the next, when you're thrown to the wolves and told to choose what's right for you among a sea of choices about which you have zero knowledge, you're not going to be choosing. You're going to be "picking." You're going to be rolling dice, or picking the option that has the coolest name.

Since I sincerely doubt you're actively learning much about personal finance, since I doubt you currently know the merits of a savings account vs. a municipal bond, I'm just going to give you some answers. This will be the advice that you stick to for the time being. If, in the coming months, you learn more about personal finance (either by reading this blog or by going to a legitimate source), then feel free to make some changes.

The advice I'm about to give isn't law. None of my advice is ever law. It's only a suggestion until you can figure things out for yourself. Here goes:
  • How much money do I need to put away? Go back to the post about budgeting. What are your essential monthly expenses (item #2)? Take this number, add 10%, and multiply by eight. Should you go into emergency mode, you will need to be able to get by for at least eight months. This number is a safe estimate of what it will require for you to get by. I say "add 10%" because I like to err on the side of caution, but in reality, you'll probably need even less than what your current expenses are, since you'll be canceling your internet connection, moving into a cheaper apartment, etc.

  • Where should I put this money? Put it into a savings account at the same bank where you have a checking account. Sign up for overdraft protection, and link that protection to this account. I wouldn't normally recommend a savings account as a place for you to put your money, but since the world of art is feast-or-famine, you'll need very high liquidity (That means "really easy access to all your money").

  • What constitutes an emergency? Don't be an asshole. You know what an emergency is, ADA. If you are put into a situation where something you need to pay for cannot be paid for, take your money out of the emergency fund. Since you're sticking to your allowance plan, since you're not building up credit card debt, this shouldn't be a problem.

    Good examples:
    • Car repairs
    • Lost job
    • Moving expenses

    Bad examples:
    • Totally sweet guitars
    • Vacations
    • Booze

    Also worth noting: once you're in emergency mode, all the rules change. If you've lost your job, you shouldn't be contributing to your retirement fund until you've found a new job. You also don't get an allowance 'til you have another job.

  • How long do I have to worry about this? Until you have enough in your emergency fund. If you ever have to take some out because of an emergency, then put it back in as soon as you're able.
Stick to that emergency fund, ADA. For someone like you, it is entirely necessary.

Thursday, April 26, 2007

About the Free Monologues


From now on, I will not be writing new monologues, except upon request. If you want me to write you a custom-made, never-before-been-used monologue, please contact me; just leave a comment under this topic. Otherwise, all monologues posted hereafter will be either old or guest-written.

Free: Yodlee

Alternate Dimension Andy (ADA):

Lemme tell you about something that will eff you up for life. There's this website called Yodlee, and it's truly, rockin' awesome.

Yodlee puts all of your online financial shit in one place. Online services you can manage via Yodlee:
  • Checking accounts
  • Savings accounts
  • Credit cards
  • Bills
  • Brokerage accounts
  • Retirement accounts
  • Insurance
  • Loans
Basically, if it's about your money, and if it has a website, Yodlee will aggregate it and put it all on one page for you.

While that is an amazingly impressive start, Yodlee does much more than just let you look at all your accounts:
  • If you can pay your bills online, you can pay then via Yodlee. You pick the checking account from which you wish to pay, and Yodlee manages the rest for you.
  • Yodlee automatically sets up a calendar telling you when all your payments are due.
  • Yodlee knows what you're spending money on, and can generate a spending report. Without you entering any information (except in rare cases), Yodlee will know that you spent 25% of your income on rent, 12% on pet supplies, and 5.3% on gas.
  • In tandem with the spending report feature, Yodlee will let you set up a budget and track your ability to stick to it. If you know you only want to spend 60% of your income on pets, Yodlee will give you an honest approximation of how much you're spending at Petco and other pet supply stores.
  • Even though you probably don't want to know the numbers, Yodlee can tell you what your net worth is (minus things like the value of your cars and home).
  • Yodlee is also a webmail aggregator. You can check Hotmail, GMail and Yahoo! mail directly from the Yodlee site.
  • Yodlee will send you email reminders. You can set it up to send you an email when you go over budget on pet supplies, when a bill is due, and when your bank accounts have large transactions.
  • Even if Yodlee hasn't already integrated one of your billing accounts -- a student loan, for instance -- you can still track the student loan via Yodlee. You just tell Yodlee what your balance is and when payment is due and Yodlee does the rest.
Okay, you are probably not geeking out as hard as I am right now, but there is one more aspect of Yodlee that I think might sway you:
  • Yodlee is free to use.
So here's my recommendation to you, ADA: Sign up for Yodlee. Start checking your Yahoo, GMail and/or Hotmail accounts from Yodlee. Make it a habit to give a shit about your personal finances; make caring as automatic as checking your email.

