The Amateur Financier

Well, it’s the end of the year, a time when we look at ourselves, at our accomplishments and our failures, and make plans to improve in the new year.  With that in mind, it’s time to look over my life in 2009, see what I did right, what I did wrong, and what I intend to do in the future.

Luckily, I’ve been blogging for most of this year, so my year-end review process is going to be much easier than it has in the past.  I’ve been pretty open about my personal and financial life when writing this blog, so it should be a much easier process to go through and spot my high and low points.  Come along and enjoy the fun!

The Good:

I started a new personal finance blog!  In hindsight, maybe personal finance wasn’t the best niche to focus on, but it has kept my interest and spurred on my writing for this past year, and hopefully quite a while into the future.

Celebrate the Good Times!

I was able to spend another Valentine’s Day with my beloved.  (I promise this won’t turn into a list of the celebrations I had with Sondra, although a few more might sneak through…)

Speaking of which, this was also the year that we got engaged!  *Does his happy Roger dance to celebrate, again*

After only a few months, I decided to go at making this blog interesting and productive, and decided to leave Blogger for my own site (which you’re reading now).  It’s been a great move, in my opinion.

I shared seven things with my readers that they probably didn’t know (unless they’ve been stalking me…)

As part of my attempts to ingratiate myself more fully with the PF blogging community, I hosted a carnival, the first of several, actually.

I got a new job, with good pay, at a place I’ve been trying to get into for quite a while…

The Bad:

…Which I unfortunately lost before too long.

I had to make semi-major repairs on my car, at a time when I was unemployed and trying to stretch my savings as much as possible.  On the bright side, I did get another post out of the deal, so there was some good that came from the whole ordeal.

And deal the bad times

While I had a wonderful trip out to visit my fiancee’s extended family, our trip home was horrible.  I hope I never have to deal with that kind of aggravation again.

The Ugly:

I tried not to spend too much time on the whole real estate melt down and the after effects, but it was hard to be a blogger in 2009 without expressing some opinion on the whole situation.  So here is my rant on the causes of our financial mess (which is far from completely cleaned up).

I’ve run into some complications getting my unemployment benefits paid, after the aforementioned job loss.  (As of this writing, it seems to be resolved, but I’m not counting my chickens before they are hatched after all the trouble that I’ve had.)

My Year in Review

I’ll be honest, I’m a bit surprised at how many good things happened this yes, and how few bad ones.  It’s easy to get lost in the bad things and forget all the positives.  But all in all, 2009 was a pretty good year.  Yes, I wish that I hadn’t had so many job problems (and all the associated money problems that went with them), but it was also a year filled with positives.  I got engaged!  I started a blog!  I held several jobs over the course of the year, and I’m sure I can get another job soon.

All in all, 2009 was pretty good.  I can only hope that 2010 will be even better.  But I suppose my year will be only as good as I can make it… Happy New Year, Everyone!

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Well, it’s that special time of year, between Christmas and New Year’s Day, when things still look so festive and exciting, and everyone is enjoying the spirit of the season.  While winter has been hitting us hard here in the Northeast part of the United States, it’s still nice to be able to come home to my fiancee and spend time with her, even if we are practically snowed in at the moment.

For this week’s thoughts, I’m going to do something a bit different than normal.  We’re going to peruse the blog rolls and see what Christmas posts were put up by my fellow personal finance bloggers.  I know, I know, Christmas is over, but it can’t be wrong to try and keep some of the spirit in our hearts through the rest of the year, right?  Alright, onto the list:

Christmas Themed Blog Entries

The Studenomist asked How Much Money Did You Spend This Christmas? (My Answer: Way, WAY more than I should have.)

Twas the Night Before Christmas 2009 (and a darn funny one to boot) over on Lazy Man and Money

A video entry on Man Vs. Debt wishing us a Merry Christmas from the Baker Family!

Merry Christmas, Happy Holidays (with kittens) on the Digerati Life

The Financial Samurai says Merry Day After Christmas!  Santa Bring You Everything You Wanted? (the answer is no, since apparently a new job didn’t fit into his sleigh)

The Writer’s Coin simply wishes everyone a Merry Christmas! (If only I could be so succinct!)

