Moneywise24 Personal Finance Development Blog

Courage For Change

August 30, 2010 | Author: admin

I attended a conference last week for work. At that conference, there was a presentation from someone, who told us a bit about how to do “great presentations”. Although I consider myself already to be a good presenter, this guy approached a few topics, which could be applied to life in general. And the more I think about them, the more I feel they are true, universally usable, and the more I feel the need to write about them. I have included some of what he said during the preseentation, as well as my own thoughts.

Do you need to change?

A remarkable fact when it comes to personal change is, that many people do not see the need to change. Often, how people perceive themselves does not quite fit reality. For example, did you know that 70% of all car drivers think they drive better than the majority of all car drivers? Mathmatically, this is not even possible.

Change begins with identifying the need for it. I know we usually tell ourselves we should stop comparing ourselves with other people. However, I do think that comparison can be good sometimes. If my neighbour is doing much better at his career than me, or he has an easy time influencing people and making friends, then I can use that as an example. He must be doing something differently than me.

Changing is believing

One of the most valuable assets to have when wanting change, is believing in it. Many people want to change, but they actually don’t believe they can do. They might think “I’ll make a fool of myself”, or something similar. And I have to admit: I have been in similair situations myself. Do you know the big difference between those people who succeed time after time, and those who do not? It is belief. People who achieve great levels of success believe they can do… in fact they know they can do it.

It will feel strage at first…

If you change anything in your personality or behavior, it will strange at first. Doing a presentation differently as you otherwise would feels strange. Engaging into a conversation with complete stranger whereas you otherwise would not, might feel very strange. In fact anything you do different will feel not right. The trick is to stay with it, until it becomes like a second nature. Over time, it will feel less and less strange, and you will become comfortable with it.

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I Plead Guilty To Being An Emotional Human Being

August 23, 2010 | Author: admin

I have to admit, I don’t have the best ‘education’ when it comes to doing investments. I didn’t grow up in a family, that taught me all about finance, and even during my education International Business Management, investments and the stock market wasn’t dealt with in great detail.

I did my first investment in 1998… or rather speculation, when I bought an option in a company, which later appeared to have falsified its bookkeeping; and thus they went bankrupt. I didn’t touch investments for a few years. Then I learned a bit more about fundamental analysis, and I thought I got it… I learned about technical analysis, and I had thought I had understood it.

But it’s when I started reading about behavioral finance, that kind of opened my eyes. I realized that everything I had done wrong, and my losses were more the result of submitting to my emotions rather than bad analysis. I want to deal with three of these typical emotions, and how they can ruin virtually any potentially good investment.

Information Bias

One of the main problems, is that people are very subjective beings. I always found it strange that for some reason I found a lot of proof, supporting my belief about a particular stock, bond, or mutual fund. Then, it didn’t work out as it was supposed to, I panicked, and suddenly I found tons of material, supporting the opposite.

Information bias is a distortion in the perception of human beings. If we have an opinion of something, we unconsciously search for information that supports this opinion, or it seems to be dominantly present. As such, we may make wrong decisions. Information bias often exists since people want to go with the flow, or the masses. Not going with the masses might mean making a fool of yourself, or being put off as ridiculous.

Selling too early, selling too late

Being successful in the stock market often means limiting potential losses and letting profits rise. At some times, I have been guilty of doing the exact opposite: selling very early with a small profit, but selling much too late, letting my losses be driven up.

Relating to stocks, we often become very excited at small changes, and the bigger the change, the more relaxed we get. Therefore, many people tend to sell early at a small profit, being euphoric that they made a profit and fearing that they might lose it. On the other side, these people might become scared at having a small loss, hoping that the stock will recover. If this does not happen, often people tend to think that it would be useless to sell the stock now anyway, and the further the stock falls, the less emotional and involved they become. It is not unusual, that these people sell the stock at exactly the least beneficial point: when it has reached its bottom.

Making up for losses

Luckily I have been largely able to control this. However, many people want to make up for their losses, just as quickly as they occurred. This is very difficult, since a 50% loss requires a 100% profit to make up for it. Many people are willing to take more risks, and invest more money after they have lost some, just to make up for it. Some go bankrupt in their attempts.

