deep thoughts

Kids’ birthdays are meant to be celebrated for various reasons - sharing the kids’ and parents’ joy, creating memories that last forever, generally having a good time, etc. However, now-a-days, it appears that the term “celebrations” have somehow taken the meaning of “spending large amounts of money in trying to prove how our party is better than yours“.

Even before I put my thoughts and words together for this post, I have been thinking in terms of “herd mentality” - especially when it comes to consumerism. It probably applies well to kids’ birthday parties.

This is what happened at a lavish 1^st birthday party a couple of weeks ago (ah.. finally a chance to get this off my chest):

Imagine this scenario at the party: Things are happening in a rather expensive restaurant. There are around 80 people including about 30 kids. The adult males have scattered into small groups and are talking to each other about totally unrelated stuff (probably the same things that are generally discussed at any given workplace).

Slightly older kids are running all over the place and pretending that their parents do not exist. Some smaller kids are in their strollers (oblivious of everything around them) and the rest are hanging around their mothers talking to themselves (because the mothers are too busy bitching talking to each other about how their respective party was better than this one).

The parents of the birthday baby are really busy taking care of the arrangements (while keeping an eye on the baby) and they don’t really have much time to talk to all the guests they have invited. The birthday baby is sleeping peacefully. It’s time to cut the cake and the baby shows no signs of waking up. The parents are getting restless because the guests (especially the children) are wondering when this cake-cutting will be done so that they can proceed to hog on the (seemingly) delicious food. So, the parents try to wake up the baby and he starts crying like there’s no tomorrow. The baby is least interested in doing anything and just wants to go back to sleep. But, everybody else is not interested in what the baby wants and they just want to eat the cake and get back home - with their gift bags filled with expensive gifts.

So, what exactly was the purpose of the party?

A little birdie told us that it was a $1000+ affair. $1000+ for what!? gift bags for spoiled kids? for inviting *friends* who otherwise didn’t have the time to come visit you to share your joy? to hear them sing “happy birthday to you”? or to tell your kid 25 years down the line: “Look, we spent $1000 on your first birthday - now don’t expect us to pay for your tuition“? OR.. was it just to show friends and relatives that you can spend a large amount of money on birthday celebrations?

Now, 1^st birthdays are bit special and I can understand parents going a little overboard in planning that one; but, I have observed almost similar scenarios at birthday parties for 2, 3, and 4 year old kids [none of our acquaintances have kids older than that, so we will have to wait and see what happens as these kids get older]. Things will more likely get worse in terms of spending and outrageousness as the kids get older.

Birthday parties are probably never about the kids - they are always about the parents and their unreasonable tendency to compete with the lavish parties thrown by their neighbors or friends. It’s more about “what will people think of us if we don’t do _____ and _____ at the party?“. When the kids get older, it’s probably more about “will my kid complain to other kids (and their parents) in the neighborhood about us being stingy?“.

When a good chunk of people in a given community start thinking along these lines, some sort of unspoken social standards get created which define a “great” birthday party. After that, everyone gets suckered into following these standards, irrespective of whether such standards are within their resources (of money and mental stress) or not, and things quickly get out of control.

Here is an excellent example that says it all:

I’ve barely started, but am already done with throwing birthday parties for my kids (ages 2 and 4). I love to celebrate their birthdays, but do not want to have to throw a party for their friends with the stress and the cost that comes with it. Not to mention the competition to make the party as fun as the friends’ parties. I want to keep the celebration small, perhaps just a special outing with just the immediate family and then have the grandparents and cousins over for dinner and cake. BUT, my kids get invited to a lot of parties, and I feel guilty for not reciprocating, and the older one is SO excited about his birthday (which is coming up) and keeps telling everyone he sees that they can come to his birthday party. I hate to burst his bubble and tell him that there will be no party…. [source]

Another birthday example that I read on Dollar Stretcher ends with this:

We’re seriously thinking of moving out of this area because of the enormous social pressure to consume!

It appears that the evil cycle of people trying to prove that their party is better than (or at least as good as) their neighbors’ is going to continue till some parents start going against the norms and pull the plug on the showoff aspects of birthday parties.

