Let me start by saying, I love to learn. Everyday we’re presented with new opportunities to better ourselves and deepen our understanding. In the financial world this is critical.

You’ll be amazed by what you can learn from other people if you’ll just watch and listen with an eye and ear towards learning. It’s human nature to want to tell others about yourself or share your point of view, but what do you gain by doing so. I believe Marcus Aurelius says it best,

“The wise man learns more from the fool than the fool learns from the wise man.”

Paradoxically, those who need the message the most are the least receptive. You can only teach those who are willing to learn.

For everything there is to know, there’s someone who knows it. So, let me hear what’s on YOUR mind. What do you want to learn more about? What do you wish you knew? Maybe we’ll all learn a little something.

One of my biggest pet peeves is the ever-blurring line between people’s needs and their wants. When most people think of this topic, they think it’s pretty cut and dry. We need food, water and shelter. All else is extra. Others believe that their needs extend out much further to encompass things such as a car, the Internet, and cell phones.

I’m not going to take it upon myself to define for you where this line should be, but I do think that it would do us all good to re-evaluate what our real needs are.

• Do you really need cable or satellite TV?
• Do you want the camera/video phone, or is it a necessity in order to keep in touch with your friends?
• Do you really need that 4th bedroom in your house?
• Do you have to have the heated leather seats? Would a bus ride meet your needs?
• How many pairs of shoes do you really need?
• Just because you’ve been doing it every morning for the past 6 years, is that cup of coffee really a necessity?

I’m not trying to step on anyone’s toes here, but just think about it. It’s OK to have the things you want, but don’t sacrifice you’re real needs to get them. Don’t sacrifice your financial future either.

Let me know where you draw the line.

I’ve stumbled upon one of the most interesting sites recently. I read about this website in some article and thought I’d check it out. The site is www.prosper.com.

The website more or less cuts out the middle man in the lending industry, namely banks. Prosper.com naturally gets its cut, but it’s comparatively minimal. Put simply here’s how it works.

Lenders are those who want to earn a percentage yield, or interest, on their money. Borrowers are those who need/want (subject for another post) a sum of money to accomplish some goal. These two groups are brought together and the fun starts.

A borrower places an ad basically with the amount he/she wants and the maximum interest rate they’re willing to pay. The lenders then bid an amount they’re willing to lend/risk at the minimum interest rate they’re willing to take. When the borrowers listing is over, the lenders with the lowest bid interest rates are the ones selected to actually lend the money. The borrower then makes payments over the course of 3 years. There’s a little more to it than this, but it’s the basic gist of things. You can learn more in the help section of the site at www.prosper.com/public/help.

Now, this isn’t exactly the place that I’d stash my emergency fund, given the risk/reward scenario. I do, however, applaud the opportunity to decide for myself to whom and at what rate I’d like to lend my money. At a typical bank, you deposit your money, and they have loan officers that lend out your money for you. Here you have the opportunity to earn more on your money because you get to keep what the banks call “the spread”.

So, take this for what you will, but you’ll at least have to admit that the concept is quite ingenious if not disappointingly intuitive (that’s short for “why didn’t I think of that?”).

It’s that time of year again and most people are trying to figure out what they’re going to do with their tax refund. So what’s it going to be? The new flat panel TV you’ve had your eye on. Possibly a wardrobe makeover. Perhaps it’ll just get frittered away on a lot of little things that you wouldn’t have otherwise bought.

Ok, it’s always said that we shouldn’t even get a refund because we’re giving the government an interest free loan, but every year we end up with a refund anyway. So I’m not going to lecture on that subject. The tax code is far too complex, and it’s practically impossible to predict how much your end of year tax bill will be. So if we can’t really know how much we’ll owe, how are we going to know how much to deduct from each paycheck? And to complicate it even further, we claim a number like 0, 1, or 2 and are expected to somehow translate this into how much is deducted.

With all this said, take your best shot at minimizing your taxes and then let it be and stop worrying about it.

My hope with this post now is for us all to take a minute and actually think and possibly make a plan for what we’re going to do with the upcoming windfall. Since it isn’t an amout of money that we usually count on, it wouldn’t make much sense to just lump it in with everything else and pay bills or go grocery shopping with it.

