By Len Penzo on January 31, 2010
This past week, the technologically ground-breaking 3-D movie Avatar was hailed across the globe as the new king of the box office world, “topping” Titanic’s box office take by grossing over $1.859 billion worldwide.
According to the media, this week Avatar will also surpass the $600 million mark in the United States and overtake Titanic as the domestic box office record holder as well.
I understand why, when reporting box office totals, the press loves to cite gross dollars. The problem with that, of course, is that those gross figures ignore the corrosive effects of inflation on the value of money.
After all, nobody would care if they printed the real story that said, in terms of the domestic box office, Avatar is only the 21st biggest movie of all time – which it was as of the end of January.
When Gone with the Wind came out in 1939 a dollar had the
Continue reading Inflation 101: Why Avatar Isn’t the Biggest Movie of All Time (And What Movie Is)…
By Len Penzo on January 26, 2010
Our “household Constitution” requires the Honeybee, who is the family’s household CFO, to deliver the family financial report every January to yours truly, the household CEO.
For years, the Honeybee has painstakingly tracked and recorded our finances using a Microsoft Excel spreadsheet. Last week she completed updating that spreadsheet for 2009.
Having reviewed the latest numbers I am pleased to report that the state of the Penzo household is currently very good.
This report is divided into three sections:
1. Net worth estimate as of December 31, 2009
2. Long term financial performance since 1999
3. 2009 Financial Performance
The Big Picture
As of 31 December 2009 the household net worth was just a notch under $700,000. This represents a net increase of five percent from 2008.
Overall, assets increased four percent while liabilities increased one percent.
On the liabilities side, other than the mortgage, we have no loans, credit card debt or any other obligations. That, ladies and
Continue reading My 2009 State of the Household Financial Report…
By Guest on January 19, 2010
This is a guest post from authors Steven and Debra Wallace.
Len extended us the great honor of guest hosting at Len Penzo dot com and it is an opportunity that we feel most privileged to accept.
The inspiration for our topic is credited to the very lively and spirited debate that followed a provocative article penned by Len at Len Penzo dot Com titled It’s Time Unemployed People Start Working For Free. We are, therefore, very grateful to Len and the readers at Len Penzo dot com who offered their passionate discourse as we drew something of value from each and every response.
When we step back and reflect upon the value of a website such as Len’s we can readily see the real value is in the sharing of information and what we are each personally able to take away from the discussion to improve the quality of our lives and
Continue reading What Perpetual Motion Machines and the Entitlement Mentality Have in Common…
By Len Penzo on January 12, 2010
Are name-brand groceries really worth the extra cost when alternative cheaper store-brand groceries are available? More specifically, when it comes to edible products, does the quality and taste of name-brand products always justify the price premium which can often be as high as 50 percent or more?
Last October I tried to answer that question, one of the great never-ending debates in the world of personal finance, by conducting a scientific blind taste test using some of my very-opinionated family members.
Unfortunately, the results from that initial experiment were frustratingly inconclusive. My panel sampled the national- and store-brands of six common grocery items including cookies, tortilla chips, kielbasa sausage and other items. The results: the national and store brands each won two of the challenges, while the remaining two challenges were just too close to call.
And so, as a scientist and intrepid personal finance blogger, I figured it was my duty to
Continue reading My Store-Brand vs. Name-Brand Blind Taste-Test Experiment #2…
By Len Penzo on January 10, 2010
We’re now almost two weeks into January and during that time I’ve read a handful of personal finance articles from people espousing their resolutions for the new year with all the usual suspects dutifully mentioned:
Track your spending. Check.
Start a budget. Got it.
Stop trying to keep up with the Joneses. Yep.
Pay off the charge cards. Good.
Pay yourself first. Uh huh.
Yeah, yeah, yeah, blah, blah, blah.
Don’t get me wrong; those are all great resolutions.
However, those noble commitments will ultimately mean absolutely nothing – bupkis, goose egg, naught, nada, zero, zilch, zip, zippo, zot – if you fail to spend less than you earn this year.