Of course, feel free to celebrate, but please do it on your own terms and stop competing with others. Try cutting down on party expenses and engage the savings in some kind of an investment that will give your kid a helping hand when he/she really needs it the future. I think your kid will really appreciate that. If you hate to have that kind of a foresight, at least stop for a moment and ask yourself “how is this lavishness going to add value to my kid’s life?” - and act accordingly.

A few times, I have tried to explain this line of thought to some parents we know, and each time, I have been silenced by a single overbearing statement: “You will understand it when you have kids“. That scares me a bit, and makes me wonder if the social pressure will eventually make me an hypocrite when it comes to our kids in future. Time will tell.

Here are some interesting resources/articles to read on this subject:

• Birthdays Without Pressure
• $38,000 Kids’ Birthday Parties @ Time Magazine
  
• Overly Expensive Birthday Parties @ Dollar Stretcher
  
• How to Throw a Kid’s Birthday Party Without Spending a Fortune @ The Digerati Life

I spent a better part of last night thinking about the analogy between chess and life. It turned out to be a very interesting exercise. As always, images get formed in my head before I can gather the words. So, here is how it appeared to me after some elementary thinking:

Now, it’s time for some words.
Here are seven powerful parallels that you can draw between a game of chess and life.

• Planning for the future: Think long term - that’s the key to survival in this game. Don’t aimlessly push your pawns without a plan. Before you decide to make a move, think a few steps ahead. Ask “what if …?” and try to anticipate the possible outcomes of your actions. Work out a backup plan and decide on an exit strategy. In life, this is the foundation of all financial planning exercises.

• A great lesson in adaptation: Your opponent doesn’t follow a given sequence of moves. Hence, whatever your plans may be, you should always be ready to adapt to the changing situation caused by the monkey wrenches that your opponent will throw at you. At times, when dealing with unconventional opponents, you may require a paradigm shift in your thinking. This requires an open mind and the willingness to adapt to changes.

• The value of sacrifices: Sometimes you need to give up some of your smaller assets to achieve bigger milestones later in the game. A great many chess games have been won with brilliant sacrifices at the right time. This essentially requires some forethought.

• The dangers of temptation: Your opponent (the dark side) will occasionally tempt you with small pawns and trivial positions on the board. These small offers will act as baits to draw you into vulnerable positions and to expose your weaknesses. Do not fall for these - they have the potential to ruin the game for you. Always be focussed on your long term objectives and resist the distractions of these momentary temptations.

• The pitfalls of a passive approach: When you play the game passively, you play to just survive and stick around - to avoid a checkmate. You accept all the tricks that your opponent sends your way, and do not question anything. Your actions will be shaped by how your opponent (uncertainties, habits, etc) chooses to play the game. If you are lucky, you may somehow manage to hold your fort till the end but you will be miles away from a “victory”.

• The rewards of an active approach: In this case, you play the game with a positive frame of mind. You play to win. You play to conquer the dark side. You define the pace of the game and you will probably control the outcome. Victory will have it’s own sweet taste. By the way, don’t confuse an “active” approach with an “overconfident” approach - overconfidence is generally not guarded by caution, thought, or adaptation.

• The importance of consistency: Like chess, life is a game of mental tenacity. It doesn’t matter how intelligent you are; if you don’t hang in there with consistent positive efforts, your opponent will eventually start eating into your defenses. If you do exceedingly dumb things, you will be eaten alive.

Finally, if you think life is like this:

You really need to wake up and stop dreaming!

Just came across some interesting numbers on American poverty, through this report: “Understanding Poverty in America“. In the write-up below, I am presenting some interesting highlights from the 2004 report (which is based on the Census data from 2002).

To better appreciate the facts, it is important to view them in light of the poverty thresholds (income levels below which a person or a family is considered “poor”) for 2002. Towards that, here are some of the 2002 poverty thresholds from Census.gov.

• Single person: $9,183
• Two person household: $11,756
• Three person household: $14,348
• Four person household: $18,392

In 2002, according to the US Census Bureau, there were about 35 million “poor” Americans - people who were below those thresholds.

Now, let’s move on to the *typical* characteristics of these poor people, as mentioned in the report [by the way, always keep in mind that "typical" does not mean "all" - it is just a statistical average, and there are always some data that do not fit in this average].

