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Lip Gloss, GameStop, and Shorting the Market

February 16th, 2021 at 09:31 pm

Lip Gloss, GameStop, and Shorting the Market

GameStop has been in the news a lot this last month, leaving many excited, but scratching their heads.  What exactly just happened?  What does it mean to short a stock?  Can I get in on this action?  Well, let me tell you about a time when I accidentally shorted MaryKay lip gloss and how it is related as well as a bonus strategy for SAFELY shorting the market.

What is a “Short”?

Stock market contracts can extremely intimidating.  Everything is tied up in legal jargon and the word "risk" is plastered all over any honest explanation.  I don't recommend anyone's first stock market transaction being anything other than a stock or mutual fund.

Put in simple terms when you short a stock, you borrow a stock from your brokerage with the promise to return the stock on, or before, a specific date.  You immediately sell the borrowed stock and pray the stock drops in the meantime.  When the stock is low, or when your contract is about to expire, or any other time you wish, you buy the stock back and return it to the brokerage, closing out your position.  You get to pocket the difference between the amount you sold it for and the amount you bought it back at, minus contract fees.

Despite all my "doom and gloom" predictions, I never have shorted any stock or fund.  One reason is that inflation might raise the dollar price of a stock despite the actual value decreasing.  A bigger reason is timing.  When choosing stocks you can hold your position for as long as you want and wait for the profits to emerge.  When you short, you're on a tight time frame.  I don't know enough to call that type of timing.

The final reason is that I'm just not ready for that kind of commitment.  When buying stocks, you can only lose the money you put in.  With shorts, you can lose an infinite amount of money, kind of.  More on that later.

Let’s check out an example to help clarify:

My first, and thus far only, time "Shorting" the Market

I used to sell Mary Kay in college.  It was as bad idea.  I made a spur of the moment decision based on the fact that I could sell my unused inventory back if I decided to quit within the first year.  I planned to get what money I could then quit with only profit and no loss.

Time went on and I was up against the 1 year mark.  I was a lousy sales woman and was extremely busy with Differential Equations homework (YUCK).  It was time to quit.  I made many calls to my unit director requesting information on how to send my inventory back, but she never answered.  The calendar rolled past the date leaving me stuck with hundreds of dollars’ worth of stuff.  Most things I would never be able to sell at a profit.  I sold what I could deeply discounted to friends, then started listing on Ebay.

One listing I made was for "Sweet Raisin Nurishine Lip Gloss".  I had slow internet and a computer glitch which made me believe the listing didn't go through.  I listed it again and unknowingly ended up with two listings.  One sold, and I sent it off.  The second one sold and I realized my mistake.  I had a contract to send someone sweet raisin lip gloss, something that I no longer owned.

It turns out there are a lot of Mary Kay ladies out there in the same boat selling on the Ebay market.  At the time, there was a decent volume of sweet raisin lip glosses selling.  I simply bought someone else's listing that met my specifications and entered in my buyer's name and address.  I’m almost certain it is against Ebay's Policy to flip product like this, but so is not delivering the promised product.  I was in a bind.

Timing and Pricing

I was lucky.  By the time I realized that I had made the mistake and was told that none of the other colors that I did have would suffice, there were new listings selling at even lower prices.  In the end, I earned $0.52 on the transaction (buyer paid $6.5 - $5 purchase from other seller - $0.98 fees = $0.52).

Had instead the price jumped, I would have lost money.  What if a popular singer had declared Sweet Raisin Nurishine Lip Gloss the ONLY thing she would ever put on her lips?  Or another company announced a contract to buy enough Mary Kay lip glosses to put them on back-order for years?  The price could have jumped indefinitely.

Shorting the Stock Market works almost exactly the same way:

Lets say you think a company is overvalued and will see a decline in the next week.  You could place a short order with your broker for a number of the company's shares (typically 100).  The Broker will give you the 100 shares, which immediately get sold at the current market price.  Part or all of that money is held by the broker/lender as collateral against your loan (margin account).  You have until a set date (anywhere between a few days to months as agreed) to return the company shares.  At this point several things could happen:

  1. You could wait until the price drops to a level you are happy with, have your broker buy themselves the 100 shares with your margin account, then you pocket any extra after fees.  You can set this up to happen automatically with a trailing stop (percentage based) or a limit order ($ value based) so you can buy at or below your threshold even if it is only at that price for a split second.
  2. You could get scared as the price trends upward and try to cut your losses by buying early (also may be done with limit orders or trailing stops).  Again, you'd have the broker buy themselves the 100 shares with your money and any extra you have to put in, pay them their fees, and accept your loss.  
  3. If the price goes up significantly, your broker may automatically buy the shares back to minimize their potential losses in case you can’t afford to buy the 100 shares at the new price (margin call, more on this later).
  4. You could also wait all the way until the contract expires, and have them do the same thing.  If the price went down enough to cover your fees, you'll make a profit, if it went up, you'll lose money.

In my lip gloss scenario, I had a contract that ended as soon as I realized it existed, so I was forced to buy at the current market price.  Had my item been listed as ships within 1-30 days, I could have waited until I found an even lower listing on Ebay at the risk of losing the low prices already on the market.

The good news is you'd never accidentally short the stock market like I did with lip gloss!

Short “Squeezes”

GameStop’s recent behavior is a classic case of what they call a Short Squeeze. 

Imagine that a large group of MaryKay ladies in the know could see a huge demand drop of Sweet Raisin Nurishine Lip Gloss as the product was no longer going to be in future catalogs.  MaryKay ladies everywhere will be forced to sell their Sweet Raisins well below the MSRP and may become desperate enough to sell on Ebay.

That group of MaryKay ladies may start selling contracts to deliver Sweet Raisin Lip Gloss that they don’t currently own, knowing the market is about to be flooded with product.

Imagine also, that there’s a group of Ebay users that are tired of the tricks of these clever MaryKay ladies.  They see what is happening and they start buying up all the Sweet Raisin Lip Gloss they can, causing the price to actually go up.

The Pink Cadillac top sellers, aren’t too worried at first.  They have plenty of days before their contracts expire.  This little price spike is something they can wait out.  They figure there is no way these small players can keep the price inflated for long.  Sooner or later, they will start selling.

Imagine now that the people who bought the contracts from the MaryKay ladies also had control of their PayPal accounts (the brokerage firms). As they see the price of Sweet Raisin Lip Gloss sky rocket they start taking precautions to ensure they actually get their order.  If the price gets close to exceeding the balance in a particular PayPal account, they force the MaryKay lady to buy into the market now or to put more money into the account.  This is called a Margin Call.

The MaryKay ladies who were operating under a small cushion will be forced to buy at inflated prices.  As they struggle to get the product they need to deliver, they cause the price to increase further, triggering more margin calls for slightly more stable MaryKay ladies.  This continues to push the price upward until nearly every single MaryKay lady is unwilling or unable to put in enough cash to wait it out.  Ironically, the ones best suited to wait out the situations, stand to lose the most money.

There’s an old Wall Street saying that markets can stay irrational longer than you can stay liquid.  In other words, you can lose a ton of money even while making good calls.

Now finally, like in the case of many hedge funds shorting GameStop, imagine that these MaryKay ladies “in the know”, who had this brilliant play on a product that was almost certainly losing value, wasn’t just using their own money.  Imagine that they had pooled millions from pension plans that were desperate to find the yields they need to cover their promises to workers.  In the end, the Ebay manipulation group, might have robbed their parents and grandparents.

Quick note: GameStop was a prime target because it showed up in a list of heavily shorted stocks (let’s face it, their current business strategy is dying out) and was traded very thinly, so tiny movements could change the prices drastically.

A safer way to short

 A Put lets you buy a stock at a certain price regardless of market value.  Typically, you’ll buy a contract that allows you to sell a fixed number of shares at a specific agreed "strike" price (below current market).  Even if the share price drops to zero, the buyer must buy your shares at your request at the predetermined strike price so long as the contract has not expired.  

In my case, I essentially had a “Put” on my original MaryKay inventory, but my one year contract expired before I learned how to use it.

For a fee, you could potentially insulate each of your holdings from things like the huge 50% drops we've seen several times since the turn of the century.  As Robert Kiyosaki (Rich Dad) says, "Professional investors always buy in pairs. One position is for growth, and the other is for protection." ( You should only gamble with money you can afford to lose.  If your stocks are your retirement, it might be worth looking into "insuring" them with puts.

Puts, used in a traditional way, are simply insurance: something that you pay a recurring fee for and hope to never cash in.

Shorting the Market with Puts

If Puts are used on stocks you don’t own, they are a safer way to short the market.  For example, if those clever MaryKay ladies had instead found a patient bulk buyer who was willing to buy up to 1,000 lip glosses at the low fixed price of $6, they could have waited for the prices to drop even lower, bought as much as they could without changing the price above $6, sell it at $6, and pocket the difference. 

It’s kind of like buying fire insurance on a house you don’t own.  It would be a great deal to buy a house after it has already burnt down at rock bottom prices, then turn around and collect insurance money on the original value of the home.  You just have to have the foresight to buy insurance on the house with fire hazards before it happens.  The worst case scenario is simply, you never cash in on the contract you paid for.

Political Side Note:

If you follow financial commentaries for entertainment (let's be friends!), you might have heard the phrase "the Powell Put".  That is referring to the fact that Jerome Powell (current Federal Reserve Chairman) is unlikely to let the stock market tank.  Should it be in peril, he will probably jump in with ever easier “easy money” to push the market back up and save the day.  Because we have money-printing-academics in charge, we are all somewhat "insured" against a crash.

Of course, this will mostly help the gamblers and hurt the savers in high inflation, but hey who wants to reward people for responsible actions anyways?  


Anyways... I hope I clarified market shorting a little better for you.  Enjoy the ride!


In case anyone cares: I lost $3.51 on the other Sweet Raisin sale (buyer paid $7.24 - $7.38 initial purchase - $1.09 fees - $2.28 shipping/ packaging = -$3.51), but that's $3.87 better than losing my whole $7.38 initial purchase!


Disclaimer: I am not a licensed or certified financial coach, planner, adviser, or anything else of the sorts.  I just love figuring out money.  Anything I recommend should be personally analyzed and discussed with your trusted financial adviser.  I cannot be held accountable for any loss or poor performance.

"Rich Dad Prophecy" by Robert Kiyosaki - Book Review

November 15th, 2019 at 08:35 pm

Robert Kiyosaki wrote this book in a somewhat narrative fashion. He goes through his early business struggles and includes conversations with his “rich dad” about the elder’s financial projections for the nation.

The book goes on to explain that there are some serious flaws in the law (Employee Retirement Income Security Act or ERISA) that encourages an unsustainable type of investing. Non-investors are thrown into the world of stocks, but it isn’t in their best interest unless they are also trained. The government has done this because there is a serious problem: people can’t afford to retire and that makes people unhappy, which then threatens their power position. Basically, government has been trying to kick this can down the road for a few decades now, causing the problems to get bigger and bigger. It looks like it will finally be too heavy to kick this next time, but who knows? The government is very talented at pushing off the root problems.

The good news is that this book also gives you some processes that should protect you. These processes are the same ones Robert Kiyosaki always says: buy cash producing assets and let them pay themselves off, get enough of them and they’ll pay your living expenses as well. What is different about this book is: 1. A stronger urgency, even for those who currently have comfortable lifestyles. 2. He addresses character traits as much as anything else. WHO you are matters as much, or even more, than anything else.

Kiyosaki takes all these concepts and wraps them nicely into a single biblical and nautical metaphor, Noah’s ark. But unlike Noah’s ark, the ark he teaches you to build will hold you afloat even if it doesn’t rain.

Where I found it:
I had been wanting to read this book ever since I learned of its existence about 2 years ago. For some reason I didn’t see it in the library catalog then. I considered buying it on ebay, but settled down when I realized there are plenty of good financial forecasting books out there to be had for free from the library. Then, one day I visited my sister in law and we visited the library. There it was sitting on the shelf. Luckily our libraries are also sisters, so I could check it out and return it at my own branch.

My takeaways:
I’ve heard a lot of solid reasons for a market collapse, here’s yet another angle: retirement.
Workers used to depend on a three legged retirement program: social security, pensions, and investments. As everyone knows social security is getting thin. The second leg, pensions, are becoming rare as companies shift the risk on to the employee.

Finally, by shoving everything and everyone into the stock market, people ill equipped for the risk world of investing are forced to participate. Their minds are set at ease by the word “diversify” and they dump their money into index funds. As more people blindly invest, the stocks continue to grow blindly as well. But what happens in market corrections? When the risk adverse employees see their portfolio going down, they switch out to bonds or another perceived safe haven, pushing stock prices even lower. Basically, the average employee has been duped into putting money they depend on into a non-dependable location and they don’t have the guts to make that work.

Maybe the employees aren’t as panicky as predicted. Maybe they have been properly indoctrinated to “invest for the long term” (even if they are retiring soon). The bad news is that there is also a built in time-bomb called “minimum distributions”. As the baby boomers reach 70 ½ years old in unprecedented numbers, they will be REQUIRED to start letting the air out of the stock market.

When all is said and done, your three legged stool is standing on a paper thin leg, and a leg that is mascaraing as two separate legs that also happens to be showered in sparks with a time bomb strapped to it. It is holding for now, but if any flames catch, your stool is toast.

It is time to take action and stop letting other people put your assets together for you. Get off the stool, and get in your boat. Choose your own cargo, strap it down carefully, and take responsibility for the steering. This book has a lot more to do with taking responsibility than following the normal “Rich Dad” method. It’s okay to build a “poor ark”, a “middle class ark”, or a “rich ark”, just don’t expect your government or job to take care of you. You are in control of your ship.

I recommend Rich Dad Prophecy to anyone who is preparing for retirement. I’m not talking about people who are 50+, but anyone who is planning their retirement whether it is next week or in 40 years. If you are still living paycheck to paycheck and retirement is undreamable, get that in line first.

This book opens your eyes to critically view the financial world around you and it motivates you to take action for your own retirement.

I do want to caution though, Robert Kiyosaki is the debt king. He believes in good debt (debt that someone else pays off for you such as the tenants in a rental property) like its God’s gift to investors. Sure, “good debt” is a great way to leverage your money and accelerate growth. It would be nearly impossible to get rich in one lifetime without it. However, too much good debt and you lose your margin of safety and go bankrupt at the first bump in the road (or storm on the ocean?). When Robert says something like, “you can retire with $15,000. Just go buy three $100,000 houses at 5% down, then live off the rent”, please take it with a grain of salt.

Also, note this book is old. Sure, the copyright is 2013, but most of the information is from the 1970’s to early 2000’s. Even if it were written from a 2013 perspective, that’s ancient in financial books.

Further Knowledge:
What got me interested in this type of book in the first place was one of Robert’s live online events. Check out

Text is Rich Dad Radio and Link is
Rich Dad Radio to listen to Robert (sometimes explicit language) any time and sign up for his emails for live events (yes, they do send more emails than I wish, but they also send occasional gems).

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Financial Book Reviews by Milly

"Making Money in Real Estate" by Dolf de Roos and Diane Kennedy - Book Review

November 15th, 2019 at 08:16 pm

This book is meant as a step by step guide to begin or improve making money in real estate. It starts with general education about cashflow, how real estate has a tax advantage in investments, how real estate employs leverage to accelerate your wealth’s growth, and how to organize your personal money so that you can be ready for the investment. It then lays out the process step by step, complete with checklists and goal setting. This step by step process includes defining what you want, checklists and equations to evaluate property, adding escape routes to your contracts, efficient ways to raise your property’s value on small budgets, and how to grow a powerful team.

Where I found it:
While reading “Rich Dad Prophecy”, I decided I wanted to read a book by Robert Kiyosaki’s Real Estate advisor. When I came across a book jointly written by his Tax Advisor and his Real Estate Advisor in my library’s catalogue, I put it on hold immediately.

My takeaways:
Much of the beginning discussion proves points that Robert Kiyosaki has made to me through his books many times: cashflow is king, debt can be good, real estate is ideal as it employs the bank’s money as leverage, etc. I will only list my new takeaways below.

Real estate is one of the few investment opportunities that isn’t dominated by computer analysis. Yes, there are some powerful tools in Zillow and other online sites, but you don’t have computers automatically pulling up listings, running the data, and placing offers (at least not that I know of). So far, real estate has too much of a personal, human, element to automate. This means that we can actually compete and win. The “deal of a lifetime” is available about once a week. You just have to go scope enough properties out to find it.

I was also floored by all the possible tax deductions a professional real estate investor can qualify for. It is clear from the tax code that the government wants you investing in this field. For example, any of my travel could be considered a business trip. I just have to visit a property and take notes. Not hard to do since real estate is literally everywhere. Also, the law assumes a residential home is worthless after 27.5 years. That means if you buy a $250,000 house, your depreciation deduction is about $9,000 a year! Basically, if you are paying taxes on your real estate investments, you need to have a talk with a real estate tax expert.

Commercial property was particularly interesting. I had never considered (or never knew about) many of the benefits: the tenant makes their income from the property and will likely maintain or even modernize at their own expense, the tenants usually sign longer leases, the tenant usually pays property taxes and insurance, and you can invest large chunks of money in only one property, thus simplifying your portfolio. Of course, there are some drawbacks. The vacant properties often sit longer and you usually need a 40% down payment.

Something that could help you at any point of your life is the advice they give in picking out a good team to help you. First, don’t try and do anything by yourself if you can get someone who can do it better for you. For example, instead of looking at hundreds of properties, talk to a real estate agent and give them a clear picture of what you are looking for. They look at hundreds of properties already and they will work hard for your commissions, especially if you are serious enough that you are a potential return customer. You should also ask them for good lenders, and ask them and the lenders for good tax guys and lawyers, etc. The better your network, the better you’ll be able to scale your investments. It also gives good advice on asking questions: ask them if they personally invest in real estate, what would make a good/bad client for them, what processes do they use for your job, do their clients invest in real estate… and once you have them on your team ask thought provoking questions such as “how can I prevent X” or “how can I write off X as a deduction”. Just asking them “can this be a deduction” usually gets a one word answer.

I recommend this book to anyone who is on the fence or ready to cross the fence and get into real estate. It is a very easy read, leaves you motivated, and gives you first steps to follow through on your motivation. This book helps you feel ready with a plan.