Monday, April 23, 2007

ADA: Get Out Of Credit Card Debt Now

Alternate Dimension Andy (ADA):

Let's talk about credit card debt. I know, I know, your favorite topic. Calm down, calm down. No horseplay.

I said calm down, motherfucker.

Here's the story as I imagine it: you wanted a guitar or some other such flashy, expensive, and heretofore-unused item. Since you're poor as hell, you paid for it with a credit card. You knew it was a bad idea, but you did it anyway.

Then, you wanted a nice amp to go with it. Then, a whole wardrobe of brand new clothes that had been made to look as if they were not brand new. Perhaps then a series of other such uncool, ill-advised purchases. A collectible Darth Vader Pez dispenser?

Now, you have credit card debt in the thousands of dollars.

ADA, pay that shit off now. Paying that off is more important than your emergency stash, more important than your retirement, and more important than any other debt you're paying off.

See, credit cards grow at rates like 13.45%. If you have bad credit -- you do -- the rates are closer to 18.99%. That debt grows way too fast to keep a lid on it. With your retirement and your nest egg you couldn't make money that fast except in the rarest of circumstances. You could never, ever count on making money that fast for a sustained period of time.

I'm going to sound like a hypocrite here: skip building your nest egg and saving for retirement until you've paid off that credit card debt. Think about it like this:
  • Once you've paid off your credit card debt, your credit limit will still be the same. In case of emergency, you'll be able to put yourself back into awful credit card debt. For this reason, paying off credit card debt is more important than contributing to your nest egg.
  • Credit card debt will grow much, much more quickly than your retirement account. What good is growing your retirement account if you're growing your debt even faster? For this reason, paying off credit card debt is more important than contributing to your nest egg.
Once you've paid off your credit card do not -- do not -- close your credit card account. If you close your credit card account, that's bad for your credit history. If you ever want to take out a loan for a car or a house, you want the best credit history you can get.

Keep the credit card. You might need it for emergencies. And if you're really disciplined, you can use the card to your advantage.

Pro-tips!: Get a card that offers rewards. Make most of your purchases with the card and pay them off immediately. Only buy things with the credit card if you can pay for them with cash; after you've made your purchases, go home and pay off the debt immediately. You'll earn the rewards -- cash back, airline miles, whatever -- without ever having to pay interest. It's sort of like free money, and it's good for your credit history.

So what are you going to do first, ADA? That's right. Pay off credit card debt.

I said calm down, motherfucker!

Friday, April 20, 2007

ADA: This Is What It's Like In This Dimension

Alternate Dimension Andy (ADA):

In this dimension, I have an incredibly hot wife. That's right. I got married. Before I even graduated college.

I know. Can you fucking believe it? You so wish you lived in this dimension right now.

Anyway, before I married this lady, she and I went into non-Jesus-style pre-marital counseling. The idea was, "This really seems like it's going to work, but are we just fucking kidding ourselves?" In NJSPMC, she and I learned a pretty alarming fact: of the approximately 50% of marriages that end in divorce, most cite money problems as a serious contributing factor. Tad Sears, the totally awesome dude who led the NJSPMC suggested that we make a budget together.

While it is probably impossible to reliably measure why people get divorced, I do believe that if a couple can't even get their financial act together, they may have trouble taking care of slightly more complicated things like "cleaning the living room before in-laws arrive" or "raising a child." I'm not going to say, "THE SECRET TO A GOOD RELATIONSHIP IS HAVING A BUDGET" or anything as asinine as that. If you're in a shitty relationship, managing your money well isn't going to change the fact that you're in a shitty relationship. I will argue, however, that because we manage our money well, we fight about money far less than other couples. We have one less thing to fight about.