The following are facts about persons defined as “poor” by the Census Bureau, taken from various government reports:

• Forty-six percent of all poor households actually own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio.
• Seventy-six percent of poor households have air conditioning. By contrast, 30 years ago, only 36 percent of the entire U.S. population enjoyed air conditioning.
• Only 6 percent of poor households are overcrowded. More than two-thirds have more than two rooms per person.
• The average poor American has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)
• Nearly three-quarters of poor households own a car; 30 percent own two or more cars.
• Ninety-seven percent of poor households have a color television; over half own two or more color televisions.
• Seventy-eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception.
• Seventy-three percent own microwave ovens, more than half have a stereo, and a third have an automatic dishwasher.

Here is what the report says about the food/hunger situation of the poor people:

When asked, some 89 percent of poor households reported they had “enough food to eat” during the entire year, although not always the kinds of food they would prefer. Around 9 percent stated they “sometimes” did not have enough to eat because of a lack of money to buy food.

And, about the general financial situation:

Some 70 percent of poor households report that during the course of the past year they were able to meet “all essential expenses,” including mortgage, rent, utility bills, and important medical care.

The report later concludes:

The typical American defined as “poor” by the government has a car, air conditioning, a refrigerator, a stove, a clothes washer and dryer, and a microwave. He has two color televisions, cable or satellite TV reception, a VCR or DVD player, and a stereo. He is able to obtain medical care. His home is in good repair and is not overcrowded. By his own report, his family is not hungry and he had sufficient funds in the past year to meet his family’s essential needs. While this individual’s life is not opulent, it is equally far from the popular images of dire poverty conveyed by the press, liberal activists, and politicians.

Honestly, the data had me confused about my definition of poverty. Irrespective of how low the income is, if a person (or a family) is able to enjoy most of the things that an average family can enjoy, is able to get proper nourishment, and is able to meet all “essential expenses”, how can such a person be termed as “poor”?

These facts bring up some food for thought. Here is what I have been thinking:

• Can people really be defined as “poor” based on the income criteria? In the same breath, if income is not a good criteria for defining the “poor” - then it cannot be a good criteria for defining the “rich”.
• If you look at all the things that a “typical” poor person is enjoying - and then look at the poverty threshold (income level) - it seems to me that poor people might be doing things frugally. Of course this doesn’t say whether they are more (or less) frugal than rich people.
• It can also be construed that poor people are being too consumerist and in fact, are *poor* in the first place because they try to buy too much on too little income. However, “too little” is a very relative term - and it doesn’t make sense to put any dollar amount income levels here.
• Is a person, who is $2,000,000 in net debt, but living in a mansion and earning $100,000 a year, richer or poorer than someone who has a positive net worth but is making ends meet with great difficulties (barely able to provide food, education, shelter, etc) ?
• So who exactly classifies as poor? a person facing financial hardships? but hey, that can happen to people with high income and bad spending habits.

I still don’t have any conclusive answers yet… if you have any, please enlighten us.

A summary of the report referenced above can be obtained through this link (pdf file).

More often than not, ethical issues - in financial areas or other walks of life - are not totally black-and-white. What’s ethical from my point of view, might be outrageous in your opinion and vice-a-versa. However, most of us generally tend to paint things with a broad brush and conveniently ignore all lines of thought that do not match our personal yardstick of what’s “ethical”.

On this subject, here is some food for thought.

There is this particular problem of a railway trolley which is pretty popular among people who study ethics and/or philosophy. It’s not a financial problem as such, but I am sure that such situations arise in the financial world where we (I am including myself here) are quick to judge other people about their ethical (or unethical) behavior. A problem like the one described below has the potential to make us think twice before we become too judgmental. There are numerous versions of the problem, but I will choose just two to make a point.

• Case 1: A railway trolley is rushing towards a group of 5 people who are trapped on the railway track. If the trolley is not stopped or diverted, it will definitely kill all 5 people. You are observing the situation and the ONLY option you have is to press a button that will divert the trolley to a different track. However, there is 1 person trapped on the other track too and he will be definitely killed if you divert the trolley. What would you do?

• Case 2: Essentially the same problem as above, but instead of that 1 trapped person on the other track - there is a person (unknown to you) standing besides you. Now, the only option to save those 5 people is to push this person on the track in front of the moving trolley - a situation in which this unknown person gets killed, but the other 5 are saved (similar to Case 1). Would you push him?

