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Earn it.

Save it.

Have fun with it.

You do it in that order, and you will be set.

Families are great. They are the first ones to come help, and the last ones to leave us when we are in trouble. When we were young, we lived with our families, and we start our very own later on in our lives.

Families however, make money matters even more complicated. Let’s face it, money is important to us, and anything important can potentially create conflicts. Most people enjoy a very good relationship with their families because there is no money conflicts; for others, money (or the lack of) can become a sticky subject.

Most people believe that the lack of money creates conflicts, but having money is just as troublesome. When parents have money, sometimes their children will try to fight for the inheritance, directly or indirectly. This is one of those unfortunate events that we all dislike when we hear it, but we see people do this time and time again. Another example is when our family members are in trouble and we become the “defacto” go to person for free loans.

So, if having money and not having money both creates conflicts, what should we do?

Here’s what I suggest. Although we cannot eliminate conflicts completely, we can drastically reduce the possible fiction points by being able to sustain our own finances. If we cannot stop everyone else from asking us for money, at least we can stop asking others for it. This also means taking the appropriate risks with our finances, and doing our homework so we are prepared for the consequences.

For business owners, this means they expand at a controllable level. For the rest of us, this means that we be responsible and create an emergency fund. Not gambling excessively or buy a house that we never really could avoid (something far too many did the last few years) also comes to mind.

If we don’t need financial help from our family members, I bet our family life will improve too! Money matters, but family matters a great deal too. So create a happy financial situation, and relieve the potential stress it will have on our families relationships!

Sooner or later, there comes a time when we make more money. Whether it is because we got a raise or because we found an additional income stream, it is something everyone will experience. Most of us start spending more money when these events happen because we feel that we can afford the extra expenses. However, if we want to achieve financial freedom, I suggest doing the following instead.

401k and IRAs - We should increase our 401k contributions and IRAs! Since we just got a raise, we wouldn’t feel much of a difference since we can probably increase our contribution rate and still get a higher take home pay!

Savings and Investments - Exactly the same as above. If you get a raise of 5%, why not put most of it into savings and investments? You won’t feel a difference and you will be much happier down the road. Save more, keep more and get to retire earlier.

Spend Some, But Delay It - When we increase our income, we should save the money and start spending it in a year. That way, you give your money time to accumulate and start earning interest. If you stick to this plan, you might be able to just live off the extra interest that you are earning!

Of course we should celebrate when we get an increase in income, but we should do it responsibly! Work hard, spend with discipline and live happily!!

My wife sent me a link to calculate the cost of renting vs buying a home the other day, which was basically a pitch from a home builder about why owning a home is so great. If you believe the calculations, buying the home with the prices we would consider is save us $1,075,638 after 30 years.

On the surface, it sounds like we’ve got to jump on this home buying bandwagon that everyone else is on. After all, who would turn down 1 million dollars of savings? Looking at it further though, and there are many flaws with this calculation.

First, although it has a box to put in a percentage for home value appreciation, it assumes that the property tax amount is the same for the entire 30 years. Unfortunately, this is just wrong. We will probably never get a new assessment of property tax every year, but we can bet that the property tax will increase with the home value over the long run.

Second, it assumes no cost associated with obtaining a loan. This is again incorrect. When a loan is made, there are upfront closing fees that just need to be paid. Some people end up taking a bigger loan to cover the closing costs but this is still money paid up front that could be earning interest in our saving accounts.

Third, buying a home usually accompanies a huge down payment. This is money that would otherwise be earning interest. This might sound like a small detail, but the down payment could more than double at 3% a year after 30 years.

Fourth and last (there are more, but let’s stop here since I think we see the point), it doesn’t say anything about the higher monthly payment that we have to come up with if we decide to buy. This situation stays the same for years before rent appreciates enough to surpass it. The extra cost of owning a home for the first many years could’ve been invested or saved, which would further cut into the perceived savings that the website is leading us to believe.

If we look at the calculation of owning vs renting more carefully, owning a house might actually be more expensive after 30 year if we include the extra cost of maintenance!! Hopefully, no one falls for the calculation in the link above thinking that they are saving a million bucks by buying a home now.

Everyone who is reading this because he/she wants to know how to get rich quick needs to realize that there’s no calculated way of doing so.  Every day, there are many people who all of a sudden become rich whether it’s because of the lottery or betting big on the right stock which skyrocketed.  Unfortunately for us though, these are mostly based on luck and can never be repeated systematically.

So, in order to get rich, the first thing we have to learn is be patient.  Time my friends.  That’s the only fixed variable in the get rich formula.

If we want to get rich, we first need to start saving to create a positive cash flow.  Whether it’s a dollar or a thousand dollars, we need to save as much as we can.  There will be sacrifices like not being able to buy that 50-inch LCD TV or the latest Gucci bag, but everything we buy is just an obstacle to our road of becoming rich.

