Depreciation Kills.

-Like the effect of rot on a home, depreciation threatens our personal financial structure.

Depreciation is a silent thief. It is our responsibility as stewards of the balance sheet (see 8-5-09 post) to ensure that in order to maximize personal profits we keep an close eye on depreciation. This is done by closely monitoring our purchases and in every instance and attempting to purchase things that appreciate, not depreciate.
The vast majority of things we buy depreciate. It is the nature of the world to pull things from order to disorder and so it is understandable that that a certain item's value reflects this. There are, however, things in our world that keep their value or grow - which is usually due to scarcity, usefulness, or perceived value. An example of this would be land. It keeps going up in value, or appreciating, because of its scarcity. Stocks appreciate because their value reflects underlying business which needs to continue growing to survive. These things are recognized as being valuable because of the hope that one day they will give back more than originally invested. Most things lose their value over time as natural process work to destroy them.
New cars are a great example of huge depreciation. It is said that the car's value drops by about 30% the minute you drive it off the lot. Almost everything we buy depreciates in value...Clothes, food, furniture, and cheap crap from Wal-Mart all usually has all the value removed and then is discarded. While we need various things to navigate life we can do a few things to minimize the loss in value due to depreciation:
-Buy used things: Essentially removes the large drop in depreciation that happens when we walk out of the store.
-Tools: Tools are a great purchase because while they individually depreciate they allow for the creation of more wealth. Because people recognize this tools to depreciate less than other consumer goods.
-Shop intelligently: Many things drop in value faster than others. Toyota cars are a good example - while they may be more expensive at first they still sell many years later for a much higher value than their competition. Sometimes you have to pay a bit more to ensure you will lose less value over time.
-Update the Balance Sheet: By keeping and updating the personal balance sheet we can keep a close eye on depreciation. After a few updates we begin to see which of our things are holding or increasing in value and which are falling.

Paying attention to what depreciates and appreciates is important. It is probably the most significant affect on your personal value ten years from now.

Lifestyle-Cash Congruence

Activities are the key to success if your goal is better financial control. Through consistent pursuit of activities that bolster ones lifestyle it becomes much easier to gain financial control and freedom of lifestyle.
We all have hobbies, activities, and interests that we enjoy pursuing. Having such interest is important to enjoying life. If we desire to create congruence of lifestyle and the bottom line it is important that we find a link and actively pursue it.
The next time you go out to do something you enjoy take some time to ponder why you enjoy it and how you can either bring it to other people or use to bolster your financial situation. I love bikes, so for the past few months I have been purchasing broken bikes, repairing them, and selling them to people who appreciate getting a working cycle. As long as I make a few bucks on each transaction I am happy because it has been a very symbiotic relationship. I get to mess around with bikes in my garage, and help other people enjoy the sport for a reasonable price. This is just one example. The important thing is to find interests that you can pursue to enhance you enjoyment of life and at the same time make a few bucks. Here are some examples off the top of my head:

-Fishing: Try to put a meal on the table once a week with this pastime. (Hunting could work in the same way.)
-Gardening: Grow a little more than you need to sell or barter with your friends.
-Art: Find a way to sell your work, even if it means tiny profits.

The key with this exercise is to find a way in which you can marry your loves and passions with greater capitalism and use the two to do what you love while creating a little extra cash in the process...Give it a try!

CA$H - <3

Cash is awesome. We all love it. Because of this we can employ it as a powerful tool to moderate spending. Putting the debit / credit card in the back of your wallet or, better yet, leaving it at home you can create some restraints on your spending.
The psychological effect of cash is great. When we have it we naturally want to keep it. There is a substantial emotional connection that is much greater than some numbers in the bank that change slightly when you swipe the plastic. For this reason it is better to carry cash when one is on a budget. By deciding what we want to spend for the week and only taking that amount of the ATM on payday we can create a budget for ourselves to stick to the old fashioned way... just imagine that in the olden days everyone did this!

