Jul 16 2012

Food is Expensive

By |July 16th, 2012|Blog, Personal Finance Tips|24 Comments|

So I had a hypothesis that I might be spending too much money on food, especially considering the fact that I’m now living with my girlfriend and buying food for two.

What I found was disgusting. I spent $939 on food (groceries + restaurants) in June.

Apparently I’m eating out much too much. In fact I ate out 35 different times during the month of June, which comes to over one meal outside the home per day. I guess there’s a reason my friends call me Fat Kevin.

I’m not as young as I used to be and my metabolism isn’t as strong as it was years ago. If I don’t start eating out less, I’m going to get fat, spend a bunch of money, Tag is going to leave me and I’ll lose to The Hoff in my Race to $1 Million.

I can’t let any of that stuff happen.

I’m Not Eating Out for 7 Days

I decided that Tag and I need to kick this eating out habit. Cooking for one is hard because you always end up with a lot of leftovers and you are stuck either eating leftovers most of the time or throwing out excess food. If you end up throwing out lots of excess food then it isn’t much cheaper than eating out.

fat kevinCooking for two is much better because double the amount of eaters means half as much leftovers. The problem is it takes a lot of time to shop for the right groceries, plan out meals, and cook them.

Luckily Tag and I have done that. We have a few meals planned this week and a bunch of stuff to make easy meals like sandwiches. We made a decision on Saturday that we wouldn’t eat out for seven days.

So far it’s going well. On Sunday Tag made banana bread, which we ate for breakfast. Then I made grilled cheese for lunch, and we went to my aunt’s house for a steak dinner like we do every week.

Now we just have to make it six more days without spending a dime at a fast food joint or restaurant.

What’s Next?

We are going to make it a week without eating out. But it won’t mean much if we go right back to Jack in the Box and Taco Bell next Sunday. The goal is that we find some recipes over the next week that we really enjoy and will cook more often.

Furthermore, I’m going to start keeping closer track of my eating out expenses. I’m not sure what my monthly food budget should be, but I know it needs to be lower than $939.

Be on the lookout for more food related posts. This is a pretty big deal for me and I’m not going to let overspending on food ruin my goals of having money to buy a house and increasing my net worth.

Readers: How much do you spend every month on food? What do you do to keep your food expenses down?

Carnival Links

Carnival of Fin. Camaraderie at The University of Money
Carnival of Financial Planning at Master The Art of Saving
Carnival of MoneyPros at Portfolio Princess
Carnival of Retirement at Good Financial Cents
Totally Money Carnival at Money Reasons
Y & T’s Weekend Ramblings at Young and Thrifty
Yakezie Carnival at Tackling Our Debt

Jul 12 2012

Other “American Government Bubble” Investments

By |July 12th, 2012|Blog, Personal Finance Tips|11 Comments|

As you probably know by now I’m very worried about the growing American Government bubble and I believe that investing in dividend paying companies in countries with a trade surplus is the safest way to put money in the stock market.

But the stock market isn’t the only place to invest. If you want to ensure your money retains it value or grows, there are a few other investments mentioned in The Real Crash that should do the trick.

Precious Metals

The experts say that a good diversified portfolio includes 10% precious metals. I tend to agree, although I’m willing to go up to 20% of my assets and I want to hold at least half of it physically.

I’ve already written about junk silver which is my favorite form of precious metals. It’s easy to identify real junk silver (any dime, quarter or half dollar made before 1964) and they could very well become the default barter currency in the event of a true collapse of the dollar.

While silver has the inherent value of being a “precious metal”, it also has applications nano technology and super computing because it conducts electricity better than any other metal. I highly recommend having some junk silver stored safely in your home.

If you prefer gold, that’s another good way to invest in precious metals. Some people think the price of gold is inflated, but I contend that the reason the price keeps going up is because the Federal Reserve keeps printing money. I think the Fed will keep printing money, so I think gold will keep going up against the dollar.

Precious metals are a great way to diversify your portfolio and protect against an American Government bubble.