The number one thing my wife and I do to manage our money well? We make the money management automatic. My retirement contribution is automatically taken out of my paycheck and put into my 401(k). Then, our allowances are direct deposited into our respective checking accounts. The balance of my paycheck is direct deposited into our joint checking account. All of hot wife's check goes into our joint account. We use our joint checking account for rent, bills, groceries, insurance, etc. Note that this requires absolutely no recurring work on our part; our employers handle all of the deposits for us.

Reason I mention this, ADA: if you are employed, these are all things that it's likely you'll be able to do. Most employers do direct deposit. Most employers have a retirement plan. It's not hard to make it automatic.

By making it automatic, you're ensuring that you're not cheating yourself. That you're not saying, "I can afford skipping the retirement contribution this week, since I'm so far ahead." You're also making it less tempting to dip into your everyday expenses to fuel what should be allowance-style expenses; if the math has already been done for you, you can't very well argue, "I don't remember how much I've spent on myself this month, but I'm sure it's okay if I take out another $100 from my checking account.

I don't think I've got all my shit together. I don't think I'm the best organized person in the world, or the person best qualified to give you financial advice. I do believe in this plan, though, and if you implement it in your own life, you'll see changes immediately.

The platitude they use in the finance biz is "pay yourself first," and trite though those words may be, that's a great way to remember this lesson.

Pay yourself first, ADA. Seriously.

ADA: You Can Still Have Fun

Well, Alternate Dimension Andy (ADA), I imagine you found the previous post sobering. I know it's unnerving to realize that in an average month you make less than $800. Or that your rent is 60% of your take-home pay (FUN SIDE NOTE: For most people, rent should be at most 28% of your total income, which by my estimates is 40% of your take-home pay; since you're flat broke, though, we have to bend the rules).

I have some other news which you probably will not like: you do not get to spend the remainder on whateverthefuckyouwant. You have two other things to worry about:
  1. What happens when you get fired from your shitty-ass busboy job.
  2. What happens when you retire.
In case it's not self-explanatory why you'd need to plan for something like losing your job: if you don't have a job, if you get hurt and can't work, or if you suffer some other kind of economic hardship, your landlord's not going to stop asking you to pay rent. Groceries will not become free. You will still need running water and electricity. Saving for such circumstances, I think, makes sense even to those who don't lend much credence to the art of personal finance.

Saving for retirement is probably a tougher case for me to make, but I promise it's just as important. I'm sure you've heard all this math bullshit before, but here it is again:

Suppose Ernie and Bert are both 25 years old. For ten years, Bert puts $1000 into a retirement account every year, and Ernie puts none into a retirement account. When they turn 35, they reverse roles; Ernie puts away $1000 a year until he retires, and Bert never contributes another penny to his retirement account. When they turn 65, which of the two will have more money?

If the answer were Ernie, it wouldn't be worth asking the question. And indeed, the correct answer is Bert, assuming that they were pulling in 7% in interest every year (which is a pretty trivial requirement).

Not that tables are particularly fun or interesting, but you need to look at this one:

AgeErnie AddsErnie's TotalBert AddsBert's Total

In the end, Bert has more money, even though he only ever put in $10,000. Ernie, on the other hand, put in a total of $30,000 and in the end has $10,000 less than Bert. ADA, this is why you can't afford to wait on saving for retirement.

Just as important as saving for hardship and saving for retirement, though, is taking care of yourself. What good is saving if you hate being alive, right?

So here's what you're going to do, ADA. You're going to take that disposable income, and you're going to put it into three separate accounts:
  1. 1/3 of your money will go into a savings account for hard times.
  2. 1/3 of your money will go towards your retirement plan. I'll talk more about choosing a plan in a later post.
  3. 1/3 of your money will go into an "allowance" checking account. Spend this on whatever the hell you want. Go out with your friends, buy a new TV, purchase Smurf memorabilia on eBay. Do what you can to keep your sanity by spending this money on fun things.
If you can, make putting money into 1. and 2. automatic. Your employer might have a direct deposit system that lets you split up where your money goes; you can automatically put some money into your savings and not have to rely on yourself to remember. Your employer probably also has some kind of retirement plan, which automatically deducts money from your paycheck and puts it someplace where you can't touch it 'til you're 65. Use tools like these to make sure you're honest with yourself!

