Sep 72015

How to start a business Part 1 (In Colorado)

By |September 7th, 2015|Blog|2 Comments

HahaBusinessAh labor day, what a great day to learn how to start a business. Everytime I’ve ever thought, “gee, I should start a business” I’ve had a great deal of difficulty getting started.  All of the information on the subject seems to be from folks who have done it so many times that they leave out details that feel important to me.  There seems all of this information on how to start a business but its all like, “Decide what to do”, “Do market research”, and then there’s like one little note on the actual legal process of starting a business. In this series I’m going to start an actual business.  It’ll be a dummy business.  We’re going to actually detail the whole process.  I’m going to base the series off of the SBA’s 10 step plan.

Step 1: Write a business plan

A business plan is an essential roadmap for business success. This living document generally projects 3-5 years ahead and outlines the route a company intends to take to grow revenues. -From SBA’s website

Before starting a business you should probably sit down with an excel spreadsheet and start making conservative assumptions about costs.  Make sure that you’d actually make money with conservative assumptions.  Preferably start with a business that doesn’t have any start up costs.  This seems to be the safest approach.  For example, I do a lot of tutoring as a contractor through WyzAnt.com.  For this series I’ll be starting my own tutoring business.  For such a simple business going through this whole process is probably unnecessary, but the real point here is to learn.

Sample Business Plan

The one paragraph business plan: “Quantum Tutor” (working title) will be a business which specializes in tutoring upper division physics students in their courses.  The knowledge required is very specialized and there are few available tutors with the requisite training.  I will therefore charge a premium to typical tutoring services ~$50 per hour. This will be a small side-gig and I expect to do no more than ~5 hours a week of tutoring.  Therefore the expected revenue in the first year is $12,500 at maximum.

If I needed investors, which I don’t, this would be my “elevator pitch”.  Simple, straightforward and enough to get started.

Step 2: Get Business Assistance and Training

The SBA website has a bunch of free training and counselling services.  Between now and Wednesday I plan on taking the “Legal requirements for small businesses course” and the “Customer Service” course.  Both are available on the website under step #2. Both are expected to take 30 minutes. Go ahead and find some courses that interest you and start working on them, and maybe between all of us we can cobble some useful knowledge together.



Sep 42015

So you want to learn economics

By |September 4th, 2015|Economics / Politics|Comments Off on So you want to learn economics


Savings on cover design passed on to the consumer no doubt.

It takes considerable knowledge just to realize the extent of your own ignorance.  

-Thomas Sowell

The easiest way I’ve found to learn any subject in particular is simply by reading books. Reading lots of books.  If you want to learn something about economics the best place to start is Basic Economics by Thomas Sowell.  This is a very math-lite introduction to economics, and is designed to be understood by the layperson (ie me). I read this book in about three sittings.  I found it to be as engaging as popular science books such as A Brief History of Time or Guns, Germs, and Steel, so if you’re into that sort of thing this’ll be right up your alley.

Plot Summary

Economics is not simply a topic on which to express opinions or vent emotions. It is a systematic study of what happens when you do specific things in specific ways. In economic analysis, the methods used by a Marxist economist like Oskar Lange did not differ in any fundamental way from the methods used by a conservative economist like Milton Friedman. It is these basic economic principles that this book is about.

You are a citizen, who doesn’t understand economics.  Thomas Sowell makes you understand it.  Through the use of intuitive examples and clear language Thomas Sowell discusses what forms the underlying basis of economics.  This often focuses on the role that prices and incentives play in determining how scarce resources are distributed and consumed.


The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.

Basic Economics covers a number of political issues.  Thomas Sowell is a conservative economist.  The book supports free-market economic policy.  Mostly it does this by using examples to show why the price system and incentives matter.  Sowell goes on to show that time and time again the consequences of most political policy are often far different than the intentions of that policy.  Mostly Sowell is pointing out clear cases where virtually all economists agree with the free-market point of view.  For example, an early chapter in Sowell’s book deals with price controls.  The vast majority of economists would agree with a general statement such as, “most price controls cause more problems than they solve.”

A short explanation of price controls might be useful here.  For example, when there is a price ceiling set on, say bread, in ancient Rome some producers decide to stop producing bread.  Since it is cheaper some consumers use more bread, buying it instead of other foods.  This mismatch causes a shortage.  Everyone as a whole is worse off because there is less bread to go around, and more people are using it when an alternative would do as well.

