Review of Year 2008

I am saddened by the disastrous financial crisis in 2008 which caused a lot of wealth destruction. It is a wake-up call, not only for Wall Street but also the regulators who have been sleeping on the job.

Nobody seems capable of solving the recession for us. Interest rates have been cut and bailout and loans in billions of dollars have been doled out already. Yet, we are nowhere near the bottom of the market.

In fact, I have enough of the saying: "Things will get worse before it gets better." If politicians and economists earn their stripe and money (and they look recession-proof) by reciting this phrase over and over again, I will consider switching jobs soon.

My wife has been discussing with me whether saving our money has been worth it. The upside of making huge amount of money is limited but we share in the downside when the market collapsed.

Our philosophy has always been prudence with our income and an abhorrence of loans. However, the reckless manner in which the government heaped debts on taxpayers when they bailout financial institutions and propped the housing market is shocking.

The trillions of dollars will come back to haunt us in the form of future taxes. It is ironic that we get creative about pinching our pennies but end up forking huge wads of cash to save those who practice irresponsible lending and borrowing.

By the way, some of our money has been spent on luxurious resorts for AIG executives and huge bonuses for the investment bankers. I don't think it is fair that honest and hardworking people have to be screwed in this manner...

In any case, since we will be having more of the bear market in 2009, let's keep our spirits up by seeking positives from a negative situation. My wife loves the bear poster below and looking at the advantages of being a bear, I can't help but agree. Check it out!

Weekly Coupons Tips #1

My family use coupons aggressively and I consider it the best thing since sliced bread when it comes to saving money. We save nearly $1,500 a year using coupons. To the rich people, that’s chump change; but to me, it’s a pretty good amount.

Though I often tout the advantages of coupons to friends and relatives, I find that they do not share the same fervor. I guess they are feeling embarrassment about using coupons.

Well, I am not and don't look like Donald Trump, so I have no qualms about using coupons. Please people, the companies made coupons available for us to use, we are not acting like thieves or cheating anybody.

If I am given a choice of having to pay full price for every items or being called a cheap stake, I will gladly accept the latter any day.

For those who are just starting out on their coupon adventures, there are a few things to take note in order to maximize your savings.

I suggest that you cultivate a habit of being organized early. Our family adopts a meticulous method of placing our coupons in envelopes which are organized by category. Once a month, we go through our coupon organizers to check for expired coupons.

If you think we are being fanatical and this is all too much trouble, just imagine these tiny slips of paper as money and you will think differently. Every coupon you need but can’t easily locate is cash slipping through your fingers.

To make the most of your coupon savings:

1. Look for double-coupon deals.

2. Sniff around for coupons of items that are already on sale or discounted.

3. Coupons are not the be-all, end-all; sometimes store brands can still be cheaper, so having a basic understanding of prices will put you in good stead.

4. Don’t disrupt your shopping list jsut because of the manufacturer’s coupons. You may end up buying unnecessary items... so what if they are cheap!

Instead, plan your regular shopping list first, and then go to your coupon wallet and see whether you have current coupons for the items you’re buying.

5. When shopping online, look for online coupon codes to save on either purchase price or on shipping/handling charges.

Just type the name of the site you’re shopping at and coupons into your favorite search engine to see what you find.

Magazine Subscriptions Don't Help The Household Budget

My wife loves her Oprah magazines and she stacks up all these magazines around the house, like waist high, and to be frank, I doubt she reads all the content inside. It is causing me lots of frustration, but that is besides the point. Our housekeeping is not the main gripe today.

She is a die-hard fan of Oprah Winfrey (who isn't?), hence the regular subscription to Oprah Magazine. For your information, the half-inch, monthly "booklet" for women does not come cheaply but as I mentioned before, we do allow some indulgences in our household budget.

But ever since my wife is retrenched, she is slowly coming over to the idea that magazine subscriptions are non-essential items which should not exist on a smaller household budget.

I am actually less concerned about the magazine subscription fees than the content. It is alright if you just read and chuck the magazine aside but what if you are enticed to buy from all the ads inside. That will surely burst any household budget.

And Oprah Magazine has a nice chunk of ads that tells you what to buy if you want to look good, rejuvenate, or stay healthy. I waded through 50 pages of advertisements before I got to the text of the actual magazine.

