I’ve been getting back into reading financial books, but am really behind in writing reviews for them. One book I finished last month was Wise Investing Made Simple by Larry Swedroe, which promises “Tales to Enrich Your Future”.

The key word is “tales”, because this is not a book with complex mathematical formulas or lots of charts and statistics. (Although I love charts…) It contains 27 short stories using simple concepts like sports analogies to explain the benefits of a long-term, passive approach to investing. Each story includes a quick “Moral of the Tale” summary.

I’ve already written about my favorite tale in Why Sports Betting and Stock Picking Are Similar. But here is my paraphrasing of another good chapter:

The $20 Bill
Here’s is a common story used to poke fun at the Efficient Market Hypothesis. An economist who believes in efficient markets walks down the street with a friend. The friend says “Look, there’s a $20 bill on the ground!” The economist says “No way. If there was a $20 bill on the ground somebody would have already picked it up”, and continues to walk away. This supposedly counters the idea that in a truly efficient market it would be impossible to find an under-priced stock (similar to a $20 bill priced at $10 or even free).

However, this argument is not really correct. What the story eventually explains is that many passive investors believe that although $20 bills on the ground may exist, spending your time looking for them is not the most effective way to make money. The same could be argued about stock-picking or market timing. Persistence in beating the market beyond the randomly expected is very rare.

Summary
For the investor that is already committed to passive investing and fully understands the underlying reasons why they believe that is the best strategy for them, this book probably won’t bring that much new to the table. It won’t help you decide whether to hold 20% International or 45% International stocks, or if you should include exposure to commodities or precious metals. If you are a full-time trader who is adamantly against passive investing, this book probably won’t contain enough hard facts to sway you either.

Instead, I think the sweet spot for this book are those investors that have been told “index funds are great” and may even invest in them but don’t really know why they are so great and don’t have the interest level to read some dry investing book about correlations and standard deviations. The problem with this level of understanding is that when things get tough it can be easy to bail out if you don’t really know why you’re doing something. This book breaks things down into simple, bite-size pieces without being patronizing.

On a personal level, this book might not be the very first book on saving money I’d give someone, or my favorite book about investing, but I am going to keep it in my library because it provided some different ways to explain to others (and myself at times) why I invest the way I do.

Overall Rating: (ratings explained)

I have moved all of my posts on my experiences as a first-time homebuyer to this central page. It’s huge, sometimes I can’t believe I wrote all that stuff. Although I have few things left, I seem to be close to wrapping things up.

Do you have any other questions about buying a home you’d like to see answered? Please leave a comment below. I’m sure I’ve missed some things. I continue to be amazed by how confusing and complicated the home-buying process can be. No wonder so many people simply make offers and sign their mortgages without even reading them.

Another month has gone by already which means it's time to do a quick financial checkup.

Lets start with the markets.  It seems that the markets have stabilized and even on an uptrend.  I'm not sure how long this is going to last, but I'm not too worried as most of my money is in long term investments these days. 

In terms of spending, we kept it under control this month as most of our time was spent caring for the newborn baby.  The biggest expenses were perhaps diapers, groceries and other tidbits related to baby care.  For now, we have decided against cloth diapers mostly because of the convenience factor.  I can see the summer time getting a bit heavier on the credit card as we still need to do landscaping and other finishing touches around the house.  For the new readers out there, when I say that I'm going to use a credit card, I use it for the points/benefits.  I've never carried a credit card balance.

Income was another big issue this month.  As maternity/paternity government benefits take about 30 days to kick in, we went through the whole month on 50% of our regular salary (not including side business income).  I thought it would be a lot more stressful with the new baby and mortgage, but it's working out ok as we have reduced spending.  Cash gifts that we have received for the newborn have also helped. ;)

Assets: $574,450 (+0.65%)

• Cash: $4,500 (+0.00%)
• Savings: $ 37,000 (+4.52%)
• Registered/Retirement Investment Account: $ 52,500 (+5.00%)
• Pension: $ 22,350 (+0.00%)
• Non-Registered Investment Account: $18,300 (+1.67%)
• Smith Manoeuvre Investment Account: $25,300 (+1.20%)
• Investment Property: $ 124,500 (+0.00%)
• Principle Residence: $275,000 (+0.00%) (purchase price)
• Vehicles: $15,000 (2 vehicles) (-6.25%)