Now Sowell uses actual real world examples, rather than ones he made up for a blog post.  I think this makes his argument more convincing, though the logic is the same. Sowell, however, fails to identify areas where there is more disagreement among economists.  The minimum wage is a price control and is largely lumped in with other price controls, though there seems to be substantially more disagreement among economists about its overall effects as opposed to price controls on other goods and services.  The arguments he makes are no less convincing for it, but you should know that he may be overstating the economic consensus in a few rare cases.


Sowell does a great job both explaining how the market economy functions, and what serious problems can be caused by government’s meddling in the economy.  If you’re aware that Sowell is an economist from the Chicago school (read: pro free-market) this is a fantastic book to read.  What I would hate to see, however, is someone read just this economics book and assume that it has vindicated their political opinions.  If this is all of the study of economics you’ve done you don’t get to have political opinions on the subject. (Yes, I know that you are legally allowed to.  Just work with me here.) The opposite of this is even worse.  Anyone considering skipping the book because they disagree with free-market economists are doing themselves a great disservice.  You are probably wrong about a number of things.  Reading is part of how people become less wrong.  Especially reading the work of folks who disagree with you.  Thomas Sowell has a great deal of knowledge to drop on you, and the vast majority of it is consensus in the science of economics as far as I could verify, you’d be seriously remiss to ignore the book because of your political bias. I particularly enjoy the way Sowell emphasizes the power of incentives in this book and I’d like to leave you with my favorite quote of his regarding the intersection of politics and economics:

It is hard to imagine a more stupid or more dangerous way of making decisions than by putting those decisions in the hands of people who pay no price for being wrong.

Sep 22015

Cheer the crash

By |September 2nd, 2015|Blog|Comments Off on Cheer the crash

SaleStockClearanceSince we had a great deal of market volatility last week I thought this would be a good time to remind everyone that unless you are taking your money out of the stock market soon a market crash is generally go
od news for you.  This is even more true if you are a net purchaser of stocks going into the future.  Every stock is partial ownership of an actual business.  If business goes south, that’s bad.  If just the stock price goes south, all that means is that you can buy the same percentage ownership for a lower price.  You’ve probably heard this before.  Many financial bloggers enjoy pointing it out.  Stocks are on sale, they say.  They’re right.  Market drops are great for net savers, which I hope most of the readership is.  The lower market prices are, relative to current book value and future profits, the better off you are.

What about people who aren’t buying, just holding?

Let’s say that you and a friend make a bet.  Let’s say you think Verizon will do better for investors over the next 15 years, and he thinks AT&T will do better.  You agree to both reinvest your dividends.  The winner is the person with the most money at the end of the bet.  For simplicities sake let’s suppose that the dividend yield of each is exactly 5% rather than the 4.87% and 5.88% that they are currently at.  The day after you make the bet disaster strikes, Verizon shares go down 50% in one day, for no discernible reason and AT&T shares stay flat.  Worse yet, Verizon shares stay down for all 15 years, and AT&T shares stay at basically the same level for all those years.  In fact, both businesses earns the same profits for the next 15 years, and their dividends stay exactly the same.  The only difference is that on day one your shares fell 50%.  Who wins the bet?

Well clearly you wouldn’t be asking if my friend won, so what gives? How is that possible?YearsAfterDrop

You win by a small margin about 1% of the size of your original investment. It was a benefit to you that the stock fell on that first day, and its too bad that it didn’t fall further, because then you might have crushed your friend.  When you reinvested your dividends you were buying twice as much future dividend income as your friend was, that extra dividend income made up for the 50% drop on the first day.  Not only that, but based on a $100 initial investment you are currently collecting about $21 in annual income, while your friend is only collecting about $10.

Bigger crashes are better

If you look closely at the plot you’ll notice the larger drops catch up quicker.  This is counter-intuitive, but true.  The bigger the crash, the better.  If that Verizon stock only fell by 1% you wouldn’t have caught up in time (maybe for centuries).  This is because the lower the stock falls, the higher its dividend yield is.  Since returns are compounded each additional percentage point of return is worth more than the last one. Now all of this only really applies assuming that the market is basically dropping for reasons that are unimportant.  It is quite likely that if a business is doing bad, their stock price will deteriorate.  That isn’t good.  Every stock price deterioration isn’t evidence that a business is doing badly.  This also applies to the stock market as a whole.  I find it very difficult to believe that the actual future expected value of the businesses in the US swung by trillions of dollars over 5 days.  Hopefully, all that happened was that some of your stocks issued dividends and they were reinvested at relatively lower prices.

