Archives For October 2007

Financial planners and “experts” love to look at people as individuals in a vaccuum. “Get educated!” “Save money!” “Start a business!” they preach, as though everyone is perfectly capable of doing such things but are somehow simply choosing not to.

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Check out the latest “The Mole” column in Money, in which the Mole answers a question about dumping a horrible money manager. The question:

After three years of negative returns, I need to find a new money manager. What should I ask and is there anything I can rely on that ranks the quality and returns for money managers?

I’m guessing the three years are 2004 – 2006. If that’s the case, there’s no excuse to have negative returns. According to the Callan Periodic Table of Investment Returns, the S&P 500 Index total annual returns for 2004 – 2006 were 10.88, 4.91, and 15.79, respectively. To turn in a negative return over that same period of time is inexcuseable. This manager must be on drugs.

My advice for this person is to:

1. Dump the money manager, just beware of any tax consequences if this is a taxable account.

2. Develop an asset allocation plan.

3. Utilize low-cost index funds or exchange-traded funds. Index funds are great in that you generally don’t have to worry about underperformance. Of course, you’re never going to perform better than the market, but in most cases there’s nothing wrong with accepting market return.

I think simplicity is the best.

Dave Ramsey is notorious for saying that personal finance is 80% behavior and 20% head knowledge. It’s a neat little soundbite but does it make any sense?

I wonder how he came up with it? I was thinking it was 70% behavior and 30% head knowledge. Or, maybe it’s 40% behavior and 60% head knowledge? I joke, I joke. But, I’m curious to know if any of you Dave Ramsey fans know how Dave came up with this little tidbit. If you know, please share.

Perhaps it’s related to the 80/20 principle (also known as the Pareto Principle). According to Wikipedia:

The Pareto Principle states that, for many events, 80% of the effects comes from 20% of the causes. Business management thinker Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who observed that 80% of income in Italy went to 20% of the population. It is a common rule of thumb in business; e.g., “80% of your sales comes from 20% of your clients.”

I don’t think the Pareto Principal applies here because it doesn’t fit this scenario. Dave is saying that 100% of personal finance success is the result of 80% behavior + 20% head knowledge, while the Pereto Principal would say that 80% of personal finance success comes from 20% of something else (behavior or head knowledge).

Obviously you can have all the personal finance knowledge in the world but if you can’t control your behavior you’ll never get anywhere. So, you do have to have both ingredients. I just want to know how Dave Ramsey came up with his soundbite.

This just cracks me up.

I recently purchased new garage doors and two Genie garage door openers from Home Depot. I spent $185 per opener, which I thought was expensive. These openers came with remote keypads for easy access from outside. It’s a cool feature and one of the reasons I bought these particular openers. I decided to pay extra to have the openers installed because installing garage door openers is a royal pain in the…

After the doors and openers were installed, I had to program the keypads. It took me a few minutes to figure out the process but I eventually got one of the keypads to work. I never did get the second keypad to work. I called customer service and the rep told me to change out the battery in the keypad. So, I went and bought a 9 volt battery, installed it, and tried to program the keypad again. It still wouldn’t work.


Today I called customer service again and the rep told me that they would ship me a new keypad. She took my address and then told me that I would be reponsible for the shipping of the keypad. LOL! I said, “That doesn’t seem right to me. I mean I paid $185 for the opener and the keypad not working is not my fault.”

She was nice about it and told me that the warranty states that Genie is not responsible for shipping. What a load of crap! Anyway, she did agree to waive the shipping charge for me one time but told me that I was now in their system and that if I ever had a problem again, I would have to pay shipping costs. I told her, “I hope I don’t have another problem with the openers.”

Had I known this, I wouldn’t have bought a Genie garage door opener. It tells me that they must ship out a lot of parts and they are tired of paying for shipping. Regardless, making customers pay shipping costs to replace defective parts is VERY POOR customer service!

The Democrats Tax Plan

October 25, 2007

Well, the Democrats have come up with their tax plan. Overall, it’s not too bad (I like the idea of making lawyers and accountants pay into Social Security) but there’s an area that bugzs me. According to this article I found on Bloomberg, the plan calls for a surtax of 4%+ on “wealthy” families. Their definition of “wealthy” is families with adjusted gross incomes over $200,000 per year.

Sure, $200,000 sounds like a lot of money but does it make a family “wealthy?”

I hate progressive taxes.

Most of the time, Ramit and I see eye-to-eye. This post, An Annoying Email I Got, is no exception. The email Ramit received:

This is nothing personal against you, because every personal finance author I’ve read says the same thing, but your advice is not for real people like me. The “spend less, save more” theory is great for singles or young married couples with no kids (and therefore, fewer attachments, expenses, etc.) I’m 30 years old, married, with two children. I make a very good wage for a 30-year old, but after a mortgage, two car payments, a wife who is a full-time student herself, daycare, and (many) other various utilities, activities, etc. there’s not much left for saving.

Granted, things will be better in a couple years when my wife is done with school and we’re back to being a dual income household. But all you personal finance gurus are people who have graduated from Stanford (or some other 1st tier school) and worked your way into a high paying, high end job. You represent about 0.01% of the population. Not that I hold that against you–I wish I had been that successful. But I need some other strategies to help me get my finances in order.

Ramit’s response is classic. You can always count on Ramit to tell you EXACTLY how he feels!

It’s getting close. Unfortunately our range won’t be in until November 4th!

Here’s some fresh pictures I took this afternoon:

What do you think?