Apr 072015
 

I recently read an article called “Perfection Anxiety” from an old copy of Vanity Fair magazine. In it 25 year old Petra Ecclestone, the daughter of Formula One mogul Bernie, and her recently married husband, bought an $85,000,000 mansion in Los Angeles. Wow, and I thought Vancouver real estate was expensive. 😛 Before moving in to their new home they also spent $19,000,000 on their wedding. 😯 To put that into context the average wedding in the United States only costs about $25,000. But of course most weddings don’t serve bottles of $6,000 Chateau Petrus, nor does the bride wear a $130,000 Vera Wang dress.

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If that wasn’t enough excitement for the couple they later bought a 17th century self-portrait by Van Dyck for $20,000,000. 😕

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Oct 172014
 

The following is a guest post.

The days when you had to shell out thousands of dollars for a good cash register are gone. In their place and for less money, you can have a sleek cash drawer and a tablet computer with a card reader. Despite the minimal setup, the system works just as well as before. In fact, it’s often better, as the new systems like Shopify are faster and more efficient. These advances in technology might lead you to wonder when you will be able to set up a register with just the tablet and the card reader, without the receipt printer or bulky cash drawer. Those days aren’t here yet, sadly. For the moment, you still need all of these in order to make your checkout experience complete. Still, a cashless society is looming on the horizon and more than a few people are wondering what it will look like.

Added Security for Customers

14-10-cash-registerWhenever there’s a security breach online, people rush to point out that this is why cashless societies will never work. It’s just too easy to steal someone’s information, right? This argument only holds up if you forget that people get mugged and banks get robbed. Your cash isn’t safe, either. If someone steals your money, you can’t report it to a company and expect to get all of that back again. You can’t track where the thieves went after taking your check; there’s nothing for you to do but regret that you ever went down that dark alley or trusted that bank. Credit card theft is a very serious issue, but a person who can show that their identity and their cards were stolen stands a good chance of filing their claims and disputing the charges. With over 11 million cases of identity theft annually, according to Statistic Brain, there are systems in place to deal with these damages.

Tipping Doesn’t Vanish

One of the things that people are afraid of in a cashless society is that tipping will die. When you’re paying for your latte with a swipe of your card, how are you going to drop your change into the tip jar? Digital tipping is always an option, but most people think that working out how much to tip on a small purchase like a cup of coffee or a sandwich just wouldn’t be worth it. However, when tipping is made easier, then the amount that people tip digitally versus with cash actually rises. When taxi drivers in New York City started adopting a mode of tipping that let the customer check a box on a touchscreen payment device to add 10-30% to their bills, they saw their tips rise drastically. The average before digital tips was only 10%, and the average afterwards was 22%, according to The New York Times. That’s a huge boost! If this carries over to other industries, then ease and convenience of tipping might lead to better salaries for everyone from baristas and waitresses to bellhops and chauffeurs. Not to mention the fact that it will cut out the honest mistakes that people sometimes make when trying to find the proper 20% tip on an eight-person check.

Paperless Saves Business Expenses

Paperless is the way to go for many businesses looking to save costs. If you’re looking for the most expensive liquid in the office you can skip that water cooler that everyone loves and head straight to the printer. At an average of $3,330.14 cents per gallon according to Techopedia, printer ink is the most expensive reoccurring expense in your business. When you don’t have to print every receipt, you save money. When you don’t have to print out every report and checklist, you save money. When someone pays with cash, the only way for them to record their purchase is to get a receipt from you. When they’re willing to go paperless, you can either email their receipt to them or they can just check their debit or credit card statement online. The itemized lists will tell them exactly where that $50 they meant to save got away from them. This level of ease provides customers with more security and an easier way to plan their budget. No one wants to sit down with a ledger and a month’s worth of lunch receipts, bills, and payments made and missed when they can set everything up online and read the printout. You’re saving time and your customers are saving money.

Budgeting Advice Is the Only Thing That Stands in Its Way

Perhaps partly because mental math will put the brakes on your spending spree, the only place you really see someone advocating to pay cash these days is in the advice of budgeting analysts. There’s nothing to stop you from going over budget like literally not having the money to pay for something. But even electronic money can be budgeted, so when we do become a cashless society, the same principles will still apply.

Apr 222014
 

In 2002 I didn’t have any money of my own yet. But today, I have over $750,000 in gross investments. Sometimes I feel like I don’t value money as much as I used to. I guess a lot can change in 12 years.