I had been on the fence worrying that I could not invest in Real Estate because my location wasn’t very secure and I didn’t dare buy farther away. About 4 months later, I’m putting in my first ever offer on an investment property in a market I feel very good about (yay!).

I would also like to add a little caution. Make sure you follow the advice about different bags of money and on insurances. Make sure you have your emergency fund and several month's expenses before throwing your money into income producing assets or growth assets. Debt is powerful, but it can also bite, so make sure you “cover your assets” before you buy them.


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"The Millionaire Next Door" by Thomas J. Stanley - Book Review

November 15th, 2019 at 05:36 am

Stanley wrote this book after extensive study of the American wealthy. At first, he thought he would be studying America’s upper class, but starting with his very first set of interviews, he realized that the truly wealthy do not live the lifestyle that one might imagine. This book works its way through many aspects of the lifestyle of the wealthy and contrasts it with the lifestyle of the high consumer. Private schools, car shopping, inheritance, neighborhoods, and marriage are all discussed. Everything is backed by data and/or interesting anecdotes.

Where I found it:
It is a little silly how long it took me to get around to this book. I became an avid consumer of everything financial literature in 2016, yet here I am in 2019, finally reading the book that so many have been shaped by. I found it while browsing the “for purchase” section of my local library and picked up the hardback book for $1.

My takeaways:
Stanley makes an interesting point about how people acquire wealth. He uses a formula as a ballpark estimator of how much wealth people usually have in life based on age and current income. Age x income x 10% = how much an average person would have accumulated. For example, if I were 30 and made $100,000 annually, I should have $300,000 in assets (30*$100,000*0.1). If I have twice that amount, than I am a “Prodigious accumulator of wealth” or PAW. If I have half, than I am an “Under Accumulator of Wealth” or UAW. Using this method, it is much easier to see who has learned to grow wealth. Of course, there are some major flaws. For example, if someone lost their job and had to settle for a lower salary, they would look very good on this continuum when compared to someone who just got promoted to a fat salary.

I was surprised by some of the stories in this book. I expected the usual, earn a good salary, but live like you don’t. This book portrayed something more extreme. It had horror stories about how assistance from rich parents trapped their children in a desperate lifestyle. It had a boss gently refuse his employee’s gift of a custom Rolls Royce because it would only cause him expenses and he couldn’t throw his fish in the backseat. This book boils all finances into two very simple statements: do what makes your net worth grow and teach your kids to stand on their own.

I’m not going to lie. Much of this book is tedious. There’s lots of tables of data and lots of redundant points. My impression was that it read like someone’s research report, but they stuck a bunch of stories in it to make it into a proper book. There were nuggets on most pages, but the read felt tedious, and that's coming from a numbers person.

I recommend this book to someone who is ready to start taking a big picture look at their net worth and see if they are growing it properly. I recommend this book to someone who is wealthy or a high income earner and is thinking about how to support their children. I recommend this book to people whose dream is to buy a status item such as a Ferrari. You’re going to have to be committed to reading though or you’ll have a hard time getting through it.


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"Hardship and Hope" by Victoria Sherrow - Book Review

January 7th, 2019 at 08:56 pm

Hardship and Hope- America and the Great Depression walks you through day to day life as the stock market collapses, jobs are lost, welfare runs out, the government throws out experimental programs, the programs bring hope, economic hardship persists, productivity jumps to support the war, and we remember the legacy. It addresses topics on many levels such as individual entertainment, racism, unions, ideological shifts, and survival methods.

Where I found it:
I found this book while browsing the very limited financial section of my local library.

What I learned:
Hardship and Hope was a very interesting read for me for several reasons. First, I think we are headed towards another severe depression. It was encouraging to see the human endurance. That when your surviving off the coal dropped from trains and eating mostly cabbage, you can still survive. It made me realize that humans can do anything.

Secondly, I learned accounts where government welfare saved people’s lives. Many New Deal programs were unconstitutional, funded by debt, and not terminated after the crisis subsided or set a bad precedent for future government programs. In the moment, Americans felt that capitalism and democracy had failed and allowed the legislative and executive branches beat out the judicial branch and have destroyed much (or even most!) of the intent of the constitution.

Despite my hard feelings for how Roosevelt dealt with the crisis by sacrificing what America is, a Harry Hopkins quote really stood out to me “People don't eat in the long run, they eat every day”. When faced with the Great Depression, the New Dealers weren’t thinking about the long run, they were trying to save the lives of families all across the nation. I guess this book helped me remember both sides of the story so that I can be better balanced when faced with proposed welfare programs that violate what America stands for.

I have a few problems with this book. For one, math people will be driven a little crazy because it compares sums to percentages and hourly wages to weekly wages. Without looking up population data or labor statistics of the day, many of their numbers are useless. Even the appropriately stated numbers are hard to put into comparison because we have no baseline for how much things were worth prior to the depression. The other problem that some of the points are presented in ways I disagree with, such as praising unions for ensuring that as profits are increased, wages are increased etc. The libertarian inside of me was definitely rubbed the wrong way at times. I thought it was healthy to see it from a new angle though. Overall, I was actually impressed at the presentation of facts without a political message. Sherrow did a pretty good job at staying neutral.

I recommend this book to anyone who wants a quick (only 110 easy print pages) glimpse into the past so that they can live a better future. I don’t know that this particular book is any better than others on the topic though. If your library doesn’t have it, try a different one or look up some research papers. I just like that it is short and walks you through the depression fairly chronologically.


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"The Big Short" by Micheal Lewis - Book Review

January 7th, 2019 at 08:48 pm

The Big Short is more like a biographical novel. It follows the stories of several people who spotted the signs of the oncoming 2008 financial crisis before there was any stress in the system. You get to experience their minds as they spot the absurdity, as the uncover immense moral hazards, as they struggle to find a profitable way to trade on the information, as they fight with investors who want out, as they make the victory, and how they deal with the aftermath of having bet on the demise of the financial world as they knew it. Some of the characters are very amusing, some are irritating, and some are foul. As backwards as it sounds this book captures the human element completely while at the same time discussing something as analytical as financial trading.

Where I found it:
I found this book while browsing the very limited financial section of my library.

What I learned:
The Big Short taught me how corrupt the system can get when moral hazards are present and how blind the big companies can be.

I was amazed by the clearly immoral tricks the loan originators and repackagers played to get their pools of mortgages an AAA rating. AAA! That’s the highest rating possible and better than our current US Treasuries (S&P downgraded US Treasuries to AA+ due to the debt ceiling crisis of 2011). They took a lot of low FICO loans who would most likely default and threw them in with the loans of immigrant workers who don’t have enough history for a low FICO score and only reported the average number, which was high enough to ensure no default. They didn’t care if the pools actually went bad or not because once the pool is sold off, the risk is on the new owner. All they cared about was volume. The more mortgages they sold, the more money they made. They made so many bad mortgages that one originator company had 20% of the mortgages default AT THE FIRST PAYMENT and had to take the loss themselves.

On the other hand, the rating agencies were lost. They didn’t have a model for these mortgages, so they accepted the model they were handed by the packagers. They loved it because rating agencies get paid per security rated. With companies buying up these AAA products in a feeding frenzy, they got a lot of things to rate.

Investment banks were just as lost. They didn’t really care what gave something an AAA rating, they just knew if they filled themselves up with something that wouldn’t default and had a good return, they’d make a ton of money. They snatched these up even faster than they could be produced, so paper mortgage backed securities got invented. The paper securities were not even backed by mortgages, just construed to mimic them financially.

Basically, there was a moral hazard at the beginning of a system as originators learned to game the system. They did it so well and the people later down the chain were so blind and poorly managed that it resulted in a massive financial bloom and rot on such a scale that it put the entire global financial system out of whack.

I loved seeing into the crisis. There were so many things to discover that I actually talked to people about it a lot while I was reading. Normally people aren’t interested in my random financial obsessions, but this one actually got some engagement. The discoveries were just so appalling that they had to be voiced and people are willing to hear reasons to blame. Not to mention, there were some pretty funny moments.

There aren’t many people I would recommend this book to. The beginning was boring, but the second half made up for it. A few parts are confusingly technical, but you can get the gist of it and move on. You don’t actually have to follow the author’s explanation of the paper mortgage securities, just know that they were cleverly construed. The biggest problem is that a few of the characters use the F word in every thought.


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"Total Money Makeover" by Dave Ramsey - Book Review

January 7th, 2019 at 08:37 pm

If you are in debt, this is the first place to start to get motivated and organized. It breaks down the process of going from sinking in a paycheck to paycheck (or worse) life to taking your extended family out on a cruise. The “baby steps” go as follows:

1. Save $1,000 for a rainy day
2. Pay off all debt (except your house) using the debt snowball technique
3. Finish off your emergency savings by saving up 3-6 months’ worth of expenses
4. Invest 15% of your household income in the S&P 500 (I’d put it elsewhere)
5. Set up a tax exempt college fund for your kids
6. Pay off your house
7. Give!

As you knock out each baby step, the next baby steps get easier because you’ve eliminated the drag of debt or at least have the savings to avoid putting on more debt. If you ever slip a step (you had to use your emergency savings for a broken car), just pause the step you are on and go back. You’ll find yourself getting to the later steps faster and faster each time.

Where I Found It:
I think most people looking at finances have come across this book. Dave Ramsey is the recognized lead for getting out of debt. I figured I couldn’t write about finances unless I’ve read it, so I picked it up off the shelf at the library and read it in an RV on a stormy beach.

What I learned:
There was very little in this book that I didn’t already know. It had a few things in the later baby steps about taxes that I had never stopped and considered, but I’m not there yet anyways. What I LOVE about this book is how motivating it is. It made me almost wish I had more debts just for the adventure of getting out of them. He made it that exciting.

I also learned that Dave Ramsey’s method isn’t perfect. He really doesn’t have much a clue when it comes to the later steps. That’s okay though because when he tells a broke person that you can expect to get a 12% return in the S&P 500 (try

Text is 4% or less and Link is
4% or less!) they’ve probably got years before it matters. Maybe it is helpful in motivating them to get out of debt faster and maybe it doesn’t matter since investing 15% is the commonly accepted responsible thing to do anyways.

This book is amazing at getting you motivated and there is a ton of wisdom in the baby steps. I got a little bored with the stories, but they are in boxes and easy to skip. I HIGHLY recommend this book to anyone in baby steps 1-3. There are some major problems with the later steps though.

One thing to note is the 12% he claims you should expect from the stock market is completely absurd. Get through the other baby steps first, but do more research when you get to the investment part.
Text is Please read why the S&P 500 is not a great investment and Link is
Please read why the S&P 500 is not a great investment.

Actually, don’t trust any of Dave Ramsey’s numbers. Even his $1,000 emergency savings in baby step #1 is off. I don’t disagree with $1,000, but $1,000 in 2003 (when the Total Money Makeover was first written) is equivalent to $1,362 in 2018 if you believe government published inflation data. If you want to assume a 5% inflation (like I do), that $1,000 is actually $2,079. I’m not saying that you have to have $2k in the bank before you should look at paying down you debts. I’m saying that you have to choose for yourself what number will keep you and your family from bouncing back to the credit card with every unexpected expense. Write that number down and work towards it. Then, even though you’re only sitting on a thin cushion, start attacking that debt aggressively.

I also disagree with the children’s college saving as step #5. Sure, it would be great to have money set aside for education, but my oldest is only 5 and there is a lot of uncertainty shrouding the topic.

Ramsey talks about state programs where you pay for college early so you don’t have to worry about future price increases. What if you move across the country? Now your kid has to move far away just to go to a state college. What if state colleges are overly politicized or immorally overly politically correct by then? Speaking of politics, tuition itself has become a huge political issue. I think it is just as likely that state colleges are free in 15 years.

Looking at the last 15 years and assuming things only accelerate, I’ve decided to pay my house off and get myself financially secure first so that I can afford whatever tuition at whatever school I’m asked in the future. Maybe that is silly since the money is very transferable and if I decide I’m really not going to use it, I can even withdraw it (taxes will apply). I just want to focus on the known first. If I have solid footing, the rest won’t matter as much.

Note: My husband actually sent money home to his family while in college and I only received financial help from mine the first year. We both graduated from college debt free.

I recommend Dave Ramsey’s “Total Money Makeover” to just about anyone and especially those who don’t see how they can make it financially or are in the early “baby steps”.

Text is Financial Book Reviews by Milly and Link is
Financial Book Reviews by Milly

"If you Can -How Millennials can get Rick Slowly" by Bernstein - Book Review

January 7th, 2019 at 08:26 pm

This is a

Text is FREE PDF and Link is
FREE PDF!! Read it Now! If you want to learn the 2 step lazy man's way to invest with better returns than professional investors, this one is for you. It is only 16 pages long and only takes about 20 min annually to execute. The PDF will take you through the theory, the steps, the pitfalls, and how to overcome your obstacles.

Basically, it teaches you to invest like this: Set up 3 investment funds (US stocks, foreign stocks, bonds) and fund it with a certain percentage in each (typically 1/3rd in each). Every year rebalance the ratios between your funds so that they are back to what you intended (such as 1/3rd in each). You can choose different percentages based on your aggression/risk tolerance or even have it shift towards bonds as you age. The percentages are up to you, just leave it alone except for tweaking it annually and you will do fine.

Where I found it:
I came across the PDF while surfing the
Text is BogleHeads website and Link is
BogleHeads website.

What I learned:
I finally understand why balancing portfolios increases your returns. If something is going up, it is probably becoming more overvalued so you sell some off while it is high and put that money into something that still has growth ahead of it. If something goes down, it is probably becoming discounted, so sell some of your higher valued positions and put that money into scooping up the discounts. If you maintain a specific percentage of your portfolio in each category you decide to invest in (US stocks, precious metals, foreign stocks, bonds, etc.), you will naturally adjust more optimally. It just takes guts to stay the course. Don’t leave your money to grow longer in any category just because it is hot right now and don’t be afraid to “buy the dip” when things go down.

Anyone who is interested enough to have read this far is definitely interested enough to benefit. Seriously, just click the link. It’s short and it’s right
Text is here and Link is

Text is Financial Book Reviews by Milly and Link is
Financial Book Reviews by Milly

"Who Moved my Cheese?" by Spencer Johnson - Book Review

January 7th, 2019 at 08:05 pm

Although not strictly a financial book, I see Who Moved my Cheese? as the number one most important thing to master in times of financial change, which we will all experience in some form or another.
The book is very short. The audio is only an hour and forty minutes long, so I imagine reading it is even quicker.

Who Moved my Cheese? tells the parable of two mouse sized men in a maze. After years of working through the maze, they have learned that cheese is deposited daily within a certain section of the maze. They moved near the cheese. They based their social life on the cheese. They measured their success in life by their cheese findings. Life was centered on that cheese and it was good. Then one day, it was gone.
The two men reacted very differently.

One man continued visiting the now cheeseless site daily only to find it repeatedly empty. He would sit and complain that life had cheated him. Every day he would ask “who moved my cheese?” Every day, he was miserable.

The other man tried for a few days, but quickly deduced that the cheese they had taken for granted all of those years had moved on so he did too. He wandered the maze for days discovering things he never knew existed. He found little bits of cheese here and there, but had to keep moving on.

Eventually, after a long hunt, he found the new cheese depository. From then on, he made sure the cheese would not catch him off guard. He continued to explore and was always ready in case the cheese moved again.

Where I found it:
My husband checked out the audio version from his work’s library.

What I learned:
Success takes both hard work and some luck. Maybe God put you in the path of a wise mentor. Maybe you got great deal. Maybe you were given a chance that people don’t normally get. Whatever it is, it is never really your efforts alone. Sometimes luck moves the other way. You might get unexpectedly laid off. You might have a medical disaster. So many possibilities are out there that it would be foolish to think any occupational or financial success will last the remainder of your life. When that happens, don’t get caught up on the injustice. Instead thank God for the gift you had, then embrace the new adventure. Choose to by happy, not miserable, and keep trying.

Well, I pretty much gave you the entire book, so if you are satisfied, maybe you don’t need to read it. Although, it is more powerfully told in the book. If you can afford an hour or so worth of your time to make the lessons stick, check it out. I recommend this book to anyone old enough to have cheese or seek after cheese. Mid to late teens and older? I especially recommend it to anyone who is currently in troubled times between occupations or job positions.


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Financial Book Reviews by Milly

"Beating the Street" by Peter Lynch - Book Review

January 7th, 2019 at 07:57 pm

Beating the Street should be required reading to all who wish to pick stocks. The author, Peter Lynch, was the widely successful manager of the Fidelity Magellan Fund averaging about 30% returns for 13 years. Despite his success as a mutual fund manager, he strongly believes that individuals can outperform Wall Street fund managers if they are dedicated enough to be thorough and follow some common sense rules (numbered and in bold throughout the chapters and on

Text is this website and Link is
this website).

One thing that makes Lynch unique in his investment strategy is that there is no overarching strategy. He searches for undervalued companies in ANY sector and therefore had to become somewhat of an expert in all of them. Each chapter tackles a different type of investment (mutual funds, commodities, retail, financial, etc) and gives the formulas and sample numbers specific to that sector.

Where I found it:
It was one of the recommended readings at the end of the book “Rich Dad, Poor Dad”. I requested the book from my local library. I then went to browse the for sale books, turned around and canceled my request when I saw it sitting right there for $0.25.

What I learned:
The main thing I learned from this book is that I am not interested in stock picking. I simply do not have the time to do anything in depth consistently. I could research a few companies here and there, but not with enough depth to make solid comparisons or enough regularity to be nimble in my investments. I am very glad I learned that before working from the other direction for a few years first.

However, if I were to start stock picking, I would use this book daily. Every chapter is so well put together and despite having never read about the stock market before, I felt like I could see the picture.

I actually enjoyed this book quite a bit. For a technical book on stock market analysis it had me laughing out loud quite a few times. It is full of stories and examples, some entertaining enough to share with your spouse and friends.

It is also important that you know this is a somewhat advanced book. I read it very early in my financial journey and it was extremely difficult for me to understand many parts. I didn’t even really understand what a stock was when I started. I read several sections at the computer so I could Google terms that he seemed to think were common that I had never heard before. It is impossible for me to know if I would still feel that way had I read it a few years later, but I imagine the book would be easier for someone with more prior exposure to the stock market.