I know I have a lot to learn, and I will certainly get more into this topic and write about it occasionally. Until then, I can recommend the following articles I found, which I find worth reading:

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Generation Overstressed

August 19, 2010 | Author: admin

Generally I am quite happy with my life. Surely I want to improve a few things here and there, I do sports to keep fit and healthy, and my monthly salary is keeping me off the streets. I even have some money to save up, to invest, and to enjoy a holiday twice a year. I am single, but I am not breaking my head about it; my focus is on other places right now.

Still I can’t help feeling a bit stressed. In the 90′s, when I still went to school, and later on started my education in International Business, things were somewhat more relaxed. But now… I can’t help feeling pressurized. Maybe it’s just the internet, allowing me to exchange information, and learn, from people who are not relatives or within my circle of closest friends. Perhaps it’s the marketing, which is increasingly applying more refined techniques of brain manipulation. Over the years, I have read and heard about a few topics. They seem to become more and more normal, yet I know for sure these were not issues in my life 15 years ago. Perhaps these are some phenomenons of the new millennium, or I just didn’t know about them; I don’t know. Most of the writing in this post is based on articles and broadcasts which may lie back one or two years ago… so apologies if I can’t name a source to them.

The girl next door

Starting with my favorite topic: women. Now I don’t know about the rest of the world, but it used to be normal to start hooking up at the age of about 14 or 15, and sleeping with a partner for the first time at the age of 17 on average. It must have been over a year ago when I read an article in a Dutch newspaper, where the practice of for example Rainbow Parties (I will not indulge into details, please use Google for further information), where it was commented to be common practice between 12-year olds or so, was being discussed and frowned upon in political circles.

Several psychological and society magazines, on their turn, claimed that children were starting to experiment much more early nowadays, which would be the result of pressure from peer groups and society in general. Many of these teens regret it at a later age. Additionally, social pressure of often also the cause of eating disorders or other behavior disorders.

Slavery for money

An old acquaintance of mine graduated in law at university, and obtained a job at a prominent law firm. After haven’t seen him for months, as he kept cancelling our meetups, we met for a coffee. During that conversation he confessed having to work for 16 hours a day, including Saturday and Sunday, and most of his social circle has deteriorated. Fine, he had a good pay, but he just didn’t have the time to meet up with them. But hey, he said to me, “it’s not all that bad. Other law graduates are spending their time behind the copying machine for 1,200 Dollars per month”. Two months later, he didn’t look good at all. Unfortunately I didn’t see him again after that.

I know it’s normal to have a demanding job when someone has the responsibility that goes with it, such as a manager of a division, or Managing Director. But a graduate? Apart from that, I heard it is illegal in Germany to work for more than 10 hours per day, and each and every employee needs to have at least 11 hours off work between leaving work and starting work the next day.

The man who has nothing

One of my previous neighbors had it all: a big Mercedes, nice penthouse, expensive suits, and an extremely big mouth. All he did was to talk about his riches and success. Then came the crisis and he was laid off.

“That’s not that bad”, I said to him. “You have the car, the penthouse, perhaps some savings. Live a bit frugally for a few months; someone with your knowledge and expertise should have no problem getting a new job”. It turned out he didn’t own anything.

The art of relaxing

I find it hard sometimes not get drawn in on “more, faster, better”. Actually, with increasing pressure from the media, at the workplace, from friends, you sometimes get the impression that you’re a complete failure, whereas you’re actually doing pretty good in what you do.

Therefore I find it so important to stop comparing myself with others, and lead a life that I enjoy, keeping my goals in mind, and leading a well-balanced life. What this has to do with personal finance? It’s simple: it allows me to keep a clear head and to take rational decisions that are good for me.

So, having gotten this out there in the world… it’s time to hit the gym.

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Where Did The 100 Euros Go?

August 17, 2010 | Author: admin

I found myself in a typical situation yesterday, one that I have been trying to avoid since 2009. I was going over my checking account balance, and discovered a missing 100 Euro amount. Something wasn’t right, I felt like someone had stolen it.

