Democrats, Republicans, and Wealth – Who Has More and Who Creates It Better?

Personally, one of my least favorite things to discuss, especially in an election year like this one, is who is right and who is wrong between the various political parties in the US.

Why is this? Simple – because it is almost a lost cause to get someone to change their mind about their beliefs in this area. As such, these conversations usually just turn in to arguments for the sake of arguing, which I am not a big fan of. In my book, everyone is entitled to their own opinion, and that is fine by me!

However, one of the things I do enjoy researching and sharing are the various financial differences between Democrats and Republicans based on available data. 

For example, in Jeremy Siegel’s book, Stocks for the Long Run, his team analyzed the various returns of the stock market when Republicans vs. Democrats held the Presidency and found that from 1948-2001, the annualized real return for when Democrats were in office was almost 5% higher than for Republicans. This was fairly surprising to me since Republicans are often generalized in the financial media as being the party that is more interested in the success of private industry.

As a continuation of the Democrats vs. Republicans financial comparison, today, I wanted to try to seek an answer to the following two questions based on available data:

1. Are Democrats or Republicans wealthier (as far as personal finances go) in the US? 
2. And, who is better at creating wealth?

Initial Hypothesis

Based on the general impression given by the financial and political party campaign media, I would guess that Republicans, on average, have more personal wealth and are better at creating wealth in the US than Democrats.

Comparison of the Political Affiliations of the Richest People in America

Starting at the top sounds like a good place for us to begin our numerical investigation. In other words, the first thing I looked for was a listing of the political affiliations of the top 20 richest people in the US, based on the Forbes Richest Person in the World listing.

Luckily, a study in 2011 by the New American Gazette had already analyzed this data exactly the way I was wanting to.

What they found was that 75% of the top 20 richest people in America support the Democratic party. Even George Soros, a stock market financier, was listed as being a Democrat. In fact, Bill Gates, Warren Buffet, Larry Ellison (the top 3 wealthiest on the list), and the two Google principals were all associated with the Democratic Party. This was rather surprising to me!

Comparison of Congressional Representatives

Moving down the ranks of richest people in America (now to the tens to hundreds of million Dollar net worth level), the next groups that we come to where political affiliation is very easy to identify are individual members of the House of Representatives and the Senate. By now, I’m sure we’re all fairly well aware that nearly every member (regardless of political party) in Congress is wealthy and a millionaire.

• In the Senate, the Democrats appear to be slightly wealthier, with a median net worth in 2010 of $2.69 million compared to $2.43 million for Republicans. Honestly, this is hardly any difference at all, and I would actually consider them to be tied for wealth for practical purposes. Source.
• In the House of Representatives, Republicans seem to be significantly wealthier, with a median net worth of $834,250 compared to $635,500 for House Democrats. Source.

Comparison of Political Affiliations of “The 1%”

Does anyone remember 2011? It seemed like you couldn’t even turn on the TV or bring up a web browser without hearing about the infamous 1% protests, etc. I even got to see the 1% protest / Occupy Wall Street camp in the heart of New York City during my girlfriend’s ING New York Marathon in November!

According to a 2011 Gallop Poll, the wealthiest 1% of the US population is defined as earning an annual income of $500,000 or more. The results of this study showed that the largest percentage (41%) of the 1%’ers identify themselves as “Moderates/Independents.” However, when it comes to voting, a majority (57%) tend to lean/vote Republican.

Wealth & Political Affiliations for the Rest of Us

When it comes to determining if more normal-income earning Democrats or Republicans are more wealthy, the conclusions become VERY complicated, but rather interesting!

Listed below is a summary of what I found in digging around the Internet:

• The 10 poorest states in the US according to average income levels (Arkansas, Mississippi,  Tennessee, West Virginia, Louisiana, Montana, South Carolina, Kentucky, Alabama, and North Carolina) by majority, vote and are represented in Congress by Republicans.
• According to USA Today, Slate.com, and CityData.com, the wealthiest overall geographic locations (counties and states) in the US tend to vote, by majority, Democrat. In other words, these areas had higher overall average incomes compared to locations that voted majority Republican.
• However (and here’s where it gets interesting!), according to slide 9 of a University of Arizona academic report, when the entire overall voter population is taken in to consideration, the majority of wealthier voters ($100,000+ income per year) tend to vote Republican, and the majority of less wealthy voters vote Democrat. This same finding was confirmed by other reports I came across online as well.

At this point, we have a little bit of disparity on our hands. Or, at the very least, these results seem rather confusing. On one hand, we have that across the entire US population, richer voters tend to pitch their ballot for Republicans. However, geographic areas where on average, there are wealthier people are Democrat. At this point, you may be asking – what is the reason for this? Or furthermore, is this even possible?