That being said, I still gave the book away to my 14 year old nephew because he had the same determination I had to read it and understand it. Interest has a lot more to do with who I recommend the book to than age. If you ever consider stock picking, read Beating the Street first!

Text is Financial Book Reviews by Milly and Link is
Financial Book Reviews by Milly

"How to Retire the Cheapskate Way" by Jeff Yeager - Book Review

January 7th, 2019 at 07:31 pm

How to Retire the Cheapskate Way takes the opposite end to retirement planning. Instead of learning hot investing tricks or even old school strategies to maximize your nest egg, this book is all about reducing expenses. As discussed in another post,

Text is a penny saved is 1.57 pennies earned and Link is
a penny saved is 1.57 pennies earned! In it you learn to focus on what you actually want from retirement and find the cheapskate version, which can be achieved with very little money.

How to Retire the Cheapskate Way covers everything from fulfilling side jobs that can supplement retirement, to where to get less expensive medical care and how to navigate Medicare, to extreme frugal living. It is filled with cheapskate strategies ranging from the normal brown bagging your work lunch to the extremes of saving discarded calendars and giving them out as Christmas gifts when the dates line up again.

Where I found it:
I found this one while browsing the very limited financial section of my local library.

My takeaways:
I am a cheapskate. My poor husband has to beg me to throw out everything from old underwear to tangled embroidery thread. Many sections of this book were like candy for me as I got glimpses of people doing things that I would totally do. It gave me more confidence in my cheapskateness and assurance that it is really okay to never spend money on things.

It also helped me feel much more at peace about retirement. Between a social security check and some type of “selfish” employment, I can survive without any retirement fund. It would be way nicer to have more money in retirement, but if I don’t need to have money, money gets a lot less stressful.

Don’t let a financial planner tell you what you need (unless, like Yeager, your potted plant needs a stack of papers to catch the runoff water). You have control of your spending and you don’t have to be conventional.

I recommend How to Retire the Cheapskate Way to anyone who has thought about retirement and worried if they will have enough to make it. Don’t worry, you don’t have to go to the extremes to benefit from this book.

Text is Financial Book Reviews by Milly and Link is
Financial Book Reviews by Milly

"The Mandibles" by Lionel Shriver - Book Review

January 7th, 2019 at 07:11 pm

The Mandibles is actually a novel. It starts a few years after a major financial shock, but before the final blow to the financial system. The family of interest is one with a humble circumstance, but with extended family in richer circumstances. The financial collapse follows much of Jim Rickard’s theories, but I think it is way off on a few details. I have hope and faith that America will be better than this book predicts.

Where I found it:
I listened to an interview with Jim Rickards on Youtube and he said “If you want to know what life is going to be like in 20 years, read The Mandibles”. That peaked my interest because Rickards has such a sensational view of what will happen in the next global financial crisis. I wanted to know what life actually looked like if Rickards were right. Also, it had been so long since I’d read a real novel that I couldn’t resist a financial excuse. I checked it out from my library a week or so later after requesting it.

My takeaways:
If things are headed south with no hints of relief, act before you are desperate. As this book dove into the hypothetical lives of people living in the times that I am preparing for, it gave me many details to ponder. What struggles would I have? How would I deal with the toilet paper crisis? What services could I provide that will always be valuable to support my family? What locations would fare better than my current home?

Since this book is actually a novel, it is more digestible to many people, that is if they can handle a 432 page novel. If you think you might struggle reading Crash Course 2.0 or Road to Ruin, pick this one up. It doesn’t really convince you that there will be a collapse, but at least if one happens you won’t be nearly as lost as everyone else and you will be able to act.

The big negative I have with this book is the language and immorality. If you struggle with casual cursing, you’ll need someone to censor this book first (buy your own copy before editing the library’s). It doesn’t really focus on sex, but the mother figure lives with her boyfriend, there is a prostitute cousin, and the second half of the book briefly discusses that sex is no longer a private thing, just biology and recreation. There is also a heroic suicide where a character sacrifices for the better chance of family survival and a kid turns to criminal actions for food.

Not exactly a children’s bedtime adventure, but definitely an adventure.


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Financial Book Reviews by Milly

"The Road to Ruin" by Jim Rickards - Book Review

January 7th, 2019 at 06:57 pm

The Road to Ruin is written by the head lawyer for the LTCM hedge fund that was hours away from shutting down the global financial system in 1998. He saw everything as it happened and negotiated the response. While everyone else dismissed the occurrence as a once in the lifetime of the sun experience, he wasn't convinced and developed entirely different models using "complexity theory" and captured the financial world as a complex system (physics term).

The Road to Ruin lines out a very dark conspiracy theory laden future for the world. It is written with a lot of scare tactic, but the strategy laid out to protect yourself is relevant regardless of whether all of his predictions play out.

His predictions go something like this: our current economic models are like using Newtonian physics. It all seems nice and relevant until you get near light speed and your math inexplicably ends up an order of magnitude off. We are living in an increasingly unstable complex system, but the current models don’t have a clue how much risk there really is. It doesn’t really matter what the initial trigger is. It may be a gold shortage, debt going bad, or geopolitical tensions. What does matter is that when the trigger happens, all of the other dynamically unstable systems will move, violently.

In order to halt the carnage, the government will be forced to freeze all electronic money and assets (stocks, bank accounts, money markets, etc.) in what Rickards has designated as a financial “ice-9”. Our current militarized police force will keep riots down at all cost. All of the laws and protocols are already set, it is just a matter of waiting for the appropriate market shock.

Eventually, the IMF (International Money Fund) will print its own form of currency (SDRs or Special Drawing Rights) and re-liquidate the frozen assets. That liquidation will come at a heavy cost for the United States as we will lose our global reserve currency status. All of these seemingly necessary actions will play out to the “global elite’s” overarching goals of “world money, world taxation, world order”. There really isn’t anything we can do to stop it, but there is a way to protect yourself. Buy the things that last: precious metals, undeveloped land, and fine art (museum quality only).

Where I found it:
I got a spam email from Rich Dad World with an extremely compelling sales pitch for the book. It looked like information I wanted, so I forked out the $4.95 for a hardcover copy sent to my home. I can’t imagine that being anything more than printing/mailing cost. What they were really selling were subscriptions to their newsletter, but I opted out before the end of the trial period to avoid paying the $99 annual subscription. Here is a

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link to the deal I used to get a hard back hard copy for only $4.95. Just make sure to CANCEL YOUR SUBSCRIPTION before the end of the free trial.

My takeaways:
Jim Rickards laid out the domino effect of each crisis very nicely: Wall Street bailed out a hedge fund in 1998, the Federal Reserve bailed out Wall Street in 2008, the IMF is the only one who can bail out the Federal Reserve in 20??. It is hard to believe anything other than a crisis will occur and that the dollar, and dollar denominated assets such as bonds, will be the ones in trouble.

My money isn’t what I thought it was. I don’t have any money in stocks, bonds, money market accounts, or even bank accounts. What I have are the liabilities of other organizations. If those organizations fail, my money is at the mercy of a bailout that may or may not happen. After reading The Road to Ruin, both digital and paper money feels so fake. It all can be made worthless or seized very quickly.

I actually feel quite liberated by this fact. If money is fake, I don’t need to worry so much about it. If I lose everything (financially) and have to start over, it is really just a blessing that I got to live comfortably on play money in the first place. Only the things that actually matter in life are real.

Finally, if I want to preserve what I have, I need to invest it in things that will always be: land and resources.

I think this one is an important read. Do I think it will all play out to the sensational language of Jim Rickards? No. In fact, I really wished he’d write in less dramatic terms so that he would sound more credible. I think it is important to understand his view so that you can see trends and make your moves accordingly. This book will open your eyes to the larger political forces that I hadn’t seen before.
Much of it was over my head and I had to look up quite a few terms, but it was worth it.

Further knowledge:
I highly recommend listening to Rickards on Youtube (
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James Rickards Project). He isn’t nearly as sensational or technically heavy in person. Only Rickards has the ability to tell you your money that you’ve spend your whole life trying to accumulate will disappear and still leave you feeling peaceful and fuzzy. His voice is so resonant and calm.

Text is Financial Book Reviews by Milly and Link is
Financial Book Reviews by Milly

"The Big Drop" by Jim Rickards - Book Review

January 7th, 2019 at 06:37 pm

The Big Drop is all about preparing your portfolio with a looming financial crisis. First, it convinces you in mathematical, historical, and allegorical terms that it would be surprising NOT to have a crisis. Then, it talks about why investing today (2016) is harder than it has ever been: deflation is the driving force, but inflation is soon to come. Both forces are investigated thoroughly.

Where I found it:
After reading

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The Road to Ruin and listening to several Jim Rickards
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interviews, I was hungry for more. I placed a hold on this book in my local library.

My takeaways:
I felt that this book had even stronger evidence of a coming crisis than either Crash Proof 2.0 or even Road to Ruin (Jim Rickard’s later book) had. It also gave more clear advice on setting up your portfolio. Jim Rickards explains the thoughts and methods behind a "barbell" strategy that is loaded up on the ends as a protection against inflation AND deflation, with cash in the middle ready to pivot positions as needed. So if you put 35% of your investments in hedge funds, private ventures, angel funds, and the like for your deflation hedge, leave 30% cash (and treasury bills) in the middle, you have 35% to diversify into an inflation hedge with precious metals, undeveloped land, and fine art (museum quality only). Both Crash Proof and Road to Ruin spend just a few pages on an possible personal solution.

In about 2.5 years, Jim Rickards wrote 4 books. This one is not the star. It seemed very rushed as if he was just trying to finish it so he could move on to “A New Case for Gold” before the crisis hit and gold prices break out. I found grammar, spelling, and even math typos. If you look at his website, it is sometimes even omitted.

It is also outdated. Yes, it is only 3 years old, but situations have been developing rapidly since it was published. For example, there is a section about the massive oil price drops seen in 2015, but oil prices are now on the rise. All of the principles are true, but you’ll have to hit up Google for current data.

That being said, this book is the best I’ve seen thus far in terms of understanding and setting up a portfolio for today’s dynamic situation.
I recommend it to someone who has already been introduced to Jim Rickards and knows he is brilliant but is looking for more guidance and insight. Otherwise, it won’t have nearly as much authority with the errors. It also should only be read by someone who is willing to fact check as some of the arguments have changed in the last few years.

Further Knowledge:
Look up his videos on Youtube (
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James Rickards Project) with the key words you are interested in. There are quite a few informative interviews.

Text is Financial Book Reviews by Milly and Link is
Financial Book Reviews by Milly

Financial Book Reviews by Milly

January 7th, 2019 at 06:16 pm

Over the last few years, I've been reading a ton of financial books. See below for my summaries, takeaways, and recommendations on over 4,500 pages of reading.

Understanding Money

Text is Rich Dad Poor Dad and Link is
Rich Dad Poor Dad by Robert Kiyosaki

Economical Forecasts
Text is Rich Dad Prophecy and Link is
Rich Dad Prophecy by Robert Kiyosaki
Text is Crash Proof 2.0 and Link is
Crash Proof 2.0 by Peter Schiff
Text is The Road to Ruin and Link is
The Road to Ruin by James Rickards
Text is The Big Drop and Link is
The Big Drop by James Rickards
Text is The Mandibles and Link is
The Mandibles by Lionel Shriver

Conservative Strategies
Text is The Automatic Millionaire and Link is
The Automatic Millionaire by David Bach
Text is How to Retire the Cheapskate Way and Link is
How to Retire the Cheapskate Way by Jeff Yeager
Text is The Total Money Makeover and Link is
The Total Money Makeover by Dave Ramsey
Text is The Millionaire Next Door and Link is
The Millionaire Next Door by Thomas J. Stanley

Real Estate Strategies
Text is Making Money in Real Estate and Link is
Making Money in Real Estate by Dolf de Roos and Diane Kennedy

Stock Market Strategies
Text is Beating the Street and Link is
Beating the Street by Peter Lynch
Text is If you Can - How Millennials can get Rich Slowly and Link is
If you Can - How Millennials can get Rich Slowly by William Bernstein

Financial History
Text is The Big Short and Link is
The Big Short by Michael Lewis
Text is Hardship and Hope - America and the Great Depression and Link is
Hardship and Hope - America and the Great Depression by Victoria Sherrow

Developing your Life Calling
Text is Think and Grow Rich and Link is
Think and Grow Rich by Napoleon Hill
Text is Who Moved my Cheese? and Link is
Who Moved my Cheese? by Spencer Johnson

"Crash Proof 2.0" by Peter Schiff - Book Review

January 7th, 2019 at 06:14 pm

Here begins my more controversial financial journey. Crash Proof, by Peter Schiff, was originally published in early 2007 as a warning bell for the coming subprime mortgage meltdown. Since the meltdown, it has been republished as Crash Proof 2.0 to also include the actual data from the financial crisis and updates for the larger crisis to come. In Crash Proof 2.0 (and its earlier version), Schiff correctly identifies the housing bubble, correctly predicts that the Federal Reserve will print money to buy ourselves out of the crisis, and also predicts that it will cause even larger problems that the Federal Reserve cannot solve by printing. The next crisis is a US dollar crisis.

Crash Proof 2.0 also explains some strategies to protect yourself from the effects and discredits some traditional strategies people think will protect them from the effects.

Where I found it:
I had heard the title several times in live online events with Robert Kiyosaki. When I was fruitlessly looking for a different financial book at the library and came across it, it was an easy choice to pick up. I am so glad I did!

My takeaways:
This book had a large effect on me. Since reading Crash Proof 2.0, it is has become my blog’s primary mission to get people thinking about these types of things and prepare.

I learned a ton from both this book and from the author's

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podcasts about the Federal Reserve and how the macro and political financial systems work. I now know what I am looking for, where the truth is hidden and where the lies are broadcasted. The logic is very sound that we are headed for a crisis, but I differ from Schiff in my opinions of the outcome.

One hope is that although we are pedaling as fast as we can towards a financial cliff, we will see the cliff just before we go over it and will do the painful but necessary things to swerve. If we don’t swerve, I hope that Americans will see the inauthenticity and vote the leaders out. Regardless of what Trump has actually accomplished, just the fact that he was voted in proves that Americans are willing to fight the system. The other hope is that we will adapt and prosper after a major setback just like Americans have in the past. Humans are persevering creatures.

Schiff is much more cynical and who can blame him. His father refused to pay an illegal income tax and died in prison without the medical attention he needed. Schiff knows the hunger of a powerful, oppressive government and fears that hardships will follow the historical precedent, that is, to lead to a larger, more burdensome government.

In any case, it has been exhilarating and simultaneously chilling to watch so many of these predicted dominoes fall at an increasing speed. I initially read this book in 2016 and it is only becoming more and more clear that we are on the path described. If you haven’t already, it is time to move to non-dollar denominated assets such as foreign stocks and precious metals.

This is a deeper book. I read it earlier in my quest for financial knowledge so I looked up quite a few things as I read it to understand more fully. I think most financially interested adults could get the points just fine without looking things up, but to truly understand they might need some research.

Despite everything I just said, it is actually a fairly easy read with stories and analogies to help you understand.

I recommend this book to anyone who has money they want to protect or who doesn’t like feeling lost in a storm of politicized finance. You probably have to be interested in this type of stuff to enjoy it though.

Further Knowledge:
Peter also has a website with frequent
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podcasts. They are pretty bold, contain occasional explicit language, and are very libertarian, but worth considering. These podcasts give you up to date data with current market moves, job numbers, and political speeches.

I'm afraid if you listen to the podcast before the book, you'll think he is either a raving doom and gloom forecaster or a whiner. You will also think he is an egotistical narcissist, but you might be correct on that account.

Please take some things he says (especially the non-economical things) with a grain of salt.

Text is Financial Book Reviews by Milly and Link is
Financial Book Reviews by Milly

"Think and Grow Rich" by Napoleon Hill - Book Review

January 7th, 2019 at 05:33 pm

Think and Grow Rich is based on the concept that thought creates physical reality. It outlines a formula to teach yourself to accomplish any mission you choose. The focus is how to become extraordinarily rich, but you can apply the principles to any deep desire you have whether it be to raise your children well, overcome illness (not necessarily fix it, but overcome it), create an organization, become more patient, or have the marriage you want. If your mission is to become very wealthy, it also has many helpful tips on where to look, and how to get organized.

Think and Grow Rich has a lot of mystic elements to it (sending vibrations to the infinite, etc.), and sometimes makes it sound like you can recite a mantra every day and wish yourself to riches. The vast majority of the book is sound and based on studies of over 500 people who were successful in many different ways.

This book falls into the self-help and motivational categories. It leaves you pumped to accomplish something grand.

Where I found it:
It caught my attention on my father-in-law’s bookshelf. I borrowed it for about a year before finally reading it.

My takeaways:
If I want to accomplish something extra special (such as getting rich, or founding something amazing), I need to train my brain to ponder it in all of my spare moments. I don’t have to know almost anything, that’s what teams are for. I do need to overcome fear, organize a team, and be obsessed.
This book also helped me realize that I don’t actually want to become rich. It would be nice, but not worth devoting my mind to it. I would rather accomplish other great things.

This is a great read for people who have large focused goal in life, especially if it is wealth. You have to be able to enjoy or look past the mystic aspects. If you dismiss the book the first time Napoleon tells you thoughts transmutate into their physical reality, you’re not going to make it past the first chapter.


Text is Financial Book Reviews by Milly and Link is
Financial Book Reviews by Milly

"The Automatic Millionaire" by David Bach - Book Review

January 7th, 2019 at 05:24 pm

The Automatic Millionaire lays out a plan to easily accumulate an egg nest larger and faster than normal, even on a normal or low salary. Strategies include things like decreasing your "latte factor" and putting your extra paycheck on 3 pay check months (if you are paid bi-weekly) into debt reduction,

The best part is, once it is set up, it is nearly fool proof. If you use the tool kit presented in this book, you can automate your saving plan, tip the scales and start building your financial base.

Where I found it:
After discussing some topics I learned from

Text is “Rich Dad, Poor Dad” and Link is
“Rich Dad, Poor Dad” with my sister-in-law, she thought I would enjoy this book. She was so right. She had read the book as required reading for a college home economics class.

My takeaways:
The most boring retirement strategy is actually a REALLY good strategy. Take a turtle approach by getting something consistent and automated, then just glance at it every few years.