I took a good look at my finances, and found an incredible amount of 100 Euro booked to the category ‘to go products’; I use this category for all unnecessary food and beverage items, which are bought quickly when I am going from A to B. Back in 2009, I just bought an item when I felt like it. I might have bought a coffee to go, even knowing that I’d be home in 2 minutes. I still do it every now and then, but usually only in the morning on my way to work, knowing that I’ll be traveling for an hour or so. But now, 100 Euros extra! An yes, having taken a quick glimpse in my ‘to go products’ category, I find the criminal: Starbucks.

I have to admit one thing though: Starbucks has launched a great and unique concept. They actually manage to sell qualitative, but overly-priced food and beverages. I am not sure about pricing in the States, but at Starbucks a muffin costs nearly as much as a sandwich at the bakery store. And I know a muffin will only compensate for that hungry feeling for 30 minutes or so. Still, their concept is so good, that it keeps drawing me inside when I pass. Yes, the frappuchinos are great, and so is the white coffee mocca, although I don’t want to know how many calories are in there.

As a rule of thumb, I always eat something when I go to the supermarket; it prevents me from buying all that food that I don’t need, and I can’t eat it all before it goes bad anyway. Now, I have to eat and drink before I leave the house, because Starbucks is waiting for me around the corner.

My action for change: every time I think about buying something at Starbucks, resist the urge and put 3.50 Euros to the side. When it reaches 100 Euros, invest the money.

Once I think about it… even if I’d spare myself 3 coffees at Starbucks each week, that would be 546 Euros per year that I could invest. At an annual rate of 8%, that is 66,801 Euros in 30 years, or by the time I retire.

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The Bicycle As A Transportation Alternative

August 17, 2010 | Author: admin

Being from The Netherlands originally, I have grown up with my bicycle. In The Netherlands, on average there is one bicycle per inhabitant, and there are more bicycles than cars. Yet I have managed to lose touch of using the bicycle as a main form of transportation when I went abroad; especially here in Germany, where people are pretty car-crazy.

Still I enjoy using the bicycle, and there are actually 3 main reasons, which I want to suggest here, why it could be a good idea to use the bicycle as an alternative form of transportation, at least partially.

It’s cheap

Let’s face it. Since this is a money-related blog, the first benefit of using a bicycle is that it’s cheap. Bicycles come for a few hundred Dollars already, and for a bit more you’ll be able to purchase a bicycle of good quality; it really does not have to cost more than 1,000 Dollars or Euros. The maintenance costs are also low: I had my bicycle maintained before last winter for around 60 Euros. I do this every year, so that I know everything is in good order, nothing is broken, and that I can fully enjoy riding it. I find nothing more irritating than having to deal with something that is half broken.

Perhaps the most important cost-savings factor is the money saved on fuel, road tax, and insurance.

If you have a bicycle of good quality, with a bit of precaution you would be able to ride for 10 years perhaps. I have mine for 12 years now… but it does need replacement.

It’s healthy

Getting some exercise is healthy. I feel we spend too much time behind our laptops, getting too little exercise. Even if it’s for 5 minutes per day, still it’s 5 minutes. I use the bicycle during summer to get to work, as an alternative to the metro. That makes 30 kilometers (or 18.7 Miles) per day. It took around one month until I was starting to get some very powerfull results. At winter, when I am not using the bicycle, I exercise one additional day per week at the gym, in order not to lose the beautiful results of summer.

You always get a parking space

The last benefit to using a bicycle is that you’ll always get a parking space. No more driving around blocks for hours, waiting for a parking space to become free, paying loads of money on fuel, or paying enormous amounts on parking fees (in the Amsterdam city center, you pay an average of 5 Euros per hour for a parking space on the street… if you are able to find some). You can virtually just hop on, go where you want to go, and leave your bicycle right in front of where you want to be.

All in all, I find cycling an excellent way to stay fit, healthy, and save some money in the process. Surely I won’t go through this trouble when I have to carry things around with me. But when I know that I am traveling lightweight, and I don’t need to go very far, and the weather permits it, the bicycle is my way to go.

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Moneywise24 Personal Finance Blog

Courage For Change

I Plead Guilty To Being An Emotional Human Being

Generation Overstressed

Where Did The 100 Euros Go?

The Bicycle As A Transportation Alternative

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