How to Prepare for a Family Emergency

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The following is a guest post by Amanda Green. Enjoy! 

No matter what you do or how careful you are, you will have to deal with an emergency or two at some point in your life. These emergencies will test your ability to handle stress, your ability to handle pressure, and they can end up causing an extraordinary strain on you. This is especially true if you haven’t taken the time to prepare for these emergencies before they happen. Dealing with an emergency with little to no preparation can be an extremely trying scenario.

Preparation is Key

No matter what the emergency is, you can soften its blow by being prepared for it. Some people look at the words “prepared” and “paranoid” as almost interchangeable these days. The simple act of preparing for an emergency like insane weather, arrest, fire, or a trip to the emergency room may be seen as being “over the top” by people like this. However, these are all very possible scenarios that real people have to deal with on a daily basis.

Reasonable Preparation

It’s important to remember that being prepared doesn’t mean you have to build your entire life around waiting for disaster to befall you and your family. All it takes is a few simple acts to prepare you for a broad range of emergencies. These steps won’t take much time out of your day, and you often won’t ever have to think about them again unless an emergency comes up.

For example, most people don’t really have a plan for what to do if they ever happen to be arrested. After all, most people don’t really see themselves engaging in any activities where they would ever be at risk for arrest. However, the truth is that everyone has the potential to make a mistake or accidentally break the law.
In the scenario above, it would be smart to have a bail bondsman at the ready to get you out of jail. You can save a lot of money when you are bailed out by a bail bond company instead of paying the bail in cash yourself. These people also know how to properly navigate the legal system and can give you advice on how to not get yourself in even more trouble.

Also, every family should have a fire plan of some sort. House fires can happen to anyone and are obviously extremely deadly. The problem is that many young children will try to hide from fire or smoke under their beds or in a closet. It’s important for parents to talk with their kids about house fires, what to do in the event of a fire, what not to do, and safe places to meet outside. Taking a few minutes now could save a life in the future.

Preparedness is Smart

The truth is that everyone deals with emergencies from time to time. Preparing for these emergencies is much easier and less time-consuming than many people think. Taking a little time to prepare now could save you a lot of pain later on.

How about you all? What steps have you taken to prepare for emergencies that could occur to your family?

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/68751915@N05/6629072839/lightbox/

Do You Have What it Takes to Be Self-Employed?

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Click here to enter my free $79.07 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is September 30th, 2012.

The following post is by MPFJ staff writer, Kevin Mercadante, who is professional personal finance blogger, and the owner of his own personal finance blog, OutOfYourRut.com. He has a background in both accounting and the mortgage industry.

At one time or another, nearly everyone entertains the idea of having their own business. Sometimes, it’s motivated by dissatisfaction at work, the loss of a job, the lack of opportunity in your field, or maybe by a slick TV infomercial—you know—the ones that promise easy riches without having to do a whole lot of work?

Any of these can be the spark that ignites the flame of desire to be an entrepreneur, but is desire enough to guarantee self-employment success?

I think desire is an important motivator—you have to want something badly to make the wholesale changes that self-employment will bring. But, desire alone won’t make a business a success. There are certain skills and personal qualities needed not only to make a business profitable, but also to sustain it over a lifetime.

What are those skills and personal qualities?

You have the ability to deliver the promised products or services

One of the biggest reasons so many new businesses fail so early on is because the would-be entrepreneur knew close to nothing about the business he or she got into. They may have bought into a franchise, acquired a business they knew nothing about, or took a flyer on something totally new.

What ever business you go into, you’ll need to have expert status or something very close to it. That’s the only reason anyone will do business with you at all.

Competition is heavy in nearly all businesses today—you won’t make it as a trainee.

Make sure the business you choose is one where you have strong knowledge and solid skills. You’ll have to be able to convey confidence in what ever it is you’re offering. If you feel you’re lacking in this area, take courses and/or get a part-time job in the field and get the necessary training and experience before you strike out on your own.

You have a high risk tolerance

When you work for someone else, there are two risks you never face, and they’re huge. One is that as long as you work, you’ll get paid. The other is that you don’t have to invest capital into your employer in order to earn your living. It’s literally a cash-and-carry arrangement.

When you’re in business for yourself, neither of those conditions exist. You’ll almost certainly have to invest upfront money in the business, and it may be many months of hard work before you turn your first profit. Should the business fail you’ll lose both your invested capital and the time you put into the business. And it doesn’t stop once the business is up and running.

You may have to invest more money in order to grow the business, consider entering into partnerships with others, or hiring people and trust them to run parts of your business. There are risks in all of that, and you have to be prepared to take them and live with the consequences.