Think over it for a while.

In both cases, there is a cost of action (you will kill someone) and there is also a cost of inaction (again, someone will get killed). Would you try and change the fate of the single person who is not really destined to die, in exchange for the life of other 5? What’s more ethical (or moral)? Do you think Case 1 deserves a different ethical consideration than Case 2?

Also, spend a moment on the mind-games that will result if you change the situation even slightly. For example, instead of 1 person on the other track, what if there were 3? or perhaps even 4? Would you kill 3 or 4 to save 5?

Discuss this with your family and friends and see how their responses differ from each other.

Sometimes, it takes a paradigm shift in your thinking to address many ethical/moral problems (financial or otherwise) - a rigid definition of “ethical” just won’t fit the bill.

Some food for thought; just in time before the iPhone takes control of your senses.

Old wisdom says:

Money is the root of all evil.

George Bernard Shaw says:

Lack of money is the root of all evil.

St. Paul says:

The love of money is the root of all evil.

I say:

The want of easy money is the root of all evil.

There are two key words here: “want” and “easy” signifying greed and laziness, respectively. Money is just a medium that makes these undesirable qualities more visible - you could probably replace the word “money” with a lot of other things (love, sex, respect, power, oil, material possessions, etc.) and yet that statement would be valid.

The “want” or desire or love for money, in fact, can be a great motivational factor that sometimes makes people work harder (and/or more efficiently). When people are no longer in control of this desire, it takes the form of greed.

Again, greed alone is not much of a problem (a greedy man can only harm himself); however, evil takes roots when the greed joins forces with the tendency to take shortcuts.

Also, for the sake of countering George Bernard Shaw’s statement, evil can take root irrespective of whether you are lacking money or have tons of it. In fact, in my opinion, the evil perpetrated by those who have it all is more malicious than the evil forced out of deprivation.

What is your take on this?

Last week, I posted a list of 25 things that “we do to save money” and I have been thinking on it ever since. Some introspective questions resulted from the thinking, like: were all of those things done *actively* to save money? or were there other motivations behind the actions - and saving money just happened to be a passive outcome? if money was not a constraint, would we still be doing some of those things?

There are no generic yes/no answers to these questions, but as I was attempting to answer them, I realized that a lot of our actions that save us money (or appear to do so) are (or were) situation specific - probably, saving money was not the main motivation behind all of them.

So, if it’s not always about the money, then what else could motivate you to do something frugal?

To answer that, here are six motivational factors off the top of my head. I will try to explain these through examples to make it easier to understand.

1. Time: I walk to school/work and I count that as a frugal activity that saves me money. However, I have pointed it out earlier that it simply takes more time (and more hassles) to reach school if I drive - and that is probably the main reason why I walk to school. The fact that it saves me money on parking permits is only a secondary motivation. It doesn’t matter if I had a billion dollars (or if someone gave me a free parking permit) - I would still walk to school/work if driving is not saving me significant amount of time.
2. Energy: We cook regularly, but we don’t cook everyday - mostly, on alternate days. Not cooking everyday is frugal in many ways: there is less washing of cooking vessels, less utilization of electricity (or gas) for cooking, less wastage of food, fewer grocery trips, etc. So yeah, it saves some money - but are we really not cooking everyday to save money? I don’t think so; we just don’t have the energy to cook (and clean things up after cooking) everyday. Here, lack of energy is the frugal motivation.
3. Attitudes: There are some things we do “just for the heck of it”. One such example is my worn out pair of jeans in the list of 25 things that attracted a lot of public (and private) attention. Yes, it saves me money because I wear some of my clothes till they wear out (to the point where they get holes in them) - but that’s not the main motivation. Stronger motivation is provided by the fact that I hate shopping for clothes, and that my “attitude” just doesn’t let me get rid of that torn pair of jeans. Even if someone gifts gives me several new jeans, I would be still wearing the torn one for another year.