Foreign Currencies

Another way to prevent your money from losing value is to get out of the dollar and into a more stable currency. Even when we aren’t in a great recession I don’t trust the Federal Reserve to maintain the value of the dollar. The Federal Reserve is a private bank that makes money by printing dollars and lending them to the federal government.


photo credit: Nina Matthews

When a private, profit-seeking company increases their profits by devaluing the value of everyone else’s money, it makes the dollar incredibly risky.

Unfortunately a central bank isn’t unique to America. All currencies in the world are fiat currencies (meaning they are not backed by any physical assets). The key to picking a currency is to make sure that the country has a history of keeping inflation low and that the country exports more than they import.

Some currencies I like are the Australian Dollar and the Swiss Franc. I don’t like the American Dollar or the Euro.

I honestly haven’t invested in any foreign currency yet, but I do know that you can invest in currencies through the stock market with companies like Currency Shares. If you know a better way to invest in foreign currencies please leave a comment and let us know.

What’s The Worst That Could Happen?

Overall I recommend at least 50% of your portfolio be invested in a combination of dividend paying stocks in countries with trade surpluses, precious metals and foreign currencies. And my question is: “What’s the worst that could happen?”

If there is an American government bubble and it bursts, these investments might not skyrocket, but they should definitely do better than American dollars and American stocks.

However, if there is no American government bubble or if it doesn’t burst in our lifetime then you’re probably still alright. Your international investments could very well outperform American investments.

Readers: Is your investment portfolio diversified enough to overcome hyperinflation of a particular currency or government default of some country?

Jul 10 2012

Emerging Markets are Safer than US Savings Bonds

By |July 10th, 2012|Blog, Personal Finance Tips|11 Comments|

If you believe conventional wisdom (the same “wisdom” that didn’t predict the housing bubble bursting or the Great Recession) then some of the safest places to put your money are savings accounts, US Savings Bonds, CD, Treasury Bills or Treasury Bonds.

The problem with conventional wisdom is that all these investments are only safe if the dollar is safe. If we enter a period of hyperinflation these investments are about the worst places your money could be. If the US government defaults and interest rates skyrocket while your money is tied up in a CD or Treasury Bond, you’re screwed.

If America is solvent then these investments are exceptionally safe. But what if you’re worried about America’s solvency?

These are the worst places to put your money in my opinion. Your reward potential is very low (0-5% gains not adjusted for inflation) because they are deemed as “safe” investments, but your risk is extraordinarily high due to the unstable US government and economy.

American stocks aren’t much better. Of course stock prices are going to rise during a period of hyperinflation, but they aren’t going to keep up with inflation. The hyperinflation will mean American consumers can’t afford higher prices, companies can’t sell their goods and services and it’s a huge mess.

My idea of “safe” investments are stocks in emerging markets.

Stuff Trumps Money

America has a massive trade deficit right now. We borrow money from China to pay for our imports because we don’t produce enough things here in America. Now imagine China (and everyone else) stops lending us money because our debt is too high and we are too risky of an investment.


photo credit: the great 8

Now we don’t have the money to import the goods that we want/need, and we don’t produce enough things here in America to meet the demand. That means we have a lot of people and not a lot of stuff for those people. That’s not good. We all know that real wealth is not dollars or euros or yen; it’s stuff that people want or need.

Now let’s look at a country like China. Let’s pretend America doesn’t have any money and can’t import Chinese goods. It sucks to some extent for China, but that just means Chinese companies will have to sell their stuff to Chinese citizens. And since all the stuff that used to be exported is now being sold in China, they will actually have a surplus of goods which will make prices go down.

Both America and China would be hit hard with an American Government bubble bursting, but America would see prices soar and empty store shelves while China would see overflowing store shelves and a drop in prices. It’s not hard to tell which one is more desirable.

Invest in Companies Based in Countries With Trade Surpluses

What’s more valuable: a company that went out of business because they couldn’t get raw materials or a company with warehouses full of goods that will be sold, albeit at lower prices than anticipated?

The company with goods and consumers beats the company with no goods and no consumers every time.

It’s also smart to avoid companies that offer services instead of raw materials. Some companies offer Storage Container Repairs in Port Container Services, but that company is going to have a hard time doing business when people are no longer shipping goods across the ocean.