You’re a certified self-starter

When you work from someone else, you typically have a job description. Each day you know roughly what it is you’re supposed to do, and if you don’t, your boss is there to remind you. When you work for yourself, there’s no job description, and no boss. Each day is an open schedule that you need to fill with productive activities. In order to do that you have to be a self-starter—a person who doesn’t need to be told what needs to be done.

You’re a natural at multi-tasking

Entrepreneurs tend to wear the “chief-cook-and-bottle-washer” label, at least when the business is in its early stages. Since cash flow will be slim, you probably won’t be able to hire others to share the workload with. You’ll handle everything from sending correspondence to making sales presentations to troubleshooting business transactions that go sour. You need to be able to balance it all with some level of ease.

You have sales skills or marketing skills

Earlier, we covered the need to be able to deliver on your products and services, and as important as that is, equally important is your ability to market those products and services.

While we often think of sales and marketing as one-in-the same, they’re actually different functions. Marketing is getting exposure for your products and services. It can include the ability to market through the Internet, direct advertising or affiliate selling. It’s the process of getting customers to come to your business, website, email or telephone.

Sales can be thought of as a combination of face-to-face marketing—a skill not everyone has—and the ability to close a sale to a customer that your marketing campaign brought in. When you’re self-employed, it’s best to have both marketing and sales skills.

You have above average money management skills

One thing you won’t have when you’re self-employed is a steady paycheck, at least not at the beginning. You have to be able to survive without it, in addition to the ability to come up with cash for both contingencies and business expansion. To do that, you’ll have to be able to get the most out of a little bit of money. This will be true even if you have considerable upfront capital. You’re ability to stretch your money will be one of the most critical skills as a business owner.

You’re a strong negotiator

You’ve heard the term “buy low, sell high”? That’s the fundamental job of every business owner. Whether you’re selling your products and services to customers, or buying supplies and services from vendors, you’ll have to have strong negotiating skills to maximize your income.

When you work for someone else and it comes to money, as the saying goes, “it is what it is”. When you work for yourself, it is what ever you can negotiate. The better you are at negotiating, the higher your profits will be.

Conclusion

If you’re thinking of starting your own business, think hard about your ability to handle the skills above—you’ll need them all. Or you might decide that working for someone else isn’t so bad after all!

How about you all? What other skills do you think are important in order to be self-employed? Which skill is THE MOST important of all the rest?

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/shimelle/877913815/sizes/o/in/photostream/

Easy Like Sunday Morning Recap and Roundup – # 9 – September 23rd, 2012

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Each time, the purpose of the Easy Like Sunday Morning Recap and Roundup series is the same – for me to be able to connect with you, the readers, on a more personal (non personal finance informational transmission only) level, encourage community, and also to give back to the other bloggers around the blogosphere who have mentioned My Personal Finance Journey throughout the past few weeks or so. It’s been about a month since the last roundup, so we definitely have some catching up to do! 

As far as the theme goes, the title of the roundup gives it away. The roundup theme is named after the Lionel Richie song, Easy Like Sunday Morning (which I play once each time I put this together), to remind us of the importance of slowing down at least every once in a while to take appreciation for that which transpired over the past few days.

So, without further ado, let’s get started with this edition’s roundup!

Updates from Jacob’s Personal Finance Journey and Life 

• As far as my life in general, the months of August and September have been full of some interesting life changes changes compared to the summer months. 
• In graduate school, I am now officially in my 3rd year of my Chemical Engineering PhD program. 
• For the past 3 months or so, I have been learning a new microscopy technique called Atomic Force Microscopy (AFM). Essentially, what it involves is using a very tiny micrometer length ‘tip’ that feels along the surface that you are analyzing. The image is resolved by reflecting a laser on the tip to sense the height deflection that occurs. Shown below is an example of one of the images I generated while learning the technique. Take note of the of the scale bar on the right having a maximum of 5 nm. This is 10^-9 meters! haha
• In addition, this fall, I am serving as a Teaching Assistant for the first time in my graduate career for a Transport Processes class. So far, I’m really enjoying guiding the students through their homework each week with the various questions they have.

• In addition, towards the end of the summer, I had my parents come in to town from Arkansas and my sister come in from North Carolina, so it was nice to enjoy some of the local cuisine, breweries, and hiking areas along with them. Shown below is one of the pictures of me cooling off in a swimming hole with my Mom. It was fun! 