There was only one strategy in the whole book that I wasn’t already doing. That also made me very excited for two reasons. 1. It showed me that I am on track to be the millionaires described in the book. 2. I organized my thoughts so I have a resource that I can share with others.

There is nothing in this book that I disagree with. It comes closer to my spending/saving philosophies than any other I have read. This is one of the very few books that you can go all out on. I recommend this book to anyone who manages their own finances (or part of their finances). Get it to them and read as soon as possible!

Text is Financial Book Reviews by Milly and Link is
Financial Book Reviews by Milly

"Rich Dad Poor Dad" by Robert Kiyosaki - Book Review

January 7th, 2019 at 05:11 pm

Robert Kiyosaki wrote this as an introduction to the rules the rich use when it comes to money. *Spoiler alert* many of the financially responsible things you’ve been taught won’t make you rich. If you don’t want to get rich, go to school to get a good job to work most of your life to hopefully retire comfortably. If you want to get rich, you’ll need a whole new set of rules based on the concepts of assets/liabilities and cashflow (net monthly income on an investment). This book will teach you those rules.

Where I found it:
After several financial conversations, my husband’s carpool buddy thought we might enjoy it and lent it to us.

My takeaways:
This book opened my eyes to macro money. Previously I had always focused on spending less and stashing money away. Now I know, if you are saving money, you are losing money. The value of the dollar is going down and if you want to maintain your wealth, you can’t just let your money sit or invest in something cookie cutter or that you don’t understand (such as 401K index funds). I’m going to keep a very strong emergency fund, but I want to get any extra reserved money in action working for me instead of sitting stagnant in a fiat currency and actually loosing value.

This book stresses the importance of working with a team. Stop taking advice from people with “poor” mindsets. You want to surround yourself with brilliant people so that you are always the stupidest person in the room. You’ll be surrounded by people you want to learn from.

I also learned it is possible to have “good” debt, or rather debt that makes you richer. The house you live in is not good debt, but if you can buy an extra house and have renters pay off the mortgage for you, that’s good debt (if you protect yourself).

I recommend Rich Dad Poor Dad to anyone who won’t go overboard. This book has many truths and great lessons, but it could be a death trap if you aren’t prudent. Yes, debt can be a great wealth source. You also could face a negative turn in economic conditions and find yourself in trouble. Robert studied these rules of money since he was 9 and still lost everything he had and had to start completely over. I imagine he understood everything he presented in the book well before losing everything.
That being said, I would give this book to anyone in my family over the age of 12. It is a simple read and goes very quickly, yet is filled with so many “aha!”s. When someone lent it to my husband, it changed my entire financial paradigm and sent me out to learn more. This book was the beginning of my financial quest of knowledge.

Further Knowledge:
The book had the most impact when I also started listening to Robert in live events. Check out

Text is Rich Dad World and Link is
Rich Dad World to play his free online Cashflow game and listen to Robert (sometimes explicit language).

Text is Financial Book Reviews by Milly and Link is
Financial Book Reviews by Milly

Saving on Wrapping Paper

December 17th, 2018 at 06:21 pm

I am baffled by wrapping paper.

Why do people fret over it, then literally throw it away? Talk about throwing away your money!

Why does it cost so much only to run out so fast?

How did our culture get to the point where we are praised for, and socially expected to buy these fancy paper shells to cover our gifts? Wouldn’t you rather the value of the present be put into the part you keep?

This is one cultural ritual that I’m just not into. If I buy wrapping paper, it will be to create a festive decoration, not to cover a present.

So what do I cover my gifts with?

Gifts at home

Well, for my kid’s birthday presents, I’ll sometimes just throw a blanket over it. I’m not super worried about appearances.

My husband grew up with the tradition of “Santa Sacks”. Instead of wrapping the presents, Santa just slides them in large drawstring sacks with the child’s name on them. This makes irregularly shaped gifts much easier, “wrapping” fast, and is reusable eliminating Santa’s wrapping paper year after year.

If you want, you could make up a bunch of little bags of various sizes and let everyone in the family use the reusable sacks.

A favorite blogger of mine, Sarah Titus, says that she will have her kids close their eyes and hand them the gift. They get to hold it and feel it to try and guess what it is. Not only is that cheap, but a fun tradition.

Unfortunately, none of these options work very well under a Christmas tree or for presents outside the house (with the exception of gifting the sack along with the present).

Here are some alternative present wrapping ideas that are free or nearly free, but won’t leave you feeling cheap.

Brown Paper Packages Tied up with String

Great news: vintage is classy.

Who wouldn’t want to open a present that looked like this one I gave out last year?

Elegant, classy, old fashioned, and so dang simple.

I bought the brown paper shipping on Amazon in 2013 on a 30 inch by 765 foot roll for $23.55 + tax. 765 feet was definitely over kill. Its 2018 and the roll is still very full and heavy.

I do recommend getting a 30” wide roll so you don’t end up having to put two pieces around a large box and have an unsightly seam or spend too much effort covering the seam with a ribbon in just the right spot. I just don’t think the 18” rolls will be versatile enough.

Don’t want to buy paper?

Often I don’t even have to use my brown paper because I get enough packing paper stuffed in Amazon boxes. It is wrinkled, but personally I think the wrinkles add a nice rustic touch. Sometimes, I even wrinkle my own paper to get the same effect.

You also might have some other type of traditional paper. If you live near a place that gives out newspapers or newsletters on similar paper, snatch up a stack of outdated ones (maybe ask if they could set some aside for you?).

As for the ribbon, I buy it at about $0.01/yard at thrift stores or yard sales, and save any ribbons I get elsewhere (such as last Christmas). Embroidery thread, twine, and lace all work well too.

Personalized Paper

If brown paper packages aren’t personal enough for you, you can touch it up with some artwork.
Usually this means I turn the toddlers loose with a bag of crayons, but I’ve also made some very classy presents with metallic poinsettias drawn in red and silver or snowflakes drawn in blue.

An alternate method is to cut up some junk mail or scrap decorative paper and add some texture to your present like the one above.

String Art

Probably the most time consuming, but receiver appreciated is when I get fancy with embroidery thread.

I lightly draw a word in cursive with an erasable pencil until I get the right shape. Then follow on top with a thin streak of school glue and lightly press the thread in working only a few letters at a time.

Always stop when you get to a hard angle change such as the 180 degree reversals at the top of the “d”. That way you can let it dry, then pull it snugly in a new direction getting crisp changes.

I’ve collected tons of embroidery thread over the years, mostly from other people’s unfinished cross-stitch projects or leftovers from my own projects. Even if you have to buy embroidery thread, it can be found for about $0.30 at Walmart and will cover quite a few presents.

Boxes and Bags

I also collect “wrapping paper” all year. I save gift bags from birthdays and cute boxes that some products come in.

Bottom line: my presents end up pretty for basically no money and you can do it too!

Have fun!

Self-Fund Halloween with Costumes

December 4th, 2018 at 07:21 pm

My husband and I are fairly divided when it comes to Halloween. He’d much rather buy candy, keep the candy, and stay up with a movie. For me, however, Halloween is all about the costumes! Since we are divided on the topic, I decided to do an experiment and let Halloween fund itself. That way, there can be no complaint.

It turns out homemade costumes sell REALLY well. In fact, I might start making two of some costumes for extra profit. So here’s the formula: make cute costumes, sell them 10-11 months later, use the profit as your Halloween budget for candy and such the next year.

Make sure to get good pictures of all the details when you wear it, especially if it is a children's costume. You just don't know if it will fit next year. When you are finished with your costume after Halloween, clean it up, take pictures of any damage, and put it somewhere you will remember it next September. For me, that is in my Halloween box since I get it out early. You might need to put it with your back to school stuff, or fall harvest type stuff, or set a calendar event for next September telling you where it is (my favorite).

Of course, you can always just list it immediately and let it run all year until it is sold, but then you'll have to be watching your eBay notifications carefully and notify eBay of vacations. You don't want to miss your delivery.

When that magical time comes around, create a quality eBay listing with great detailed pictures. Be very clear which parts of the costume they will be getting. You don't want the buyer thinking they are getting the full outfit if you are only parting with the accessories or be surprised when the Captain Hook wig isn't included. If you list it early enough, you can ask a high price and wait. I like the “or best offer” feature since it shows me what price most people are wanting it at. If it hasn't sold at two or three weeks before Halloween, I’ll lower the price to just above the best offers I received and send a notice to those who sent the previous offers. If it doesn’t sell in a couple days, I’ll accept an offer. I’ve learned from my limited experience that people don’t really go for multiple costume sets (one size fits all adult couples costumes may be an exception). You will probably make the most money listing separately even though it means you will be paying more shipping.

Here are my numbers:

note: visit my

Text is Halloween Costumes for under $1 and Link is
Halloween Costumes for under $1 post for details on the costume creation prices.

Peter Pan (2015):

Captain Hook:
Sell Price= $35.50
Costume Cost= $6.16
Shipping Cost= $10.38
PayPal Cost= $1.33
eBay Cost= $3.55
Total Profit= $14.08

Costume Cost= $0.00
Not for sale.

Sell Price= $9.00
Costume Cost= $0.00
Shipping Cost= $2.64
PayPal Cost= $0.56
eBay Cost= $0.90
Total Profit= $4.90

Peter Pan:
Sell Price= $7.50
Costume Cost= $0.25
Shipping Cost= $2.83
PayPal Cost= $0.52
eBay Cost= $0.75
Total Profit= $3.15

Total 2015 Costume Profit (2016 candy budget): $22.13
Actually spent on Halloween candy in 2016: $19.94

Cinderella (2016):

Grand Duke:
Sell Price= $10.00
Costume Cost= $0.50
Shipping Cost= $3.34
PayPal Cost= $0.59
eBay Cost= $1.00
Total Profit= $4.57

Fairy Godmother:
Sell Price= $27
Costume Cost= $0.75
Shipping Cost= $7.25
PayPal Cost= $1.35
eBay Cost= $2.70
Total Profit= $14.95

Costume Cost= $0.00
Not for sale.

Sell Price= $9.50
Costume Cost= $0.25
Shipping Cost= $2.77
PayPal Cost= $0.58
eBay Cost= $0.95
Total Profit= $4.95

Prince Charming:
Sell Price= $9.50
Costume Cost= $0.00
Shipping Cost= $2.92
PayPal Cost= $0.58
eBay Cost= $0.95
Total Profit= $5.05

Total 2016 Costume Profit (2017 candy budget): $29.52
Actually spent on Halloween candy in 2017: $22.07

Make sure to see
Text is Halloween Costumes for under $1 and Link is
Halloween Costumes for under $1 for more costumeing fun.

Happy costuming =)

DIY Halloween Costumes for under $1

September 5th, 2018 at 12:31 am

Welcome Halloween!

For me, Halloween is all about the costumes. I love costumes so much that when my mom said I was too old to go out trick-or-treating and there were no Halloween activities for me to go to I got creative. I convinced my brothers and some friends to dress up and go Christmas caroling with me on October 31st. My mom gave us credit for creativity and let us go, so long as we weren’t accepting candy. It was such a good experience! We had 4 part harmonies and brightened quite a few doorsteps with “Joy to the World”, “Far Far Away on Judea’s Plains”, and other favorites.

Now that I have toddlers, I can resume trick-or-treating. For the last few years, I have done coordinated themes for the family and have made the costumes from scratch. I have a few strategies to making them super cheap. My family has been winning costume contests for less than $1 per costume (on average) every year with this 6 step process.

First: Choose mostly cartoon humanoids.
Humans are great because they don’t require huge construction pieces. For example, if you were to do an elephant, you'd need a trunk and huge ears. With humans, you are already the right shape.

Cartoons are even better because they usually have one or two iconic outfits making you easily recognizable without adding a ton of identifying accessories.

Second: Choose the idea you already have a base for.
Take a few ideas to your (and your kids) closet(s) to see if you already have the main pieces (a large red shirt, a bluish dress, black pants, or whatever). Choose whichever one is going to require the least scrounging so you can use what you already have.

Third: Plagiarize.
Do a Google Image search for costumes of your character. Think very carefully about your words before you hit "search". You don’t want to end up with a bunch of scantily clad ladies in your search results. Adding the words “baby”, “Toddler”, “Children’s”, or “Kids” at the beginning will usually pull up appropriate costumes. I even add those words when looking for my costume just to keep it clean.

My other favorite is to use Pinterest and search “DIY *CHARACTER NAME* Costume”. Both of these types of searches will show you what the costume looks like on actual people as well as different directions you can go with it. I would have never thought of the jacket I used for Captain Hook nor realized you could use red trimmings (instead of gold) on Prince Charming if it weren't for Pinterest!

Fourth: Plan it out.
Break each costume into its components and see what you need: Prince charming needs red pants (check), a white shirt (check), a belt (not check), and some fancy cords or something on his shoulders (not check). What can I use for the belt and cords?

Do some more searches for those specific parts if you're not sure what you can use (i.e. "DIY Pirate Hat). Then figure out specifically what plan you’ll use. Do you need fabric? Cardboard? String?

Don't stress out if it looks like a lot of sewing. Most of the "sewing" portions can actually be "hot glue" portions. All I was taught about sewing came from sewing pillow cases and pajama pants in Junior High, but I can sew a costume. Costumes don't need to look professionally done and, if you're careful, they might never even have to withstand a washing machine.

Fifth: Gather resources.
Almost any part of a costume can be broken down into cardboard and fabric. Cardboard shouldn't be hard to come by. I usually use cereal boxes for my cardboard because it isn't corrugated eliminating the rough edges, but I've also used junk mail and gift bags for my structures.

The first place I always look for fabric is the thrift store. The key is to see clothes as fabric. Turns out it is generally a lot cheaper to get fabric from rejected clothes than to buy fabric at a craft store. Just walk in looking for a specific color and find the best fabric at the best price you can get. I’ve bought pillow cases, t-shirts, sweaters, and a dress all for fabric.

Actually, even cheaper than the thrift store is if you throw your unwanted clothes in your fabric pile to begin with so you almost always have what you need.

If you get stumped, hit a store that sells fabric by the yard. Often, they will sell as small as 2 inch strips of fabric so the little trimmings can be done cheaply that way.

If you plan 2-3 months in advanced for shipping out of China, you can get some really cheap accessories (tiaras, formal gloves, etc) from Ebay. Otherwise, keep hitting Pinterest and Google for DIY options.

Sixth: Construction.
My biggest advice here is keep moving. As soon as you find the pieces, build what you can while you look for the other materials. I would get stumped on one costume or feature of a costume and move on to the next while my brain kept working out the first.

Now time for the results!
Seriously, I can’t get over how cute these kids are.
I wish I had better pictures, but I’m not sure I’ll ever be able to get my husband in his costume in time for a photo shoot.

Who Framed Rodger Rabbit (2014):

Eddie Valiant:
*Already had the suit/hat
*Handcuffs were borrowed, broken by a toddler, and replaced for $1.07

Jessica Rabbit:
*Already had the dress/make up
*Sewed the gloves from a skirt that was falling apart

Rodger Rabbit:
*Already had the onsie/pants
*Bow tie was made from the same skirt as the Jessica Rabbit gloves (yay matching!)
*Sewed scrap tulle in a ball for a tail
*Made the ears from a hat we already had and a paper plate
*Bought the suspender ribbons for $1.07

Barrel of DIP (wrapped in a blanket):
*Cut off the back of a black t-shirt that we had 3 of (from a career fair) and wrapped him up like a blanket
*Stitched on some thick paper (from junk mail) for lettering

Total 2014 cost: $2.14

Peter Pan (2015):

Captain Hook:
*Already had the pants/boots/belt
*Hat was made from a pair of pajama pants that were in my fabric pile, red spray paint ($2.68), and feathers from my neighbor’s bird
*Wig was borrowed from my parents
*Jacket was a red t-shirt from the thrift store ($0.25), black fabric from last year’s “DIP” and gold ribbon ($2.15)
*White shirt was free from the thrift store (bogo)
*Hook was a bike hook at Home Depot ($1.08).

*Already had the night gown/shoes
*Ribbon was saved from a present and used for the waist and a hair bow

*Already had the wings/tights/sandals
*Shirt/skirt were quickly sewn from an old girls camp t-shirt that was HUGE (in only one nap time)
*Puff balls on her shoes were from coffee filters

Peter Pan:
*Already had the belt/pants/shoes
*Shirt was made from a $0.25 thrift store pillowcase
*Hat was made from the same pillowcase wrapped around a gift bag core and a red feather given to me out of my mother’s craft box

Total 2015 cost: $6.41

Cinderella (2016):

Grand Duke:
*Already had the shirt/pants/belt/shoes
*Sash made from $0.50 thrift store pants
*Epaulets made from an old shirt stretched over cereal box cardboard. The trimmings are yarn and ribbon I’ve had for years.
*Monocle is two doughnut shaped pieces of cereal box with plastic wrap glued in between. The string is some old embroidery thread.

Fairy Godmother:
*Already had the dress/undershirt/shoes
*Hooded shawl made from a $0.25 thrift store dress
*Bow is from a thrift store sweater $0.50
*Wand is a small curtain rod we already had

*Already had the dress/shoes/tiara
*Necklace is a black elastic from a pirate patch (we have lots of them)
*Gloves are sewn from a white shirt in my fabric pile

Lucifer (the cat):
*Already had pants
*Ears are from a black baggie, felt from a creepy monkey stuffed animal (that I had already turned into an airplane pillow), and a broken tiara
*Shirt is a $0.25 thrift store sweater with a grey "fabric pile" shirt stitched on
*Tail is a black "fabric pile" shirt and the rest of the grey shirt
*Bought black eyeliner for $0.96

Prince Charming:
*Already had the pants/onsie
*Shoulder loops are leftover ribbon from the Rodger Rabbit suspenders
*Gold belt/armpit loop/pant stripes are leftover Captain Hook trimmings

Total 2016 cost: $2.46

The Wizard of Oz (2017):

*Already had the pants, shirt, belt, boots
*Hat is made from black worn out shorts and a ripped fitted sheet sewn into a braided cord
*False cloth neck is made from the same ripped sheet and a cord from stained pants
*Straw sticking out of the shirt sleeves and buttons are strips of the ripped sheet
*Scarecrow makeup is the black eyeliner I bought for the cat costume the year prior

Glinda (Good Witch of the North):
*Dress is an old prom dress modified with a corset back (so that I could fit into it again). We happened to have the fabric on hand from modifying the dress back in highschool
*Crown is made from a cereal box painted grey ($0.50 paint), glue and glitter, and an elastic from worn out pajamas
*Wand is a dowel that we use as a lock for our sliding door painted grey with a cereal box star painted grey and more glue/glitter

*Dress was given to us by a cousin who outgrew it
*Basket was found at a thrift store for $1
*Already had the sparkly shoes

Cowardly Lion:
*Lion costume was given to us by a cousin who outgrew it
*Makeup is black eyeliner from the year prior's cat costume
*red bow is from a present we received

*Shirt is my husband's worn out shirt sewn smaller and some white fabric from another old shirt
*Lollypop is another dowel used as a window lock with a cereal box circle painted like a lollypop
*Tights were his sister's when she was little

Total 2017 cost: $1.50

This brings my average cost to $0.66 per costume

Moral of the story: Halloween costumes can be cheap!
…or even profitable. See my other article on

Text is Self-Funding Halloween and Link is
Self-Funding Halloween.