Peter Schiff says it much better than I can in his book The Real Crash:

So elsewhere in the world there are more creditors than debtors, and there is pent-up demand and excess production. In the future, these economies will see a surge in demand, while ours will see demand fall.

You want to be invested in businesses whose customers will be richer in the future. That is, you want to be investing today where people are saving and producing, so that tomorrow, when they’re ready to spend, you’re getting some of that money.

It makes so much sense it’s hard to believe this is the “crazy logic” and buying US treasury bonds is the “safe bet”.

Peter Schiff recommends buying dividend paying stocks in the following countries: Australia, Singapore, Hong Kong, New Zealand, Switzerland, Norway, The Netherlands, Canada, and China.

How Do I Buy Dividend Paying Stocks in Emerging Market Countries?

I’ve done a little research and I’ve found a few ETFs that seem to do a good job of diversifying investments in a broad range of countries. My favorite is the Asia/Pacific Dividend 30 Index Fund (DVYA) which does a darn good job of following Peter Schiff’s advice. 92% of the holdings in this ETF are dividend paying companies in Australia, Singapore, China, Hong Kong, and New Zealand.

This is just one of many investment options to get involved in strong emerging market companies that pay dividends. My recommendation is to put at least 20% of your assets in this type of investment.

Let’s pretend I’m right and the American Government bubble does burst at some point in the next few years: this investment will almost surely beat any group of American companies.

But what if I’m wrong and the American Government bubble doesn’t even exist? Then you just have a little more exposure to emerging markets than “experts” suggest, but you still might end up ahead because emerging markets have higher upside than American companies anyway.

High upside and low downside in emerging markets: that’s what I call a “safe” investment. Low upside and high downside in American Treasury Bills, Bonds, and publicly traded companies: that’s what the “experts” call “safe”.

Readers: How much of your portfolio is in emerging markets? Are you planning to increase that percentage any time soon?

Jul 9 2012

Your Investments Are in Big Trouble

By |July 9th, 2012|Blog, Personal Finance Tips|15 Comments|

This is the first of a four-part series where I’m going to make some pretty unconventional investment recommendations.

Today I’m going to tell you the “problem” and during the rest of the week I’m going to tell you how I think you can make money off the problem. I believe this is one of the scariest economic times in recent history, but if you prepare yourself financially there’s a good chance you can make a bunch of money while many people around you are losing their shirts.

Let’s get started.

The Next Bubble to Burst

Let’s pretend it’s December 2006 and you have $100,000 ready to invest in anything you want. Now let’s pretend that you were pretty sure the housing market was in a huge bubble and it was about to burst. What would you have done with all that money?

Let’s say you don’t want to be a complete conspiracy theorist so you put half your money, or $50,000, in the S&P 500 (price: $1,418.30) to be “safe”.

With the other half, you:

  • Short Fannie Mae for $10,000 (price: $59.39)
  • Short Bank of America for $10,000 (price: $53.39)
  • Short big insurance company AIG because they are holding the PMI on a huge number of subprime loans (pre-reverse-split price: $1,433.20)
  • Buy $20,000 worth of Gold ETF GLD (price: $63.21)

Here’s what those investments would look like today:

  • S&P 500: $47,757.17 (-4.49%)
  • Fannie Mae: $19,957.91 (+99.58%)
  • Bank of America: $18,565.27 (+85.65%)
  • AIG: $19,779.72 (+97.80%)
  • GLD: $28,634.71 (+143.17%)
  • Total: $154,694.79 (+54.69%)

As you can see, predicting the housing bubble bursting and investing half of your money on that happening would have resulted in about a 54% gain over a 3.5 year period. 54% is incredible any time, but it’s especially good over a 3.5 year period where almost everyone else lost money in the market.

I know what you’re thinking: it’s easy to suggest shorting financials and buying gold in 2006 when we’ve already seen history play out. But there are people, professional investors even, who were predicting the burst of the housing bubble in 2006. One professional investor, Peter Schiff, was ridiculed for these predictions on many TV shows. One host even said, “I know you want to continue that expose on Santa Claus.” You can see all the embarrassing proof in this youtube video:

Considering the fact that Peter Schiff successfully predicted the burst of the housing bubble in 2006, I was curious to find out what he believes is happening today. Luckily he just put out a new book titled The Real Crash.