Jeff Rose wished us Merry Christmas From the Roses on Good Financial Cents

Mrs. Micah updates us on her bone marrow donation and wishes us a Merry Christmas

A Tough Money Love Christmas Greeting from Mr. ToughMoneyLove, himself

A short list of holiday does and don’ts, courtesy of J. Money at Budgets are Sexy

The entire Weakonomics family (including the Boxer) wishes you a Merry Christmas

Trent is always good for a Merry Christmas from the Simple Dollar

And J.D. helps us to get some perspective on Holiday Celebrations from Around The World

That should be just about everyone on my blog list; hopefully, all these great bloggers are still enjoying the Christmas spirit (and aren’t too hung over; I’m looking at you, FS).  Have a merry holiday season, everyone!

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It’s Tuesday, and you know what that means: yes, it’s another edition of Small Business 101!  This week, we’re going to cover one of the biggest issues facing those going from the corporate world into business for themselves: taking care of everything you should do before you leave your job.  Whether you intend to start a small business of your own, get into a different job, or simply make sure you’re prepared in case of a downsizing, there are plenty of steps you can take to ensure that you will be ready when your regular paycheck from work is no longer there.  These include:

1. Building Up a Sizable Emergency Fund: I’ve already discussed emergency funds before, but if you are planning on leaving your place of employment in the near future (or fearful that your company or industry will be cutting jobs), it’s absolutely essential to be sure that you won’t run out of money before you can make your business profitable or find another job.  A standard emergency fund with three to six months worth of expenses might be enough to see you through until your business takes off, particularly if your spouse or significant other is still employed and makes enough money to cover the household expenses.

Avoid looking like this by planning ahead before you leave your job

If you are the major breadwinner, though, you should shoot for an even more robust emergency fund; while I hope that you will soon turn a profit and make your business a success (or find other employment), it’s good to have plenty of money in the bank, just in case.  Shoot to accumulate at least one year worth of expenses; that will give you a nice, healthy cash cushion, as well as plenty of time to allow your business to grow before you really need to have income.  Also, work on lowering your expenses; besides allowing you to stretch your emergency fund further, it’s just plain good for your wallet!

2. Research Health (and Other) Insurance: Amongst your other benefits, there’s a good chance that your company provides you with health insurance, or at least a rather substantial discount on your health insurance coverage.  Once you are no longer working at your current company, you’ll need to purchase insurance on your own.  While you’re still employed, it would be a good idea to look into the costs of buying insurance of your own to cover all the policies currently provided by your company.  Be sure that your new endeavor will provide enough income to cover these additional costs (and the cost of your insurance needs is included in your emergency fund calculations).

3. Have a Plan For What You’ll Do Next: If you’re quitting your job in order to start your own business, this should be pretty simple; after all, you’ve already created a plan for how you’re going to get your business up and running, right?  But it’s worth making a plan for how you’ll build up your clientele, generate income, and generally get your post job life up and running.  The more specific you can be, and the more contingencies you include (after all, sometimes things don’t go as we plan), the better, as you’ll have a valuable road map to your post-employment life.

4. Build Up Your Network: It’s always good to know who you can contact for help, advice, or simply some friendly encouragement.  With some luck (and plenty of effort to reach out to your coworkers), you’ll have a substantial list of references from your professional life, who might be able to provide you with support as you start your own business.  But don’t overlook friends, neighbors, and even family members who might be able to help you in the next stage of your life.  Be sure to join some small business organizations to get help from people who have experience in the field, as well as sharing your own experiences with those who come behind you.

5. Be Sure You Want To Leave: There are many advantages to starting your own business, from freedom to the opportunity to do what you want and earn a living.  But there are advantages to being employed by someone else, as well; regular paychecks, social interaction with your coworkers, and defined responsibilities (rather than having to do or delegate everything involved with the business) are all among the some times overlooked benefits of working for someone else.  You’ll have to weigh the relative pros and cons of your current position with the potential to work for yourself, in order to determine which path you should take.  If you do still feel that you want to leave your job, the previous steps will help to ensure that you can do so without having too much trouble in the transition.