Happy costuming =)

Where to buy your Precious Metal Investments

March 27th, 2018 at 05:09 pm

This is part 4 of Milly's "Precious Metals for Beginners" series. For other parts see:
Part 1:

Text is Why you NEED Precious Metals in your Portfolio and Link is
Why you NEED Precious Metals in your Portfolio
Part 2:
Text is Silver vs. Gold and Link is
Silver vs. Gold
Part 3:
Text is Coins? Bars? ETFs? What form of Precious Metals are right for you? and Link is
Coins? Bars? ETFs? What form of Precious Metals are right fo...

Where to buy Precious Metals
Once you know what you want, now it's time to go shopping in one of the following locations:

Pawn / Coin Shops
This one is, of course, the most fun.  It's like a treasure hunt to drive between several shops looking for gold and silver.  You also have the advantage of seeing what you buy, holding it in your hand, taking it home that same day, and looking at those shiny proof coins that you shouldn't buy.

Probably the best reason to go to a coin shop is you get to talk with people who have been watching the market and touching the coins for decades.  Some of the things I'm sharing with you right now came from talking with these experienced businessmen.

The biggest problem is that you'll end up paying a lot more for these precious metals.  Local shops have a hard time competing with online companies operating all over the nation and even internationally.  Their expenses are much higher and so are their prices. Even if you find a good deal, all that driving also adds to the premiums.

Other problems include low volume and sometimes poor quality.  These are odds and ends that have been sold by individuals.  Some of them are found cleaning out their grandparent's house, some are reluctantly given by people scrapped for cash, and others are flip sold as spot prices increases.  There isn't going to be several rolls of brilliant, uncirculated, matching, rounds. Many have been sitting in a drawer or played with for years.

Also, if you are buying by the ounce, make sure the scale reads in troy ounces.  Troy ounces are slightly larger than regular ounces. Ridiculous, I know.  If you are reading in standard ounces without converting, you won't go home with as much weight as you think you are getting.

One more thing to remember is don't buy anything you don't recognize.  It is hard to know if something is solid or just plated.  I have a 1 oz gold-plated copper Bitcoin round that I bought for under $2.  It looks a lot like gold, weighs 1 Troy oz, but you would need to measure it and do some math to know it is too large to be solid gold.

Company Websites
This is where to get the bulk of your investment.  It is cheap, in abundant supply, and they clearly state the actual silver weight (ASW) or gold weight in troy ounces to avoid confusion.  Not all companies are created equal though.  You will want to look up a list of reputable companies and work from there.  Here are my recommendations and comments:
Silver Rounds:
Text is JM Bullion and Link is
JM Bullion often has excellent specials and even some at
Text is spot price and Link is
spot price!
Junk Silver:
Text is APMEX and Link is
APMEX is usually the cheapest
Silver Eagles: It used to be that
Text is BGASC and Link is
BGASC was absolutely unbeatable in this category, especially when they have "any quantity" sales around holidays. Now, they no longer give free shipping so it depends on the order. Sometimes you get a better deal at
Text is SD Bullion and Link is
SD Bullion, but their checkout process is annoying.
Gold Eagles:
Text is SD Bullion and Link is
SD Bullion, usually has a price slightly lower than anyone's on everything, but with the shipping costs it isn't cheaper unless you are ordering several thousand dollars worth or you have a free shipping coupon.  In the case of Gold Eagles, they are usually cheapest here, even with the shipping.  
Text is SD Bullion and Link is
SD Bullion is a pain because you have to set up an account to check out *grumpy face*. Read the Ebay section below for another great gold buying option.
Anything else:
Text is BGASC and Link is
BGASC is usually the winner.  You'll have to check on a piece by piece basis.
The disadvantage of buying from any of these companies is you have a bit of a run around with payment and slow delivery.  They will usually make you lock in the price with a credit card, but send a paper check in the mail.  You have to wait for your check to get to them, for the check to clear, then for your order to get to you.  It will take a couple weeks, but unless you plan on giving away or flip-selling the coins quickly, it really doesn't matter. Of course, you could just pay with credit card, but it will cost a much higher premium.

Note: If sales tax is added to your order, look up your state laws.  There may be a threshold you can buy that eliminates sales tax on precious metals.  In California buying from a California company (such as you'll have to purchase at least $1,500 in precious metals (not gift boxes or other products) to avoid the investment-crushing taxes.

I actually really like Ebay for precious metals.  It is faster than online stores, you don't have to send in a paper check, often competes in price when you shop with the wholesale dealers, and so far I haven't had to deal with the weird sales tax laws on precious metals.

One gem I've noticed is that APMEX actually lists some gold cheaper in
Text is their Ebay store and Link is
their Ebay store.  A few months ago, they were selling a 1 oz Gold Buffalo for $1,336.49 on Ebay, but at, it cost 1,359.49.  Even SD Bullion was selling Gold Buffalos at $1,343.79 (plus $7.77 shipping).  Before that, their special was on Gold Eagles.  Since I am fairly confident it is actually APMEX (based on high reviews, US location, an old store, and enormous volume of sales), I don't have to worry that I'll get some weird fake in the mail.  In this case, Ebay is, surprisingly, the way to go.

The thing to watch out for is Ebay is the perfect place for conning people.  Check reviews, how long they've been selling, etc.  Again, don't buy anything you don't recognize.  Also, be very careful to read the description of what you are buying.  Make sure your 1 oz coins aren't actually 1/2 oz coins with the same design, your 1 lb of junk silver doesn't have any war nickles or 40% silver coins, note any discrepancies between ounces and troy ounces, and that your rounds aren't just plated copper.  Actually, two of the sample entries in my spreadsheet came from the same suspicious Ebay listing.  They said 1 lb of 90% silver coins, but the coins they list don't add up to 1 lb!  If they list two different things, check with both methods on my free
Text is junk silver spreadsheet and Link is
junk silver spreadsheet to make sure they are consistent.

If you are tempted by some weird mixed lot, PLEASE PLEASE PLEASE use
Text is my calculator and Link is
my calculator to know what you are actually getting.  I've seen so many things that look like great deals, but when it adds up, it is $11 over spot per ounce of silver.  People love to list in standard ounces (not Troy ounces), throw 35% silver War Nickles or 40% silver half-dollars in with 90% silver coins in a "Junk Silver by Weight" listing.  Don't pay silver prices for copper or zinc!

When you are ready to buy, here are some calculators that can really help to compare apples and oranges so you can know if you are actually getting a good deal.

Text is Junk Silver Calculator (Excel spreadsheet) and Link is
Junk Silver Calculator (Excel spreadsheet)

...and if you want one for jewelry or nuggets or a simplified one for non-mixed purity by the weight listings...

Text is Gold/Silver Calculator (Excel spreadsheet) and Link is
Gold/Silver Calculator (Excel spreadsheet)

Seriously, get the money you can't afford to lose out of the stock market, out of dollars, and into precious metals.  Your grandchildren may thank you.

Good luck and enjoy your shiny wealth!

This is part 4 of Milly's "Precious Metals for Beginners" series. For part 1 see:
Text is Why you NEED Precious Metals in your Portfolio and Link is
Why you NEED Precious Metals in your Portfolio.

Disclaimer: I am not a licensed or certified financial coach, planner or adviser, just an enthusiast. Anything I recommend should be personally analyzed and discussed with your financial adviser.

What Type of Precious Metal Investment is Right for You?

March 9th, 2018 at 12:58 am

This is part 3 of Milly's "Precious Metals for Beginners" series. For other parts see:
Part 1:

Text is Why you NEED Precious Metals in your Portfolio and Link is
Why you NEED Precious Metals in your Portfolio
Part 2:
Text is Silver vs. Gold and Link is
Silver vs. Gold
Part 3:
Text is Coins? Bars? ETFs? What form of Precious Metals are right for you? and Link is
Coins? Bars? ETFs? What form of Precious Metals are right fo...
Part 4:
Text is Where to buy Precious Metals and Link is
Where to buy Precious Metals

Which Form of Precious Metal to Buy? - Pros and Cons
Once you've decided to
Text is get some precious metals and Link is
get some precious metals and have decided on
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what type of metal to get, there are a multitude of options what form to get the metal in. Each option comes with it's own advantages and disadvantages.

Buying Non-Physical Metal: Stocks, Futures Contracts, ETFs, etc.
Gold Stocks are just the stocks of companies within the gold sector, usually mining and exploration companies.

Futures Contracts/Options are basically leveraged bets made on price changes of the metal. Any change in the metal's price, whether up or down, is greatly magnified leading to large gains or losses.

ETFs and other investment assets can be set up to track the price movements of silver and gold. Some even offer delivery upon request.

All of these methods are very liquid. While sitting at home, you can click a few buttons, and sell or trade your assets. You can access your wealth rapidly. Buying and selling physical gold requires physical movement and can be much more cumbersome with large price vs. speed trade-offs.

Gold Stocks and Contracts can offer leverage. If you are certain that gold will grow within a narrow enough time window, you can grow your wealth relative to gold, not just the dollar.

Gold Stocks are still just stocks. They may or may not make the anticipated changes in value based on gold price. Sometimes their values even head in the opposite direction as the metal they "should" be tracking.

A single bar of gold can have many contracts claiming it. Not all of the claims can be filled by a physical delivery, the rest will have to be settled in dollars. In the case of rapid inflation, you'll be very disappointed if a check is delivered instead of bullion.

Even if the precious metal is backed up one for one in your name and audited by third parties, there may come a time when people will do anything they can to keep it or seize it. Companies can change policy, governments can change regulations, and mailed packages with precious metal company names on them might be more likely to disappear.

I don't recommend any of these methods as your "precious metals" investment. That doesn't mean they can't be right for some people own, it just doesn't count as owning precious metals in my book. Instead, they belong as part of a well diversified stock portfolio. If you don't physically have it, you own someone else's liability and are at the mercy of their willingness and ability to pay.

Buying Gold and Silver Bars/Rounds
These are simply gold or silver bullion that has been refined and pressed into tokens (rounds) or bars by private mints.

Depending on where and when you are purchasing from, this is usually the most affordable way to buy any precious metal in both price per ounce and buy/sell spread.  You can even get a few ounces of silver at spot price from JM Bullion with
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this deal!  Without the deal, you can still usually find silver specials for $0.69/ounce premium or less over spot.

The potential drawback with this choice is that they are not recognized like government coined gold and silver.  If it didn't come from a well-known private mint, people might not trust it. If you are getting it second hand, maybe you shouldn't trust it either.

If you stick to well known brands such as Sunshine, Silvertowne, and APMEX you should be able to resell your rounds just fine. Expect less demand though.

Buying Junk Silver
Junk silver is a deceiving term for old coins that have silver content.  Most junk silver you'd buy are 90% silver, but pay attention because they can be as low as 35% in war nickles (we needed nickle for the war, so we used silver in 1942-1945) or even 10% in old Mexican Pesos (1957-1967).  Don't worry, all the coins and dates are listed under the "coin" tab in my free
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junk silver spreadsheet so you can just look up the silver content/ weight if you get confused.

In a time of crisis, survivalists have deemed junk silver the currency of a collapse.  I don't think it will become the standard because it is too uncommon, but it is a good idea to have some on hand just in case you need smaller amounts of silver in a barter scenario.  At today's price a 90% silver dime is worth just over $1, so you can easily price things in these lower denominations.

Another major advantage of junk silver is it's recognizability.  Everyone knows what a quarter looks like.  We've been using the same Washington obverse since 1932!  Also, it is very hard to counterfeit something that has been worn from years of circulation.  You will notice if something is amiss in a counterfeit.

We are also accustomed to doing transactions in these coins.  Sure a 90% silver dime is worth more than 10 cents, but you know that 5 dimes is the same as two quarters and that two quarters is the same as a half-dollar (so long as they are all 90% silver).  It is easy to make change with this system.  One exception to the "face value" math is the old silver dollar.  Despite being 90% silver just like the others, Morgan and Peace dollars are heavier than 4 quarters so they have more silver and are worth more.

You have to do more research when purchasing in this category.  If you limit yourself to large reputable dealers who sell quality coins in standardized batches, it simplifies things.  If you only invest in US 90% silver coins it gets even simpler.  Each face value dollar worth of 90% silver US coins contains 0.715 troy ounces of silver (unless they are silver dollars).

Seriously, if you haven't caught on yet, you need my
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junk silver spreadsheet.

Junk silver doesn't follow the ups and downs of the silver market as much as 99.9% fine silver does.  In my observation, regardless of silver price, junk silver trades around $13-$14 per dollar of face value for US coins.  What that means is that if silver spot price is above $19, you might be better off buying junk silver, otherwise rounds would be cheaper.  Sometimes Junk silver even sells at spot price! It also means that these are a poor investment choice since they are likely not to increase in value as much over time.  I can't say this trend will always hold true though.

Because these coins are not "fine silver" you would have to pay a refiner to process them before you could use it in jewelry or industrially.  After adding that cost, the coins are probably more expensive than just buying bars or rounds.  40% silver coins are often not even accepted by refiners, but that could change in a large silver price jump.

Unless you are paying a hefty premium (additional price over spot price) for fancy coins, these are not showroom pieces and have been through may years of abuse.  Personally, that makes them fun. It is a little piece of history and I can sort through them and play with them without damaging their value. If the coins are extremely worn make sure to you get the price in weight, not face value as some silver has rubbed away.

Buying Fine Gold and Silver Coins
Fine Coins are generally 91% to 99.9% (or even 99.99% in the case of Canadian Maples and Australian Kangaroos) gold or silver and are minted by a government and has a monetary face value.

When you hold a silver eagle, it makes all the generic rounds feel like a toy version.  Silver eagles even feel heavier in my hand.  I know it is just an illusion by pressing them a little wider and thinner, but it still feels nice.

Another benefit of coins is their weight and purity is guaranteed by the sovereign government.  Of course, reputable private mints are defending their reputation too, so I wouldn't worry about fraud.

In general, government minted coins are easily recognized globally and have very liquid markets.  The American Silver Eagle is the most liquid silver coin in the world. The Canadian Maple is the most liquid gold coin. You could sell them at any pawn shop on any day they are open.

Because these are coins, they have years stamped in them.  This adds an additional collector value to the coin.  This is especially true of Chinese Pandas since each year has a different adorable picture of pandas.

More of a note than a disadvantage, but the face value usually doesn't mean anything because the value of the metal is worth so much more than the face value.  The most extreme example I know of is an America the Beautiful 5 oz silver "quarter".  With a silver spot price of $16.56/troy oz, this coin is worth 331 times it's face value!

The premiums are very high on Silver Eagles, currently about 13%, even on large volumes.  The generic rounds are only about 3% over spot.  For gold, however, this is not the case.  A Gold Eagle premium is only 2% and the cheapest bar is still about 1%.  I'd pay the extra $15ish and get the coin.  It will probably be much easier to sell in the future.

Buying Collectibles: Nuggets, Numismatic, Proof, Graded coins, etc.
Nuggets are chunks of precious metal in the raw, as pulled out of the earth.  Most of the gold and silver mined is in tiny particles encased in rock.  They get it out by grinding and chemically removing the rock.  Nuggets are rare and often found with metal detectors by hand.  The larger the nugget, the exponentially rarer the find.

Numismatic coins are rare coins such as extremely old coins, coins with low mintages, or errors.  The value is primarily determined by the quantity in circulation, not age.  Check the mintage on the years and mint marks carefully. One year might be rare while another year is common.

Proof coins are the normal coin design, but the blanks and dies are both carefully cleaned and polished for a superior finish.  They also struck at least twice to ensure a well defined design.  These coins are absolutely beautiful!

Graded coins aren't inherently anything special, but when people get a hold of a seemingly flawless coin, they may send it to a company, such as PCGS or NGC, to have a professional rate its perfection. If the coin is certified at a high standard, it increases it's collector value.  If not, the cost of grading it exceeds your gain in value.

These coins are collectible, interesting, and often stunning in appearance, a good choice for display or jewelry.  They hold their price even in market lows because much of their worth isn't just derived from the metal content.

When dealing with unique pieces, things become less standardized. Go figure. It is easy to get confused or tricked. Where do they come up with their market values? Are they telling you the weight of the piece or the weight of just the gold portion? Are you sure they are talking in troy ounces not standard ounces?

For a little extra help, see my free
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Gold Nugget Calculator. It can be used for gold or silver nuggets, jewelry, and even coins (if not using face value).

If you are looking to invest in precious metals, put your money into the metal, not baseball collections.

Very rare museum quality pieces (of any type) aren't a bad idea for a tiny portion of your investments, just don't get confused and include them in your "precious metals" allocation.  They belong in "fine art". (note: Jim Rickards recommends 5% of your investible assets in Fine Art)

The cost of these fancy coins far exceed the cost of the metal within them.  You'd get a lot more precious metal and exposure to market gains, if you just bought the everyday bullion.

The Bottom Line
All of these types of metal have their own role. It is nice to have non-physical metals for liquid and leveraged positions. It is nice to have bars/rounds because you can get the most metal for your dollar. It is nice to have junk silver because you can get small fractions of metal (and a little piece of history) cheaply. It is nice to have coins because they have the most confidence (and in the case of gold is still very close to spot!). It is nice to have collectibles because, well, they are fun.