Liabilities: $279,520 (-0.38%)

• Investment Property Mortgage: $93,700 (-0.21%)
• Principle Residence Mortgage (readvanceable): $152,700 (-0.65%)
• HELOC balance: $25,120 (+0.48%)
• Other Liabilities: $8,000 (-0.00%)

Total Net Worth: ~$ 294,930 (+1.65%)

Started 2008 with Net Worth: $279,300

Year to Date Gain/Loss: +5.60%

My net worth gain up to this point, as compared to March 2007, seems to be on track.

Interested in seeing how my net worth has progressed up to this point?  Check out my history of net worth updates.

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Since the beginning of MDJ, I have talked about the Smith Manoeuvre.  For those of you just joining us, The Smith Manoeuvre is a wealth strategy that utilizes a home equity loan to invest in income producing assets.  The result is a tax deductible loan and portfolio that increases as you pay down your mortgage.

There are quite a few Smith Manoeuvre strategies out there.  The plain jane SM strategy involves investing the small credit line increases into tax efficient mutual funds.  For me, I'm doing a slight twist where I'm going to use the credit line increases to fund the investment loan, thus giving me a larger lump sum to start with.  Along with that, I'm going to invest in purely strong dividend paying stocks which meets the CRA "income" requirement and giving me tax efficient income to boot. 

The dividends will then be used to further pay down the mortgage.  If this strategy works out, according to the Smith Manoeuvre Spreadsheet, I should have my $150k non-deductible mortgage paid off in under 10 years.  At that time, hopefully my dividends will have grown to the point where they can service the underlying investment loan in addition to buying me steaks when I'm feeling carnivorous.

Onto the portfolio.  With the markets in it's current state, who knows where the financials are going.  I'm a little bit on the nervous side, so I've been simply dabbling in stocks that appear cheap to me.  As you can see from the portfolio below, it's extremely overweight in financials.  I plan to diversify into energies and utilities as they (hopefully) come down in price.  

You might be thinking that I'm crazy for buying such small lots, but since I have a bunch of free trades to use up, why not? 

Hopefully, these updates are interesting to you.  If there is something that you would like added to the table above, let me know and I'll see what I can do.

While on my lunch break, I went over and bought some Series I Savings bonds, due to their high interest rates described here. Technically I had two more days until the 30th to get an April 2008 issue date, but I didn’t want to cut it too close in case there were any problems. I was also fueled by the news that interest rates will probably dropped yet again soon by Bernanke and Co.

Here’s how to do it:

1) Find a bank near you that sells paper savings bonds. Although the TreasuryDirect website says “any financial institution”, not all banks participate. I asked a few smaller ones near work and they did not carry them. The big boys like Bank of America, Washington Mutual, Chase, or Wachovia should all have them. If you don’t have one of these megabanks, just call the biggest banks in your region.

2) Either move funds into an account there, or bring cash. You can’t write a check from another institution, because they need to have the funds immediately. Although I didn’t try, a cashier’s check should work, assuming the bank can simply turn that into cash. I just had them withdraw the funds out of my bank account.

3) Ask for the Series I Savings bonds order form. Don’t be surprised if the teller looks confused, as this isn’t a popular request. Have them ask a supervisor, it should be Form 5374. I had one left over, so here is a scan of what it should look like:

Remember, the limit for paper bonds is $5,000 per Social Security number per year. So you can put down $5k for you and $5k for your spouse if you have one, and simply pay $10,000 by yourself. You may also wish to buy something like five $1,000 bonds instead of one $5,000 bonds for ease of paper redemption.

The issue date of the savings bond will be the same day that the bank accepts payment. This date will be noted on the application, and the bank should also stamp it to confirm.

4) Wait. The forms says that processing will take 3 weeks, and then it will be mailed to you. You can have it sent to a P.O. Box if you have one, for more security. The processing time won’t affect your interest earned because again as long as you paid in April it will be stamped as issued in April 2008. Also, you can’t cash out until after 12 months, so there is no hurry.