Making an annual commitment to spend less than you earn is the mother of all resolutions and one that should be renewed each and every year by good folks like yourself who wish to achieve the ultimate nirvana of the common man: financial freedom.
There is a reason why
Continue reading The Only New Year’s Resolution That Really Matters…
By Guest on December 14, 2009
Hi, this is Mr Credit Card from www.askmrcreditcard.com. Len and I really got to know each other recently and I found out he was a Los Angeles Dodgers fan. Well, I’m a Philadelphia Phillies fan and so you could imagine our conversations when the Phillies played the Dodgers this year in the NLCS playoffs! So in the spirit of baseball fans everywhere, I’m going to write a post about what we can learn on personal finance from baseball.
http://www.flickr.com/photos/chrisptacek/ / CC BY 2.0
1. Take Advantage of Opportunities when they Present Themselves – After the 2008 season, the New York Yankees signed CC Sabathia and AJ Burnett on nine-figure multi-year deals. Are these two pitchers the best pitchers around? Probably not (neither won Cy Young awards this year), but they were riding on good form and performance when the Yankees (with loads of financial backing) came knocking on the door. Well,
Continue reading 10 Financial Lessons We Can Learn From Baseball…
By Guest on December 12, 2009
This is a guest post by Jennifer Lohan from Finance Buzz for Us.
If you allow your debts to pile up, they can draw you into a vicious debt cycle. You can try to solve the debt problems on your own by implementing some severe austerity measures such as cutting spending to the bone, and selling luxury items to free up cash. You can also look at getting assistance from a debt relief company or opt for refinancing.
If you have managed to get your existing mortgage refinanced, now is the best time to pay off debts, either by using the freed-up cash you received from your refinancing, or via your new lower monthly payments.
Debt Consolidation
If not, and you qualify for other debt relief options, you can always try debt consolidation to pay off debts. Debt consolidation is a process in which you merge all your debts into a single account.
You
Continue reading Why Now Is The Best Time to Pay Off Your Debts…
By Len Penzo on October 20, 2009
One of the great never-ending debates in the world of personal finance is whether or not name-brand groceries are really worth the extra cost when alternative cheaper store-brand groceries are available. Furthermore, when it comes to edible products, does the quality and taste of name-brand products always justify the price premium, which can often times be as much as 50%?
Because inquiring minds like mine want to know, I decided to find out for myself by conducting a blind taste test using my very-opinionated family members to settle the question once and for all.
So last week, I headed out to our local Albertsons grocery store with my son, Matthew, and we picked out half a dozen everyday grocery products for the experiment. To ensure a one-to-one comparison, we only chose name-brand items that had identical store-brand counterparts; package size and item type had to be identical, or virtually identical.
The next step
Continue reading My Store-Brand vs. Name-Brand Blind Taste-Test Experiment…
By Len Penzo on October 6, 2009
Back when I was a kid, I remember going to Catechism and learning about the seven deadly sins.
Maybe that’s why this national sin survey, conducted by a Kansas State University team of geographers, caught my attention last week. The provocative survey, actually an academic study, measured and created a “sin index” for 3000 US counties with respect to pride, envy, lust, gluttony, wrath, greed, and sloth.
Fascinating stuff.
Did you know your personal finances are subject to the very same seven deadly sins that many believe afflict the human soul? It’s true.
That’s why today, my fellow finance sinners, Reverend Len from the First United Church of Our Lady of Blessed Household Finances is holding confession for our small – but mighty and quickly growing – congregation.
Now let me hear a Hallelujah, brothers and sisters!
It’s time to step into the confession booth and reflect upon whether you have committed any
Continue reading The 7 Deadly Sins of Personal Finance…
By Len Penzo on August 18, 2009
Some things are seemingly impossible to explain. I mean, how do spiders know how to spin such beautiful webs? What ever inspired the construction of Stonehenge? And why is Taylor Swift so darn popular?
One perplexing question that scientists have been diligently working to reveal is the reason why people make weird decisions about money. Indeed, there have been countless experiments in behavioral economics that demonstrate when it comes to money, reason and rationality are often trumped by our emotions and feelings.