   

   My favorite (and dilapidated) jeans

4. Preferences: Another frugal example, in which saving money is probably a secondary factor, is our homemade lunch routine. Of course, not eating out for lunch saves money, but even if I had a ton of money, I don’t think I would prefer eating at McDonald’s, Taco Bell, or Subway (the three fast food joints closest to my workplace) - I hate those places (for various reasons). The main motivational factor here is probably the hatred for fast food and preference for home-cooked meals.
5. Lack of Resources: During my early days as a graduate student (when I was single and sharing apartment with roommates), only one of us had a car (and it wasn’t me). That sort of restricted the frequency of my grocery trips, out of town socializing trips, movie theater trips, etc. It wasn’t like I was going only twice a month for groceries to “save money” - it happened because I didn’t have a damn car (and I didn’t like asking someone for frequent favors). Agreed, it was a frugal thing to do, but it was very situation specific. It’s very likely that I would have had a different lifestyle (probably with less “money saving” habits) if I had a car at that time. A resource crunch also encourages the “make-do” attitude - which is probably one of the most fundamental reasons behind a lot of frugal habits.
6. Habits: Here, I will quote my own words from the list of 25 things post:
   

   I am also in the habit of extracting the last drop of shampoo from almost-empty shampoo bottles by filling some water in them - doesn’t save diddly-squat of money, but it’s a fun thing to do.

   It’s pretty clear right there - it’s a habit. I would probably continue doing it even after I become a millionaire. I am sure it will save a few bucks over several years, but that’s not the main reason why I keep doing it. It’s just for the heck of it.

So, in summary, there are things that are done specifically for saving money (buying a used car, renting a small apartment, etc.), but there are a lot of frugal things that we probably do due to other motivational factors - and save money in the process. The six factors listed above are only some of them and depending on your situation, they may or may not be influencing your frugal behavior.

What are the motivations behind your frugal actions? is money-saving your only driving factor?

I recently received an email from a reader with this question:

I am thinking of running a website in order to generate income and quit the rat race; can you tell me from your personal experience, is it a wise decision?

There are a few reasons why this question bothers me:

• “thinking of running a website” doesn’t sound very confident and is indicative of the fact that you probably don’t have one yet.

• “quit the rat race” sounds more like you are fed up of your day job - but it doesn’t show any love for developing (or maintaining) websites. In that case you should probably look for all possible alternate sources of income (for example, selling stuff on eBay, working at a different job, etc.), don’t just stick to starting a website.

• Many people mislead themselves into believing that blogs/websites can make a ton of money without requiring a lot of work. I am getting the vibes that the author of this question perhaps belongs to that category. A general observation is that most people have a tendency to grossly underestimate the efforts that go into starting and maintaining a good website.

For a moment let us assume that the question was asked in great earnestness and none of the above reasons are valid - that sort of puts us in position where we can actually start discussing the issue.

Let me list some facts/issues to be considered before you even start thinking about whether it’s wise or unwise to quit your day job.

1. Websites don’t make money instantly. Generally, the income from a website depends on it’s popularity and popularity does not come overnight. People need to trust (or enjoy) your content (if you are blogging) or your product (if you are selling a product) before you start becoming popular and that takes time and a lot of efforts.
2. With all your sincere efforts, dedication (before and after launching your website) and average growth in popularity, it may take anywhere between several months to a couple of years before you start making even nominal amounts of money. By “nominal” amounts, I mean a few hundred dollars a month.
3. In most cases, websites generate incomes that are proportional to the number of visitors and hence are generally at Google’s mercy (contextual pay-per-click ads like Google AdSense). Such type of income is not “guaranteed”. One unfavorable tweak in Google’s search algorithm and a significant portion of your income can vanish in thin air overnight. You need to acknowledge this and chalk out contingency plans for such situations. You need to think about how to diversify your income in order to minimize the pain in such cases. For example, you could probably sell a service or a product - or do something else that doesn’t depend too much on search engine results.
4. You have to take care of your own retirement benefits and health insurance and you don’t get any paid holidays. Obviously, your website income needs to exceed your day job income if you are thinking of quiting the day job.
5. There are many things beyond your control that can screw up your website (and hence your income). For example, your website hosting company might kill your website for a technical reason, you could screw it up while editing stuff, or someone can hack into it ~ again you need to think of backup plans for all such situations before you start relying on your website income.

Now, let us look at some specific issues.