How do I redeem them?
You can either convert these paper bonds to electronic format at TreasuryDirect and redeem online, or cash them in at the same place you bought them (or any other financial institution that sells them). The cool thing about electronic format is that you can do partial redemptions.

I was doing my regular web money reading and came across an interesting article on MSN Money Central about marriage infidelity.  No, not that kind of infidelity, I'm talking about financial infidelity. 

What is financial infidelity? 

This is where one spouse in the relationship overspends without the other spouse knowing.  I can see this being a major problem if it happens often, especially if money is already tight.  According to divorce lawyers interviewed by MSN, they see more divorce cases lead by financial rather than sexual infidelity.

Some marriages never recover from that breach of trust, says Brandt, the lawyer. That's when they come to see her. "I get people at the end of the marriage when it's too late," says Brandt. "You have to start talking about these things before you even get into a marriage."

What's the solution? 

I believe that the key to avoid money related issues is through open communication about money.  Even with our most trusted partners, some of us still treat money as a taboo subject.

Here is what the MSN article suggests:

Brandt and others advise that the best way for couples to avoid this problem is for both partners to get actively involved in the finances. You don't both have to pay bills, but both partners must be aware of how much money they have and where it's going.

Couples should also have an agreement about how much they can spend using joint funds before they need to clear it with the spouse. Online banking makes it simple to periodically check for unusual withdrawals or changes in financial position. Don't leave financial management all up to one person, especially if that person has had spending problems in the past.

Money may seem like a secretly understood topic, but everyone has their own opinions/views.  In addition to the above, David Bach from Smart Couples Finish Rich teaches that the key to financial success between couples is to determine a common ground with regards to money.  He suggests to base family financial goals around values instead of monetary goals.

How do we handle purchases in our family?  I have to admit that I'm the family chief financial officer but all bigger purchases need to be agreed upon.  To give ourselves a little freedom, we each get some discretionary cash at the beginning of each month to spend on whatever we please without question. 

If you're in a relationship, how do you deal with purchases? Are you guilty of hiding purchases from your partner?

Photo Credit: hypertypos

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Here’s an updated list of companies willing to pay you to try out their services. None of these listed require a credit check. See links for more info.

RevolutionMoneyExchange $25 Bonus. Offer extended to May 15th, so get in by then if you haven’t already. Just sign-up with this PayPal alternative and grab your $25. You don’t even have to make a deposit or buy anything. More details here.

eBates $10 Bonus (+$18 possible). eBates offers rebates on online store purchases. After your first transactoin, you’ll get a $10 bonus. Just sign-up with your e-mail and you’ll see the $10 in your account. One suggestion: sign-up for a free trial of Netflix through eBates and get another $18, and they’ll send you $28 during their next cycle. (Looks like you have to become a paying member, cheapest plan is $4.99/month.) Just remember to cancel in time. More details here.

Prosper $25 Bonus. Peer-to-peer lending means you get to earn interest by lending to people you choose. Make a loan of $50, and you’ll receive a $25 bonus on top of your interest rate. More details here.

ING Direct $25 Bonus. One of the earliest online-only savings accounts, ING Direct will pay you $25 immediately if your initial deposit is at least $250. The account currently earns 3.0% APY.

ShareBuilder $50 Bonus. If you open an account with this brokerage and make any one trade, you will earn $50. In the application, say you are responding to a promotion and use the promo code “50GO28“. More info based on a previous similar offer.

I have applied and received all of the bonuses above successfully except for the Prosper one, as I had signed up before the promotion started. You can also get $100 all at once by applying for one of these credit cards, although applying will require a credit check (and some spending restraint, I suppose).

The economic stimulus checks are coming! Before depositing your tax rebate at the bank, it might be a good idea to see what retailers will offer you for it. While I don’t necessarily like the idea of treating this extra money as different from any other money (a dollar is a dollar), you might as well take advantage of the promotions if it doesn’t change your intended spending patterns. Although some of these require an economic stimulus check, others work with any tax refund check.

Even if the big names like Kroger and Albertson’s don’t ring a bell, read the lists below carefully for a store that is near you. For example, in Portland, Oregon there is the popular Fred Meyer chain, which I didn’t know was part of the Kroger family.