Peter Schiff Says to Prepare for The Real Crash

Peter Schiff didn’t just predict the burst of the housing bubble; he is the CEO and chief global strategist of Euro Pacific Capital. Being a CEO of an investment brokerage doesn’t mean he can predict the future, but he’s not some Joe Schmo either.

In this book, Peter Schiff says the next bubble to burst isn’t an industry within the US economy; he says the next bubble is the American Government itself.

And I see no reason to doubt him. We all know Greece is in a boatload of trouble right now. Officially Greece’s debt-to-GDP ratio in 2011 was 165.3%. Due to Greece’s unsustainable debt problem interest rates on Greek two-year government bonds rose from 3.47% in January of 2010 to 177.37% in February of 2012.

Basically Greece has so much debt that no one is willing to lend them money. To put it in terms that are easy to understand, Greece is like a person who has $355,600 of debt, makes just $40,900 a year and spends $50,100 a year. Would you lend that person money? I doubt it. source-wiki

Obviously Greece is bad, so where is America today?

The American Government Bubble

In very rough numbers, we have about $16 trillion in debt, and our GDP is about $15 trillion. That makes our debt-to-GDP ratio of about 106%. America is like a person who owes $160,000 in debt, makes just $23,000 a year and spends $36,000 a year.

According to these numbers we aren’t as bad as Greece, but we also have some huge problems coming down the line.

Payments owed to Social Security and Medicare recipients aren’t included in the national debt. Assuming we keep Social Security and Medicare in their current forms (which is what both Democrats and Republicans want to do) that’s another $61.6 trillion that should be added to our debt. Take that into account and we look insolvent to me.

If our government was serious about fixing this problem, the first step would be to get tax revenue and spending on the same level. Unfortunately neither political party is proposing any significant spending cuts (which is the only solution in my opinion). If you are someone who believes taxes should be raised to fix the deficit, neither party is proposing any significant tax increases either (the Buffet Rule would bring in only $162 billion over 10 years, or about 1% of the debt).

It doesn’t matter whether we have a Democrat or Republican in the White House either. Since 2000 our government has shown no desire to decrease the national debt, and neither Barack Obama nor Mitt Romney has publicly stated any desire to stop spending more than we bring in from tax revenue.

federal debt

photo credit: wikipedia

How Much Time Do We Have?

If Peter Schiff and I are right and the American government “bubble” is going to pop, the question is “when?”

Unfortunately no one knows exactly when it will happen, but I can tell you what it will look like. When other countries start seeing American government bonds as risky investments they will start demanding higher interest rates like Greece is seeing now. You might remember hearing about the drop of the credit rating on US debt last year. That’s the first step to higher interest rates.

We paid $230 billion in interest on our debt in 2011. When (if) interest rates go up, that $230 billion a year could turn into $460 billion. Or $690 billion. Or worse.

At that point we won’t be able to borrow because interest rates will be too high, and we won’t be able to pay those increased rates because we won’t have the money. Either we default as a country, or we print a bunch of money and go through a period of hyperinflation.

No matter whether we default or hyperinflate the dollar, the result could be really bad for your investments if you don’t prepare yourself. I’ve personally been worried about the American Government bubble popping for some time, but I wasn’t smart enough to know what to do with my money to protect myself. Luckily Peter Schiff has some suggestions, which I’ll talk about over the next few days.

I’ll leave you with one final video that takes a humorous approach to explaining America’s financial situation:

If you are fascinated by finance and how it works, completing courses towards an economic crime management degree will not only help you have a better understanding of finance but also help you find the career the give you financial security.

Readers: Do you think the American Government is a bubble that is liable to burst in the next few years? If not, why?