Aug 312015

Up the Ladder: Smart Strategies to Get That Promotion or Pay Raise

By |August 31st, 2015|General Personal Finance|Comments Off on Up the Ladder: Smart Strategies to Get That Promotion or Pay Raise

promotionMost people wait for opportunities to fall in their lap. But, not you. What can you do to force opportunities to seek you out? What can you do to make your own luck – to make your own opportunities? Here’s what you can do.

Make Yourself More Valuable First

Employers must pay you your base rate plus any holiday pay due according to your work contract or conditions. By law, the employer must also provide liability cover to protect you and create a generally safe work environment, relative to the natural risks of your job. If you are unsure if your employer has set up the right kind of liability cover, seek guidance from claims specialists like slatergordon.co.uk. But, beyond that, employers don’t necessarily have to give you raises. Yet, most people want them. To get them, you must earn them. To earn them, you must make yourself more valuable.

How do you do that? By taking on more responsibility.
Think about it. You’re paid for the job you do now, and you have a certain amount of responsibility. When you take on significantly more responsibilities, you will earn higher pay – so long as you ask for it.

Taking on responsibilities outside of your core work has to be done very carefully, however. You need to make sure you’re getting all of your work done before you add more to it.

In some cases, you can’t add more work or responsibilities so you have to stand out in other ways, like doing a better job than your peers. In almost every job, there’s room for growth and improvement. For example, an IT specialist can take additional courses and obtain advanced certifications that the employer may find valuable, even if it’s for a different position (which is really what you’re going for anyway).

Sometimes, a basic cert is required for a job, but advanced certifications might allow you to do a better job. Get those certifications. Then, you have a right to ask for a raise.

Have a Positive Outlook

Having a positive outlook means that you believe in yourself and your ability to perform for your employer. It means that you know your worth, whether it’s deserving of a raise or not. You have to be able to think positive, but also be realistic. That’s how you honestly assess your value to the company and obtain the raises you want.

Be Eager To Learn More About Your Industry and Your Employer

If you want a raise, you’re going to have to learn as much as you can about your industry, and about your employer, specifically. Try to find ways to improve on existing processes. Ask to shadow your manager and learn more about how the company works from a different perspective.

Become a “sponge” for knowledge. Soak up everything you can, even if it doesn’t immediately result in a raise. You have to put in a lot of work, a lot of effort, before it pays off. You may have to work for years before your employer offers you a raise. Be patient.

Research Industry Averages

It helps to know what the industry average pay is for your position. Fortunately, it’s easy to find this information online. You can also ask your friends (if you are both comfortable discussing each other’s personal finances like that). Finally, you can research what other companies are paying their employees for similar work.

It will give you a reference point when asking for a raise.

Adrian Holt works as a senior career consultant. He likes to share his thoughts and insights online. His posts mainly appear on career and personal finance blogs.

Aug 312015

My Own Rant on Rent vs Own

By |August 31st, 2015|Blog|Comments Off on My Own Rant on Rent vs Own

The most expensive thing you will ever buy is a house.  It deserves more research than just checking that you can manage the payments.  Sure, there are a number of non-financial reasons to own a house. You don’t have to deal with a landlord (just the HOA), you can knock down some walls (if they aren’t load bearing, and the city/HOA let you), you are a “homeowner”.  These things might matter a great deal to you.  They might matter more than the financials.  There are also non-financial reasons to rent.  You get more flexibility about where you’ll live from year to year.  The financial calculation, however, is complicated but well defined.  There are dozens of variables involved. Unfortunately for you, this calculation is non-optional.  Fortunately for you, the New York Times has taken all of the relevant variables and made a nifty calculator.  You officially have no excuse!

NYT Calculator

The only housing valuation calculator you may ever need.