Here are three behavioral experiments that have been conducted by scientists. What decisions would you make for each of the presented scenarios?
1. Assuming that prices of goods and services stay the same, would you rather earn…
A. $50,000 a year while other people make $25,000
B. $100,000 a year while other people get $250,000
Did you pick option A? Although that is completely irrational, research shows that the majority of people would rather make twice as much as
Continue reading 3 Simple Tests to See if You’re Irrational When It Comes to Money…
By Len Penzo on August 9, 2009
Since I’m still struggling to get interviews with respected personal finance bloggers (even personal finance genius Rich Livingston was on vacation) I finally concluded that enough was enough!
Therefore, because desperate times call for desperate measures, I decided that instead of waiting for somebody (anybody) to agree to an interview, I would hold a live web chat with my trusty Magic 8-Ball – if it approved, of course.
I have to admit, there was a brief moment of tension on my part when I first asked the 8-Ball if it would like to answer a few money-related questions from me and my readers.
That tension was soon broken, though, after I carefully shook the ball and looked into its magic window, where the following response was revealed: Yes – definitely.
I think the interview was a grand success.
Anyway, if you missed the live chat, here is a transcript:
Arnold From Sacramento: Somebody once
Continue reading The Magic 8 Ball Answers Your Money Questions…
By Len Penzo on July 14, 2009
This is Part 2 of a two-part post on negotiating tactics. Please click on this link for Part 1 of this article.
As I noted in the first part of this article, I have always believed that one of the most important life skills that every person should have mastered before setting out on their own is the ability to successfully negotiate.
For most of us, negotiating skills are usually needed shortly after we leave home to strike out on our own for the very first time. For example, the opportunity to engage in negotiations often comes into play when we get our first job, move into our first apartment, and buy our first car.
In Part 1, I highlighted the first five essential tactics that everyone should know. Here now are the remaining five tips that I always follow to ensure that I get the most from my negotiations:
6. Use Misdirection to Gain Negotiating Leverage
Just as
Continue reading Ten Essential Negotiating Tactics Everyone Should Know (Part 2)…
By Len Penzo on July 12, 2009
I have always believed that one of the most important life skills that every person should have mastered before setting out on their own is the ability to successfully negotiate.
For most of us, negotiating skills are usually needed shortly after we leave home to strike out on our own for the very first time. For example, the opportunity to engage in negotiations often comes into play when we get our first job, move into our first apartment, and buy our first car.
With that in mind, here are the essential tips that I always follow to ensure that I get the most from my negotiations:
1. Don’t Ever Be Afraid To Ask For Better Terms
It really isn’t that hard to ask someone, “Is that the best you can do?”
But I know a lot of people who don’t have the nerves to ask for better terms on anything, simply because they’re afraid they may insult the other party. But that train
Continue reading Ten Essential Negotiating Tactics Everyone Should Know…
By Len Penzo on June 26, 2009
The other day I was talking to somebody who shall remain nameless that was lamenting the fact that life “was just too darn expensive!”
I found that fascinating considering Eddie (oops!) drives a brand new BMW and lives with his family of four in one of the tawnier parts of Southern California, yet he apparently doesn’t have enough discretionary spending available to save for an annual family vacation.
The truth is life is only as expensive as we make it. In fact, good financial choices are often nothing more than an exercise in practicality.
Eddie is a classic example of what I like to call a financial jellyfish. He’s not alone either; more than 70 percent of American workers still live paycheck to paycheck according to a recent American Payroll Association poll.
Many people like Eddie might be surprised to find out that they could probably uncover some significant savings that would really stretch
Continue reading The 4 Biggest Ways to Stretch Your Income…
By Len Penzo on May 24, 2009
First off, I don’t know who you are, but I want to thank those of you who have taken the time and displayed enough interest in this blog to subscribe to my RSS feed. There’s currently not a lot of you, but you are greatly appreciated. If I knew who you were I’d write you a personal thank you letter!
