Money News and Views
By Steve Gillman - June 15, 2013
Here is a small collection of news, ideas and opinions relate
to the making, saving and spending of money. We start with a
look at what kind of backgrounds billionaires come from. Further
along we look at lottery tickets and we try to dispell the myth
that starting a business is always riskier than getting a job.
Traits of the Wealthy
Forbes magazine reports that among the parents of American
billionaires the most common professions they found were engineer,
accountant and small-business owners. Others have noted that
being comfortable with numbers is nearly universal among the
wealthy (the exceptions are likely to be those who found wealth
through fame, like movie stars and sports professionals). It
seems that for most of us, a certain level of comfort with math
may be a necessity for attaining great wealth. After all, although
an accountant can keep track of your returns on a real estate
investment, how do you know to buy it in the first place if you
have no idea how to quickly figure a capitalization rate when
looking at a property? (And high school math should be sufficient
Mathematical skill may in part be hereditary, but certainly
it can also be learned. This is something to keep in mind if
you hope to make much money in business or investing.
If you don't trust the currency and you want a safety net
made of something more substantial, what should you choose? Gold
has long been the alternate money of choice, but it can fluctuate
wildly in how it is valued in this or that currency. Also, if
you envision a worst case scenario where the government destroys
the currency, gold is rarely in small enough quantities for convenience.
How do you get change from an ounce of gold when you want to
buy a few loaves of bread and that ounce is worth 300 loaves?
For these scenarios it may be best to have a small hoard of old
silver coins. Any quarter minted before 1965 is 90% silver and
has been worth enough to buy a loaf of bread for most of its
Are Businesses Riskier Than Jobs?
The idea that starting a business is riskier than getting
a job is great for keeping people in their "places,"
or for making them fear change. But the truth is that there are
many businesses you can start with little investment and build
up to a livable income even while keeping your current job. As
a plan for increasing your income, it can be better than getting
a second job.
For example, my wife and I started online with a used computer
that I paid $100 for, and a phone-based internet service that
cost us $5 per month. For many years we made many times more
than any job either of us has had in the past. Even, now, after
our business income has fallen substantially, it still pays the
bills, and it has provided the capital necessary to buy a new
business if we choose to do that.
Also, it is common to underestimate the risk involved in seeking
jobs as a sole source of income. You can be fired or your employer
can go bankrupt. And as for the monetary risk, consider how much
time and money you spend getting a degree. The money spent is
obvious, but don't forget that the years in college are years
that you could have been earning money (either at a job or in
a business). As reported by WiseGeek and others, there are over 100,000
janitors working in this country who have at least a bachelor's
degree, which reminds us that after a big investment of time
and money an appropriate job is still not guaranteed.
There are many good reasons to have a job rather than a business,
but income security or lack of risk is not the most convincing
one. If you really want to lower your risk consider developing
several sources of income.
How to Diversify Out of the Dollar
If you are worried about the collapse of the U.S. dollar,
you can put some of your money in a foreign bank, or a U.S. bank
that lets you open foreign currency accounts. One such bank is
EverBank, at http://www.everbank.com. If the dollar falls 20%
against the Swiss Franc, or whichever currency you choose, you'll
be that much further ahead. If it rises, of course, your account
will lose value. These accounts are FDIC insured, but this won't
protect you from currency fluctuations.
Do You Buy the Name?
Research done in the field of behavioral economics shows us
that people buy things for many reasons that they are not aware
of. For example, in blind taste-tests, most people prefer draft
beer to bottled beer, yet most buy the bottle at a bar, and many
claim they like the tastes better. What are the real reasons
they buy the bottles?
Researchers have identified two motivations. First, some customers
don't want to appear "cheap" by getting the inexpensive
draft version of a particular beer. Second, most people get their
sense of identity in part from the things that are "theirs,"
including the labeled bottle in front of them (are you a "Bud
man" or an eclectic Mead drinker?).
Here's an idea: If we learn to not worry about what others
think of us and we stop identifying with things as self, we can
have better beer (and many other things) for less money, leaving
more money available for more important goals and values.
Skip the Lottery
I recently read that a person who drives ten miles to buy
a lottery ticket is more likely to be killed in a car accident
along the way than to win the jackpot. Three times as likely!
I'm not sure about the primary source for the statistics, but
I do know that the state governments who simultaneously promote
this kind of gambling while hypocritically making laws preventing
"immoral" gambling offer far worse odds than the worst
casinos on the planet. Skip the gambling altogether and invest
the money. There's enough risk in that, after all, but at least
the odds are in your favor if you do it right.