• As far as my personal finances, the months of August and September have treated me pretty well. 
• At the beginning of August, I was able to max out my Roth IRA contributions for the 2012 tax year. 
• Since then, I have started contributing any leftover money I have had to my Individual Self-Employed 401(k) with Vanguard. So far, I have made some good progress, with about $2,500 contributed thus far for 2012. 
• However, from now until about the year-end, I plan to begin investing more of my excess funds in to my blog to build for future growth instead of my personal finance retirement savings. 
• As far as my blog goes, the end of September and beginning of October will mark some VERY exciting changes for our site! Read on below to find out more:
• For about the past year, my graduate school schedule has been sufficiently busy to only allow me to produce about one very high quality post every 1-2 weeks. Aside from that, the only other posts that I’ve run have been the occasional guest post.
• Thus far, this set up has worked fine. I got to interact with readers through my periodic postings and learn many new things in the process. 
• However, I’ve reached a point on this blog where I feel the desire to provide more frequent and consistent high quality to you all, the readers, instead of simply throwing a post out to the blogosphere whenever my graduate school schedule permits. 
• As such, I want to introduce to the new complete My Personal Finance Journey Team that will begin helping me out with various things on this site going forward:
• Becca @ The Academic Wino – Becca is my girlfriend of almost 2 years now. She runs an amazing research-based wine blog (The Academic Wino). She has been helping out for about 4 months now on submitting various posts on My Personal Finance Journey to social media bookmarking sites.
• Cherleen – Cherleen has been a part of the My Personal Finance Journey team now for about a year. She helps me each week by commenting on various sites around Internet to let me know of good articles that arise that I may have otherwise missed. 
• In addition, I am adding several new staff writers who will contribute articles for the site on a regular basis. These posts will be spaced out in such a way that I’ll still have plenty of time to post my regular articles. But, instead of having one to two week breaks between regular posts while I am busy in graduate school and leaving you all out to dry, you will have some great new content to read! I am really excited about this new set up, and I hope you all are too. Listed below are the new staff writers that I have hand-picked for My Personal Finance Journey. 
• Miss T from Prairie Eco-Thrifter.
• ADP from American Debt Project.
• Travis Pizel, a writer for Care One and Enemy of Debt.
• Kelly from Cordelia Calls it Quits.
• Melissa from Mom’s Plans.
• Kevin from Out of Your Rut.
• Jeff from Sustainable Life Blog.
• Tahyna from DinksFinances (also a Certified Financial Planner!).
• Toi Williams from Fine Tuned Finances.
• Let’s welcome all of these writers to the site! 🙂

Guest Posts from Personal Finance Bloggers on My Personal Finance Journey

Since the last roundup, there were no guest posts here at My Personal Finance Journey. Let’s change that, shall we?!

How Much of Your Net Worth Should be Sitting in Cash or Low-Interest Savings Accounts?

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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free $79.07 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is September 30th, 2012.

The following is a post by MPFJ staff writer, SK. SK writes about the reasons we get into debt, changing the patterns that get us into debt, and examines small business ownership and real estate investing at her blog, American Debt Project. Please welcome her to the MPFJ family! 

How about you all? What percentage of your net worth do you feel should be held in very liquid accounts (savings, money market, etc)? 

Share your experiences by commenting below!

Financials of a College Football Game

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Click here to enter my free $79.07 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is September 30th, 2012.

Living in the town where the main campus of The University of Virginia is situated, about every two weeks each Fall, I get to see first-hand how the city morphs in preparation for a UVA Cavalier’s home football game. The hotels book up, the restaurants fill to the brim, there are more people walking around campus, and the main roads in and out of town become a little more cumbersome to transverse.

Event though I personally do not attend the majority of the home football games, I actually do enjoy the atmosphere and the excitement that manifests in town for the games (provided that I don’t get stuck in too much of the traffic). It’s pretty fascinating to have so many different types of people interested in the common theme of the college football game for that one weekend. It feels like it’s really a way to bring people together more.

During a recent home football game, I began to wonder how much money changes hands as a result of a big (Division I) college football game? However, in searching through my head for an answer for this, I really had no concrete idea. As such, the purpose of this post will be to try to find a numerical answer to this football-financials question!

Before searching around the Internet for existing statistics, I figured I would do a few rough calculations and come up with a few college football game financial stats of my own. These are listed below:

• Ticket Sales
  • Assume a 70,000 person stadium and an average ticket price of $30.
  • Total ticket sales revenue = $2.1 million per game.
• Concession Sales
  • Assume each of the 70,000 people in the stadium purchases $3 of concessions.
  • Total concession sales revenue = $210,000 per game.
• Parking Passes/Donations
  • At both of the colleges I have attended (University of Virginia and University of Arkansas), you had to donate $5,000 or above in order to have the privilege of spending the $500 to purchase a season-long parking pass to do your tailgating for the home college football games.
  • Assume that there are a total of 3,000 of these ‘preferred’ parking spaces on campus for each home game.
  • Total parking pass and donation revenue = 3,000 x ($5,000 + $500) = $16.5 million per year.
• Hotel Revenue for Local Economy
  • Assume half of 70,000 people in stadium come from out of town to watch game = 35,000 people.
  • Of these 35,000 people, assume half decide to spend the night and get a hotel room either the night before of night after a game = 17,500 people in hotel rooms for game.
  • Assume 2 people per hotel room @ $100 cost per hotel room per night.
  • Total hotel revenue = $100 x 8,750 rooms = $875,000 per game.
• Restaurant Revenue for Local Economy
  • Assume 35,000 people from out of town eat 3 meals in town for the game at an average of $10 per meal.
  • Total restaurant revenue = 35,000 people x 3 meals x $10 per meal = $1.05 million per game.