The text is not devoid of temptations either. It recommends stuff (thanks to the helpful editors), that is cool or must-own for a family... heart shaped pillows, classic necklaces, interior design accessories, etc.

My wife is also told what kind of fashion items that are "in" this season. The satin dresses looks stylish in every wardrobe and those in our closet are a disgrace (by the article's standard).

The price for the satin dress is a cool $1800. If ever a dress like that is bought, I could be having only plain sandwiches and water for lunch every day of the month.

Thus, I have always told my wife that we need to cut ourselves off from all these magazines. In this way, we resist strong pressures to purchase, all in the name of following current fashion trends or looking cool and youthful. What for??

It requires immense self-discipline to balance a household budget when all the temptations are laid before your eyes. Remember, we humans are impulsive animals. Fortunately, my wife has self-restraint. Sure, she give into the pressure once in a while, but mostly on low-priced items, and never on a $1000 evening dress.

But now that she is willing to forgo her subscription, I am more than happy. Our household budget is safe from "adverse influences" and guess what, our house can finally look more tidy without all these magazines lying around.

Why Government Acts Like A Condom?

Wish You A Merry Christmas

I know times are bad and it will get worse in 2009. With only a few trading days left, the curtain will soon be drawn on what has been a tumultuous year.

Nevertheless, here’s wishing all of you a great festive season full of fun, laughter and joy. May you have a wonderful year ahead, and may the Christmas wish come true for all of us.

I suspect Santa Claus will be having a hard time sending gifts though...

Save Money While Playing Golf

Playing golf has been my only indulgence but my wife has never understood my love for the sport. On weekends, I usually hang out with my business associates and friends while she goes on her shopping trips..

However, of late, my indulgence has been causing a bit of family rift. In good times, you don't think much about going to the golf courses weekly but in this recession, golfing has burned holes in my pocket.

As my wife is retrenched, there is now lesser income in the family. Thus I have to sacrifice a bit to balance our family budget.

Anyway, I am coping and have devised some tips to keep me on the greens and not wasting green.

1. Choose Off-Peak Hours

Many golfers schedule their tee-time on Saturdays. I don't see any reason to join the crowd, unless my business clients request for it.

Weekend play can cost you around $35-$50, depending on the golf course. I have taken to clearing weekday leave... you get the golf course all to yourself and saved a good bit of money in the process, so why not!

2. Look for Discounts

Golf courses may offer discounts at different times and to different age groups. Just make enquires at the course management office, you have a good chance if you are a senior citizen or a teenage golfer.

3. Special Deals When Business Is Slow

Like any business, golf courses have their overheads even when nobody is teeing off. So if you know when business will be slow on certain times during the week, you can ask the information desk about special deals. Check out different websites to make comparisons, we are looking for the best deals, not loyalty.

4. Get A Membership

This is for the regular golf players. Joining as a member of a course is worth it if you intend to make it your second home. A membership is more economical with larger discounts on play and equipment.

Once again, compare other clubs first before committing to a membership. The time you spend on research can save you lots of money in the long run. As a guide, monthly fees for most golf course is around $100-$400 and you get unlimited use of the golf course. Cart and practice range fees may or may not be included.

5. Try 9 holes instead of 18 holes

If you are playing golf in the evening, you will be foolish to attempt 18 holes. You are under pressure to finish the game or be out of the money when it turns dark.

Thus, you should go for 9 holes and inquire about discounts for doing that. Some courses may even accommodate a pay-per-hole request if you are short on time.

The Great Crash: 1929" Series 2

This is the second series of excerpts from the classic "The Great Crash: 1929" by John Kenneth Galbraith. See Series 1 here .

From Chapter 1: "A Year to Remember"
Opportunities for the social historian

"In the autumn of 1929 the mightiest of Americans were, for a brief time, revealed as human beings. Like most humans, most of the time, they did some very foolish things. On the while, the greater the earlier reputation for omniscience, the more serene the previous idiocy, the greater the foolishness now exposed.

Things that in other times were concealed in a heavy facade of dignity now stood exposed, for the panic suddenly, almost obscenely, snatched this facade away. We are seldom vouchsafed a glance behind this barrier; in our society the counterpart of hte Kremlin walls is the thickly stuffed shirt.

The social historian must always be alert to his opportunities, and there have been few like 1929."