What other actions should someone take before quitting their job?  Would your recommendations depend on whether they are trying to get another job or start their own small business?  How big is too big for an emergency fund?

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One of the most basic tenets when you are saving for retirement is to dollar cost average your investments by contributing the same amount of money each month (or quarterly or weekly, depending on your preferred investment schedule).  By doing so, you’ll end up purchasing more shares of the (usually) mutual funds when the price is lower, and fewer when the price is high.  The end result is that you end up purchasing more shares at a lower average cost, than by purchasing the same number of shares each month.  For an example, let’s check out the following table:

Dollar Cost Averaging in Action

If you wanted to invest $100 in the Vanguard 500 index fund (the first and probably most popular index fund) on the fifteenth of each month (or the last business day before the fifteenth, for months when the fifteenth falls on a weekend or other holiday), this shows you an example of how dollar cost averaging will lower your expenses.  If you take a straight average of the share price, you come up with a share price average of $87.56.

But, you didn’t purchase the same number of shares each month, did you?  Nope, because you put in the same amount of money each month, you ended up buying a total of 13.913 shares; dividing the total you spent ($1200) by this number of shares, and you’ll see that you bought your shares for an average price of $86.25.  Because of your dollar cost averaging, your per share cost is a bit lower than the average share cost of the year.  If you’re in the process of buying sharing to build up your investments, this is a good thing; more shares for less money!

But let’s reverse the money flow; imagine you’re a retiree who is selling your investments in order to generate additional funds in retirement.  Now, you are selling enough shares of your Vanguard 500 index fund to generate $100 each month.  You’ll have to sell more shares when the price is low, and fewer when the price is high.  The end result is that you’ll get less money for selling more shares; not the sort of situation in which you want to find yourself.

This is known as negative dollar cost averaging (DCA); where the process of dollar cost averaging, when thrown into reverse, ends up increasing the number of shares you need to sell in order to keep your cash flow the same.  (It was mentioned as part of Yes, You Can Still Retire Comfortably!, which recommended a version of market timing to counter the problem.)  How can you prevent negative DCA from taking its toll on your investments?  There are a few possible methods:

1) Sell a constant number of shares: Negative DCA results when you sell different numbers of shares at different prices in order to generate constant cash flow.  You can break up this problem by selling a constant number of shares instead.  If you sell one share each month (for our example), you know that by the end of the year, you’ll have sold 12 shares, regardless of the changing share price over the year.  The problem is, you’ll have to accept a fluctuating income stream from your sales; if the share prices drop in half, your income from selling these shares drops in half, as well.

2) Rebalance your portfolio regularly: Assuming you have more than one type of investment in your portfolio (and you should, unless you have a target-date fund, which will rebalance automatically), you should make an effort to rebalance your portfolio on a regular basis.  (At least yearly, although quarterly or even monthly rebalancing can work provided you are working in a retirement account and don’t have to worry about taxable events when buying and selling mutual funds.)

When you rebalance, you sell the portion of your portfolio that has risen above your desired allocation and use the proceeds to buy the under-performing funds.  You’ll be putting the ‘buy low, sell high’ formula back to work for you, and won’t have to worry about negative DCA working against your progress.  Alternatively, you could…

3) Sell from the best performing funds: A poor (or tax-adverse) man’s version of rebalancing, you can sell from the funds that are performing the best (the ones that represent a larger portion of your portfolio than you originally intended).  The result is that you’ll bring your portfolio more into line with your desired portfolio, and you’ll avoid having quite so many taxable events (since you won’t be selling large portions of your portfolio to shift them around at once).  While not completely relieving the need for occasionally rebalancing your portfolio when things get really off kilter, it’s not a bad way to generate needed funds without causing any negative DCA problems.

Hopefully, you now have a better idea about negative DCA, and what it will do when you start to draw down your retirement income.

Has anyone else given any thought to negative dollar cost averaging (or dollar cost averaging in general, for that matter)?  Are there any other methods of avoiding negative dollar cost averaging that I missed?  Aren’t mathematics just a load of fun?