Total Economic Impact Per College Football Home Game = $6.3 million per home game. (This assumes 8 home football games per year.)

Literature Search – Financials of a College Football Game

Having generated some rough statistics based on my personal experiences with college football games, I then ventured off to the Internet to find what numbers already existed on this same subject.

Interestingly, when I did a Google search for “college football game financials,” there was quite a bit of information that popped up about the direct revenue/expenses that arise from college football games as well as the impact on the local economy.

Listed below is a summary of the findings I uncovered:

• A University of Arizona study estimated that a home football game brought in $8.3 million in economic impact to the local Tucson economy.  Another Utah study found that home games brought in an economic impact of $5.5 million.
  • Amazingly, this isn’t too far off from the quick calculation I did above! haha
• ESPN.com maintains a very extensive listing of the total revenue and expenses for college football programs from the years 2008-2011.
  • According to the 2010 stats, Texas has the top ticket sales ($45 million), Michigan State is paid the most to play away games ($4 million), Alabama has the biggest yearly program budget at $123.7 million, and Texas spends the most on coaches pay at almost $18 million per year. (Source)
• Home games against very small, no-name teams often bring in just as much revenue as playing home games with bigger opponents, but come with much lower expenses, boosting overall profits.
• If the University of Texas football program were to be valued like a business, it would be worth almost $850 million.
• SEC conference football games bring in by far the most money, bringing in an average profit of almost $30 million per year.
• An academic study from Holy Cross University found no statistically significant relationship between a town hosting Division I college football games and a boost in the local economy. In other words, I read this to mean that compared to the normal business throughout the year, any boost that a hotel or restaurant gets during a home football game doesn’t add much in the long run.
• CBS42 news reported that the state of Alabama experiences a yearly economic impact between $350-$500 million because of the games played by Auburn and the University of Alabama.
• In 2009, Penn State football brought $90 million in business to the local State College economy.
• The BCS college championship bowl game brings in about $190 million in business to the local economy.

How about you all? Which of the stats above do you find most surprising and why? Do you think the level of money spent on college football programs is too much or appropriate? 

If you live in a college city/town, do the college sports play a significant factor in the local economy?

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/stevendepolo/6224563889/sizes/o/in/photostream/

The Dangers of Working Without Professional Indemnity Insurance

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Click here to enter my free $79.07 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is September 30th, 2012.

The following is a guest post. Enjoy!

There are many things that you need to consider when starting up a new business, particularly a business that provides services to individuals and companies. No doubt your first thoughts turn to finding customers for your services, your overall business model, your cash flow situation, and many other things that relate directly to your business. However, one important item that you should also think very carefully about is professional indemnity insurance, which we will call PII.

Professional Indemnity Insurance Defined

PII gives you financial coverage should you be sued by a client. However careful you might be in your work, sometimes things go wrong. It might not even be your fault; you could, within the capacity of your profession and in all good faith, advise a client to take a specific course of action which did not work out as planned.

A Case Study

A recently reported case that illustrates this and demonstrates the dangers of working without adequate PII concerns an architect who provided services relating to a house extension. In order to reduce costs, he recommended the house owner to use a certain builder. However, there were many problems with them. The builders damaged a neighbouring property, building regulations were breached, and work was sub-standard.

As a result, the client sued the architect for around £130,000. Unfortunately, the architect did not have PII cover for the job and as a result he had to liquidate his business. Furthermore, the architect was struck off the official register of architects, which will make it very difficult for him to find work in the future.

Conclusions

Without PII, being sued by a client can be financially crippling. It really is never worth the risk. You can cover yourself for millions of pounds and the costs of the premiums are really not high for the amount of cover they provide.

How about you all? If you are a business owner, do you have insurance specifically for your business? Why or why not? 

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/uaeincredible/217849066/sizes/z/in/photostream/

$79.07 Giveaway – Community and Charity 10% Monthly Blog Income Give Back # 12 – September 2012 Edition

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The 10% give back giveaway fun rolls on for the month of September! 