Create A Household Budget To Improve Money Management

Are you often short of funds soon after collecting your pay? Does it feel like you pay and pay but yet you are nowhere near clearing your credit card debt?

Most likely, you do not have a household budget.

Ok, so what is a household budget and how does one make a budget?

To put it simply, a household budget is a money plan for you to organize and achieve your financial goals. If you are constantly out of the money and your household debts are mounting, you need to pen down a budget right away.

As parents, we have the responsibility of allocating the family’s funds and making sure there is enough to go around. If we cannot exhibit financial discipline, then it is almost impossible to impart the right money values to our children.

Below are some steps which you can adopt in formulating a practical household budget.

1. Sit down with your spouse and plan a household budget together. List down what your joint financial goals are…long term and short term.

2. Cut family overhead to the bare minimum. Do you really need the $500 romantic dinner every week and expensive coffee at Starbucks? "Keeping up with the Joneses" is not cool if the quality lifestyle is built on debts.

3. Make reasonable allocations for food, clothing, shelter, utilities and insurance. A household budget is not a financial starvation diet where you deprive yourself of basic needs.

4. Allow yourself some pampering in the household budget. This will be for your entertainment, relaxation, recreation, vacations and gifts.

Working hard all year round and not taking appropriate breaks to re-energize or buying gifts to reward yourself is too taxing. Frankly, not the kind of household family budget which I will adopt and I try hard to preach what I do.

5. If you have spare cash for investments, allocate them according to short term and retirement needs.

If you want to get organized, there are many online budget forms available. Just use any search engine and type in “free budget forms.”

I use a simple Excel spreadsheet and then check monthly how and what I did as compared to my plan. For a more detailed budget, you may want to try MS Money which can even give you your personal financial statement and analysis.

On a final note, remember that any successful household budget will require you to consider savings first before any spending. Remember “Pay now, enjoy later.” Even a small amount saved will edge you closer to your long term financial goals.

There are two major ways to increase savings. One is to actually save and scrimp on available funds, and the other is to increase your income.

Which method do you think is easier to save money?

The Great Crash: 1929" Series 1

Aren’t markets supposed to have rational decision-making from individuals who participate in them so that irrational, herd behavior can be precluded?

I wish... but the Great Housing Bubble of this decade is a perfect reminder of just how irrational and unthinking markets can be. The root of the current market demise can be traced to any number of incidents.

But we can look at the ’90s when Republicans relegated government-sponsored mortgage firms like Freddie Mac and Fannie Mae to the doghouse due to huge losses and handed banks a free reign in extending credit to low income people.

What followed was an orgy of mortgage lending by the banks that resulted in the evolution of ever-looser credit standards, a temporary home price bubble and now a corresponding revision to the mean (a bust) that is threatening to take down the North American economy.

This latest crisis is just one in a long history of periodic speculative bubbles and resulting panics: The tech bubble of 2000; the Asian Crisis in ’97; the market crash of ’87, and the S&L crisis of the ’80s. All have come and gone with remarkable consistency.

People never learn and only in bad times do we know who has been swimming naked.

I love this classic "The Great Crash: 1929" written by John Kenneth Galbraith. There is a wealth of information contained within which is worth analysing by thousands of investors now and in future.

This is the first series where we look at the sanity of people in the midst of a bubble.

From the Introduction

The people who remained sane and quiet

"Even in such a time of madness as the late twenties, a great many man in Wall Street remained quite sane. But they also remained very quiet. The sense of responsibility in the financial community for the community as a whole is not small. It is nearly nil.

Perhaps this is inherent. In a community where the primary concern is making money, one of the necessary rules is to live and let live.

To speak out against madness may be to ruin those who have succumbed to it. So the wise in Wall Street are nearly always silent. The foolish thus have the field to themselves. None rebukes them."

Global Reactions To Bernard Madoff's Ponzi Scam

Wall Street Journal: Spielberg and Katzenberg Get Hit

A few years ago, Hollywood financial adviser Gerald Breslauer shed most of his clients to focus on two top entertainment-industry figures: director Steven Spielberg and DreamWorks Animation chief executive Jeffrey Katzenberg.

Now both of Mr. Breslauer's remaining clients have been hit by the alleged fraud by New York money manager Bernard Madoff.