Of course, the better our cash flow situation, the faster we can become rich.  However, just saving is not enough, or at least won’t be fast enough.  In order to shorten our path to the goal, we need to have compound interest work for us.  I’m sure everyone is familiar with this, so I won’t try to pitch the power of compound interest.  Just note that the higher the return, the faster we can increase our wealth.

There are tons of ways to gain interest with our money, and every way involves some risk.  The higher the risk, the bigger the potential return.  For example, online savings account is a pretty safe way to gain interest, but it only gives roughly a 3 percent APR at the time that this article is published.

A way to get higher returns with our money is through investing in stocks.  This has proven to have the highest return over a 20 year time horizon, but those that have been invested in the last 3-6 months will have wished that all their money was transferred to the online savings account.  This is due to the short term unpredictable nature of the stock market even though the potential reward is bigger.

In short, my point here is that there’s no cookie cutting way to get rich.  At least there’s no sure way to get rich quick.  In order to shorten the time it takes to become rich, we just have to take on more risk.  Whether we are willing to take on the risk is up to us, because we are the one that will live with the decision.

As a famous person once said, there’s no free lunch in this world.

I don’t used to feel that bad when I’m sick because I get to miss school (now work). Every time I’m sick, I just call and say that I’m not coming in and I get to rest at home. At my work, I get 48 hours of sick time a year. Even if I don’t use them (I used a total of 4 hours last year), I lose them since they do not accumulate so it made sense to use them.

However, as I got older and more in tune with finances in general, I realized that getting sick can potentially be quite expensive. In this post, I won’t go into the costs of major sickness and only want to talk about the common stuff like cold and fever etc. How much does these costs us?

Seeing the Doctor
We have health insurance at work but we still have to pay a fee of $20 every time we see a doctor. If I have to see my family physician and then he refers me to some other specialist, the costs of this adds up pretty quickly. Usually, they also prescribes some type of medicine, costing even more money.

Lack of Opportunity to Decide
Seeing the doctor are obvious costs, but how about the missed opportunities because we were sleeping to recover our energy or we were at the doctors waiting for our turn? The world is revolving constantly and it definitely won’t wait even though we are sick. For most of us, this is usually not much of a problem when we just have a flu or cold but as we become older and our responsibilities grow, the potential that any missed chance be significantly costly increases.

Misjudgement because of Mental Weakness
Even if we had the chance to decide, we might not be in the right mindset to make a judgment. Would we decide to buy or sell a stock when we are really sick? What if we had to for some reason? How about negotiating a deal for our work place when we are sick? In these scenarios, a wrong judgment could even cost us our business or job.

Final thoughts
Okay, maybe I was exaggerating a bit and that it is not this bad. However, I am not as focus when I’m sick and I often make decisions that I regret later in these situations. As we grow older, the decisions we make will have a bigger impact on not only us but everyone around us. Therefore, we must take more care with our bodies when we are healthy so we get sick less often. When the times come when we do feel sick, we must take extra care in making important decisions so it doesn’t cost us unnecessarily.

As you have probably heard, ETrade is having a customer appreciation day where they are waiving all trading commissions. So, I logged into my account just now and realized that I didn’t really want to buy or sell any securities. I reminded myself that I shouldn’t trade a stock or fund just because the commissions are free. My investments are based on research and planning, so the $10 dollars that each trade saves me shouldn’t change that philosophy.

If you are also a ETrade customer, you shouldn’t trade more frequently today just because of this promotion offer. Those that worry about commissions should look into companies that offer free trading like Zecco.

The bottom line is that we shouldn’t be impulsive with our investment decisions (and financial decisions) in general. Don’t let a promotional offer lure us into making one.

Side note: I’m flying back to California today so Money Ning should return to regular scheduled programming

December is here and it means that 2008 is just around the corner. Most people tend to start relaxing and enjoy the holiday celebration. With work starting to slow down, it is the perfect time to start looking into a few things before the year is over!

Roth IRA - If you haven’t already done so, start contributing up to $4,000 ($5,000 if you are 50 or older) for the year 2007. The deadline is April of 2008 for this year’s contribution, but don’t put it off as April will be here before you know it.

401k - You should at least look at your 401k plan periodically to see if there are any adjustments that need to be made. You should also consider increasing your contribution percentage for next year so you can save more money! Those that recently got a raise should seriously consider this because you won’t know the difference of contributing more as your take home money would not decrease.

Another thing to check your 401k plan for is your asset allocation. It is always a good idea to review your fund selections to make sure it matches with your objectives. Consider seeking financial advice here too as your 401k often provides this for free!

2007 and 2008 Goals - Those that made financial goals for this year should check to see if you are on track to make them since you should know by now. It is always a great time to start thinking about next year’s goals. Use your current year results to adjust your goal so it is hard to reach but achievable.

This is a small sample of many things that we can do to keep our financial health in check. I’m sure all of you have other great suggestions so share with us on what we can do!

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