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I have a problem.  It seems that the Pennsylvania Unemployment Compensation Bureau is in the process of reviewing my claim to verify if it is legitimate.  While I remain confident that I will be getting unemployment benefits in the not too distant future, this is proving to be a bit of sticky situation, as I am not receiving any benefits during the review period (and may not receive anything, if they decide I’m ineligible).  I have been spending money as if the money I would be getting from unemployment was already in my account, not bothering to cut my spending to be more in line with my significantly reduced earnings.

In a nutshell, I’m running out of money.  My liquid savings are rapidly being depleted, as I dip further and further into the money I have in order to cover things like credit card bills, rent and regular spending.  While technically this is the whole point for this saved money (most of the cash I’ve been using had been explicitly set aside as my emergency fund), my spending has been much higher during the past two months than it really should have been, even taking the holiday season into account.  I will do everything in my power to cut down my spending, but unfortunately I have to deal with my spending over the past two months without the money I was expecting to receive.

This week’s report is surprisingly upbeat, given all of what I’ve just told you; in the next few weeks, as various bills and other expenses come due, the red ink will start to spread.  (Unless, of course, the issues with unemployment get resolved soon and in my favor, in which case I’ll have a lot more breathing room to get my financial boat in order.)  With that understood, let’s go to the table:

I realize that all of this not the sort of thing you expect (or hope) to hear from someone writing a personal finance blog, but I felt it was important to point out where I currently stand, financially.  Hopefully, if nothing else, there can be a learning experience from my troubles, and I can serve as an object lesson about what NOT to do when you are awaiting unemployment benefits.  In any event, thanks for reading, and I hope I can keep providing interesting, solid information here on the Amateur Financier.  Thanks for reading!

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It’s been a long time since I put a Ben Stein and Phil DeMuth book through the patented Amateur Financier review process, but here we are, and it’s time to put them back through the wringer.  Yes, if you write a personal finance book, sooner or later you will find that yourself in my steely gaze, and if you write more than one book, expect to find yourself a repeated target.  Which brings us right back to the book in question.

Yes, You Can Still Retire Comfortably! is another investment book from this pair, written in much the same way: heavy on statistics and explanation, light on ‘one size fits all’ advice.  It’s a guide specifically aimed at older persons approaching (or at least preparing for) retirement and attempts to beat the Baby Boomer retirement crisis.  What suggestions do they have to that generation to keep them in the black?  Well, let’s check out and see what’s under the cover:

Summary

The book is divided into three main parts.  The first one, called Yes, You Can Still Retire Comfortably! (creative, no?), starts with 21 basic rules of retirement (including things like spending less than you earn and maxing out your retirement accounts) and a decade by decade guide to your financial life, providing advice for every age bracket from teenagers up to (and beyond) retirement.  Consider it a shorthand version of Yes, You Can Get a Financial Life! (the other book I’ve read from Stein and DeMuth).

The first official chapter of the book details the coming problems with retirement planning for Baby Boomers (and Generation X, and although we aren’t mentioned, Generation Y, as well): Social Security is running out of money and company pensions have all but disappeared, taking out two of the three traditional ‘legs’ supporting retirement nearly nonexistent.  The third and final leg, personal savings, is still around; the only problem is, most people aren’t saving enough to supplement these programs, to say nothing of saving enough to supply all of their retirement needs.  The second chapter covers the importance of saving in order to save yourself.  The book recommends several ways to cut down your spending, including eating out less, buying used  cars, and owning your own home.

The second part of the book (entitled How Much to Save and How Much to Spend) attempts to go into more depth on how to get your finances in order.  The third chapter provides a ‘back of the envelope’ (in the author’s terms) guide to how much you should be saving at each stage of your life, making a number of assumptions about your life, your investments, and your eventual age at retirement.  The fourth chapter is similar, allowing you to choose from a number of options, not only those above, but things like how much you expect to get from Social Security (if anything) and from a pension (again, if anything).  Once you know how much to save, the fifth chapter covers what to use as your investment.  (Stein and DeMuth recommend index funds, of equal parts Total US Stock market, Total Foreign stock market, Total US Bond market, and TIPS.)