The important thing is that you know what type of role you are trying to fill with your purchase and get the right form (or mix of forms) of metals to match your needs and definitely don't invest in anything you don't understand.


Compare deals and evaluate premiums with my precious metals spreadsheets:
Coins and Rounds:
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Junk Silver Spreadsheet
Nuggets and Jewelry:
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Gold Nugget Spreadsheet

This is part 3 of Milly's "Precious Metals for Beginners" series.
For the next part see:
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Where to buy Precious Metals
For part 1 see:
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Why you NEED Precious Metals in your Portfolio.

Disclaimer: I am not a licensed or certified financial coach, planner or adviser, just an enthusiast. Anything I recommend should be personally analyzed and discussed with your financial adviser.

Financial Benefits of Decluttering

February 26th, 2018 at 06:15 pm

When getting your act together financially, you probably wouldn't think to put decluttering on the list.  Sure, decluttering feels nice, but does it have anything to do with finances?  YES! There are so many benefits to clearing out your crap that it's worth going through the whole house.  I can think of 8 quite serious financial benefits:

1. Sell your Junk

The most obvious way to have a financial gain while decluttering is by selling your junk.  I use Facebook sale pages or Craigs List for any item that is either common or large (such as generic clothes or furniture).  I use Ebay for more unique items like homemade Halloween Costumes, vintage computer games, non-local college paraphernalia etc.

One thing to note is that many items are simply not worth your time.  It might take 3 hours to photograph the item, put together an advertisement, and answer endless questions for iffy buyers.  Then you might have to rearrange your schedule to be home for them to come get it or package it up and take it to the post office during their operating hours.  If the item was only $5, maybe you should just put it in a bag with other stuff and take it to a donation center.

Solution: I've never hosted a yard sale in my adult life because my city is a pain about it, but if you are doing a lot of items, yard sales are a great way to move smaller items that people might not drive out for.  Despite taking a lot of time and effort, it is still much easier that listing a bunch of small items separately.

2. Donate your Junk

Don't worry!  Even donating your items can directly return you money.  If you donate to a charity such as Goodwill, you can write off the items as tax deductions!

They say a penny saved is a penny earned, but I've calculated it out to

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1.57 pennies earned after tax savings.  If you jump through the hoops to deduct those items, you are saving about a third of the current value of the item.  Example: donating a blazer valued at $6 reduces your adjusting tax return income by $6, saving you $2 in taxes.  Pull a whole stack of clothes out of your closet and that could add up fast!  The Salvation Army put together a generic
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price guide that will help you determine the value of your donations.

Of course with anything government there's paperwork: If the year's cumulative donations are under $500 in value, than everything is simple (double check me, rules tend to change over time).  Just make sure to get a receipt when you drop the items off so you can have proof for audits.  Once it is over $500, you need to document more information such as how the value was determined (independent appraisal?, comparing to other prices in the thrift store?).  Make sure to get your paperwork done at the time of donation! (
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more info)

This is all only applicable if you are itemizing your deductions. With the new increased standard deduction, this will apply to many fewer people. Is anyone else bothered that the standard deduction is increasing? Sure it is extra money in my pocket, but for most people, it eliminates charitable incentives by just handing it out to everyone. Okay, my rant is over.

3. Eliminate future Junk

Once you've gone through and purged your belongings, you'll become much more picky about what you buy.  I've personally noticed that the more crap I throw away, the less crap I buy.  Now, when I see that fun, cheap, non-necessity in the store, I see myself throwing it away in my next purge.  No longer tempting.

The bonus benefit to this one is you'll also see an increase in the quality of your products.  Example: I used to feel like I needed a new wardrobe.  I had so many worn out clothes from high school and almost nothing without pit stains.  Once I started going through it and clearing things out, I realized that I have plenty enough good clothes, they were just hiding with the old ones.  It's a work in progress, but eventually I'll get rid of all my "meh" shirts and only have "yes" shirts.  Basically, I'll get a "new" wardrobe without spending a dime, or at least if I buy something I'll know what I actually need.  Moral of the story: if you purge your crap, all you'll have is quality and you won't feel like you need to buy.

4. Open up your space

How much does your home cost per square foot?  Mine is less than most because I live in the middle of nowhere, but even my house costs $72 per square foot BEFORE you add in all the interest payments and property taxes over the years.  Let's say you clean out 10% of your space.  You've effectively just saved tens of thousands of dollars on a larger house!

If you currently rent a storage unit, there are some obvious savings potential there. Even without a storage unit, if you clear out enough space, maybe you'll consider downsizing your home or monetizing some of the space by taking in a tenant.

5. Know what you already have

How many times have you bought something only to discover you already had what you needed?  How many opened bottles of the same type of glue do you have?  Ever buy something that you know you already have but couldn't find it? Decluttering gives you a chance go dig through all of those piles and know what you already have and where it is so you don't have to hit the stores as often.

6. Shopping in your Junk

The best place to shop is your closet.  This week, a friend asked me when I start my Christmas shopping.  I gave the quick answer of "last year", but the truth is I don't really shop.  I scrounge and squirrel away.

Most things I give away cost $0-1.  I am not above re-gifting items that would become clutter at my house and love re-purposing old things. For example, I made an old pajama shirt into a toddler apron for my niece and I made string art out of some scrap particle board covered by a poor fitting t-shirt with finishing nails and embroidery thread. Just this month I turned a polo shirt into a gym bag and some dog fencing into a tomato trellis.

7. Reduce country's consumption

When you give away or sell the decluttered items, you are redistributing items to people who want it more than you do. If all items were redistributed optimally, we would buy much less as a whole.  This leads to less consumerism, stronger savings, greater physical investment, and actual growth (despite flawed GDP theories).  In other words, this is how you make America great again.

8. What goes around comes around

When a friend thinks of me, I'm much more likely to think of them.  This isn't because I require other people to give me gifts before I'll return the favor, but because their action created an association between themselves and looking out for other people.  I bet as you find thoughtful items to pair your family, friends, and associates with, you'll inspire others to do the same.  Don't be surprised when you become the recipient.

Even more than just getting things from your associates in a circle of giving, donating actually boosts your income! It sounds backwards, but there is statistical evidence to back this up. Arther C. Brooks set out on a quest to prove that earning more leads to more giving, but kept getting what he believed to be erronious results:
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giving leads to more earning. My guess is this has something to do with the fact that giving makes you happy which leads to interview accpetances and boosts job performance. In any case, what a great excuse to donate!

Basically, as backwards as it sounds to the usual "frugal hoarders", decluttering is one of the best ways to get started on a frugal life!

Resources to Help You!
Not sure where to begin? Here's 
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Heasly's list of places to purge for her "40 bags in 40 days" callenge.

Having a hard time getting rid of "just in case" items?  You could try the 
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20/20 rule by "the minimalists" or your own modified version: If it costs less than $20 to replace and can be found within a 20 min drive, just replace it when you need it.

Don't know whether to trash, donate, or sell your finds? 
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Here's a guide by "clean and scentsible".

Also from clean and scentsible:
"If you do not love it, use it, and need it, it should probably be in the garbage or donate pile.  If you are having difficulties getting rid of things, you may want to read 
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this post for some helpful tips on 
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overcoming decluttering paralysis"

Good luck friends!

If what you found was useful or interesting, please comment, pass it on, and/or pin the image above!

Text is Follow Milly on Pinterest! and Link is
Follow Milly on Pinterest!

Note: Any financial choices you make are yours alone.  I cannot be held responsible for any results or legal implications of your choices.

Why your Budgets FAIL (and what to do instead)

February 22nd, 2018 at 08:31 pm

Are you in a constant battle with your budget? For the first two years of my marriage, I was too. We wanted to be financially responsible and were taught that financially responsible people kept budgets. But budgets are hard.
Luckily, there is something much more effective than a budget to keep you and your family on the right financial path! Let's start by learning why budgets don't work:
Why Your Budgets Fail:
1. There is no correct allotment
This is probably the main reason people fail.  We tracked our expenses for months.  We figured out how much we spent at grocery stores, gas stations, bills, etc.  We set our budget to those amounts.  We failed, repeatedly.  
The reason being that if the allotment was too low, you struggle, run out, then fudge.   If the allotment is even a little high, you feel like you don't need to try in that category and you actually get worse.  When you see an extra $20 in your "bills" fund you think about what monthly payments you could get that cost $20 or wonder how much more comofortable the house would have been if you set the AC one degree cooler.  If you see it in your "groceries", you relax a little and buy a little nicer meat or more cottage cheese (probably overspending the $20).  If you see it in your "apparel" budget, that cute pair of shoes is not only irrisistable, but "deserved" as a reward for your financial prudence.  You get the picture.
No matter what amount you choose, in some months you will have extra and in some months you will struggle.
2. Categories are confusing
To start off, you've got to set up clear, mutually exclusive categories.  Is nail polish "toiletries", "apparel", or the "wife's discretionary"?  Is the soda you buy for a party "groceries" or "fun"?  It is a personal choice, but you need to think it through ahead of time.

3. Split receipts are a pain
If you buy your kid some socks at the grocery store, does it add to your "grocery" expenses or does it get split out to your "apparel" category?  Costco or Super Walmart receipts are particularly troublesome because just about any type of expense could be on it.
4. You have to break the budget to save money
Last year, we bought a welder and all the accessories from a friend at a crazy good price.  We had been wanting one for years and even have a money-making opportunity that requires one.  We expected to pay more than twice the price we paid.  Had I been on a strict budget, I surely wouldn't have had the required $600 in my "tool" category.  I had just bought some other used tools for my husband's Christmas present.  
When there are great sales on things you plan on getting, you need the financial flexibility to act.
5. Budgets break your soul
What is the purpose of budgeting?  Improving your financial security.  Budgeters will never get there.  You can't feel safe if you are constantly checking your balances and trying to get ends to meet until your next deposit.  
I feel so strongly against constantly checking your balances that when I actually was low on funds during college, I haredly ever checked my bank account. Instead, I would only buy things that I needed regardless of whether or not I had the money. Maybe that was reckless, but I felt it was okay because it had a definite end point as I wouldn't be a college student forever. Because I convinced myself every dollar was my last dollar, my dollars stretched like never before and I actually began to build a sizable buffer underneath my expenses. Yes, sometimes I ate "bread sandwiches" or "salsa rice" or even "salsa-supplemented-with-chili-powder rice", but not once was my bank short the funds needed to cover my credit card's auto-pay-in-full. To me, this felt more free than constantly worrying about how much money I had. No one wants to feel trapped.  It isn't fun, it isn't healthy, and it isn't worth it.

What to do instead:
For the last 5 years, we have used an alternative method:
tracking and analyzing expenses.
Roughly twice a month, I review my receipts, bank account, credit cards, PayPal, Amazon, and any cash purchases I've noted.  Every item on the receipt is categorized and entered into my

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annual financial spreadsheet.  I literally enter how much I spent on eggs in a separate line from my lettuce. My
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spreadsheet then crunches all the numbers and spits out everything I might wonder about our spending and saving habits. It takes a little time, but I can usually get through it in a half-hour and I don't have to think about it constantly like a budget.
I review that data briefly whenever I wonder about it and in depth annually. Every category is compared to the previous year's averages where we can easily spot any "lifestyle inflation" we've accidentally given ourselves. Usually just knowing you've spent more on apparel than normal curbs the issue. I also double check to make sure our over all spending increases don't out pace our take home income increases. To me, that is the most important thing to consider.
We currently live off (not including giving or investing) 50% of our take home income. That is a goal I've worked towards and am so happy to have achieved. I don't want to let it slip.
I didn't solve the problem with identifiying categories, but I have practiced enough years that it is easy for me to search my heart and know the purpose of each item. I think it is actually a benefit now as I force myself to acknowledge that some electronics are "home" and others are "toys".

There are so many advantages!
1. I am not trying to target a specific number with each category which really realieves stress and opens up flexibility for smart deal shopping.
2. I can focus on continual improvement as I try to lower (or maintain despite inflation) each category's monthly average.
3. I have a record of all purchases and dates.  I can filter for specific items and see exactly how many boxes of goldfish I buy annually.  This helps me know how much I can buy without worrying about expiration dates.  I can figure out exactly how much a baby shower cost me by summing the various items.  I can look back and know by my hardware purchases when it was that my father-in-law came over last year and worked on the project car.  I can use filters to know roughly how much I spent in sales tax (for tax return purposes).  This data captures so many things!
4. I can easily figure out good deals.  Since I have the spreadsheet on my phone, I can quickly look up while in a store if I got a better deal on oatmeal at Winco or Costco.  For items that I like to compare, I add information in a unit price section so it is even easier.
5. I can crunch the numbers any way I imagine. I am not stuck with some app that has a thousand features, but won't accept formulas as prices or that won't let me search for all entries with the word "cereal" or won't let me consider my expected income (standard paycheck) vs. bonus income (includes overtime, bonuses, side gigs, etc). I am a control freak and this is the ultimate control.

What we still budget
There are only 2 categories that we still budget out: giving and investing.  The reason those are still in the budget is because they are more like a quota.  We want to spend the full amount each year.  For those unique categories we try to increase the expense, not decrease it.
For those two “budget” items, we’ve found that is by far easiest to stick to your budget with automation. Make sure to have a percentage of your paycheck deposited into your 401k automatically.  Many charities have the ability to accept direct deposits as well.  If you can, set up your direct deposit allotments to put either a dollar amount or a percentage into separate banking accounts for savings, giving, investing, or any other allotment you never want to shortchange. Actually, just go to your library this week and check out
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The Automatic Millionaire by David Bach. He'll walk you through all the what's, why's, and how's of a conservative way to accomplish goals and get rich over time.
There you have it.  Don't fight the system. Ditch the budget and do something that actually works!

Text is Download Milly's Free Spending Tracker Here and Link is
Download Milly's Free Spending Tracker Here

Disclaimer: I am not a licensed or certified financial coach, planner or adviser, just an enthusiast.  Anything I recommend should be personally analyzed and discussed with your financial adviser.

What to Expect from the S&P 500

February 13th, 2018 at 07:39 pm

Many people are counting on an 8% compound interest to get them to retirement. Dave Ramsey’s book “Total Money Makeover” even claims a 12% return! Where on earth did these numbers come from? Are they at all a reasonable expectation?

What is the Long-Term Return on the S&P 500?
To start, I plotted the S&P daily opening values since 1871 (when they started tracking) and added a trendline. I choose to use a trendline to back out all of my expected returns so that all of the data within the range count towards the return. Because the odds of buying at the beginning and selling right at the end are astronomical, I think this trendline method gives a better idea of what people actually experience.

Looking at the equation of that trendline, I could conclude that the S&P 500’s annual return is 4.49%. That is a lot less than 8%.
As you can see though, we need to look a lot closer at the data to see if it actually matches in the trendline. With this zoomed out view, it is impossible to tell if the first 100 years are skewing the trendline down away from the 8% people expect. Because we are seeking the exponential return, a logarithmic graph should show us the data more clearly.

There! Now you can actually see the data. As suspected, the old data is very different from the new data. We are going to have to consider this data in pieces based on historical changes.

I’m going to walk you through several historical periods to get you adjusted to what is historically normal. If you want to just skip to the current period, be my guest and scroll down to 1995.

1871-1914: Industrializing World before the World Wars

During this exciting 38 year period where we experienced serious industrial expansion, urbanization, and erected the brand new Statue of Liberty, the annual S&P 500 return was only about 1.9% growth. Yup, definitely skewing the data down.

1914-1945: World Wars and The Great Depression

During this 31 year period the overall return was only about 1.32%: -1.1% during WW1, 2.14% between the two wars, and 4.83% during WW2. I find the cycle between the wars particularly important to look at as we are currently going through massive build ups followed by devastating crashes. The difference here is that we were still on a global gold standard so the recovery didn’t involve a boost from printed money (inflation).

1945-1971: Tense Global Cooperation

This 26 year period the US experienced several civil rights movements and the major world powers fought the cold war and indirect wars though Korea and Vietnam. This is our first period to yield high S&P 500 returns at 8.9%! Yay!

1971-1995: Goodbye Gold Standard

In my opinion, this is the most important dividing line in our financial history, the flight to

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fiat currency. In 1971 we got the "Nixon Shock" and the US Dollar decoupled from gold. Since 1971, the very essence of what money is has changed. All major currencies have abandoned any physical backing and floating exchange rates emerged. I don’t know that we can really count any data prior to 1971 towards identifying trends. (see
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fiat currency).
During this again profitable period of 24 years, the S&P 500 grew by 8.5%, but it lost some ground in the monetary policy switch and shifted to the right before resuming the growth.

1995-Present: Federal Reserve Induced Oscillation

In the piloting world, there is something called PIO, pilot induced oscillation. This is caused by a pilot pulling up, but the airplane delaying its response. The pilot’s instinct is to pull up harder, but when the plane finally starts responding, it is too hard of a pull, sending the plane towards a stall. To correct the error, he or she will quickly nose over and try to dive. Again, the delayed response of the plane intensifies the action as it convinces the pilot to keep pushing down. If the pilot doesn’t fight the instinct to recover, the rollercoster motions will increase in intensity until it suddenly stops and the plane lay in pieces on the ground.

I fear we are experiencing the same phenomenon in the financial world:

Since entering this increasing rollercoaster of crashes and bailouts and bubbles, we’ve dropped back down to, a 4.4% annual return on the S&P 500. That’s just under the all-time historic average of 4.5%, but this time we aren’t gold backed.

That 4.4% might actually be a little high. The graphed data includes 2.5 full cycles: three ups, but only two downs. The next bear market will push the trendline down.

Now I understand that I'm looking at much less data now making the numbers somewhat cherry picked. It is over 20 years though. 20 years is definitely significant in a 40 year career path. I don't really care if I can count on a 100 year return of 8%. I don't plan on working 100 years!

I can't use more data because things probably won't work out the way they did over 20 years ago. Can we really pull numbers to predict the future from before Bill Clinton and Greenspan (former Chairman of the Federal Reserve) started playing with money? I'm worried we can only really expect the 4-5% overall return until money game shifts again. When it does shift, who is to say it will be back to the 8% we got for only 50 years out of 147 or the 8% we got for only 24 of the 47 non-gold backed years?

