Save Money: Passport Photos

The next time you're looking to renew your passport, save the $9 or $10 that it costs to take a passport photo at your local pharmacy, and do it yourself with a digital camera. Have someone take four or five shots of you from various distances against a white background and upload those pictures to your computer to figure out the right size you need. Or, just head over to the pharmacy to print out your pictures at $0.19 each and pick the one that looks right. All in all, it shouldn't take too much more time than getting your photo taken at the pharmacy.

Why Women Love Handbags

Like most guys, I've always been confused by one of the great mysteries of the world: what's with women and their handbags? Part fashion accessory, part functional, most bags seem to accomplish neither. They're either way too big (read: suitcase) or way too small. And how is a $2000 bag with the Louis Vuitton symbol plastered all over it considered stylish instead of ostentatious free advertising?

In her book review of It's In the Bag in the Atlantic Monthly, fashion write Lynn Yaeger lends some insight into the mysterious female mind (to be fair, this applies to guys and their man-purses):

As a fashion writer (and, let’s face it, compulsive shopper), I’ve spent the last couple of decades looking at extravagantly priced handbags, trying to uncover their secrets: Why are women dragging veritable suitcases to work when their male counterparts make do with a billfold and a BlackBerry? Why does a frivolous bag like the coquettish Fendi Baguette, shaped as the name would indicate, cause a sensation while the Chanel 2005 (introduced in 1998), which looked like a high-tech pillow and prided itself on its ergonomic correctness, lay a tremendous egg? The answers, it turns out, lie far beyond considerations of practicality or even objective aesthetic appeal. (Sometimes a jolie laide bag will take off while a lovely purse languishes.) This much can be said with certainty: Handbags have nosed their way into a place once occupied almost exclusively by diamonds and fancy furs, functioning as badges of honor, announcements that you’ve arrived at a particular economic or social level, or at the very least, emblems of hopefulness, yearning, and optimism—I have the same bag as a movie star! I am someone to be reckoned with!—that can be brandished for all the world to see.

And, so therein lies the rub - it's about status. A nice purse equals high status. I suppose the guy equivalent would be cars, watches and the big-screen TV. But, with the guy items, I get why the 52 incher is better than the 40 incher or why the Porsche with the super horsepower beats out the cherry red Chevy Cavalier. But, what makes the $920 Gucci bag better than an $8 Target bag? And who can really tell if the knock-off Chinatown Prada bag isn't the real thing? Anyways, pardon me while I go check out the hot new 3 series from BMW......

Personal Finance 101 - Know Your Financial Picture

For many people including myself, spending one's limited free time on personal finances can feel like a major drag. After all, who wants to spend a beautiful weekend afternoon entering in receipts? The obvious response to this is that the more you know about your own financial situation, the more empowered you will be in making informed financial decisions for yourself and your family. I wish I had a more clever response than that, but I don't. In any case, here are some fundamental metrics to get you started on understanding your financial situation:

1) Net Worth

Net Worth = Assets - Liabilities; or in English, net worth is the overall snapshot of your financial situation -- it's where you stand when you line up all the "stuff" you have against all the money you owe.

To calculate net worth, I would recommend creating a spreadsheet or using commercial software such as Quicken or Microsoft Money. If that sounds like too much of a pain, check out NetWorthIQ, where you can figure out your net worth online.

You'll need to enter in two types of data: your assets and your liabilities. Assets are your "stuff", including all your bank accounts, retirement accounts (401k, IRA, 403b, etc.), stocks, bonds, mutual funds, cars, market value of your home if you own, value of your real estate holdings, and other personal property. "Other personal property" includes things like the diamond ring that grandma gave you, the Monet hanging over your fireplace and the Mickey Mantle rookie baseball card that your mom almost threw away when she was cleaning your room. On the liability side, you have items such as the principal amount of your mortgage, auto loans, student loans, and any other loans, along with your credit card debt and any other debts that you may have. Add up all your assets. Add up all your liabilities. Subtract the total liabilities from total assets, and you've got your net worth number.