Now that you have your portfolio set up, it’s time to let you in on the retiree’s paradox: if your portfolio is set up properly, you will have plenty of money later in your retirement, as long as you can live on relatively small portion in the beginning (when you’re the youngest and most eager to go crazy with your retirement funds).  The last two chapters in this section address two different methods of getting income in your retirement.  The first is by setting up an income portfolio, with REITs and high-yielding dividend stocks (or appropriate funds) in place of the stock index funds mentioned above.  The second is information on how to draw down a non-dividend fund, which provides information on safe withdraw rates at different time stretches until the end of your retirement and at different margins of safety.  It finishes with an interesting discussion of how the advantages of dollar-cost averaging while you are saving for retirement end up biting your rump due to negative dollar cost averaging during retirement, and suggest market timing as a possible solution (selling stocks when they are overpriced, and bonds when they aren’t).

The third part of the book is called If Everything You Have Isn’t Enough, and covers three possible contingencies to make your money stretch further.  The first option they bring up is immediate annuities, where you turn over a lump sum of money to an investment company and receive a regular payout in return.  The second is to relocate, either to a less expensive part of the country or to a less expensive country (they recommend several, including Mexico and Costa Rica).  The third option presented is to take out a reverse mortgage to draw down the equity in your house.  All have potential, although will require significant research before you can safely choose one (or more than one) to make your savings carry you through retirement.

The final part of the book covers 25 Big Truths of Retirement Planning (yes, the authors do seem to like their lists).  Then they go over about a half dozen different retirement withdraw methods that have been suggested, subjecting them to the economic conditions of the Great Depression (and the three decades that follow), to ensure how well a one million dollar portfolio would have performed during that time frame.  Their method of using a balanced portfolio, rebalancing yearly, and using the safe withdraw numbers they provided earlier was a success in this regard, although a few other methods had some promise (and many more simply crashed and burned).

Pros

-Easy To Personalize Advice: Of all the books I’ve read about investing and retirement, this is first one that’s essentially a financial planner in book form.  If you go through the worksheets provided at various points along the way, you’ll create a reasonable financial plan for yourself, without the need to bring in an expensive planner.  It’s one of the only books I’ve read that didn’t fall back on a single number when telling people how much to save for retirement (or even worse, just telling you to ’save as much as you can’).

-Well Supported Information: The calculations and figures presented are well supported by research provided in the book, and the claims made by the authors are backed up, either by historical fact or repeated standardized testing protocols.  The level of backing provided by the authors for their arguments is rare in other books, and it helps to back their credentials as sources of information well worth giving a listen.

-Very Thorough: There aren’t many aspects of planning for retirement (or finding money in retirement if you didn’t start planning early enough) that aren’t covered in this book.  From creating a personalized investment and savings plan to drawing down your accumulated funds, there’s enough advice to help people gain a handle on their money.  From getting started investing to using your funds to provide for your retirement, there’s a wealth of information for all types of people.

Cons

-Conservative Leaning: I know I said this in my last review of a Stein/DeMuth book, but well, here it is again.  Although the conservative bias isn’t TOO noticeable after the first chapter (which details many of the ways the government has failed in the authors’ eyes, and also takes a crack at Al Gore), it does occasional tint the advice in the book.  Whether that is enough to make you skip this book is up to your individual politics, I suppose.

-Sometimes Confusing: As sometimes happens when trying to follow a rather complex train of thought, it’s possible, even likely that you’ll lose the thread of conversation or fail to completely understand the point.  Unfortunately, the book doesn’t make much effort to clarify or resolve the more complex issues it tackles, so it’s possible that you’ll end up missing something if you don’t have a decent monetary background.

-Occasionally Insulting: Besides the aforementioned conservative slant, there are some parts of the book that are simply insulting.  Negative comments about the lower class, lawyers, and the average worker (among others) are expressed, with varying levels of justification.  You might just find yourself (or someone in your family or circle of friends) being backhandedly insulted in the course of the book.

Overall

While it has a few flaws (due more to the authors’ politics than the book’s other contents), Yes, You Can Still Retire Comfortably! is an impressive store of personal finance planning knowledge.  Perhaps not the best gift for the devote leftist in your family, but a solid source of investing and saving information.  Whether you’re trying to create a saving and investment plan, checking to see that you’ll make your retirement goal, determining how fast to draw down your savings, or even figuring out how to stretch your retirement money further, this book will have some good suggestions.