In case you missed the 11 editions of the 10% Blog Income Give Back, after doing some thinking at the beginning of October 2011 about what direction I want this blog to grow and evolve towards in the future, I decided that any income made from this blog would have more significance to me at a personal life values level if I knew that a portion were being given back to the following places:

• 1) The readers – Obviously, without you here to read my articles and interact with my ideas, there would be no blog in the first place (let alone blog income). As such, it is only fitting that you receive a portion of any blog income.
• 2) Charitable organizations – If you’ve read my blog before, you know that I’m a big believer in donating a portion of my money to charity. Each year, I donate between 5-10% of my income to the National Multiple Sclerosis Society as part of the Bike for MS fundraiser that I do. Beyond the good that is done by donating your money, getting used to contributing to charity is also a good practice to emulate the actions of affluent individuals (T. Harv Eker discusses this in his book, Secrets of the Millionaire Mind, which I would definitely recommend reading if you have a few hours).

Like last month, I’ve decided to use the RaffleCopter giveaway management tool to handle sign-up facilitation for the September giveaway, so simply go through the steps listed in the widget below to enter the running for the prize and accumulate entry points.

There is no limit to the amount of points you can earn. If you refer 10 subscribers – your name will have accumulated 170 entry points! Or, if you link to the giveaway more than once, you can accumulate those 7 entry points multiple times. You can also retweet the giveaway and/or share other My Personal Finance Journey articles via social media sites once per day. In the event of a tie, I will be using a random number generator to select the winner.

Important instructions: After you complete an entry method, make sure to click and fill out the “I Did This” or “Enter” button in the widget so that I have a record of your points. 

a Rafflecopter giveaway

Remember, the deadline for entries will end at 11:59 PM, September 30th, 2012 (a little over 2 weeks from today – the start of the give back). Good luck to you all! Please contact me if you have any questions. After the deadline for entries passes, the winner (one with the most points accumulated) will be contacted via email to receive their prize and select this month’s charity organization for the donation.

***Photo courtesy of http://www.public-domain-image.com/cache/nature-landscapes-public-domain-images-pictures/autumn-public-domain-images-pictures/fall-foliage-meadow_w725_h450.jpg

When Is Business Debt A Good Thing?

Given the business climate over the past few years, debt has become something of a dirty word. And, on the whole, this is a healthy attitude. As a general rule, debt is a necessary evil for all businesses – large or small – rather than something to be taken for granted as the natural order of things. In fact, many soundly-managed businesses get themselves completely free of debt. Nevertheless, debt can sometimes be a good thing if used correctly – as well as simply being necessary to maintain cash-flow etc.

Business Mortgage Debt

For example, business mortgage debt is a generally smart move, financially, given sufficient time. In other words, commercial property values generally rise more quickly than the interest rate over long periods of time. This is also a good way of building steady value in a business in the equity in the property and by avoidance of expensive leases – unless you can strike a great deal, of course, or are given some form of financial incentives.

General Business Loans

But mainly, a business loan can be “good” debt for companies which have a proven business model and are on a steady road to expansion – with a future in which they may be reasonably confident of adding value. If your ability to create good profits that far outstrip the payments on your loans, then debt can be a wise way of fueling your expansion.

But, always take professional advice in this area from older and wiser heads. We all tend to be a little too optimistic about our business prospects, particularly when things are going well. Independent advisors will be a little more balanced in their view, and on the potential pitfalls – and will be able to advise on the best debt solution if you get yourself in too deep, too quickly.

How about you all? In what circumstances in business or your personal life do you think debt can be a good (or at least acceptable) thing?

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/betsyweber/5053385796/sizes/l/in/photostream/

11 Personal Finance and Life Lessons I Learned from Bicycle Racing

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Have you ever wondered to yourself, “What do athletes think about while they are exercising?”

For me personally and several other people I have talked to, the answer to this question is surprisingly, “Not much at all.” Generally, what I think about when I am running or cycling is either 1) my breathing, 2) my stride or pedaling, or primarily, 3) what comes next in the trail or road ahead. However, now that I think about it, this of course may be the whole reason for the attraction of exercising – to turn our brains off for a few minutes and/or hours each day!

Regardless, while on a trail run several weeks ago, my thoughts actually began to focus on a rather profound and potentially cheesy (but, since I am kind of cheesy, I figure why not, right!?) topic to write about on my blog – the life and personal finance lessons that can be gleamed from my time doing a lot of category 2/3 road bicycle racing several years ago (see picture of me in action to the right!). 

Let’s get started with the list of 11 total things that I brainstormed! This should be fun!  

1. The Importance of a Good Team Around You

One of the most important things that newcomers to the sport of cycle racing don’t understand is how much of a team sport it really is. A good team can really make or break your chances of winning a race, regardless of how fit you are. In cycling, teams provide financial support, coaching, race strategy tips, massages to keep the riders’ muscles flushed of lactic acid, equipment, mechanical support, team workers to transport and distribute food and liquid to the riders (both in cars and within the peleton of riders), and much needed drafting to shield their leading riders from expending too much energy in the wind.