Unfortunately, one of my hypothesis is that it will actually be a lot worse. If you recall the PIO example, it doesn’t just oscillate forever, expect a catastrophic collapse:

Dotcom boom and bust
With the excitement of the internet, new companies popped up all over and investors poured money into anything ending in “.com”. No one cared how much a company earned, only how many views they received. The Dotcom bubble had formed and the S&P 500 spent 5 years shooting up at a rate of 24.8% annualized.

Eventually, it became clear that many of these companies had failed business models and were going bust and there was a major sell off. The S&P 500 plummeted for two and a half years at a rate of -18.0%. The Federal Reserve slashed interest rates and encouraged investing.

Housing Crash
With the slashed interest rates and incentives, it became very easy to buy a home. With the extra buying of houses, the sticker prices of the houses increased. At first, the increased price simply offset the decreased interest rate, but then people started noticing trends and got greedy. With the house prices shooting up, people started buying houses and using them as banks. Some would buy as big of a house as they could with special interest only loans. The assumption was that they would sell it in a few years for much more than they were in debt for and turn a huge profit. Others took out home equity lines of credit on the appreciation they received on the home they already owned. With this buying frenzy, prices continued to shoot up, and paper wealth abounded. The S&P 500 again shot up for 5 years, this time at an annualized rate of 11.0%. People had thought they found the secret to unlimited wealth. That is, until some people started realizing they couldn’t actually afford the payments that the bank was so willing to sign them on.

Banks began to receive house keys as people walked away from their mortgages. As the buying frenzy reversed, house prices plummeted, destroying the crazy dream of living off home appreciation and putting many families “under water” owing more than their home was worth. The S&P 500 dropped at an annualized rate of a whopping -38.5% for one and a half years. Again the Federal Reserve slashed interest rates, but this time to unprecedented levels. In the dotcom aftermath the interest rates were slashed from around 5% to 1-2%, but this time they went all the way down to 0.1% for years. In addition, the Federal Reserve bought up securities, increasing the money supply.

Dollar Crash?
Again the Federal Reserve is fueling a crash by creating a “bailout bubble”. Each one getting larger than the one before. The interest rates stayed at experimentally low levels low for a full decade. For some reason, people are again thinking this can go on forever and the S&P 500 has grown at a rate of 12.1% for almost 9 years. Investors have become complacent knowing that the Fed refuses to let the market slide and will bail them out in the case of disaster. That’s what it did all through Obama’s administration, but who knows where the new Federal Reserve Chairman and Trump have their priorities: normalizing or market stability?

I worry the next crash will actually break confidence in the US Dollar. I don’t see any way the Federal Reserve can avert the oncoming crisis. I see two options:
1. They could continue to raise rates and shrink their balance sheet (sell the securities acquired after 2008). This would send the stock market into a crash and increase the price of servicing the debt to levels we can’t pay, causing countries to drop the dollar. The dollars would all find their way back home and become worthless.

2.They could reverse rhetoric and start easing to save their struggling economy, but sacrifice the dollar in inflation, also triggering countries to not want the dollar or dollar securities.

Luckily, I am not the one choosing the options. My hope is that there is a third option that those in power will come up with once they notice the cliff they are running towards.

It is hard to know what this will do to the S&P 500. The hundreds of years of data is somewhat useless since we have never had a market like the one we have today. My personal guess is it will crash, then grow but mostly due to inflation.

It all comes out in the inflation wash
If you read my explanation of
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what inflation really is, you understand that we are really hovering around a
Text is 5% inflation and Link is
5% inflation! In other words, unless the stock market starts beating its 4% growth, your gains are just adjusting your money to inflation (or pent up inflation). If you have a mixed portfolio with bonds, you're losing to inflation. By all means, that is much better than losing the full 5% to inflation, but it does make retiring a challenge.
I re-ran my retirement numbers with the following grim assumptions:
1. Any money I gain in the stock market will be negated by inflation
2. Any pay increases you gain will be negated by a higher cost of living and taxes

In effect, it is as if we just kept replaying today over and over until retirement.

The good news is with these assumptions, we expect to be millionaires in today's money before I'm 50! The bad news is my husband will have to work till he's 69 before we can retire. Luckily, I should eventually be able to help him out, so I doubt it will really be that long. The numbers are still sobering though. Even maxing out our 401K ($18,000/year) isn't necessarily going to cut it.

If you want to run your own numbers with these depressingly conservative assumptions to see what could be ahead,
Text is here's a simple and free spreadsheet and Link is
here's a simple and free spreadsheet.

Bottom line:
If anyone is telling you long term rates (especially Dave Ramsey's crazy 12% expectation), ask how they derived those numbers. The data can be cropped, skewed, and made to tell anything you want. When it comes to something as important as retirement planning, you've got to do your own thinking and figure out what makes sense to you (and don't forget inflation!).
Good luck!

Disclaimer: I am not a licensed or certified financial coach, planner or adviser, just an enthusiast. Anything I recommend should be personally analyzed and discussed with your financial adviser.

Bitcoin vs. Gold

February 7th, 2018 at 09:43 pm

The 2017 Bitcoin Frenzy has led to quite a debate on which is better, Gold or Bitcoin? Some are even calling Bitcoin Digital Gold. I see two ways of addressing this question: Which makes the better money and which makes the better investment. Let's start with the first question:

Which is the Better Money? Bitcoin or Gold?

For a currency to work, the quantity must both be fairly low and fairly stable.  If the currency is too abundant, then huge quantities would have to be used for everyday purchases.  If the quantity fluctuates too much, it becomes difficult and speculative to price goods or form contracts.

What makes Bitcoins usable is its elegant, indestructible self-regulation.  Bitcoins cannot be created at the whim of a computer developer.  Actually, no one even knows 

Text is who created it and Link is
who created it.  It isn't regulated by a single party, but by the entire system itself (decentralized) and the computer code is open source for all to inspect.  You can't hack your way to Bitcoin creation because the way to create Bitcoins is essentially using your computer to figure out numbers that fits an increasingly difficult sequence.  That number is part of the coin.  If you and your computer can figure out a usable number, then you have legitimately mined the coin.  You can't modify the structure, because it is continuously validating itself and checking for problems.  Because the release of bitcoins is asymptotic, there will never be more than 21 million coins released.  The supply is scheduled (by an adaptive level of mining difficulty) and limited.

Although Bitcoin itself is scarce, there is an infinite number of other cryptocurrencies that can be created and popularized.  Over a thousand types have been created already!  Litecoin, Bitdeal, Beatcoin, BipCoin, Bit20,  BitBTC, Bitcloud, Bitcoin 21, Bitcoin Cash, Bitcoin Planet, Bitcoin Plus, Bitcoin Unlimited, BitcoinDark, BitcoinFast, BitcoinTX, Bitcore, Bitcurrency, Bitdeal, bitEUR, Bitgem, bitGold, Bitland, Bitmark, BitSend, BitShares, bitSilver, BitTokens, bitUSD, BTCGold, BritCoin, Bytecent, and Bytecoin are all trading on the market.  Some are bringing in millions or even billions of dollars.  For this comparison, we will only consider Bitcoin itself and make the VERY poor assumption that if Bitcoin were to be used as a currency, it would be the only cryptocurrency to do so.

One of my friends humorously stated that gold is so rare that you can buy it at any pawnshop in any city.  It is true that there's a lot of gold out there, roughly 
Text is 165,000 metric tons and Link is
165,000 metric tons of it (
Text is what that looks like and Link is
what that looks like).  It is still scarce though because the available gold supply grows more slowly than the demand for it.  Unlike Bitcoin, there is no substitute for gold.  No other material in existence has the same useful material properties (nearly impossible to corrode, extremely malleable and ductile, efficient at transmitting heat and electricity, and very pretty).

If there is a sudden breakthrough in lowering mining costs, especially if it allows us to mine deeper or in the ocean cheaply, then we could see a supply jump.  That would lower gold's credibility as currency, but I think the yellow metal will always be aggressively sought after.

Winner: a protected Bitcoin

I know, it's a funny word.  Fungible means non-unique.  If someone pays me a dollar, I am not worried that they gave me a 2016 dollar instead of a 2014 or a serial number ending in a lucky 7.  For something to work as currency, each piece must have a standardized value and not require a collector's evaluation.

Bitcoins are identical.  Sure the strings of numbers vary to identify the coin, but the users don't know what those strings are.  They are hidden within the code.  All the user sees is a quantity on the screen.  It could be any Bitcoin, or more likely, fractions of many Bitcoins.  By lacking a physical form, I don't think you can get any more fungible without also being easily counterfeited.

Gold is a little more collectible.  People are more willing to pay top dollar for rare or flawless coins, nuggets, and intricate jewelry.  When that happens though, it isn't being used as money.  Those coins and trinkets are effectively outside of the money supply and are a product of themselves.  When gold is melted down, refined, and made into uniform pieces, fungibility is not a problem.  Right now though, gold tends to be special and people care what form it is in.

Winner: Bitcoin

It us useful to have a currency with enough precision to represent the finest subtleties of worth.  This allows for transactions of tiny amounts, or slight differences in value.  Imagine if there were no subdivision to the US dollar.  Buying produce by the pound would be a game of "The Price is Right" as you try and get the most tomatoes without tipping it to the next dollar.  Sales taxes would be difficult for stores to directly pass on to the buyer.  Stock market values would be more stair stepped.  It is also important that the sum of the divisions equal the whole.  Four $0.25 pieces cannot be worth more or less than $1.

Bitcoins can be subdivided in to a hundredth of a millionth of a Bitcoin, also known as a
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satoshi (0.00000001 BTC).  In other words, Bitcoins would have to reach a value of $1,000,000 USD per coin before it is less precise than pennies (1 satoshi = $0.01 USD).  My understanding is that it is also possible to open up more decimal places if needed.

Gold is also highly divisible.  It has been pounded to
Text is 0.000002 inches thick and Link is
0.000002 inches thick for coating astronaut visors.  That is so thin that it is actually translucent!  A single ounce of it can be stretched 50 miles (5 microns thick).  It can be divided into such small particles that you would get more gold scooping up a random cup of dirt.  At some point the divisions of gold will get too small to handle properly or see clearly and counterfeiting would abound.  Imagine trying to buy something small like a candy bar.  It would be hard to weigh out tiny flecks of gold.  It could become standard to use volumes of a standard gold solution or use "gold bills" with tiny flecks laminated inside.  At that point counterfeiting becomes much easier though.  Copper or other metals could be used for smaller quantities, but then your small coin to large coin rates would fluctuate with the relative metal prices.

Winner: Bitcoin

There have been societies that operated off food as currency.  It is a great system because what is more inherently valuable than food?  I guess water and air, but usually those are both available without cost in these situations.  One problem is almost all foods are poor long-term stores of value.  To invest your life energies into a currency, you need some assurance that it won't be destroyed or made worthless.

Bitcoins are difficult to destroy, but easy to lose.  Since the beginning of Bitcoin, there have been just over 10 coins destroyed on creation.  It turns out, it is possible to earn a block of coins, but not claim them all.  If you claim fewer than the reward, the remaining coins disappear forever.

It is much more common to lose them.  You could send coins (not very likely to happen by accident) to a bogus receiving address, never to be used again.  
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Thousands may have already been lost to this method. Another method is to put an OP_RETURN script on them (I don't know what that means either), which paralyzes them from future use.

Probably the biggest problem is if one loses access to an account via computer crash (with no backup or paper record), forgetfulness, or
Text is dies without passing it on and Link is
dies without passing it on.  There is no third-party you can call to open the account for you.  Likely the largest holder of Bitcoin is its creator with about a
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million coins.  There is also speculation that this mysterious person has died with those coins never to be circulated.

Gold, on the other hand, is here to stay.  It cannot be destroyed.  I guess you could chemically dissolve it and disperse it to the point where it is no longer economically practical to mine again, but that's about it.  It is also possible to lose gold, but unlike Bitcoins where there are more combinations than the
Text is entire energy of the sun and Link is
entire energy of the sun could go through with a perfectly efficient computer, I imagine gold usually eventually gets found.  In any case, you'd never accidentally lose it to shelf-life or damage.

Winner: Gold

You must be able to easily exchange the currency to properly use it in commerce.

Bitcoin has a great advantage in that it can be digitally transferred.  I can pay someone from across the globe with Bitcoin.  In person it is just as easy.  All you need is your smartphone with a specialized app.  

Of course Bitcoins are not widely accepted yet.  Sure you can use Bitcoin for, Newegg, Subway, Microsoft, Dish Network, and Virgin Galactic as well as anything from charities, to local shops, but I don't think anyone pays their rent in Bitcoin.  I believe most of the companies that do accept Bitcoin trade for their preferred currency as soon as possible.  They don't actually want the Bitcoin, they just want to tap into the paper assets the Bitcoin owners have.  If the Bitcoin volatility settles off, we could see a change here.  

Another problem Bitcoin is facing is it is expensive to transfer and very slow. Users are repeatedly suprised by extreme and varying
Text is transaction fees and Link is
transaction fees and sometimes loose access to their coins for days as they are stuck in transactions.

The other restriction to Bitcoin exchange is the requirement of hardware and internet.  If the power goes out or service is disrupted, you are stuck.

Gold, unfortunately, loses ground here.  The advantage to gold is that you could use it in a pinch even without electricity.  It has been used as money for thousands of years, so even if they are not set up to take gold, they might make a deal.  

I don't think physical gold could ever return to the normal currency status though.  Imagine if you had to mail out gold pieces before ordering anything online!  That would be even more expensive and slower than Bitcoin. Even in person it could be a pain.  As mentioned earlier small denominations could prove problematic.  In order to make tiny fractions usable, they will have to be packaged.  That could get bulky or counterfeitable.

There is a solution though!  
Text is GoldMoney and Link is
GoldMoney Mastercard lets you preload your card with a certain amount of gold you buy out of their vault.  You can then use your card just as any other prepaid card.  You simply are selling back your gold at whatever the current market price is and GoldMoney sends the dollars to the seller.  The physical gold is also available for your request at any time if you'd prefer to cash out in gold.  Of course, you are still limited to companies that take Mastercard and you'll have internet and hardware restrictions.

In theory this system is brilliant.  Just be careful because this is a major tax grey zone and the company is unproven.  Similar companies such as
Text is e-gold and Link is
e-gold and
Text is MtGox and Link is
MtGox have failed and the users lost. I think this company will do fine, but do your homework first.

Winner: Bitcoin

Overall, is Bitcoin or Gold best as a Currency?
Both mediums of exchange do very well on most categories and MUCH better than the US Dollar when it comes to scarcity.  I think the transfer of gold is just too crippled in the digital era and Bitcoin was designed as an attempt at a perfect currency. Bitcoin takes the overall best currency win.

Note: This is still taking into consideration the HUGE assumption that Bitcoin has a monopoly on cryptocurrency and other variations are barred from the market or fail for other reasons.

Unfortunately, just because Bitcoin is a more useful currency than gold doesn't necessarily make it a good idea to buy.

Which is the Better Investment? Bitcoin or Gold?

Inherent Value
Bitcoins don't exist!  They are just a blip on the screen and are as real as Pokeballs.  Just because they don't exist, doesn't mean they aren't valuable.  A Picasso painting is only useful for looking at, yet they can be worth
Text is millions and Link is,28804,1917097_1917096_1917100,00.html
millions.  The same can go for other unique and rare virtual items.  Americans spend billions of dollars every year purchasing pixels.  Some even 
Text is flip-sell and Link is
flip-sell in virtual markets.  When all is said and done though, there is nothing of value in the Bitcoin except its clever novelty.

Gold actually is fairly similar in this aspect.  Most gold isn't productive either.  
Text is 52% and Link is
52% is used in jewelry,
Text is 34% and Link is
34% is reserved as money (government holdings, individual retirement, etc), and only
Text is 12% and Link is
12% is used industrially.  The remaining 2% is unaccounted for.  In the extreme case where all "pretty" or "hope to resell" gold was dumped on the market as people need money, the industrial demand should still command a fair price in the growing technological world.  This isn't a very great way to look at it, but I'm not going to devote more time to the study:  12% of $1,330 (Feb 2018 price) is $160 per ounce, so you could probably expect that much as a bare minimum.

Winner: Gold

Market Cap
First off, Bitcoin's price passing gold's price (and even trading in 5 figures) means nothing.  If twice as many Bitcoins were released in each block, then the price per Bitcoin would be roughly half the current amount.  If we wanted to look at gold in pennyweight, Bitcoin would have passed its price in 2013.

What does matter is market cap, or how much money are people willing to collectively dump into that investment vehicle.  Most experts agree that in all of history roughly 
Text is 165,000 metric tons and Link is
165,000 metric tons of gold has been mined.  That is 5.4 billion troy ounces.  With the current market price of gold of about $1,330 USD (Feb 2018), that is a market cap of about $7 trillion US dollars.  As of 5 Feb 2018, there are a total of 16,845,938 Bitcoins mined.  With a Bitcoin price of $8,271 USD, the market cap is about $139 billion USD (over 50 times smaller than gold).

That is actually quite impressive considering cryptocurrency has only been around for a few years.  It is amazing that something so new could capture that much market.  There are three problems with this picture though.
1. The Bitcoin market cap changes pretty dramatically day to day.  Since Jan 2017, the weekly Bitcoin price spread has averaged at 22%, whereas the weekly gold price spread has averaged at 2.3% in the same time period. Bitcoin's record weekly change since 2017 could be as high as 80%, but gold only had one instance over 10% in many years (when President Trump was elected) and quickly resumed it's normal pace. Bitcoin is extremely volitile.

2. Bitcoin isn't the only cryptocurrency out there.  Ethereum, the second largest cryptocurrency as of writing, was only released in July 2015.  At initiation, its market cap was about 3% of the size of Bitcoin's.  A year later it was 10% the size of Bitcoin, 11 months later (June 2017) it peaked at 83% the size of Bitcoin.  If there were no other cryptocurrenies, Bitcoin would have lost almost half of its market to Ethereum.  Of course there are
Text is over a thousand and Link is
over a thousand other cyrptocurrencies that are also trying to eat Bitcoin's market.  Although Bitcoin has gained some of that market share back (Ethereum's market cap is about 60% the size of Bitcoin's), it is easy to imagine another currency disrupting it's position in the future.