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Merry Christmas to you all!  I hope that you all had a wonderful holiday, and spent it with your family.  I thought that I would take a break from the personal finance information today, and instead tell you a little bit about one of my favorite Christmas rituals: my church’s Christmas Eve candlelight service.

Every Christmas Eve, there is a special service (actually two, one earlier in the night for those who have young children and another one later in the night).  The services are pretty similar to normal Sunday services, although given the time of year and the joy of the season, it’s generally a more festive atmosphere.  All of the hymns are more commonlC hristmas carols (From ‘Oh Come All Ye Faithful’ to open the service, to ‘Joy to the World’ as the recessional hymn; which I’m sure is not meant to a be a reflection of what people think as they are able to leave church).  The gospel passages are all part of the Christmas story.

The centerpiece of it all is  the candlelight service.  Everyone in the church has their own candle, and near the end of the service, the pastor lights candles for two ushers who move down the center aisle of the church.  Each person in the center of the aisle lights their candle, and then allows the person next to them to light their candle, until every candle is lit.  The lights are turned off, and then, we all sing ‘Silent Night’ in a darkened church, reading our hymns by candlelight.  At the last verse of the song, when the song talks of ‘radiance streaming, love’s true light’, everyone in the congregation takes their candles, lifting them above their heads, still singing, a hundred pin pricks of light burning through the darkness.

When that happens, I always, always look up, staring out over the congregation, seeing all lights shining out in the otherwise dark church.  This year as I did so, my mind started to wax philosophic, thinking of how all the lights came from the same initial flame, and that, no matter how many candles were lit from the initial one, the lights were not diminished.  Metaphorical thoughts of sharing knowledge flashed through my mind, and I ended up getting a little teary as I tend to do.  If I had to pick one single moment that I felt most clearly represented everything I love about Christmas, that moment would be it.

What’s your favorite part of the season, everyone?  I’m eager to learn what appeals to everyone about this side of the holidays.

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By the time this post goes up, it will already be Christmas day in most of the world, and there will only be a few hours remaining before it will be Christmas for the rest of us, as well.  I thought, as a somewhat early Christmas present, that I would share a few ideas for ways to celebrate the holiday inexpensively, but still in a festive manner.  If you don’t already have plans for the day (hopefully plans that involve more than just opening all your presents and playing with your new toys, although that can be pretty fun), here are a few suggestions from The Amateur Financier:

1) Go to Church: Obviously, this is most practical if you are a Christian; although, even if you aren’t, going to your temple/synagogue/mosque could still be a good way to spend the day.  Besides helping to put all this gift giving, present unwrapping, and general merriness in perspective, you may have the chance to run into some people you haven’t seen in a while, or even get the opportunity to help someone in need.  What better way to spend your holiday?

2) Spend Time with Your Relatives: Holidays are meant to be shared with the people you love.  If you’ve already planned to meet with your family this holiday season, good on you.  If not, why not go and visit them, or give them a call if you are currently far away.  I’m sure they will appreciate knowing that you were thinking of them, and it’ll be the perfect chance for you to reconnect.  Enjoy the family togetherness, as well as the chance to celebrate the holidays with the ones you love (even if you are only talking together).

3) Play Outside (in the Snow): Being able to go outside and play is a wonderful way to celebrate the season, and if you happen to live in a snowy area, the fun of snowballs, snowmen, and snow angels could be just outside your front door.  If you live outside the snow belt (or in the Southern Hemisphere), you might have to be a bit more creative in your outdoor play (although, since you could go to the beach, you’re not going to get much sympathy from me).

4) Watch a Christmas Movie Together: There’s nothing more relaxing than gathering as a family and watching all the Christmas classics you have in your collection (or that will be filling the air waves).  A Christmas Story, Rudolph, Frosty, How the Grinch Stole Christmas (the animated classic, not the live-action one, for a really fun time), It’s a Wonderful Life, and any of the many, many versions of A Christmas Carol.  (My sisters and I have turned The Muppet Christmas Carol into an annual tradition.)  There are plenty of good movies to help you get in the Christmas spirit.