ADA: In some upcoming posts, I'll tell you how you and your totally hot wife have worked out finances in this dimension; and I'll tell you how to pick a retirement plan.

Enjoy your allowance. Don't spend it all in one place.

Wednesday, April 18, 2007

Monologue: Bedfellows

by Andrew M. Kasper
Originally written for Matt Olsen
work is licensed under a Creative Commons Public Domain License.

SETH: Honey, I'm home earl-- WHOA! Whoa, whoa, whoa. Yikes. Sorry. Didn't mean to startle you, sweetheart. Who's this? Sorry, I'll let you two get dressed. Hi, I'm Seth. Nice to meet you. I didn't mean to startle you, hon. I'm sorry. Wow. Pretty amazing. I guess I never thought of how I'd react to something like this, but now that it's happening right here in front of me... wow. I'm surprised to say that I'm not angry or anything. Not that I'd expect myself to be; I've never been the jealous type. But this, I mean this is... wow. Look at me going on. I'm sorry. Rude of me. Can I get you anything to drink? No? You, hon? No? Was that weird? That was weird. And now I'm staring. And now I'm talking about staring. My God, talk about making an awkward situation worse. Am I right? Tell you what. I won't even look at you. I'll just stare at the ceiling. Sound good? Honey, funniest thing happened at work today. Tim was asking about contracts for the 2006 fiscal year, but John Raimer thought he was talking about 2005. So, they got into this-- you know what? Not a very funny story. Funny, though. I thought things were going fine with us. You and me, I mean. Not you. I've never met you. Really did think things were fine. We never fight. I guess we haven't had sex in a while. Makes sense now. All right. Going to the kitchen. Last call for drinks! No one? I might stay at a hotel tonight, honey. Just seems like that's the sort of thing you do in a situation like this. I'll see you later, I guess. It was nice to meet you, Miss.

ADA: How Much Do You Spend?

Alternate Dimension Andy (ADA):

Yesterday, I read this article which I'm quite certain you did not read. Executive summary:
Make a budget! Here's how:
  1. Look at your credit card statement.
  2. Track your spending for a month by writing down everything you spend money on.
  3. Make a spending plan.
  4. Stick to that plan; think before you spend money.
Not to be overly condescending, ADA, but I just know this won't work for you. It's step 2 that I'm particularly concerned about. You would rather die than whip out a pad of paper every time you bought a cup of coffee. You would most certainly not be caught with a spending patch wrapped around your credit card.

Hell, you're probably not even convinced that a budget is a good idea. I mean, you're an actor! You probably live off of tips! Not all of your income is steady, so how can you possibly predict where you're going to be spending money?

Dude, shut up. That is the most twisted, idiotic logic I have ever heard.

Why do you need a budget? Well, think about the last time you were worried about money. Perhaps you were worried about paying rent on time. Maybe you were already late on rent, and the threat of eviction loomed large. How stressful was that? How much hassle was that? Now, compare that stress with the estimated stress inflicted by making a budget. Perhaps making a budget will be really stressful... as stressful as worrying about rent three times over! But you'll only have to make a budget once, and after that, you'll never have to worry about it again. It's a one-time cost, bitch.

Let me also mention this: it's far easier than you think it is. Seriously, if you have access to the Interwebs, you'll find tons of sites that make it easier. Additionally, Yodlee is a free service that will handle 90% of the work for you; I'll talk more about that in a later post. There are a lot of resources out there to help you with this; there's no excuse not to make your budget.

Here's my worksheet for your budget. If you have your checking account statement and a pay stub handy, you should be able to do it in under ten minutes. For every question, err on the side of caution:
  1. How much are you guaranteed to make (take home) each month? Assume a worst case for tips (if you usually make $100 a shift, but some shifts you only make $50, assume $50 a shift). Don't include acting jobs or other irregular, non-steady jobs. Use this formula:

    [Hourly wage * number of hours worked per week * 52 weeks in a year * 0.7 for taxes] /12 months.