In a person’s finances, I’ve learned that recruiting and maintaining a high quality financial team around you is equally important. For me personally, I employ the help of a CPA for assistance with my taxes and blogging business structure planning, and a real estate agent, lawyer, and insurance agent to advise me on issues related to home ownership. Another good addition to your ‘financial team’ would be a a Certified Financial Planner (CFP). However, I opt to manage my finances myself (since I am interested in that sort of thing), so don’t have a CFP.

2. Working Harder Does Not Guarantee Success

In cycling, one of the things that took me the longest to learn was that knowing how to ride very easy on certain set days is almost as important as doing very hard, long workouts. The reasoning behind this is that you need the easy days in order to recover and be able to have better performance out of your body in the harder workouts. In other words, working harder does not always guarantee that you’re working the smartest you can. By being strategic with your cycling training (especially with the help of a coach), you can maximize the benefit you get out of your training hours/minutes.

Similarly, in your personal finances and career, working harder does not always guarantee success. The common theme here in both financial and career matters is that we must focus our efforts on what ADDS THE MOST VALUE. For example, I once read a story about a family who spent MANY hours a week balancing their checkbook to know where their money was going. However, since they spent so much time doing this one step, they did not have any time left to do important financial planning sessions to try to achieve their goals. In addition, they didn’t have time to analyze their spending to see where they could save money. Similarly, at the workplace, we are often asked to do tasks for others in order to merely be helpful or support the workplace community. However, these tasks, while also important to a certain degree, are often not the ones that actually add value to the company/organization. Hence, we must always focus on committing a good amount of time to what is the most value adding.

3. Staying with the Pack is a Wise Choice to Avoid Big Losses

In cycling, if you are drafting/riding behind a group of other riders, you are expending about 30-40% less energy than the person at the front battling the wind resistance. By conserving your energy and staying in the ‘pack,’ you greatly increase your chances of making it to the finish and avoiding being pulled from the race. In fact, simply finishing with a group of very good riders is often enough to get you points to advance to higher categories of racing!

In personal finance, when I first started investing, it was very tempting for me to try my hand at investing in individual stocks for the chance at getting that one BIG winner that stands apart from all the others and beats out the market (the ‘pack’). However, by investing in individual stocks, while I had a couple good performing ones, I definitely lost a lot of money overall.

Now, I simply invest WITH the market using passively managed index mutual funds. By doing this, I am able to preserve more of my capital for long term growth.

4. The Importance of Short and Long Term Goal Setting and Periodic Review/Progress Assessment

During my cycling days, my coach and I would meet once per year to set specific goals for races/events that I wanted to target for doing especially well, both that specific year and in the long term. In other words, these events were the ones in which I wanted to have my peak performance. After setting these goals, we would then meet once or twice during the year as a follow up to check in on our progress.

I have found that organizing my personal finances with this same structure increases my chances for success. Once a year (usually around Christmas), I sit down and define my short, mid, and long term goals for the coming year. Then, once per month, I check in on my financial/net worth progress and also how I’m doing to meet the specific goals I set for myself.

5. You Don’t Have to Be Good at Everything

On a cycling team, it is common for the various team members to have specific specialties. For example, there is generally a team leader, several smaller riders that specialize in climbing mountains, several riders that are very strong on flat roads and time trials, and then several weaker riders whose job is to help the team carry water bottles and food to the other riders. In other words, no one person is expected or should be good at doing everything.

This same line of reasoning applies to personal finance (and business) and also relates to the importance of building a good team around you. For example, if your strength as a blogger is being able to write really high quality articles, then you can hire other team members to help you with promotions, commenting, bookkeeping, etc. In personal finance, if you are really good at implementing an investing strategy, but aren’t as good at knowing all of the tax codes, then you’d want to hire the help of a good accountant to handle that facet for you.

6. Learning from Your Losses/Mistakes and Improving for the Future

Back in 2005 when I was just starting to race as a Category 2 cyclist, one of the races that I was targeting for a good performance was the Joe Martin Stage Race in May of that year. I had trained pretty well in preparation for the event, had eaten and properly hydrated the day before, but when it came race time, my stomach got tied in a knot because I was a little nervous about performing well in the race. Ultimately, I got dropped off the back of the pack after about 60 of the 100 miles in the race the first day and had to hop a ride with a race vehicle to get back to town.

It was rather disappointing to train for something and then have it not work out, but such is life. Even though I was a little down about the experience, I got back on my bike the next day and went out for a training ride to get ready for a big race I was targeting for the next weekend. In that event, I did very well and was able to ride to the peak of my ability.