Do you ever get the feeling that the more you learn about the world around you, the less you realize you actually know about it? Throughout my adolescent years my view on personal finance was restrained to over simplified rules and models, taught by the public education system, which for practical life purposes meant very little 🙁 Isn’t it interesting that we learn how to dissect frogs and solve polynomial, algebraic, and transcendental functions in highschool, but are never taught how to buy or sell a home, how to use a credit card, or what kind of investments can be placed into a Roth IRA? 😕

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Luckily education doesn’t have to just come from schools. Over the past 6 or so years I have exposed myself to regular doses of financial knowledge from newspapers, business shows, and of course, the internet. And now, in my mid twenties, I have a completely different view on finance. I used to think that money was just a medium of exchange that I could earn, spend, and save. While that’s not necessarily wrong, it doesn’t tell the full picture.

So here’s a better explanation of what money TRULY represents to me.

When I look at money today I see POWER. When I look at my net worth I feel POTENTIAL. When I save money I insure my future SECURITY. When I spend money I’m buying INFLUENCE, and I’m buying back my TIME, which is the most precious commodity in the world! When I read about money I gain KNOWLEDGE & UNDERSTANDING about society. When I invest money I facilitate jobs, wealth, hope for others, and create MEANING to this world. When I waste money I squander my LIBERTY and INDEPENDENCE. When I invest money into stocks I’m buying POSSIBILITIES. When I blog about money I share and disseminate CONFIDENCE. And when I eventually reach financial independence I will experience FREEDOM like never before.

Money gives me perspective and context. By associating money with powerful words it’s easy to understand the importance of financial literacy, not just from a materialistic point of view, but also in terms of reconciling our emotional and personal well being with the modern world we all live in. The more we understand how money works the more dominion and authority we’ll have over all the dimensions of our lives. By controlling our money we control our fates! 😉

Will it take a lot of work to reach financial enlightenment? Maybe. But will it be worth it? Definitely! 😀

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Mar 132014
 

Some people have a fear of losing money. This prevents them from taking the necessary risk with their investments, like buying stocks, to give the best probability of a long term return. The S&P500 returned 20% over the last 12 months, so anyone who holds American stocks like me have probably done well with their net worth over the last year 🙂 Despite reaching new record highs however, we don’t hear people talking about the stock market too regularly these days because things are going really well. But what if the S&P500 had lost 20% over that same period? I bet it would get a lot more attention wouldn’t it 🙂 Bear markets certainly give the media more to talk about.

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This is because many people can’t stand losing money. In economics the tendency to prefer avoiding a loss rather than making a gain is called loss aversion. This psychological behavior prevents many people from making smart investment decisions.

Scientists have done experiments where they give monkeys a single banana each. Predictably the monkeys would appear satisfied 🙂 The scientists then gave two bananas each to another group of monkeys and then took one banana away. Note that these monkeys still ended up with a free banana each, but they become noticeably angry and agitated at the scientists, as if they had just been robbed. So sometimes  1 ≠ (2-1).

In terms of behavioral finance,  we’re not that much different from monkeys. We feel pretty good about getting a $20 discount on a new pair of shoes, but we feel a whole lot worse if we realize we lost $10 because it had accidentally fallen out of our pocket. But learning how to process and react to losing money correctly is important to understanding the financial system. In fact Canadians who describe themselves as more knowledgeable investors are more likely to have experienced a major loss.

Here’s an easy experiment to find out if you are risk adverse. Pick a stock to follow and imagine you own it. Record how much it has increased or decreased after each day, and your feelings about it. Over time if you notice that you feel emotionally stronger toward losses than gains of the same magnitude then this means you have a lower risk tolerance for investing, which is fine. You simply value capital preservation more than potentially larger gains. Just be aware that the time when we should be taking on the most risk is when we’re young. If our investments fail at least we would still gain valuable knowledge and experience, which we probably can’t afford to do when we’re old and crusty 😛

To me a dollar lost has the same emotional intensity as that from a dollar gained 🙂 I don’t get upset if I lose on a stock trade because I know I can just as easily make it back next time. I can also sleep well at night during a recession because I know bear markets don’t last forever. Thinking about losses logically can make us more happy 😀

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Random Useless Fact: While sitting in front of your computer, lift your right foot and make clockwise circles.
While doing that, take your right hand and draw the number 6 in the air.
For some people, your foot will change direction all by itself. Try it 🙂