For the record, I currently have four hard-core fans following me: my dad, my mom, my cousin Kevin, and my father-in-law Tony. Notice I said “fans” and not “subscribers”. In fact, I hope my relatives don’t subscribe, or else I suspect my daily page count numbers will quickly converge to zero.
And, yes, I did have another official fan who wasn’t a relative, but Courtney the Waitress withdrew her allegiance from my blog.
I really would like to start improving my
Continue reading My Shameless RSS Subscriber Experiment…
By Len Penzo on April 19, 2009
Most procrastinating high school and college literature students know that when they’ve put off their reading assignments to the point where they no longer have the time to actually read the book, they can always rely on Cliffs Notes. Some kids are hooked on Cliffs Notes like a bad drug while others use them in a purely “recreational” fashion.
I’ll bet well over half of you reading this have used them at some time or another. Don’t deny it. You know you did! As for me, I’m going to paraphrase Bill Clinton: I experimented with Cliffs Notes a time or two in high school, and I didn’t like it. But I never actually, um, ‘inhaled’.
I know. I don’t buy that one either.
Anyway, for those of you who want a quick and easy read on the basics of good personal finance, I’ve
Continue reading Personal Finance For Dummies: It’s as Easy as A-B-C…
By Len Penzo on April 3, 2009
Maybe you heard about that infamous Kelton study done a couple years ago that found that Americans could identify more ingredients in a Big Mac than the individual Ten Commandments. To wit: eighty percent of Americans knew there were two all-beef patties in a Big Mac, but only 6 in 10 could identify “Thou shalt not kill” as one of the Ten Commandments.
My anecdotal research verifies the Kelton study.
I know a Big Mac has two all-beef patties, special sauce, lettuce, cheese, pickles and onions — all on a sesame seed bun, no less. But I can only name eight of the Ten Commandments. (Don’t tell my third grade catechism teacher, Sister Nora.)
I wonder if Sister Nora would feel better if I told her I can name all ten of my Personal Finance Ten Commandments? I faithfully try to follow these little nuggets of wisdom every
Continue reading My Ten Commandments of Personal Finance…
By Len Penzo on March 1, 2009
I was in heaven last week because the cable movie channel AMC ran all five Dirty Harry movies in succession.
In Dirty Harry, during that famous bank robbery scene where Harry ends up spouting off his “Do ya feel lucky?” line, Inspector Harry Callahan gets shot in the leg. It is one of the most memorable movie scenes of all time, certainly as iconic as Sly Stallone climbing the steps of the Philadelphia Museum of Art in Rocky.
Not as famous, though, is the very next scene in Dirty Harry, where Harry goes to the hospital to get treatment for his leg wound. Still, it is a great example of an individual evaluating an opportunity cost.
If you do not know what opportunity cost is, see if you can figure it out from this little exchange between Harry and the doctor treating him.
Doctor: Sure, Harry. We can save the
Continue reading Dirty Harry Teaches Us A Lesson on Opportunity Cost…
By Len Penzo on February 13, 2009
I recently shared with you a little insight about my 11 year-old son and 9 year-old daughter’s current level of sophistication about money in My Kids’ Loan Interview with the Bank of Dad. To recap, let’s just say that they are, understandably, still rookies in the world of personal finances and money management.
As a parent, it is extremely important to me that they know how to manage their personal finances before they eventually spread their wings and fly away to start their own lives.
At the very least, I want my kids to be able to manage their personal finances better than Arnold Schwarzenegger managed California’s when he was governor.
I know, what you’re thinking: “Len, you’re not setting the bar very high.” After all, I’ve already discussed why Arnold would make a lousy household CEO. But let me remind you, as Lucy Liu wisely said in an episode of
Continue reading Use a Ledger to Teach Kids Money Management Skills…
By Len Penzo on January 6, 2009
First off, I know I sound like a broken record, but I will repeat myself yet again because it is a key tenet of this blog — financial freedom can be attained by anyone, regardless of income level! “Financial freedom”, folks, is not a two-word synonym for “wealthy.” This is a common misperception among most people that I hope to change over time.