In personal finances, it is also very important to not let losses, failures, and poor performance stop you from sticking to the goals and strategy you have set for yourself. In the 2008-2009 recession, I did not actually sell one bit of my equity index mutual fund holdings out of fear that the market would NEVER return. Instead, I held firm to my asset allocation, rebalanced accordingly, kept buying shares using dollar cost averaging each month, and have experienced a significant increase in net worth in the years that have followed as a result.

7. A Little Caffeine Can be Helpful, but Too Much Can Damage Performance

Ok, so this lesson doesn’t really relate to personal finances, but since I am a big fan of coffee, I wanted to include it in this post!

Back when I used to race bikes, I would take a Red Bull caffeine/energy drink about 30-45 minutes before the start of very intense, short races. The reason for this was that while the caffeine would dehydrate you for longer races, it actually increases your muscles’ efficiency over the short term.

Similarly, in life, I’ve found that drinking a little bit of coffee each day is fine, but that if you drink too much of it or drink it too late in the day, it can keep you up at night or make it so that you don’t have as much natural energy.

8. A Consistent Moderate Pace Outperforms Short Term Sprints

One very beneficial way to train with cycling is to do interval training. What this involves is short, very intense efforts (30 seconds to 20 minutes) mixed in to a longer endurance pace ride. One day, I was out on my bike doing a series of these short, 5 minute, hard intervals. At one point, I passed a middle-aged rider during one of the interval sets. After completing the interval, I slowed down to rest for several minutes, and the middle-aged rider caught up with me. I then accelerated for another interval, passed the rider, and then proceeded to slow down again. Guess what happened next after I stopped? He caught up with me and kept pedaling on his merry way.

The personal finance lesson here is that while some very risky investments and ventures can be appealing because they can offer short-term growth, one must always remember that unless that growth is sustained, another investment (such as the S&P 500 index) growing at a more moderate pace will eventually catch up.

9. The Latest Technology/Fad is Not Always Required for Success

The equipment side of cycling is quite interesting. In general, cycling is considered a “working man’s” sport. After all, you don’t often hear about rich people hopping on their bikes and heading the country club to meet up for a group ride. Instead, you might hear about them playing golf, etc. However, the fact of the matter is that competitive cycling equipment, in my opinion, is far more expensive than golf. You have to purchase a good bike ($1000-$8000), helmet ($150), shoes ($200-$300), clothing ($200), and the list goes on.

Cyclists are especially concerned with having ‘the latest and greatest’ technology when it comes to the bike itself. However, one consistent truth about cycling is that if you put a REALLY in shape rider on a bad bike, that bike will still go fast. In other words, you don’t absolutely need the latest and most trendy technology or equipment to do well.

The personal finance world is ABSOLUTELY INUNDATED with new fads, investing instruments, high-tech analysis tools, and investing strategies. Examples of this would include the advent of all sorts of fancy, very specific ETFs, spread-betting, online investing widgets, and my favorite – some hedge funds using fractal algorithms to predict each little stock market move. Truthfully, it’s enough to make your head spin.

However, the use of all of these tools is absolutely not required in order to achieve success in your personal finances/investing. Simply buy a good mix of index mutual funds, and you’ll likely beat all of those new fads 9 out of 10 times.

10. The Importance of Pacing Yourself and Knowing Your Own Limits

In cycling, I used to wear a heart rate monitor and power meter in order to monitor the effort level I was putting out. The purpose for this was 1) to facilitate good training in order to tune my efforts during hard interval and easy rest days and 2) to make sure that I wasn’t going too hard so that my body would go in to oxygen and glycogen (energy storage) debt later on in the ride or race.

Similarly, in personal finance, knowing your own limits and pacing yourself is very important when it comes to spending. For example, if your budget system only calls for you to spend a limit of $200 per month on groceries, you must learn to stay within those limits. Otherwise, you might get in to debt levels that you cannot easily pay off each month.

11. The Importance of Good Community, Friends, Helping One Another, and Being a Good Citizen Steward

No matter where I have lived in the US, one thing remains constant: the cycling community in a given area is a very close-knit family. As such, whenever I was out on the road either riding by myself or in groups, I would always try to be courteous to other riders, help them as much as possible, talk to them, and interact favorably with people I would meet (in gas stations, for example, when I was refueling with water and food).

In my career and personal finances, I have learned that if I focus on building good relationships and helping others, favorable things seem to happen to me as well.

For example, let’s say that you’re in graduate school, and you have to depend on other people to let you use their equipment in order to analyze your samples. On one hand, you could simply go to the the lab of that other person and start using the equipment with little dialog. Or, on the other hand, you could take a few minutes out of your day and develop a relationship with them. In my experience, the person that I build a relationship with will be much more likely to help me going forward when I need it. And, you just might also find that you make some good friends along the way!

How about you all? What personal finance or career lessons have you learned indirectly by participating in other activities?

Share your experiences by commenting below!