I realize that all the money stuff I’ve written is kind of just out there and not in any context, so I figured I would put my whole perspective down in words to kind of frame my ideas in the greater context of who I am and what I believe.
I am an investor, not a speculator. I am not out to make millions of dollars from here to next week. It doesn’t happen and I’m not out to bang my head against the wall.
I am a disciple of Warren Buffett. I believe in value investing. That is, that the stock market doesn’t necessarily price stocks according to their underlying value at any given time. Eventually it corrects those mis-valuations, but if you can spot these opportunities, there is money to be made there over the long run.
I automatically take money out of my paycheck and send it to ING Direct. ING Direct is a high-yield savings account (4.3%) that makes it very easy and convenient to deposit money. I never miss the money because I never had it to spend.
I have a 401(k) through work and a Roth IRA that I manage myself through Scottrade. My portfolio is simple: index funds. Small caps, mid caps, the S & P 500, emerging markets, and one stock: Berkshire Hathaway (yup, that’s Mr. Buffett’s company).
I have a watch list. I take a look at individual stocks and “pretend” trade them. I see how I’ve done and how much I would have made or lost. It’s a really good exercise because, when you do it for a long time, it helps take the emotions out of it, which is key. Because you have no real money at stake, you can easily see where you made mistakes and where you made wise decisions. It’s all about learning.
My budgeting system works for me. This is key. Don’t do what works for me, do what works for you or it won’t ever work. It can be torture. My system is as follows: I put everything on my credit card, everything. At the end of the month I pay it all off, every month. The rewards system on my card (Bank of America Worldpoints) nets me around $250 a year (1% return), which I can redeem in any number of ways, but cash is the best one. So for using this system, which allows me to track all my spending in real time, I pay nothing. I am the one getting paid by my bank to the tune of $250 (ish, it varies according to my spending). I have a weekly budget that I don’t allow myself to go over. There are other systems, but this is mine and it works for me.
I check my finances almost every day. I am obsessive about it and I have fun setting and meeting weekly goals for myself.
And, in case you hadn’t noticed, I enjoy talking about all of the above. How others do it, new ways of doing it, etc.