Today I wanted to share with you one particularly terrific example of the type of benefits that are available to those that have achieved financial freedom. Of all the many benefits that financial freedom provides, I wanted to highlight this one in particular because it is a benefit that can be exploited during tough economic times like the ones we are currently experiencing.
Let me first give you a little background information.
I bought my current house in 1997 for $199,000. Over time the value of my home
Continue reading Living Within Your Means Has Its Rewards…
By Len Penzo on January 4, 2009
God, do I hate to pay interest! To anyone. For anything.
I abhor paying interest, and I avoid it like the plague! You should too.
I think that most people who currently enjoy a life of financial freedom have this distaste of interest payments hard-wired into their brains. I am absolutely convinced that this trait must be present in any household CEO who insists on running her household like a well-run business. If the trait isn’t inherently present in the household CEO, then it must be learned. Otherwise, the odds of achieving a life of financial freedom will be long indeed.
And remember, just as it is true that you do not have to be rich to be financially free, it is also a fact that wealth does not guarantee financial freedom. The sad case of Ed McMahon is a prime example of a supposedly wealthy person who is actually far
Continue reading Condition Yourself to Hate Paying Interest…
By Len Penzo on January 3, 2009
A household budget should be based upon a well-thought strategic plan for the future. I’ve already discussed how to establish your household strategic plan so you can begin to build a household budget that meets your long-term strategic plan. Remember, prior to creating a budget, you also need to track and record your spending over the previous several months and determine whether you are running a monthly surplus or deficit. Only then will you be prepared to create a budget that meets your household strategic plan.
Let’s look at the fictional Smith family strategic plan developed in a previous post. According to their initial strategic plan, over the next 12 months, the Smith family CEO set goals to: 1) add $4000 into their rainy day fund, and; 2) retire $2000 of credit card debt. Using a household audit worksheet, the Smith family CEO created this budget based upon their income and
Continue reading Budgeting to Meet the Household Strategic Plan…
By Len Penzo on December 31, 2008
It is the household CEO that is responsible for putting together a budget and identifying the household’s long-term needs, obligations, and desires. I will also tell you that it is important that the household budget is looked at with an eye toward the future. But before any budget worth its salt can be created, one must develop a strategic road map that identifies anticipated big-ticket purchases like houses, cars, and/or vacations that will require large outlays of cash in the future.
This road map is better known as a strategic plan, and it is essentially a crystal ball that is used as the basis for the decisions that help the household CEO determine the household budget.
Here are three steps for getting your strategic plan developed:
1. Identify your long term desires and estimate when you’ll need them and how much they are going to cost. Keep in mind that long-term desires do
Continue reading 3 Easy Steps to Creating a Household Strategic Plan…
By Len Penzo on December 30, 2008
I could have simply focused this post on how to create a budget, but that would not do justice to the importance of the task. That is because not only is a budget essential to keeping your finances under control, but it also gives you the ability to make calculated decisions about how to spend your income.
Unfortunately, most folks fail to understand the importance of establishing and maintaining a household budget. According to this survey conducted by FindLaw.com, 61% of Americans don’t have a household budget or have difficulty sticking to one. If I were a betting man, I would wager that a very large majority of those unfortunate Americans in the survey are under a significant amount of financial discomfort because they are clueless with respect to their household finances.
Every competent household CEO uses a budget to track his cash flow and manage his finances. A budget is not
Continue reading Categorizing Household Wants and Needs In 6 Easy Steps…
By Len Penzo on December 29, 2008
Now that I’ve outlined a top-level job description for the household CEO it is time to begin breaking down each of those six top-level tasks in a little more detail.
The biggest reason most people always find themselves broke and continually in debt is because they are ignorant regarding where their money is going.
In order to start down the road to financial freedom, the first task of the household CEO is to figure out exactly where all of the household money is going. This task is important because a detailed audit must be performed if you ever hope to truly understand your household’s monthly spending habits.
To start your audit, you will need to have an accurate accounting of all of your income as well as every penny you spent over the previous month.