Here are a few ideas following the pattern I mentioned in an earlier post:

1. Give to a worthy cause or help out someone in need. Nothing makes you feel richer, more fulfilled, and more alive than when you’re in the service of others. This is why I mention this first. Take a shot at making someone else’s life better and see what happens in yours.

2. Start or add to an emergency fund. This is standard advice right? I want you to accumulate a years worth of living expenses. Too much stress in people’s lives come from financial insecurity. The peace of mind that comes from having this reserve cannot be overstated. The fridge goes out; you’re laid off at work; sudden medical bills crop up. This is as much a mental and emotional account as it is a financial one.

3. Once you have a start on the previous two, consider putting putting some money into an investment account. I’m not going to get into detail here about specific investments just yet. Just know for now that you need to start having your money work for you if you ever want to stop working for money.

These options should give you enough places to put your refund this year. And yes, it’s OK to indulge yourself a little, just don’t jeopardize your future over it. More on this later.

I do quite a bit of reading/browsing on-line and so I thought I’d write a quick review of one site that I stumbled upon recently. It’s a blog from a guy in his early twenties like myself. He’s documenting his financial progress and the different things he’s doing to get to where he’d like to be.

He has a lot of good goals and what I like best is that he’s doing things to reach them. I’m a strong believer of action and of getting things done. Too many people talk about what should be done yet they don’t do the things they talk about.

I’d suggest reading this site because there’s a lot to be learned from his ambition and from his actions. The site is www.nevblog.com. Hopefully you’ll learn something and be impressed to go out and create things for yourself.

Restaurants are popping up everywhere. Fast food, casual dining, steakhouses, sushi bars, you name it. I’d say this is mostly because more and more people are going out to eat, more and more often (supply and demand at its simplest). Naturally, I have a few thoughts on this.

There are those that don’t know how to cook. Other’s claim they’re too busy, so they must “grab a quick bite”. For many, it satisfies their need to show off their social status. Still others just don’t know what to do with themselves. I don’t really sympathize with any of these.

It’s no secret that eating out typically costs more than eating in. Aside from the food itself, you’ve got to at least be civil and leave a tip. Plus, why do you buy desert. Because it’s there. You’ll buy extras that you wouldn’t normally just because it’s there (plus you don’t want to seem cheap to those you’re with right?).

As I see it, people go out to eat a lot because they don’t know what else to do with themselves. I’m not condemning the practice by any means. I enjoy eating a good meal that I didn’t have to prepare and is probably above my skill level in the kitchen, but does it have to be so often? Every friday and saturday night we sit around and wonder what we’re going to do, and because we lack creativity, we default to the usual question: “Where should we go to eat?”

Take this for what it’s worth. Hopefully you’ll at least think about what you do and why. And here’s a hint:

Look on-line or in the paper and find 5 things that going on that you’d normally never do. Maybe it’s an art or history museum; possibly it’s a rock concert. Go to the parade this year instead of watching it on TV. Find out about your city. They probably have a lot to do for free anyway. Who knows? you might learn something or broaden your horizons. Wouldn’t that be horrible?

Here’s another tip though. If you simply must go out to eat, check out this website, www.restaurant.com. You can buy gift certificates for a fraction of the price, and you can check out a few new places that you’ve never been or normally wouldn’t go. Getting it yet?

Good, now save some money and experience a few new things.

While I think it’s important to understand the concept of an income statement, I don’t actually keep one to track things. This might seem contradictory but I’ll explain.

First of all, it’s too much like budgeting. I don’t like budgeting really cause it takes too much time and it’s generally inaccurate. Secondly, I believe the principles behind the income statement are more important than the statement itself. As we talked about before, the expenses should be less than the gross income. So let’s make sure that this happens.

Build this principle into your life. You’ve probably heard all the variations on this theme:

• “Save 10% of everything you earn.”
• “Set up automatic transfers to a savings or brokerage account.
• “Pay for everything in cash.”
• and so on…

These don’t capture everything though. What if someone consistently puts away 10% of what they earn, but they don’t use their credit cards responsibly? I shouldn’t have to spell out this problem. Taking cash advances and then paying for everything in cash isn’t a good idea either.

This is how I do it:

• As a rule, pay off all credit cards every month. (No Exceptions)
• A percentage is set aside for giving. (more on this later…)
• A percentage is put away for emergency savings.
• A percentage is put away for investments.
• The rest is for all other expenses.

This system ensures that I spend less than what I bring in. It’s that simple.