New York Times: Inquiry Finds No Signs Family Aided Madoff

Federal investigators have found no evidence so far that members of Bernard L. Madoff’s family helped him carry out what may be the largest financial fraud in history.

Los Angeles Times: Madoff debacle hits region's Jewish community

Wall Street financier Bernard L. Madoff's alleged $50-billion Ponzi scheme appears to have extended deeply into Southern California's Jewish community, with millions of dollars in losses tallied by charitable organisations, Hollywood executive Jeffrey Katzenberg and a foundation bankrolled by director Steven Spielberg.

The Boston Globe: MassMutual entity loses all client funds to Madoff

A hedge fund group owned by Massachusetts Mutual Life Insuranc of Springfield has lost all of its clients' money--more than $3 billion--to Bernard L. Madoff, the New York trader who confessed last week to losing $50 billion of his clients' funds in a Ponzi scheme, the Globe reported.

The Jerusalem Post: Madoff scam rocks Jewish charities

At least $600m in Jewish charitable funds have been wiped out by the collapse of Bernard Madoff's Wall Street investment firm. Yet much is still hidden about what may amount to the most spectacular financial disaster to hit Jewish life since the Great Depression, with unconfirmed losses totaling up to $1.5bn, the Post said.

Sydney Morning Herald: HSBC caught in Madoff's alleged fraud

Europe's biggest bank, HSBC, joined a list of top names in world finance admitting huge potential losses on Monday in a suspected fraud scam run by ex-Wall Street heavyweight Bernard Madoff.

Never Go Back To Your Debt Ways

Paying off debts is like an addict seeking rehabilitation. Once you have paid off all debts, never go back to your old ways, but you can stop living like a pauper.

If you have been saving and earning an extra $3,000 or more per month, when you are paid off, you will have a lot of extra cash on hand.

As long as you don’t need this for another expense, first stop your second job. For a short while, you should be able to handle the extra workload, but there is no reason to overload yourself and diminish the quality of your life for long periods of time.

If you think you can afford it and still be able to put a good amount of money aside to build an emergency fund and then save for retirement, start adding back in some treats such as cable. Most of all stop using credit cards and always spend less than you earn.

Five Tips To Save $100 Every Month

Everybody is struggling to get by in this recession. Saving money seems like mission impossible when you are virtually depending on credit to make ends meet.

Nevertheless, if you get creative, it is always possible to eke out $100 to put into your savings account. Just try the six tips below, it may even be posible to save up to $200 for those who are disciplined!

1. Go For Recreation Rather Than Entertainment

Movies, concerts and theme parks are expensive in good times and a waste of money in bad times. They only last for a few hours or at most one day.

If you adjust your lifestyle to recreational activities such as hiking, camping, skiing, beachcombing, cycling, etc, you are on your way to better fitness and saving more money.

2. Visit the Library

The library is a good way to save money. Nobody will chase you out for spending hours in a peaceful place to read the books, surf the net, check your email, or even watch DVD movies.

You can also tap into fee-for-service databases for genealogy research. Before buying the latest book, check out the library shelves first. With most paperback books retailing at $5 - $25 and hardcover books selling at $20 - $35, you can save money easily.

3. Give The Mall A Miss

For shopping fanatics, this is hard to do. If you salivate over the latest fad items (designer handbags, cool electronic items, interior decor, etc.), your credit card statement will be a nightmare.

Give the mall a miss and cut down on discretionary items. Branded goods are prestigious but if you want to save money, they should be the first to go.

4. Shop Outer Aisles Of Grocery Stores

Ok, so you have avoided all the glitzy mall and have decided to shop at your neighborhood grocery store. Well, there is also some trick to saving money there.

Produce, dairy, meats tend to be placed on the outer aisles with all the junk food and processed products in the center aisles. Avoid as many of those inner aisles as possible and you’ll see both your waistline and expenditures drop.

5. Skip Pizza Deliveries, Lattes, And Gourmet

We’ve heard that speech before but we also know that life is meant to be lived and enjoyed. So as Ben Franklin advised, use moderation in all things even moderation. So don’t deny yourself too many treats or you’ll simply forgo the idea of saving money at once.

How about buying two lattes and only one pizza delivery per week for a savings of about $40? Start a rotation of items which break the budget and don’t give them up all at once but instead just buy some on occasion as a treat instead of making them a weekly ritual.