5) Play a Game with Your Loved Ones: A great way to break in your new board games is to open them up and play them while all the family is gathered around.  Just try to avoid getting too competitive (no need to start any family feuds over Monopoly) and you can have an excellent time enjoying each other’s company over a fun board game.

6) Bake Something: Cooking for Christmas is a wonderful idea, almost as much fun is eating what you cook.  Make a nice batch of Christmas cookies, a scrumptious Christmas ham, or maybe even some roast beast (another little How the Grinch Stole Christmas reference).  Just be sure that you have plenty to share with your family and friends; you don’t want to leave anyone without enough food.

7) Read a Christmas Story to Your Children: Probably my favorite thing to do in order to get in the holiday spirit, reading a nice Christmas story (particularly to a young child in your life) is a great way to celebrate and help to enrich the life of a child.  Choosing a good Christmas story (and there should be any number to choose from), get nice and cozy, and start the reading process.

There you are, several suggestions for how to have a wonderful, inexpensive Christmas celebration.  Happy Holidays everyone!

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It’s nearly Christmas, and with that comes all the interesting and sometimes conflicted thoughts of the season.  I’ve been thinking quite a bit about Santa this season, and more specifically, what I’ll tell my children (when I hopefully have them in the not too distant future) regarding Santa’s existence.  On one hand, it is a tradition, something I believed in myself during my childhood, not so long ago.  On the other hand, finding out the truth can be a rather devastating to a young person, and I don’t know if I want to put my children through that sort of pain.

I think that Trent of The Simple Dollar has a pretty good handle on this Santa thing.  Allow them to believe, while not actively encouraging them to believe, sounds like a pretty good compromise.  It’s the best you can do to let them to hold their beliefs while not setting them up for a huge fall.  It seems like a pretty good compromise to me.

Speaking of Santa, it’s time for my present to you: some of the best posts from this past week!  Not as exciting as a new Jaguar with a bow on it, but much easier on the wallet.  Anyway, go on and enjoy:

Good Articles This Week

Top 10 Sneakiest Business Tricks – A compilation of many of the techniques that companies use to get you to purchase their products.  Lazy Man and Money covers all the classics, from limited time offers to contests to rebates.  Speaking of which, act right now and you’ll be entered in the Amateur Financier raffle contest and have the opportunity to win back your full purchase price of this blog!  Hurry, this offer will only be available for a limited time.

Are Credit Cards Weapons of Mass Financial Destruction? – For most people, the answer is no, but for a few of us, they may as well be.  Financial Samurai covers some of the more troublesome aspects of these plasticized weapons, although we all will have to draw our own conclusions on whether we can use these little pieces of plastic safely.

How Do People Get Rich – A survey covered by Studenomics about the ways in which people get rich.  Most of them make sense (savings and investing are common methods to become wealthy, inheritance… not so much), but there’s at least one surprise, regarding starting a business of your own.  Definitely a good read.

Is Travel Worth It? – There are many advantages to travel, and I’m very glad of all the experiences I’ve had going to different places, especially outside of the country.  Baker of Man vs. Debt apparently agrees, although he has much more experience with being out of the country than little old me.  Good luck on your travels, my friend!

Year End Tax Tips – Sad to say, but it’s never too early to start thinking about taxes, but if you don’t act soon, it might be too late to improve your tax situation.  Luckily, there are several tax tips (for both this year and next) provided courtesy of Darwin’s Finance.  It’s not the most pleasant subject to think about, but better to get prepared now than get caught off-guard next year.

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We’re rapidly approaching the end of the year, a time when we begin to think about what we’re going to do in the coming year.  If you’re like me, your thoughts are probably turning to things like starting or expanding a small business, finding a way to earn money without having to go to work for someone else.  But it’s one thing to think and fantasize about leaving your job and striking out on your own, it’s a whole different barrel of monkeys to actually do it.

There are some people who are cut out to be entrepreneurs, and others who aren’t.  Much as we would like to believe that all we need is a good idea, some start up funds, and maybe a few employees to help us get things off the ground, there is more to it than that.  Some of us just don’t have what it takes in order to be successful as a business person.