Power Personal Finance

Need a jackhammer for your debt? Or maybe a tool to create more personal wealth? It is called a personal balance sheet. If used correctly it can be one of the most powerful tools within your personal finance tool box. By actively tracking not just cash flow but net worth one can achieve a handle on your exact financial condition and help to make enlightened decisions to actively enhance the bottom line.
The creation of a balance sheet is simple. Take an excel spreadsheet and on the left side list all your assets (bank balances etc). On the right hand side list your liabilities (all your debt line by line). Create a formula to subtract the debt value from your asset value and you have created a personal balance sheet. (See an example here.) It is the monthly update wherein the tools begin to do their work.
Update your balance sheet monthly. The idea of a balance sheet is to take a snapshot of your finances at a certain point in time and update it consistently. I do this at the beginning of each month after all my bills have been paid so the results are consistent month after month. Creating a balance sheet from the beginning and updating it at the same time monthly it gives you constant feedback about your actions. Instead of keeping track of cash flow it shows changes in your net worth.

Some of the benefits:
-It creates an incentive to pay down debt because by paying debt you see an increase in net value. By seeing your payment actually help to increase your net value it becomes much easier to pay down debt.

-Depreciation becomes a serious reality. Want to buy a new car? You can only hold it in the asset column for what it is actually worth (be honest now...what does it say on the Kelly Blue Book?) Hold your loan balance in the column to the right of the vehicle value and you can see the damning affects of depreciation. A good rule of thumb is to hold all assets at a lower "fire sale" price to ensure you are being honest.

-Instant (monthly) feedback. By knowing that you will have to update the balance sheet and want to see appreciation it will help to foster sound economic decisions.

So put down your computer for a minute, open up your financial toolbox, and reach for the jackhammer and unleash it on some debt. By being patient and working monthly you can work slowly to destroy bad debt and begin building on a solid foundation.

Life without money

This is what it looks like when you give it all up and go live in a cave.

http://men.style.com/details/features/landing?id=content_9817

I'll pass on the bugs sucking my blood, but maybe one could pan a little gold like the neighbors and afford a cot or something?

He blogs once a month at the public library through zerocurrency.

Can Collecting: Not for bums.

Can collecting is a great way to create extra money while keeping spending in check. While $.05 a can is not much to speak of it can bring surprising results to the rest of your spending habits.

When we look at can collecting first we think of bums roaming the streets and rummaging around in the garbage. I take comfort in the fact that if I was ever so destitute that I had no money or food I could round up a few cans, cash them in, and on my way to buying a bag of fritos or $2.25 out the door 40oz. In these terms getting drunk only takes 50 cans...not a bad deal.

But back to finance. Collecting cans can begin the resurgence of a frugal streak in anyone. By collecting cans you must acknowledge the slow and steady way to build wealth. If you are willing to bend down and pick up something fairly dirty and worth $.05 you will be willing to do a lot more to get the easier money. I recently started can collecting again (a habit I had dropped during the roaring 2000's) but with the recent downturn I find myself looking for money in all the little places and allowing these little places to amass. I find myself thinking of my spending in terms of aluminum cans - that latte I want about 80 cans - pretty expensive! If I am willing to work so hard for the cans, I can easily practice a little self restraint which is a lot easier than picking up 80 dirty cans.

If you don't like to handle dirty cans - no problem. Find something that is similar. Start saving up it up. Put random pennies in your pocket. Sell something on e-bay. Start working on the little and slow ways of amassing capital and once all the small income streams come together you will begin notice the flow growing into a river of capital.

Starbucks - Time to invest?

I have long awaited the opportunity to invest in Starbucks. Not only do they have a product I love but they are totally ubiquitous. Before the meltdown it just seemed too expensive... I noticed that Jim Cramer is now recommending the stock as a value play. While we cannot recognize this as a green light to go out and buy, if he is right and Starbucks is transitioning to a value play I freaking love it. Coming off it's 52 week high recently of 17.59 I still feel it's prudent to wait a bit longer, but maybe the time has come to set a limit order and wait...

http://www.thestreet.com/video/index.html?clipId=10554204