6. Set Savings Goals and be Smart!

When it comes to achieving your saving money goals, be SMART --- Make goals that are specific, measurable, achievable, realistic and can be accomplished on a timed basis. It’s your money so have some fun with the money management process and above all, be creative!

Invest Money While In College Using Saving Bonds

College education these days are necessary but oh, so expensive. I have a most memorable time juggling my studies and part time work to foot my own expenses for food, transportation, lodging and entertainment.

Most college students are deep in debt as they took up loans to pay for their education. If your kid is smart, he/she can apply for grants and scholarships to lessen the burden, but most students do not have such a luxury.

Is it possible to invest money while in college? The answer is yes. With a successful college investment program, students can pay off their loans faster. There are actually several ways to do so but some offer more earnings (like stocks and commodities) at higher risks.

I recommend two ways to invest money while in college that are less risky - bank accounts and savings bonds.

1. Banks

Banks offer savings account which earns minimal interest but being FDIC insured, they are virtually risk free. The minimum balance is usually $300 so if the balance falls short, the account will incur additional fees.

Banks also provide money market accounts. Money markets require a higher balance than savings accounts, but they offer a higher interest rate. The minimum balance for these accounts can be anywhere from $1,500 to $5,000. If the balance drops below the minimum balance, a $20 fee may be incurred.

For those with substantial money to invest while in college but are risk averse, money market accounts are the way to go.

2. Savings bonds

Savings bonds are best bought when a student is at a young age. You buy the bonds at half the face value and over a period of 10 to 20 years, the bond eventually reaches its face value.

If the bond is not cashed in when it reaches face value, it will still continue to gain interest. Bonds do not drop in value. However, the interest rates on them do vary from time to time. They are considered a safe investment but are also slow to increase.

Investing money while in college can be done, despite the fact that students have limited earnings power and are most likely laden with student loan and credit card loans.

Embarking on an investing program (risk free and running on auto-pilot) gives you a head start compared to your peers who are spending money freely and wallowing in debt when they begin their careers.

Debt Advice: Throw Everything You Can At Your Debts

If you are striving to achieve financial freedom but getting nowhere, I suggest you review your debts and start eradicating bad money habits first. Else, any personal financial planning will be futile.

The first step of debt reduction is to be organized and then make a plan or budget to eliminate your debt. Spend the next few months, year, or couple of years living on as little as you can until you are debt free.

Cut out any unnecessary expenses including cable, cell phone (or use a pay as you go phone), excessive eating and going out, etc. If you live in a house that is more than you need, rent out a room, or downgrade to something that will save you money.

Find a way to cut down on your grocery bill by using coupons and buying store brand. Another great way to speed up the debt reduction process is to get a part time job. Make as much extra money as you can. If it’s near the holidays, you are in luck because many department stores hire extra help for the holiday season.

If you can’t get a part time job, offer your skills to other people such as fixing things, baby-sitting, etc.

Throwing everything you can at your debts may sound extreme, but when you get it paid off, you will feel so much better. You will feel less stressed from money collectors harassing you in the middle of the night.

Don’t bother with debt consolidation, just pay off all the debts. Pay off the credit cards with the highest interest rate first. If you can, transfer your balances to the credit card with the lowest interest rate.

What Are Double Coupons?

A coupon helps frugal shoppers to save money and a double coupon doubles the effort. That is why I fall head over heels with double or triple coupons. It's a really nice feeling to know that I have saved money while making sure that I have a well-stocked pantry and freezer.

So, how do double coupons work?

As an example, if you use a coupon to shave fifty cents off your favorite body lotion, you will save up to one dollar on each bottle using double coupons.

Alternatively, double coupons are used to entice you to purchase an extra item. If you buy two bottles of laundry detergent, you will get fifty cents off each one, even though you only have one coupon.

Since the manufacturer reimburses a store for the face value of the coupon, the store is really only paying for half the discount.

Double coupons are such treasures that you have to keep a watchful eye in your local sales paper as they only happen for a limited time, on a particular day of the week (to draw in more customers on slower days), or during special sales.

Some stores that offer double coupons regularly also have a coupon exchange. This is usually a bin filled with coupons where you can trade coupons that you don’t need in exchange for others that you can use.

My family has honed our skills of taking advantage of double/triple coupons at our favorite stores. That is how we stretch our dollar to the max.