Supervalue Inc. Supermarkets - 10% Bonus
Including Acme, Albertsons, bigg’s, Cub Foods, Farm Fresh, Hornbacher’s, Jewel-Osco, Lucky, Shaw’s/Star Market, Shop ‘n Save and Shoppers Food & Pharmacy. From their press release:

Customers who are interested in growing their refunds should bring their government-issued economic stimulus or tax refund checks, along with government-issued identification, to customer service counters at their local stores between May 2 and July 31, 2008, to purchase store gift cards in $300 increments, not to exceed $1,200 per household. Each gift card will be loaded with an additional $30, to bring each gift card total to $330.

Kroger Co. Supermarkets - 10% Bonus
Including Kroger, Baker’s, City Market, Dillons, Fred Meyer, Food 4 Less, Fry’s, Gerbes, Hilander, Jay C, King Soopers, Owen’s, Pay Less, Ralphs, Smith’s and QFC stores. From their press release:

Kroger customers who are interested in exchanging their refunds or economic stimulus checks should present their check and customer loyalty card at their local store’s Customer Service center from May 2, 2008 through July 31, 2008. The program is limited to one offer per household with a limit of $1,200.00.

Sears, K-Mart, and Land’s End - 10% Bonus
I was going to buy a Martha Stewart futon from K-mart just last week… From their press release:

When customers bring their stimulus checks to a Sears or Kmart cash register, they can convert the amount of the check into gift cards, plus receive a bonus gift card worth an additional 10 percent. To be eligible, the amount of gift cards purchased must be equal to the full value of the stimulus check. The gift cards can be redeemed at any Sears, Kmart or Lands’ End retail stores or online at sears.com or landsend.com. The promotion is scheduled to last from May 14 to July 19, 2008.

Radio Shack - 10% off $50+ Purchase
Targeted at the “underbanked”, but if by chance you want something from there… Personally, I’ve only bought a headphone splitter from there in the last 5 years. Their press release.

Customers who use their checks to pay for purchases above $50 between May 4 and July 12, 2008, will receive a 10 percent discount on their purchases. Any amount left over from the purchase will be placed on a Vision Silver Prepaid MasterCard, which can be used at any place that accepts MasterCard.

Via Reuters, Fatwallet, and Consumerist. Oh, Staples has a page of special offers like $50 off $500 spent on computers, but nothing specifically tied to a stimulus check. Anyone else?

Don’t lose those $660 gift cards!!

Here are some highlighted articles from The Money Writers over the past week.

My Dollar Plan has updated their personal finance site rankings by RSS numbers.  MDJ has moved up to 14th spot!  If you like to subscribe to MDJ, you can subscribe via email or RSS here. 

Brip Blap announces that he is the newest problogger on the block!  Congrats Steve for taking the leap.  Maybe MDJ is next? …. nah.

The Digerati Life has written a great article on 10 big mistakes that new entrepreneurs make. 

Lazy Man and Money explains the financial benefits of being part of the U.S military.  I wonder if there are any financial perks with the Canadian armed forces?

Money Smart Life has written about 10 ways to teach your kids about money. 

Generation X Finance explains how to eliminate mutual fund deadbeats from your portfolio.

The Sun's Financial Diary gives us the low down on Claymore's "green" ETF. 

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Copyright 2007 MillionDollarJourney.com - All Rights Reserved

While shopping at Costco yesterday, I was greeted with a peculiar sign:

We bought one bag, which apparently did not require supervisor approval. My weak understanding of all the buzz:

1. Rice prices globally are rising.
2. This is greatly affecting countries like China, Vietnam, India, who are usually great exporters.
3. They may not export as much.
4. US citizens will likely pay more as a result.
5. Big rice buyers like bakeries worried, want to buy lots of rice now.
6. Costco and Sam’s want enough rice to make all their customers happy, so they limit purchases.
7. Buzz from CNN playing this story all day long causes (I think) undue hoarding.

But, why not just raise the prices now? It’s not like a Wii where the price is set by Nintendo. Is this happening near you as well?