The Calculator

You can access the calculator at here.  What you’re looking to compare is the final rent price on the right to the rent of an equivalent place after inputting all of your relevant data (I promise one exists, look).  As you move through the calculator you’ll see that the slope of the variable is related to how much a variable effects the final rental value. You’ll notice that there are a couple variables that are somewhat hard to get a good value on. For example, how long you plan to stay is sometimes tough one.  The entire “What does the future hold?” section is a complete crap-shoot. Worse, some of the values in this section effect the outcome a great deal.  My advice is that if you are assuming that you are staying in the house for a long time, you should assume that the money will be invested for the long term in the stock market or a similar high-volatility, high-return vehicle.  Over decades the stock market returns about 8%, so that should be your investment return rate.  Similarly you should use the long run return of housing in the US which is just a little above inflation (something like 0.2% above inflation) according to Robert Shiller. Case-Shiller  If you look at the plot on the right, you may be tempted to think that home prices really only started appreciating after World War 2 and that things are different now.  That may be fair (this earns you about 1% above inflation, go nuts). Also, look at the amount of volatility we’ve had since then as well.  Keep in mind that every time the blue line goes down by a percentage equal to your down payment, you’ve just gotten underwater on your home.  A 20% downpayment seems pretty historically safe (except for the most recent recession fun). A 10% downpayment gets wiped out every decade or two.  Don’t give in to the temptation to adjust the knobs on this calculator until you get the answer you want.  This is the second most important financial decision you’ll make in your life (Reminder: Fund your Roth).  Don’t lie to yourself about it.  Also, do NOT simply say, “House prices in my area have historically gone up faster, so I can use a larger appreciation number.”  This is approximately as bad as saying, “Historically Microsoft has gone up faster than the rest of the market, so I should buy it and assume I can use its past average growth rate.”  So you’ve filled it out? Great! Which is higher, the rent you can get, or the breakeven rent from the calculator?

Reverse Engineering

The real value of this calculator shines through when you work backwards from a known rent.  For example, let’s say that I’m trying to decide between buying a condo that rents for $1,800 and is selling for $225,000.  I use default values for everything, and change investment return rate to 8%.  I also add in monthly common fees (HOA fees) of $400.  The last thing I change is the home price growth rate, and I adjust it until the big green number on the right is $1,800.  This solves for the growth rate that breaks even. In my case that growth rate is -0.8%.  If housing values fell 0.79% per year over nine years (the time I owned the home) I would still come out ahead by buying.  By running these sorts of scenarios you can see what works and what doesn’t.  Looking at another example, a single family home near my area is selling for $365,000.  A very similar home is up for rent at $1,600 per month.  HOA fees are much lower in this area, so I adjust for that.  The value of this home has to increase by 3.2% per year in order to justify the purchase, this may or may not be reasonable.


I’ve done this too many times.


I say it one last time.  A house is your largest purchase, interest rates are very low and it may therefore seem like buying a house is the right idea, but do the math!


Aug 282015

$25 if you purchased Starkist Tuna

By |August 28th, 2015|Blog|Comments Off on $25 if you purchased Starkist Tuna



If you purchased certain types of StarKist Tuna in the last six years (and who hasn’t, StarKist Tuna is awesome) you can get either $25 cash or $50 worth of Tuna by participating in the settlement to a class action lawsuit.  Basically the lawsuit alleges that StarKist tuna cans contained 3.01 ounces of tuna in a five ounce can rather than the federally mandated minimum of 3.23 ounces. In order to participate you need to go to this website and fill out a form.  You don’t need to provide proof of having purchased the Tuna, but you are attesting under penalty of perjury that you have indeed purchased one of the types of Tuna that the lawsuit covers.

What is a class action lawsuit?

A class action lawsuit is a lawsuit that allows a group to collect or be charged damages. The process for participating in the lawsuit generally involves filling out a form and waiting for further information.  The claims administrator collects this information and then disburses settlement claims.

StarKist, the stock

The first thing that I had hoped upon hearing about this, is that the bad press may have generated an opportunity in the stock market.  StarKist has a very substantial share of the Tuna market and a strong brand.  Under-filling tuna cans doesn’t seem to be something that would substantially hurt their brand image in the long run.  If there had been a major related sell-off it might be an attractive moment to buy.  Unfortunately, StarKist is not publicly traded as a standalone company.  It is owned by Dongwon Industries.  Dongwon Industries is a public company listed on the South Korean Stock Exchange with ticker 006040.  Dongwon Industries didn’t appear to experience a major selloff, and while it might be a good investment on its own merits, it doesn’t seem like there is a thesis here.  StarKist has pledged $12 million dollars to this settlement, that represents a small amount of their annual sales (in the neighborhood of $600 million).  This is finally a case of: a minor thing happens, and the market reacts as if a minor thing has happened.


You’ll make this cat I found sad.


If you’ve purchased this tuna in the last 6 years this is basically a free $25.  You are not required to provide proof of purchase, but if you have not purchased the tuna in question, do not participate in the class action lawsuit.  When you fill out the form you claim that you have purchased the tuna under penalty of perjury.  Google “is perjury a big deal”, I dare you.  Honesty in these situations matters.  It certainly isn’t worth the $25 to lie about the purchase of a can of tuna.