3. Bubbles always grow... until they don't.

(here's my
Text is Cryptocurrency Excel Spreadsheet and Link is
Cryptocurrency Excel Spreadsheet, dated 5Feb2018 ,if you want to play with the data yourself)

I love the idea of cryptocurrency, but I just don't know that Bitcoin is going to be the winner.  Something I learned from Peter Lynch's
Text is Beating the Street and Link is
Beating the Street is a company gaining market share in a depressed industry is generally a great buy.  Bitcoin was losing share in a booming industry.  In other words, we might be paying top prices during the hype for something that won't last.

Another Lynch rule Bitcoin breaks is that if your shoe shiner is telling you to buy a particular stock, it is time to get out of that market.  We are to the point that people who have never bought precious metals, foreign currency, or even an individual stock in their life have heard about the millions some have made in Bitcoin and are advising on the matter. Even as Jannet Yellen gave a testimony to congress in July of 2017, a man held up a "Buy Bitcoin" sign in the background.

Here's a place where you can listen to up to date podcasts about the financial markets, he almost always does a few minutes at the end on Bitcoin:
Text is Peter Schiff Show and Link is
Peter Schiff Show

Winner: not Bitcoin

Bitcoin's position is precarious when it comes to government.  Bitcoin is
Text is legal in most countries and Link is
legal in most countries, but rules and restrictions vary by country and are still evolving.  In the swish of a pen, Bitcoin could become illegal, deemed a "security" and have massive regulation, or be heavily taxed.  The anonymous nature of the coin would make it difficult to enforce, but companies would not be able to offer Bitcoin as a payment option, restoring it to its original limited peer to peer nature.

Gold could also come under condemnation.  Particularly since WWI, governments have been manipulating gold away from the people.  The good news is that, as a physical commodity that has been around for longer than human law, things change less frequently and there is a long list of precedent cases to draw from.

Winner: Gold

Definition of a Bubble

If people are buying an item solely for the purpose of reselling due to a climbing market, you can bet you're in a bubble.  If you buy whatever is going up in stocks instead of researching the actual company or at least the dividend history, you need to rethink your strategies.  I think most people who buy Bitcoin buy it because they see huge gain numbers that previous holders have seen and get dollar signs in their eyes.  They don't actually want the Bitcoin, they want profits.

In contrast, I think many people who hold gold don't do it because they think gold's value will skyrocket, but because they think the dollar will tank.  They aren't looking to flip-sell.  They are looking to protect.

Winner: Gold

Overall, is Bitcoin or Gold the better Investment?
Although the argument for Bitcoin as a currency is extremely compelling, I don't recommend it as an investment choice.  If you are dead set on Bitcoin, don't just buy it because it is gong up, but because you believe it is the future of money. Or even better, invest in a company that facilitates the transactions and benefits from Bitcoin volatility, whether up or down.

Gold does provide a decent hedge against the dollar and is a sound investment.  Of course, in a future post, I will show you something even more powerful.  Subscribe to my newsletter in the left sidebar so you don't miss it!

Good luck!

Disclaimer: I am not a licensed or certified financial coach, planner or adviser, just an enthusiast.  Anything I recommend should be personally analyzed and discussed with your financial adviser.

Should I buy Gold or Silver?

February 5th, 2018 at 05:52 pm

This is part 2 of Milly's "Precious Metals for Beginners" series. For other parts see:
Part 1:

Text is Why you NEED Precious Metals in your Portfolio and Link is
Why you NEED Precious Metals in your Portfolio
Part 2:
Text is Silver vs. Gold and Link is
Silver vs. Gold
Part 3:
Text is Coins? Bars? ETFs? What form of Precious Metals are right for you? and Link is
Coins? Bars? ETFs? What form of Precious Metals are right fo...
Part 4:
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Where to buy Precious Metals

One of the first things to consider is what type of metal to buy.  I'm only going to consider silver and gold in this analysis for 3 reasons.

1. Other precious metals such as platinum and palladium are foreign to the average person.  Yes, they are valuable.  Yes large dealers know what their worth and you could probably sell them when ready.  You'd have a much harder time selling them to your neighbor though.  They look a lot like silver and most people have no clue what their worth is.

2. Copper and other industrial metals have little value when compared to other things you could put in storage.  At today's prices, a pound of copper is less than $3.  The upside to copper is it is fun.  For less than $2 extra on your gold coin order, you can get an
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extra replica (made out of copper, larger, and with a different reverse) just to play with.  Or you can get
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other designs just for fun.

3. I've only studied gold and silver, so anything I say about other metals is unfounded.

In some ways asking if you should buy gold or silver is akin to asking if is it better to put your cash savings in $1 bills or $100 bills.  Both operate by the nearly the same means, but have different liquidity and portability.

Silver is a great choice because it is more divisible.  Although gold can be pounded to
Text is 0.000002 inches thick and Link is
0.000002 inches thick and easily broken down to less than a cent's worth in value, the smallest bars major dealers circulate is 1/2 gram and rarely under 1 gram (
Text is that's tiny and very thin! and Link is
that's tiny and very thin!).  At today's $1,330ish spot price, 1 gram is worth about $43 USD.  Silver, however, is at about $16.70/toz (at the time of writing) and also can sell in 1 gram bars that's $0.54 a bar!  Smaller denominations make it much easier to actually use for things like groceries.

The problem is, if you try and put some of your life savings into precious metals, that could amount to quite a bit of silver.  You can carry enough gold just on your person to start a new life.  It is also easier to hide since gold is much smaller than it's silver equivalent.  If gold were $1,330/toz and silver were $16.70/toz, the gold would be about 80
times lighter and about 147 times smaller than the same value of silver!

I guess, it comes down to how you imagine needing the metals. Will they be used for day to day life? or bulk wealth preservation? Probably a mixture of both.

Another consideration is the two have separate markets and their relative prices vary.  Right now, Gold is about 80 times the price of silver.  Since 1995 (just before the dotcom boom), that ratio has averaged around 62.  In other words an ounce of gold will buy more silver today than it has for most of the last couple of decades.  Silver is "on sale" in terms of gold.  Of course, there is always the possibility that this is the new norm.

Another thing to note is that silver might be more volatile than gold.  If you normalize the two metals in 1995 like I did in the graph below, you see that silver jumps to a higher percent gain than gold does in both the dot com and housing crises, then comes back together at the resolution.  If you are trying to play the market, buying low and selling high, silver might be the more useful vehicle.

One final market consideration is found in monetary policy.  
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Fiat currency is starting to fail on a global scale.  No country is willing to admit this because they are desperately trying to keep confidence in their paper money, but the complex systems of national debt, supposed assets, and inflation have reached unsustainable levels.

In the background, India, Russia, and China are buying up immense amounts of gold.  A while ago I heard some whispers about a backing of the dollar by gold and other assets. A few months ago I heard one about indirectly backing the Chinese yuan with gold.  Both of these seem like very far fetches, but what choice do we really have?  With Donald Trump's nominating
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5 of the 7 Federal Reserve Governors recently and in the near future and Trump's history of "stirring the pot", who knows?  Maybe he could actually pull something off.

Regardless, I think it is clear that countries know that gold is their best chance for a favorable end game, but it is a very delicate game. There is a lot more money than gold (at the current prices) and no one wants to loose the confidence of their currency.

If any country does make the jump, it will likely put a huge upward move on the gold price and not have the same amount of force on silver.

Of course, that also means a higher confiscation risk, especially with the historical precedent. I don't think silver will be cost effective for the government to confiscate, at least not at the individual level.

Silver is better for day to day bartering.
Gold is more efficient in terms of size/weight.
Silver may be a better deal right now.
Silver may be better for playing the market.
Gold may be better for long term moves.

How you should invest is based on your personal needs and philosophies.

Good luck and enjoy your shiny wealth!

This is part 2 of Milly's "Precious Metals for Beginners" series.
For the next part, see:
Text is Coins? Bars? ETFs? What form of Precious Metals are right for you? and Link is
Coins? Bars? ETFs? What form of Precious Metals are right fo...
For part 1 see:
Text is Why you NEED Precious Metals in your Portfolio and Link is
Why you NEED Precious Metals in your Portfolio.

Disclaimer: I am not a licensed or certified financial coach, planner or adviser, just an enthusiast. Anything I recommend should be personally analyzed and discussed with your financial adviser.

Inflation - A Tax on your Savings

January 29th, 2018 at 10:38 pm

You get taxed on your income, you get taxed when you spend it, you get taxed on your property, you get taxed when you visit other properties (hotel tax), and you get taxed when you die.  Americans are subject to taxes in every form.  What most people don't realize is that the government taxes savings as well.

Yep, after you put in your hard effort earning at a discount, buying at an increase and trying to make those ends meet, the government steals away a significant portion of the money responsible people and businesses set aside.  The money is taxed as you earn it, then anything unspent gets taxed repeatedly until it is reduced to nothing.  

What really drives my crazy is there's an old economic saying that you get more of what you subsidise and less of what you tax. The government is taxing the very behavior that prevents individuals and companies from needing bailouts and welfare programs. What does that lead to? More dependency, less freedom.

How are they stealing savings?
One word: Inflation

How is inflation the government stealing savings?
It should be fairly obvious that inflation causes the buying power of your savings to go down.  You might be able to buy milk today for $3.  In a few years, it might cost $5.  In other words, if you put your money into a stagnant account it lost 40% of its buying power.  By setting it aside for your future, you just made your $3 worth $1.8.

Even with an inflation as the current target of 2%, prices will double 2.3 times in the average lifetime. Increase that to 5% and you're looking at almost doubling 6 times! Even normal inflation levels can drastically reduce your wealth.

What is less obvious is how this puts it into the government's pocket.  Imagine you are in severe debt.  Wouldn't it be nice if dollars were worth less?  With a government as in debt as the United States, it is pretty easy to see why they might like inflation.

Inflation is a socialist.  It takes from the prudent and prosperous to benefit the reckless and failing.

But wait Milly, inflation has been near zero for a decade and hasn't been high since 1981.
I guess it all depends on how you measure inflation.

When you look at inflation data, it is usually represented by the CPI (consumer price index).  What is the CPI?  Supposedly it represents the price of household goods.

A tricky method many economists use is the

Text is "Core" CPI and Link is
"Core" CPI, a CPI that excludes energy and food.  The justification is that energy and food costs are much more volatile and large moves in those prices don't necessarily indicate true inflation.  The truth is that CPI isn't that great of an indicator unless you are averaging over a long time anyways, negating that argument.

The problem with "Core" CPI is that it is held artificially low by more heavily weighing items that rapidly decrease in price as technology develops.  Remember buying a 1G thumb drive a few years ago?  What does a 1G thumb drive sell for today?

Often they'll even take it a step further using hedonics. With the hedonic regression, they break items down past their unit price into their constituent parts. In other words, TV screens might be much more expensive than they were in 2000, but maybe the per pixel price has gone down, so they announce deflation. Who knows what formulas they use for completely new features on smart TVs. I can buy an amazing smart TV today for a few thousand dollars, where as in 2000, I would have had to pay a team of computer engineers to research it first. With that mentality, a smart TV's price has come WAY DOWN! Just look at the communications portion of 2017's CPI. Did your phone costs go down
Text is 4.9% and Link is

Now look at your own expenses from groceries to electricity to toys.  You know prices are going up.  When prices do go up, what is the first thing you start trying to adjust to meet your budget?  Probably energy and groceries, exactly what "Core" CPI doesn't include.  Energy and food matter a lot to the consumer!

The bottom line is that by using different indicators and clever math, inflation can be carefully crafted to whatever the Federal Reserve wants it to show and that means low inflation.  They've even kicked their game up a notch and are making a huge show to try and increase inflation, as if that is a good thing.  If they can get us excited about avoiding deflation, their job gets a lot easier.

Text is Latest CPI data and Link is
Latest CPI data broken down into subcategories and months
Text is Weighting of categories and Link is
Weighting of categories and locations for the CPI (in 2014).  

I ran the numbers against my personal spending percentages for 2016 and the weighting they give each category (at least in 2014) seems reasonable.

Why are they concealing the true inflation?

Every time the Federal Reserve adds dollar, money  already distributed decreases its share of buying  power.  The United States depends heavily on borrowing.  If they let the rest of the world know what they are doing to the value of the dollar, who would loan us money?  At a minimum, they would demand interest to adjust with real inflation, something we simply cannot afford.

Officially low inflation also keeps domestic benefits cheaper.  If they released what the true inflation was, they'd have to also increase Social Security benefits.  Tax brackets would raise as well, limiting the money we give them.

Economists' Plea for More Inflation!
Just hiding inflation won't work forever though. On June 9, 2017, a group of 22 prominent economists including former Federal Reserve President Kocherlakota, wrote a letter urging then current Federal Reserve President Yellen to raise the target inflation rate above 2%.  The
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argument is that with only 2% of room to play, there will not be enough "ammunition" in an economic downturn to raise up employment with near-zero interest rates (closely tied to inflation).  In other words, if the expected inflation was at 5%, near-zero interest rates would be closer to 5% lower than expected and produce a much faster recovery than a 2% lower than expected interest rate.

Kocherlakota also states, "periods of zero nominal rates are likely to "
Text is be more frequent and Link is
be more frequent".  With the current 2% inflation target, the rates will need to be at the "zero lower bound about 30 percent to 40 percent of the time."  It is clear that Kocherlakota sees that the economic times have changed and drastic measures must be used.

What is crazy is the Fed's are saying it is great that we are on track and even above our target 2% inflation as if that is good news. They also say that 3% is okay since inflation has been so low for so long. Three problems with that thought:
They are acting as if their target 2% is a benchmark to beat. Shooting an arrow a yard above your target isn't a good thing.  They are making it sounds like we don't need to worry about anything, we are already exceeding our annual goals!

It hasn't been near zero for long. It  averages pretty close to 2% since 2008.

Even if we were near zero for a decade, that mind-set is very hard on the consumer. Imagine going years of near zero inflation. In your perceived prosperity, you load up on all forms of debt.  Then, suddenly prices jump in one year. Between higher living costs and adjustable interest debt (such as credit cards) your budget becomes VERY tight.

Note: the other way they could achieve these results is to toy with Europe's idea of
Text is NEGATIVE interest rates and Link is
NEGATIVE interest rates.  In other words, paying someone 3% for them to hold your money for you.  This idea could only work if money is trapped in the system.  Like in [href="]India[/url], we could see a situation where paper money is forced to be converted to digital money, where Uncle Sam can see, track, and tax it all.

So how should we be measuring inflation?
Good question!

You could think of inflation as having two components, the supply of money and the velocity (how frequently the money is passed from person to person in a year) of that money. One is formed by monetary policy, the other by the behavior of the people within the economy. Let's start with money supply:

M3 - Broad Money

Money supply is measured in several categories.  The most useful in this case is
Text is M3 and Link is
M3, or broad money.  This includes cash as well as assets easily liquidated into cash (savings accounts, money market accounts, CD's, repurchase agreements, etc.)  If you look at a historical chart of this number, it has been steadily increasing until 2006, when the Federal Reserve announced they would no longer provide M3 numbers (
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When my daughter is about to do something she knows she'll get in trouble for, she shuts the door or asks me to go into a different room.  If broad money was increasing like it was when openly disclosed, what do you think has happened since 2006? If you check out 
Text is and Link is for a private sector calculation of the numbers, you can see a dramatic ramp up in money.  Is there any wonder why there was an inflated real estate bubble and a massive falling out in 2008 with double-digit percentage increases in broad money?

Note: to learn more about where money originates look here:
Text is What is Money? and the US Dollar Machine and Link is
What is Money? and the US Dollar Machine

This component seemed strange to me at first. Why would exchanging money make it worth less? Try thinking about it this way. If twice as much money passes through your hands annually, but there are still the same number of products, the product will have to cost twice as much to prevent a shortage.

The Federal Reserve doesn't seem to be worried about inflation because they believe in a "
Text is goldilocks economy and Link is
goldilocks economy" that is not too hot and not too cold which is easily tuned with economic easing/tightening if something does get a little out of balance.

What they fail to realize is how behavioral based the velocity component is. Right now, as businesses and families feel economic strain, they look towards securing their future and save money as best as they can.

What happens if inflation breaks out even just a little? Suddenly, analysts will advise corporations to spend on upgrades, inventory, and raw supplies while their money has more power. With the increased corporation spending, prices will rise and individuals will catch on. With a subtle shift, that saving could turn to a spending frenzy that grows exponentially.

I think we are sitting on a situation even more volatile today than in any of the historical hyper inflation stories. On the corporate level, companies rely on computer data and analysts more than ever. With this data and statistical analysis, the strategy has become operate on the tiniest margin possible to capture the largest market share. What happens when a company as large as Walmart or Amazon notice a bad inflation trajectory? Dollars will pour into the economy as fast as the companies can wisely manage it as they scramble to protect their tiny margins.

On the individual level, social media can create massive behavioral movements in just a few days. As each move is made, more parties will catch on and the more aggressive each party will have to become.

What can we Do about it?
There really isn't much we can do to stop the problem except spreading awareness and electing officials brave enough to stand against the Federal Reserve.  Luckily, you can protect yourself from the effects.  When you are storing your economic resources, don't leave the bulk of it exposed to inflation.

The commonly advertised way to do remove the effects of inflation is by investing in TIPS (Treasury Inflation Protected Securities).  When inflation increases, so does the payout.  One major problem, the official inflation tracks CPI, not the money supply/velocity.  Your savings will still get eaten by the dying power of the dollar and you are back where we started.

Here's what you should do.  Keep your emergency funds liquid and ready, but diversify your deep savings such as retirement.  Most people think diversifying their portfolio means investing in various stocks and bonds.  But what happens if it is the dollar that crashes?  All of those deals and obligations become worthless regardless of how diverse they were.  Instead invest in some domestic stocks, some foreign stocks, some real estate, some
Text is precious metals and Link is
precious metals, some in long shelf-life food storage, and most importantly invest in your own personal education and skills.  With a diverse portfolio like that, you can weather any depth of economic crisis and make it out just fine.

Further reading:
Peter Schiff's
Text is Crash Proof 2.0 and Link is
Crash Proof 2.0
Text is What is your money? and the US dollar machine and Link is
What is your money? and the US dollar machine
Upcoming US Economic Collapse - How and Why (coming in a future post)
How NOT to Prepare for the Economic Crisis (coming in a future post)

Disclaimer: I am not a licensed or certified financial coach, planner or adviser, just an enthusiast.  Anything I recommend should be personally analyzed and discussed with your financial adviser.

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