Carnival Links

Yakezie Carnival at Edward Antrobus
Carnival of Retirement at Write and Get Paid
Carnival of MoneyPros at I Am 1 Percent
Y & T’s Weekend Ramblings at Young and Thrifty
Carnival of Fin. Camaraderie at The University of Money
Canadian PF Happy Hour at Canadian Personal Finance
Carnival of Financial Planning at The Skilled Investor

Jul 6 2012


By |July 6th, 2012|Blog, Life|9 Comments|

Tonight I’m going to see The Amazing Spider-Man, and not just at any theater. It’s called a Cinema Suites theater where I get assigned seats, a leather recliner, and they serve me dinner.

It’s freaking awesome.

Sure the tickets were $18.50, which would be outrageous if it weren’t for two things.

First, I have an assigned seat right in the middle of the theater. In a regular theater I’d have to show up 30-45 minutes early and stand in line to get a good seat during opening weekend. Now I can show up 5 minutes before the show starts and still get the best seat in the house. Time is money, so this is a great perk.

Second, IT’S SPIDER-MAN!!!!!!

Never Forget The Purpose of Money

Money is nothing more than a means of exchanging what you have for what you want. When your favorite super hero has a new movie that’s received positive reviews and it’ll cost you less than $20 to see that movie in the most comfortable setting possible, that’s a pretty darn good use of money in my opinion.

Of course, I have no debt and a net worth of almost $50k, meaning I have the financial means to make such a decision. If you are drowning in debt, $20 plus food is completely overpriced for a movie in my opinion.

If you have the money, go see Spider-Man with me this weekend. If you don’t, read a good book and put an extra $20 towards your debt.

Have a great weekend everyone!


photo credit: mejane8

Jul 3 2012

Race to $1 Million – July 2012

By |July 3rd, 2012|Blog, Life|2 Comments|

You might remember that this was a big month for me because I paid off the last of my student loans in June. While it was a big hit to my checking and savings accounts, it’s nice to finally be debt free.

But was paying off $7,000 of debt and getting 3 paychecks this month (yay for 5 Fridays) enough to beat The Hoff?

Race to a million

Unfortunately, it wasn’t. Crap.

Conspiracy Theory Tangent: Usually The Hoff tells me his number first and then I would look through my accounts and come up with my number, which in many cases back in 2011 was just a few hundred higher than The Hoff’s. This month I did my number first and he came back with a number only $166 higher than mine. I wonder if we can trust this “The Hoff” character???

Now that I’m done speculating about The Hoff cheating, I’m happy to report that after two months of my net worth decreasing, I’m in the black again.

Now I have some significant changes coming down the line that should have substantial impacts on future updates.

I’m Now $300 Richer a Month

This time last year I was paying $300 a month in student loan payments. In July (and every month in the future) I’ll pay $0 month in student loan payments. Not only do I have $20,000 less in liabilities, but I have $300 a month that I’m free to save instead of use to pay down debt.

$300 a month is $3,600 a year. That’s a significant amount of money, and hopefully it will help me catch up to The Hoff.

My 401k Strategy Has Changed

I’ll write more about this later, but I’ve made some pretty significant changes in my 401k investment strategy. This is hugely important because my 401k represents 47% of my total assets. A change in the investment returns of this account can make huge differences in future net worth updates.

I’ll detail what and why later, but I’m moving a lot of my money into Emerging Markets. Common knowledge says these are “risky” investments, but I’m actually moving into them because I feel safer with my money in Asia and Latin America.

My Net Worth Tracking

As always, here are the net worth tracking graphs I use in my customized Net Worth Tracking Spreadsheet that is free to download. It’s fun to track this stuff, especially when the numbers are going up like mine have been!

Take a look at the student loan line that has reached $0. Pretty freaking sweet, huh!? You will also notice a huge dropoff in liquid assets (which were used to pay off the student loans). Everything else is looking pretty good. If you haven’t started your own spreadsheet yet, today’s a good day to start!

June Net Worth

click for larger image

Carnival Links

Carnival of Retirement at I Am 1 Percent
Lifestyle Carnival at Young, Cheap Living
Yakezie Carnival at One Cent At A Time
Y & T’s Weekend Ramblings at Young and Thrifty
Carnival of MoneyPros at Simple Finance Blog
Carnival of Fin. Camaraderie at The University of Money
Carnival of Financial Planning at The Skilled Investor
Festival of Frugality at Help Me To Save

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