• First ask yourself: exactly what amount of website income am I looking to generate? If you are earning $100,000 a year and want to replace that with your website income, all I have to say is “good luck to you sir (add a chuckle if you want)”. It’s not that people don’t earn $100,000 through websites - it’s that it doesn’t happen very often and takes enormous amounts of professional efforts (and probably a lot of leverage) to get there.

• By the way, the median household income in US is about $46,000. Assuming that your household makes median income and that you contribute half of it (and your spouse contributes the other half), you are still looking at $23,000 a year just to match your day job income (read point #4 above). Approach your website ambitions with these numbers in mind - if you are planning on quitting your day job.

• For higher income generation (of the order of $10,000~$15,000/yr or more), you need to look beyond blogging. You will probably need some brilliant new website idea for a service or a product that people are going to like. In this case, you should be handling your ideas in a highly professional manner; treat it like a serious startup company instead of an amateur website. The planning an coordination in such an effort might be more intensive than an average day job - so quitting your day job might be the only way to pursue such a venture. However, you got to have a high level of confidence in your product/service and a strong support (in terms of man power and money) to attempt something like this.

• For lower income generation (few thousand dollars a year), you could probably start and maintain a very good blog. Focus on generating good content - this is the world’s most cliched statement ever, but it makes sense. Contradictory as it may seem, you should stop blogging for money if you want to make money. Blog for generating good content if you want to make serious money. You should also keep in mind that even with great content, it is not guaranteed that a good blog will earn a lot of money - it depends on how successfully you monetize a good blog (interestingly, it is guaranteed that bad blogs will never earn good money).

• Believe me, blogging for a few thousand dollars a year is a very tall order (although very much achievable) and will not come without persistent hard work and great content. If you follow this approach, the safest thing to do is keep your day job and blog alongside; wait for a couple of years and see where things are heading - if you have not made much headway with your blog income till that point - quitting your day job is probably not going to work for you.

• By the way, don’t get too optimistic after reading about extremely high income numbers from Google AdSense or other advertising programs, unless they come from a popular and trusted blog - there is a general tendency to showoff inflated advertising revenue numbers.

So, finally, is it wise to quit your day job and depend on your website for income?

If you are an average person, just looking for a break from the boring day job routine, my honest answer is - No, it’s not a wise thing to do. You can work hard on a website and really make a lot of progress in a few years, but till that time don’t even think of leaving your day job.

If you are really passionate about blogging or love working with websites or have a brilliant idea for a product (or a service), then you probably have a better chance at making it big sooner - but even in this case, make sure you consider all the issues raised above before you call it quits.

The wisest thing you can do is to make an informed and well calculated decision (either for or against your day job), and work hard and excel at whatever you ultimately decide to do.

To end this, I will once again make the message very clear - it is foolish to assume that you can make a ton of money just by creating a website, without putting in a lot of hard work and dedication into it.

Although, in this write-up, my thoughts were specifically directed towards someone wanting to start a website to make quick bucks, you could easily generalize them to any other entrepreneurial foray. There is no such thing as easy money.

Feel free to share any additional comments you may have on this issue.

Below are some articles from this blog’s archives that reflect my thoughts from the past. Feel free to comment and/or criticize - reasonable arguments are a great source of learning moments.

• Education Is A Great Economic Leveler

Though we came from different financial backgrounds, education provided us with almost equal opportunities when we later started thinking in terms of becoming financially independent. It sort of raised us all to a common level without discriminating between the rich and the poor. In other words, it sort of acted as a leveler.

• Yes, There Are Educated People Who Think Like This

There are probably many people (educated people who spend half their day on the internet) who don’t know (or resist) personal finance basics. I am not sure if such people even care to read personal finance blogs, but I am hoping that they stumble on at least one personal finance blog that shines a light in their head.

• I Didn’t Need Dave Ramsey To Get Out Of Debt

By the way, I didn’t even know who Dave Ramsey was when I went on my own debt reduction program. In fact, I was totally unaware of any of the financial gurus that you generally see floating around many personal finance blogs. Heck, I wasn’t even fully conversant with the concept of “blogging” at the time.

Here are some more articles from other blogs that warrant some thinking.