    Example: You work at Starbucks 30 hours a week, where you earn $8.00 an hour. 8.00 * 30 * 52 * 0.7 / 12 = 728. You take home $728 a month.

    It looks complicated, but it's not, I promise. You can just punch it into the calculator in that exact order.

  2. How much do you have to spend every month? Here are typical expenses. If you're unsure, err on the side of caution:
    • Rent
    • Loan Payments (Student loans, car payments, etc.)
    • Food (groceries and eating out)
    • Gas, the Subway, etc.
    • Bills (Gas, garbage, electric, water, insurance of all types, cell phone, cable, etc.)

    Add all of these expenses up.

  3. Subtract the result of 2. from the result of 1. This is your disposable income.
Hopefully, the result is a positive number; if not, you need to find a new job, cut some of your expenses (cable may need to go), or find a cheaper place to live. Sell your car and buy a less expensive one? Get another roommate or move to a different apartment, maybe?

If the number is a positive one, though, you're in luck. In my next post, I'll talk about what you can do with this money. Here's a preview:
  • Save it for emergency or unusual expenses.
  • Save it for retirement.
  • Spend some of it on fun stuff.

Tuesday, April 17, 2007

ADA: You Know Less Than You Think

Alternate Dimension Andy (ADA):

Stop and think with me for a second: where do people who know how to handle money learn that skill? It's not taught in school. There's no special segment on Sesame Street. I'll give you a hint: who knows how to handle their money best? The wealthy do.

An interesting fact you may have noticed about the wealthy: many of them had wealthy parents. While it seems obvious that people who inherit money will become wealthy, there's much more to the story than that. Having money is not enough to make you wealthy; you have to know how to handle your money as well. Consider, for instance, the multi-million dollar lottery winner. How many times have you heard the story of the lottery winner who cashes out and immediately spends money the way he thinks rich people spend money? Five years later, he's back exactly where he started.

Can we agree that having money is not enough to give you financial security for the rest of your life? Can we agree that managing money is an important skill in this equation? That if someone knew what to do with ten million dollars, he would never need to work again for the rest of his life?

Back to the original question: where do people learn to handle money? You've probably figured it out, but here's the answer anyway: the wealthy learn from their parents. People who know how to manage their money recognize that it's an important skill; they teach it to their children.

Consider your own family's financial history, ADA. Your grandparents were poor and raised during the Depression. Their financial plans were essentially, "Keep it in a coffee can under the bed." They knew to save and to plan for hardship, but they didn't consider scary things like inflation. They didn't trust banks or the stock market. They didn't really understand enough about money to take advantage of their retirement plans. They lived in fear of money, and so they were very frugal.

Your parents were Boomers. They had grown up with parents who didn't want to indulge them, and as soon as they got jobs, as soon as they had disposable income, they started blowing it on things that they thought would make them happy. "Finally! We're adults! We can buy all the toys we want!" Look at the house your parents live in. Look at the cars they drive. Look at the $1000 rug they have in their living room. Look at the myriad of $20 DVDs your dad has on his shelf. Your parents are not at all bad people, but they do love toys. Also worth noting: they did not teach you to manage money, because they did not know how.

So it's only natural that you should buy a car, only to have it repossessed a couple of years later. It's only natural that you should have to work almost-full-time while you go to school. It's only natural that you should have no idea what a bond is. It's only natural that you should have no idea how to plan for retirement.

Normally, this wouldn't be a concern. You'd grow up and get a job where you could safely live paycheck-to-paycheck. You'd be able to pay rent, possibly even buy a home with the help of your wife/ girlfriend/ sex slave/ whatever it is you're into in that alternate dimension of yours. You'd have money troubles, but they wouldn't be terrible until retirement came around. Hell, you might even experience moderate success.

But ADA, you are doubly screwed, 'cause you got into the arts. There will be little or no stable income for you. You're probably waiting tables or doing some other job for which you are grossly over-qualified, but underpaid. That's what artists do, since they, you know, have to pay rent and eat and all that jazz. The problem is that you will be barely squeaking by until one of the following happens:
  1. You make it big.
  2. You are too old to work anymore.
In the case of number one -- and trust me, I hope against all hope that this is the fate that befalls you -- you will have more than enough money. You'll be purchasing $100,000 cars that you never drive. You'll have a house that puts every house in Stillwater to shame. Your retirement plan will be "live off of royalties."