2) Monthly Cash Flow

While net worth gives you an overall financial picture, you'll also want to take a snapshot of your monthly cash flow. That is, in a month, how much money do you bring in, and how much money goes out? Unfortunately, unless you have a photographic memory of all the Starbucks and McDonalds purchases, this is where entering in receipts comes into play if you want a completely accurate picture. If a month seems too long, try keeping track of cash flow for a week. After keeping track of your cash flow, you should be able to answer the following questions: What are my total fixed monthly costs ( e.g. rent, mortgage, utility bills, groceries) and, consequently, how much money do I need to bring in in order to meet those fixed costs? What does my discretionary spending look like? Am I saving money? If so, how can I save more?

And perhaps most important, figuring out your monthly cash flow will let you know what amount of emergency reserves you should have handy in order to meet your living expenses. A lot of experts will generally suggest having 3 to 6 months of living expenses as a rule of thumb. Those numbers sound about right, but again it depends on one's personal situation. If you're a DINK (double-income, no kids), one partner losing their job might not be as disastrous as a family with a single breadwinner who loses his or her job. If you're in an occupation where other comparable jobs are not readily available, it may make sense to have a bigger cushion of emergency reserves.

Dumb Purchases

Most of us have made dumb purchases in our lives, especially dumb impulse purchases. Here are some of mine:

1. SiPix SC-1300 Digicam

This 1.3 megapixel special was my first (and only) foray into the digital camera world. Everything worked perfectly, except for the minor inconvenience of the battery lasting for only 3 pictures (4 on the lucky days).



2. 15 shares of Cisco stock in April 2000, back when Cisco was supposed to overtake Microsoft as the biggest and baddest company in the world. My stock's stellar performance to date.

3. Clothes that are way too big for me. It took me about a decade to learn that baggy clothes generally do not look good on most people, especially me. Unless you're a rapper.

4. Too many groceries. Perhaps it's the small things in life, but few things make me happier than seeing a packed refrigerator filled with fresh produce and other goodies. The downside is that the Honchos periodically find themselves throwing away food unnecessarily either because they forgot about the food or simply overbought groceries. Worst grocery buy ever? 20 heads of cabbage for $0.99 (from a special deal as part of the grand opening of a supermarket). Needless to say, the Honchos ate a LOT of cabbage for two weeks and that was after giving away as many heads as we could:

Conspicuous Consumption: I-Banker Style

The most popular article from the online version of Friday's Wall Street Journal was "The Wealth Report" piece (paid log-in may be required) about a survey conducted on how 200 investment bankers who received bonuses of $2 million or more spent their recently-announced record bonuses. For most bankers and particularly even more so for senior bankers, the vast majority of compensation comes from their bonus, with just a small fraction coming in salary. So, what is a banker to do when he or she has slogged away for 364 days out of the year on just merely a salary (these "mere" salaries still dwarf salary and wages in almost any other industry or service field) and on that 365th day a windfall falls in their lap? According to the survey in the WSJ article, bankers did some of the following with their bonuses:

• 16.5% was put into savings or investments
• 16.1% was spent on real estate
• 11.9% was spent on art
  
• 11.2% was spent on jewelry or watches
• 4.2% was spent on charity
• 3.4% was spent on debt reduction (hey, even a banker has to keep up with the Joneses down the (Wall) Street - get it? Ok, that was corny)
• 2.8% was spent on luxury cars

No huge surprises here. What people choose to do with their money is very personal by nature, and the Honchos are completely neutral as to what others want to do with their coin. We'll leave the arguments over optimal saving vs. consumption arguments up to the eggheads in the ivory towers. Given that little caveat, we're not surprised that those with greater means to save more choose to spend (although, we should point out that the 16.5% put into savings is higher than the negative personal savings rate of Americans). The 16.1% (or $322k of a $2m bonus) on real estate is a little surprising in that we would have thought that number would be a little higher, particularly given the high cost of real estate in Manhattan. But, overall, just an interesting snapshot on what those top 1 percenters in the income world choose to do with their money.