• 3 Reasons Not to Buy a Home by Flexo @ Consumerism Commentary. Flexo lists some financial reasons against buying a home. Now, I am all for saving money, and getting the most out of it. But, personally, buying a home will NOT be a financial investment for us. It has to do with some kind of a personal satisfaction - I am not able to put my finger on the exact reason - but something along that lines. When I will be in the market for a home, the only financial question I want to ask myself is “Can I afford this home - with the mortgage and all - for the next 30 years”. If I can afford it - I will buy it, irrespective of whether it turns out to be more expensive than renting. I will have a whole post on this very soon.

• Which is More Important: Money or Job Satisfaction? by JD @ Get Rich Slowly. There are some interesting comments on this article. I am not sure which is more important. Probably, the importance that we attribute to these two factors changes with age and status. In the past, when I was single, I have refused to give in to a high paying job opportunity for one simple reason “I don’t like the job profile” However, I am not sure I will have the same attitude if someone offers me a similar opportunity once again. I do lean more towards job satisfaction, but money is becoming increasingly important.

• Facing Reality: The Tremendous Cost of Higher Education by Cap @ Stop Buying Crap. This requires a bit of thinking. It’s not as simple as some people make it out to be like “education is not worth it because of the costs” - there is more to education than just financial returns. Here are Cap’s thoughts on how to tackle the issue:

Again, this isn’t about the decision you make concerning your educational pursuit. It’s okay if you want to study sociology at an expensive private university — you can never place a concrete return on investment towards the cost of higher education — just be fully aware of the potential income level you may earn, and the means & steps you can take to pay back your debt. If you head into debt without a clear idea of its consequences and tackle on more than you can handle, you may be jeporadizing your financial future.

I discovered something interesting yesterday. My boss doesn’t know how to handle his bills!

It was none of my business to know this, but during one of our conversations he happened to mention that his wife is away for a conference and he is supposed to take care of some their bills - and is basically having a hard time getting things done.

I didn’t think much about it at the time, but later, while walking home from school, I was wondering about how this reflects on the quality of communication of financial information between couples (for that matter…between two or more members of a family). I started connecting the dots from my previous conversations with friends and relatives, and realized that some sort of a *self-centered* financial management perspective was extremely common among families. For example, in most cases, the husbands dealt with all the stock market investments stuff - and the wives didn’t know absolutely anything about it; whereas, the wives dealt with groceries and household expenses - and the husbands didn’t know much about it. In all cases, the individuals were working for the family and their actions and intentions were not selfish. However, their financial knowledge was limited only to themselves (hence the term *self-centered*).

In the normal course of things, this type of approach could be considered as a part of an efficient distribution of responsibilities. But think about this for a moment - what happens to your finances in abnormal conditions in which you are unable to carry out your part of the financial workload? (various events can give rise to such situations; for example: call for military duty, accident, death, stressful times at work, and so on). In such cases, it is extremely essential that someone - with a similar level of financial knowledge as your’s - be available to take over your role and ensure financial stability….and this is not going to happen unless you have taken positive steps to share your financial knowledge with that “someone” who is going to take your place.

By the way, I am not talking about just having a will ready (in the extremely unfortunate event of a sudden death). A will only ensures the transfer of wealth in an orderly manner, it does not ensure wealth preservation. You can pass on millions of dollars to your surviving spouse (or children) but if you haven’t passed on your financial knowledge to them, those millions of dollars will probably vanish pretty soon.

You could also extend the importance of sharing financial knowledge to cases of separating couples. When together, they may have been rich, but when separated, both individuals might face financial difficulties - just because they never exchanged their financial knowledge with each other when they were a couple and now they can’t play the role of their missing partner.

Basically, the point is that we should regularly make efforts to communicate our financial knowledge to our partner (or a family member). Perhaps, switching roles often might help. Husbands: teach your wives to pick stocks. Wives: teach your husbands some household financial stuff. Keep some kind of a notebook to record information (including passwords) about all the websites/portals that you use for your financial transactions - and make sure your spouse (or a family member) knows how to access and use them. Without the proper exchange of financial knowledge, noble personal finance objectives may not serve their intended purpose.

Ah…so much for the train of thoughts that started with my boss’s little story.

If you have already taken steps to ensure that your personal finance knowledge doesn’t go to the grave with you, please feel free to share your tips with us.