Let's See if You're Ready to Be Your Own Monkey!

How can you determine if you have the right traits to be a small business owner?  Why, the same way we determine all personality characteristics nowadays: an online test!  *canned sitcom laughter*  Seriously, though, there are places to look to see what traits most entrepreneurs share.  I like the one from Georgia State, myself, although our old friend, the Small Business Administration, has a checklist of their own.

Of course, since you’re already here, I may as well share the completely unofficial, based only my own experiences (including those with this very blog), Amateur Financier list of Entrepreneurial traits.  *canned audience cheering*  If you are seeking to start your own small business, you should ask yourself the following questions before you get started:

Entrepreneurial Quiz

Are you willing to work hard?

Probably the biggest determinate of the success of your enterprise (at least, of the ones in your control) is how much sweat and elbow grease you’re willing to put into your business or other venture.  I’ve yet to hear of a business that requires little time and effort while still providing substantial monetary benefits (not counting various infomercial claims, of course).  Starting a small business is like investing, putting in time in order to generate a profit in the future.  Working on your business will require significant time, as much as a full-time job in many cases, if not more.  If you are unable to put this level of effort into your enterprise, you’d likely be best served with a less time consuming investment, in something like mutual funds.

Are you a self-starter?

This is an important trait, one that goes hand in hand with out last trait.  When you have your own business, there’s not going to be anyone looking over your shoulder, telling you what to do, setting deadlines, and providing regular feedback.  You’ll need to be your own taskmaster, cheerleader, and manager, or your enterprise will simply fall apart if you don’t force yourself to keep your nose to the grindstone.  (Well, if you have a spouse, they might help you to stay on task, but that all depends on whether they support your enterprise.)  If you aren’t up for this level of work, you’ll be much better off finding a job you like, preferably at a stable company, gradually building up your savings and investments.  (In spite of what Robert Kiyosaki would have you believe, gradually saving and investing while working a regular job is a perfectly reasonable and successful method of becoming rich.)

Are you willing (and able) to fail?

Let’s be honest, many businesses end up failing.  Stores don’t get customers, manufacturers don’t get orders, even blogs sometimes find themselves not getting much traffic in spite of the bloggers’ best efforts.  As an entrepreneur, you need to be able to accept these failures, learn from them, and move on with your next venture, and keep doing this until you find success.  As for the ‘able’ part of this question, you need to be prepared for what will happen if your enterprise fails.  Do you have adequate cash reserves to fall back on?  Do you have a back up plan if your business isn’t a success (or isn’t a success as quickly as you’d hope)?  Is your family going to be provided for should things take a turn for the worse?  Ensuring that you know what do if things go wrong is important to guaranteeing you can try your hand at your own business without wounding your rump.

Are you confident in your enterprise?

Sorry if that last point brought you down, but hopefully your reaction was, ‘I’m prepared for the worst, but my business WILL achieve success’.  Being confident in what you are doing may not automatically lead to success, but giving up on your business before its time is a surefire way to guarantee failure.  The confidence you experience will help determine how much work you put into the business, how inspired any workers are, how much help you will offer to customers, and will generally improve your business’s chances.

Are you creative?

Creativity is one of those nebulous characteristics, which many people attempt to define with only moderate success.  For our purposes, one of the major advantages of creativity is being able to deal with the many issues that will arise in the course of owning a business.  Problems and difficulties will arise while running a business, and not all of them will have obvious, textbooks solutions.  Being able to use your creativity in order to come to solutions for your problems is an important trait, one which is all but necessary if you start a small business and need to figure out how to solve problems.  Learn, grow, and advance your skills, and you’ll end up coming out ahead.  (See?  Spend long enough discussing entrepreneurship, and even a pessimist ends up looking at the bright side of life.)

There you have it; meet these five requirements, and in my opinion, you’ve got a pretty good foundation (that is, yourself and your tendencies) to start building up your business.  Good luck, and enjoy the life of a small businessperson.

(PS. To verify my identity to Technorati, I need to put this code up on the site to verify my identity: QAWWAA6GXBVG  Soon, I’ll be Technorati bound!)

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