Financial Thought of the Day September 30, 2014: Resisting the Propensity to Consume

When people start to make more money they want to spend more. When you resist the temptation to spend more when moving into a higher paying job, it can change your life in unimaginable ways. It's akin to winning the lottery.

Financial Thought of the Day September 29, 2014: The Importance of Cash

While money can't buy happiness it sure can buy options. This includes a cash cushion to get through a layoff or capital to take advantage of stock market corrections. Not being able to take advantage of buying a great company at a low price is like someone wanting that fancy watch or toy that is on sale but still not having enough money to buy it.

Financial Thought of the Day September 26, 2014: Matching Expenses with Your Paycheck

One of the ways I developed to save money is to add up your bills for the year and divide it by the number of paychecks you get in a year. If you get paid every other week divide your total expenses by 26. If you get paid twice a month you divide total expenses by 24. If you get paid once a month you divide total expenses by 12.

It gets a little more complicated if you work for yourself but developing financial statements will help even in this situation. If your expenses exceed your paycheck, you may want to either work more or cut back on expenses because you are burning through your savings or going in debt. If your expenses are less than your paycheck you are saving money.

Financial Thought of the Day September 25, 2014: Waiting for Politicians is a Recipe for Poverty

"Vote <Insert your party here> and remain poor" is the dumbest thing I have ever heard. As long as we remain a capitalist society, its up to you as the individual to garner success. Waiting for a politician to do it for you is a recipe for poverty.

Financial Thought of the Day September 24, 2014: A Penny Saved is a Penny Got

I would very much recommend this Forbes blog that talks about the financial and business wisdom of Benjamin Franklin. Benjamin Franklin talks about the importance of staying out of debt and acquiring valuable skills as evidenced by his quote, “There’s more old drunkards than old doctors". The blog also goes on to talk about misnomers. For example the authors point out that Ben Franklin never said "A Penny Saved is a Penny Earned" but rather said "A Penny Saved is a Penny Got" in the preface to his 1758 almanac.

In the honor of the phrase "A Penny Saved is A Penny Got" let's see what a penny will get you compounded at various interest rates over a period of 30 years:

10%--Historical return of the stock market--.01 x (1.10^30) = $0.17

22%--Fantasy super investor return--.01 x (1.22^30) = $3.90

Now imagine savings dollars, tens of dollars, and hundreds of dollars.

Financial Thought of the Day September 23, 2014: The Function of the Stock Market

The stock market provides the individual with the ability to buy and sell shares of publicly traded companies with very little start up capital. A large number of people stands ready at any given moment to sell you their shares of a company that could make you wealthy over the long-term. Conversely a large number of individuals stand ready to buy your shares in a company providing you with the opportunity to convert your shares to cash to use as you see fit--hopefully to retire or fund a child's education. The stock market serves as the best bet for the average individual to accumulate wealth.

Financial Thought of the Day September 22, 2014: Stock Market Corrections

Long-term investors will hope for a temporary stock market correction. Then they can go in and pick up shares in good companies on the cheap.