Keep in mind that in order for this task to be done correctly, you will have to do some
Continue reading Why You’re Broke: You Don’t Audit Your Spending Habits…
By Len Penzo on December 27, 2008
Being the household CEO can be a very lonely job indeed, but it doesn’t have to be. In multiple-person households, there may be others (usually the spouse) who will wish, or even insist, to be a part of the financial management process. Luckily, in order to keep harmony within the household, the savvy household CEO can delegate many of his responsibilities to a second management position. This adjunct position is known as the household chief financial officer (CFO).
In the Penzo household, it is the Honeybee (my wife) who takes on the role of household CFO, while I function as the household CEO.
The role of household CFO is not some honorary position invented just to keep a spouse from getting their feathers ruffled. Indeed, the position of household CFO is complementary, and certainly no less important, to the role held by the household CEO. In fact, I will argue that the
Continue reading What the Heck Does a Household CFO Do?…
By Len Penzo on December 26, 2008
Okay, so you’ve heard me preach that the job of household CEO is a relatively easy one. I’ve already discussed the primary qualifications that every household CEO must have in hand, but just what is it that a household CEO does?
To answer that question let’s first look at what most corporations expect from their CEOs. When they are not drawing a fat paycheck, receiving copious stock options, enjoying all-expenses paid country club memberships on the company dime, getting their daily massage, or using the corporate jet for travel to various far-off business meetings at various resort locations, a corporate CEO is expected to define the company vision and provide any and all guidance necessary to turn that vision into reality; in other words, the corporate CEO decides where the company is going and how it’s going to get there.
Now how does that compare to the job description for the household
Continue reading What the Heck Does a Household CEO Do?…
By Len Penzo on December 24, 2008
George Lucas continues to mislead millions of people into believing that the most powerful force in the universe is, well, “The Force”. But every successful household CEO knows for a fact that Lucas is dead wrong. That is not surprising at all given that Lucas is a filmmaker and not an astrophysicist. In fact, it was none other than Albert Einstein, the true authority on this topic, who unequivocally stated that, “there is no greater power in the universe than the power of compound interest.” And has there ever been a greater authority on the universe than Mr. Einstein?
Honestly, who could argue with Al on this? Yes, I know Al is dead, but let’s not quibble over technicalities.
Since Einstein is dead, allow me to use a simple example to prove Einstein’s claim. If
Continue reading How to Become A Millionaire in 28 Days (I’m Not Kidding)…
By Len Penzo on December 23, 2008
Here’s a newsflash for you. Before anyone can expect to successfully manage their household finances, they must be able to exercise self-control.
Self-control requires a backbone.
It demands scruples.
It requires the ability to put off instant gratification.
It means you must have the intestinal fortitude to say “no” to other household members, and handle the inevitable repercussions.
It relies on an ability to recognize personal financial limits and it demands that you stop worrying about the Joneses, who just bought that new BMW the other day.
Unfortunately for many people, asking them to exercise self-control can be akin to waiting for a jellyfish to spontaneously generate a spine.
Every good household CEO understands that the foundation of self-control is personal responsibility.
In my experience I have found this household CEO principle is, without any doubt, the toughest to master. That is because it requires a large amount of sacrifice.
Continue reading Don’t Be a Financial Jellyfish…
By Len Penzo on December 19, 2008
Nothing you can’t handle, nothing you ain’t got
Put the money on the table and drive it off the lot…
Got to have a Jones for this, Jones for that
Well this running with the Joneses, boy
Just ain’t where it’s at
– from the Boz Scaggs song “Lowdown”
In 1976 Boz Scaggs released his critically acclaimed album Silk Degrees. I was only in 5th grade at the time, but to this very day that album continues to remain a guilty pleasure of mine. In the brilliant, strutting, track “Lowdown”, Boz casually warns a buddy to “face the sad, sad truth” and quit his indiscriminate spending before it leads him down the road to financial ruin.
For many people, “running with Joneses” is a highly competitive sport. Unfortunately, many people who end up playing that game end up putting themselves in a real monetary bind that adversely impacts their ability to achieve financial freedom. Those who
Continue reading The Dirty Lowdown: Distinguishing Wants from Needs…
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