Dirt Simple

A couple posts back, I talked about risk tolerance as it applies to investing, and suggested that it was something that wasn’t easy to assess unless you’ve had a bit of experience with investing. I also mentioned that risk tolerance is an emotional concept, while your risk capacity is a mathematical one. I wanted to expand a bit on this issue because risk is a fundamental component of investing, and it’s very important to understand how your choices with regard to risk can greatly affect the performance of your portfolio.
Read more »

A while back I wrote about my recent bicycle purchase, and how I plan to use it for running errands around town. I also talked about how bicycles are such a prevalent means of transportation in The Netherlands, and how we North Americans could learn a thing or two from how the Dutch get around. Unfortunately, I didn’t snap that many pictures of all that cycling goodness while I was in Holland. By coincidence though, I stumbled upon a site put together by a guy from San Francisco who had the same thoughts I did, and took a whole bunch of pictures of Amsterdam bicycles.

The site was featured on reddit.com, so it might go down from too much traffic. Here’s a sample picture from the site.

This collection really captures the bicycle not only as transportation, but as utility vehicle. I know The Netherlands isn’t the only place in the world where bicycles are such a prevalent mode of transportation, but it’s the only such place that I’ve been exposed to firsthand. It is certainly the most affluent country I can think of where bicycles are so numerous. Really makes you think about the “necessity” of driving.

I set up a new account with ING Direct recently, and as a way to verify that they have linked to my correct existing bank account, ING sent two small deposits of just a few cents each to my account. I then reported the amounts back to ING to confirm that the account is mine. Many other online financial services firms use this account verification technique.

Well, from the Threat Level blog at Wired magazine we learn of an alleged enterprising fraudster who saw an opportunity in this verification technique. He is accused of opening thousands of accounts under false names in order to cash in on these small free deposits, to the tune of around $50,000.

OK, I know fraud is a serious crime, but I always feel just a little pang of admiration for people who think differently from the rest of us.

If you’ve ever bought a mutual fund, or opened a brokerage account, you’ve filled in one of those risk tolerance questionnaires to determine how much risk you can handle. If you aren’t familiar with this type of questionnaire, you can try out the Risk Tolerance Quiz over at MSN Money. The purpose of these kind of quizzes is to try to ensure that you don’t take on more risk than you can handle, either emotionally, or financially. The concept is important, but in reality, it’s very difficult to accurately assess risk tolerance from a quiz. Here’s why:
Read more »

A while back, I mentioned that I had discovered Jeff Yeager’s book, The Ultimate Cheapskate’s Road Map to True Riches, by way of a piece on the Today Show. I promised to read the book, and let you know my thoughts. Well, I ordered the book from Amazon, and just finished it today, so here are my thoughts on the Ultimate Cheapskate.

You can probably guess from the title, and the caricature of the author on the cover, that this isn’t a highbrow finance book. It’s not even your typical personal finance book. You won’t find many charts and graphs in this one. Yeager’s point is simple: we are our own worst enemy when it comes to achieving the quality of life that most of us desire. We try to improve our lives by acquiring things to increase our happiness, and in the end, we make ourselves miserable trying to pay for it all. Yeager’s coaching on how to become a cheapskate, is not just meant to grow our bank balances. It’s also an attempt to teach us to recognize the true riches most of us already possess.

A lot of the stuff in this book falls in to the category, of things you probably new, but just weren’t paying attention to. For example, do you really need to be told that buying a used car can save you thousands of dollars in depreciation costs? Probably not. Reading Yeager’s book won’t turn you into a cheapskate if there isn’t already some desire to be one. What it might do is provide some encouragement to those who’ve already made the choice to start living more frugally.

I did think that some of Yeager’s suggestions were useful though. For example, I liked his idea of going over a months worth of receipts and credit card statement with a highlighter, and picking out purchases that you regret, or could easily have done without. He also makes great points when it comes to home buying, and avoiding the tendency to constantly upgrade. He points out that, when it comes to housing, the tendency is to buy not only beyond your means, but beyond your needs.

I also liked the fact that the book draws attention to the benefits of frugal living when it comes to preserving the environment. Our addiction to consumption has such disastrous implications for the sustainability of our society, and Yeager makes many good points about how living frugally can have the added benefit of saving the planet.

As for Yeager’s writing style, well, it is whimsical, maybe even juvenile, and replete with cornball humor, puns, and sexual references. My wife found his style annoying, and I found it a bit tiresome at times too. But I acknowledge that Yeager is trying to break through the stereotype of personal finance books, and show that you don’t have to be some stuffy, spreadsheeting, penny pincher in order to achieve financial happiness.

Overall, I enjoyed the book. It’s a quick read that serves largely as Chicken Soup for The Frugal Soul. I don’t see it turning the designer clothes buying, BMW driving, Bluetooth headset crowd into bicycle riding, coupon clippers. But for those of us trying to do things a little bit different, it is welcome encouragement.

Remember when you were a kid and you got your first bike? I do. My first two-wheeler was a blue beauty with a banana seat and ‘Y’ handle bars. It had one gear, and that good old back-pedal brake mechanism, which, after a bit of practice, allowed me to perform those oh-so-impressive skidding sideways stops. I went everywhere on that bike. For me, as for most kids at that age, it was freedom.

As I grew up, I got other bikes. I graduated to a ten-speed, and later, a mountain bike. But none of those bikes ever got as much use as that first one. At some point, riding a bike ceased to be a means of transportation. Instead, I regarded it as something to be done primarily for exercise, rather than for getting from A to B. Of course, once I got my driver’s license, the lowly bike quickly became a fossil, gathering dust in my parents’ basement.
Read more »

As I’ve been writing over the past few weeks, I’ve been running up against a persistent conundrum–how do I address two different audiences in one blog? Some of the stuff I’ve written about has been specific to Canadians, while other stuff has been largely U.S. related. It is becoming apparent that this dual focus is less than ideal for a blog.

I’ve been pondering different methods of dealing with the issue, and the simplest solution seems to be to create a second blog. The current plan is for Dirt Simple to focus primarily on Canadian financial matters, and for a second blog to focus on my experiences as a Canadian living in the United States.

Considering the fact that there are about 3 million Canadians living in the United States, I haven’t found many good sources of information on all the issues surrounding taking up residence in the States. Maybe the Canadians who are here are too busy lounging on the beaches, playing golf, or writing code for software companies. Whatever the case may be, I’m going to at least have a go at blogging my experiences south of the 49th parallel, and hopefully, over time, that blog can become a resource for other Canadians looking to do the same.

I have a separate domain name reserved for the new blog, and should be ready to “go live” with it soon. Will keep you posted.

Owning your own home is, without a doubt, one of the single best things you can do to secure your financial future. The appreciation in the value of a home not only increases your net worth, but also provides protection against inflation. As a renter, you’re at the mercy of the landlords when prices start to rise.

In addition to the financial benefits, there’s also the emotional benefits that come from a sense of ownership, and the freedom to do as you please with the place. All of this can lead to a sense of urgency about getting into the real estate market. But before you embark on what will likely be the biggest financial adventure of your life, there are a number of things you should consider first.
Read more »