In the case of number two -- unfortunately, the more likely outcome of the two -- you'll just have to... I don't know, live on the street? Choose between medical care and food? Just rely on social security (I hope you're at least in touch enough with politics to realize how much of a joke that is)? Basically, it's way the hell too scary to think about.

But your parents didn't teach you personal finance, so you should be completely off the hook, right? Natch, that is the stupidest thing I've ever heard. You're entering a career for which it is even more important that you learn to manage your money well. You're going to go through a lot of dry spells, and if you don't have a nest egg, don't have some kind of security, you're going to be completely screwed.

Listen, man. I know you don't want to be rich. I imagine you don't have any qualms with being rich, but I understand that it's not the highest priority for you. And that's great. I feel the same way. I'm not sayin' you have to be rich. I'm saying that you need to have a plan so that you can eat, have a place to sleep, have medical care, and so forth.

Conclusion, ADA: you know less than you think about personal finance, 'cause your parents never even taught you the basics. Only reason I know anything is because I've been teaching myself. And every time I learn something I think, "Fuck! Is there even a chance that ADA knows about this shit? Probably not." It is up to you to learn, Bro, because no one else in the world is going to take care of you. In fact, I think very few people are going to be sympathetic to your case, since you've chosen to be an artist. The "Real World" thinks that artists bring their awful financial fates onto themselves.

Just sayin', it's worth learning. We cool, ADA? I thought so.

Monday, April 16, 2007

Monologue: Angry People Talking About God III

by Andrew M. Kasper
Originally written for Matt Salmela
work is licensed under a Creative Commons Public Domain License.

LEON: Homework problems? Psh. You have nothing to worry about; God made this place too goddamn big. Today, I was learning about tying knots and stuff -- you know, for when you’re sailing -- and I started thinking, “What the hell does this matter?” I mean, how important can something be? Then, I started thinking about what the most important thing ever would be: the end of mankind, probably. The end of the world. Like, if a bunch of bombs went off and everyone died. Or if the earth got cracked into a billion pieces by an asteroid. Hey, that’s not even one piece for every person who would be killed. Holy hell. And even if that were the case, even if it were the end of humanity, so what? People have only been around for a few seconds on the clock of All Time. And that’s assuming that even the most conservative estimates of how old the universe is are even close to true. I mean, life has only even been around for a few minutes, unless it started up earlier on some other planet, in which case, maybe a few more minutes than we thought. As far as we know, though, only a few minutes. If we all died, what would it matter? It would just be one of nine known planets near one of millions of known stars in one of billions of galaxies in the hugest place ever. How meaningless would it be to the universe -- to God, the only being who really matters -- if we all died? It would be like Ted Turner dropping a penny. Not even that. It wouldn’t even register as a fart, cosmically. What I’m saying is, cosmically, no one gives a good goddamn about you or your homework, and it doesn’t pay to worry about it.

Monologue: Angry People Talking About God II

by Andrew M. Kasper
Originally written for Matt Salmela
work is licensed under a Creative Commons Public Domain License.

LUCAS: Call it bigotry all you want, you little puss; I call it the truth. They really are money-hungry, deceptive, evil. It’s just a fact. Plain, simple fact. Don’t hate me for it. It’s just how they are; hate them. They’re the ones raising the interest on your loan. You’re paying them for your house and your car… Listen, just forget it. I can’t believe you’re pussing out like this. You don’t even have to do anything that bad. We’re not even going to hurt anyone. Break some windows. It’s like when you hit a foul ball through the neighbor’s window; you saying Mr. Winslow is worse than a Jew? You’ll smash his window? Fine, but if you tell anyone, you’re dead. And when you die and get to Heaven, God’s gonna say, “What’s the matter with you, you little puss?”

Monologue: Angry People Talking About God I

by Andrew M. Kasper
Originally written for Matt Salmela
work is licensed under a Creative Commons Public Domain License.

NILS: Where are you going to go? To look for God? If you see him, tell him I said, “Up yours.” Get back here. I can tell you something about God: he doesn’t love you the way I do. If he did, he would put a roof over you head; he would make love to you; he would at least show up every once in a while. If you want to leave me, fine: your loss. But if you want to leave me for God, I can tell you that you’re never even going to find where he lives because the asshole doesn’t exist. Figment, that’s it. People need the idea for comfort or an excuse to go to war or a reason to hate brown people. He’s not even real. I’m real. Stay here. You can stay here and put up with my ‘harsh reality,’ get some love and attention, have someone to care about, or you can go look for God and fail miserably. I know what I’d choose.

Free Monologues

Alternate Dimension Andy, I'd like to save you a few bucks; save you a few minutes of your time.

I'm cleaning off my old hard drive, and I've found a few of the old monologues I wrote. I'll start posting them here so that you and other starving actors can use 'em. Some are for women, so be sure to share them with your alternate dimension actor girlfriend. None of 'em are particularly great, in my opinion, but hey, they're free! What did you expect? Hopefully, these'll be useful to you and to people who don't have the time to run to the library or don't have the money to purchase monologue books or scripts.

Some notes about these monologues:
  • Free monologues will be tagged with "free" and "monologue," plus a gender tag: "male," "female" or "gender-neutral." Should make it easy for you to find them.
  • The opinions of the characters speaking the monologues do not necessarily reflect my own beliefs.
  • If you have monologues that I've written that aren't posted here, I'd appreciate you send 'em my way so I can share 'em with the other starving actors.
  • Any actors other than Alternate Dimension Andy who are in need of monologues can request them here. Just send me an email or post a comment in this thread.

The Idea

Last night, I thought, "In some alternate dimension out there, there's an Andy running around doing theatre. He's a starving actor in New York or L.A., possibly respected, more likely not. He can barely afford rent and doesn't know the first thing about personal finance. Maybe he has a goatee."

I thought about some of the financial luxuries that Real Andy takes for granted, but which Alternate Dimension Andy (ADA) doesn't know anything about. The things ADA doesn't care about and thinks he can't afford: owning stocks, contributing to his 401(k), etc. Notice that I said "thinks he cannot afford." See, what ADA doesn't realize is that he cannot afford not to know about and take advantage of these things.

Recently, I've added "Personal Finance" to my ever-growing list of nerdy hobbies. I read about a book a month on the topic. I check Google Finance, Money Magazine, and about a dozen blogs and websites about finance on a regular basis. I've gotten my financial act together, and I'm trying to get the people around me to do the same.

To anyone who knows me, it might seem like a strange hobby. After all, I've had some rather serious financial problems in my time. There have been all the usuals -- a late rent payment here, a bounced check there -- and there have been far more serious incidents -- namely, my car being repossessed after I failed to make a couple of payments. In my mind, this actually better qualifies me to dispense financial advice to ADA: I've learned some important lessons.

But why am I, Real Andy, even worried about Alternate Dimension Andy? I'm worried because it is only by chance that I fell into the very important hobby of personal finance. I'm worried because I think I have a rough idea of what ADA knew about personal finance when he graduated from college -- namely jack shit. I'm worried because I want that goatee-donning bastard to eat and to have a roof over his head.

I don't necessarily care if he's rich; I know that's not important to him 'cause it's not important to me. I just want this: when the time comes, after a lifetime of struggling and starving for his art, for him to have the option to retire. That is, if one day he hasn't made it (or, perhaps more likely, he's gone through a lifetime of feast-or-famine), he'll be able to take a day off and sit at home reading the newspaper. He won't be 65 with aching joints, unable to afford medical care, working 60 hours a week as a too-old busboy in a scary part of Brooklyn. Not unless he wants to, that is.

I'm writing this blog so that if we ever get inter-dimensional Internet access and Andrew Kasper in Dimension 24XS-B (ADA) decides he wants to look himself up in Dimension Alpha Prime (Real Andy), he'll find this blog and take some lessons away from it. And if my fellow starving artist friends, in the process, can enjoy and learn from this blog, then I'll be that much happier.