What path to take/breakdown of options

I've been thinking a lot lately about what path to take.

Here is a breakdown:

• Law School or some other graduate program
• Entrepreneurship
• Continue current path but ramp up savings and investing/figure out side income

Law School or some other grad program was something I was pretty hot on just a few weeks ago. However, I'm beginning to cool on the idea, mostly due to the expense involved. Even if I get funding, I will likely have to curtail my lifestyle considerably, which I'm not sure I'm ready to do just yet.

Entrepreneurship is kind of an emerging area of interest for me and probably something I should have been thinking about years ago since I have the brains to make something like that work. The problem that has always stumped me though is that I don't know what area I would go into business in. Seattle already has tons of coffee shops. Between Vita, Stumptown, Zoka, Vivace, and Cafe Ladro, I don't know how much room is left for independents. Allegro is horribly run, so there is the possibility of buying them out some day and then expanding the brand. Alternatively, there are no doubt a number of cities that lack the concentration of coffee shops that Seattle has.

An idea that has been bubbling in my head for a while is some sort of management services business for small gyms, independent personal trainers, yoga studios, etc. Most of these people go into these types of businesses because these are areas they have a passion for. The weakest part of their business is likely to be their own management acumen, or lack thereof.

The one option that is NOT on the table is to do nothing. Even if I continue along the path of the cubicle-dweller, I need to figure out a plan to optimize that existence, which has to include a large component of saving and investing and, ideally, some sort of money-making gig on the side.

New Car Purchase

I am in the process right now of evaluating a vehicle purchase. Contrary to advice I've received for most of my life, I am considering purchasing brand new rather than used. All my life, I've heard this off the cuff mantra from parents and others that a vehicle loses 25 percent of it's value the moment you drive it off the lot, and therefore purchasing a vehicle new is a big waste of money. While it's certainly true that purchasing any vehicle is an investment in a depreciating asset, if you look at the available numbers (Kelly Blue Book), 25% is obviously inflated, especially for a vehicle like the base model Hyundai Tucson, which is the car I'm zeroing in on. For the Tucson, it looks like average depreciation is in the range of 15-16% the first year, 9% for the next two years, and then anywhere from 14% to 18% after that. For my purposes, I'm assuming a depreciation charge of $190/mo for the first five years, which would be the likely length of the loan. Assuming a purchase price of $19,500, I will be left with an asset worth approximately $8,100 when the loan is paid off. I might even be able to get a better price than that if the factory rebates come through soon.

An alternative to the Tucson would be to get another used Civic. There is a vehicle on Auto Trader right now that I test drove once and it is truly a screaming deal. It's a 2007 with 23,000 miles and it's in absolutely perfect condition. The owner is asking $12,900 for it, which is just about 2K under Blue Book. It's a really sharp looking car too.

I keep going back and forth on this. On the one hand, the Tucson would be really awesome. But is it the best spending decision right now? The Civic would obviously be more optimal from an expenditure standpoint, but how much happier would I be driving the Tucson than the Civic? Also, it's not like buying a base model Tucson would be an outrageously irresponsible spending decision. Quite the opposite in fact. But, I need to remember that cars pretty much never make sense economically. They are, ultimately, just transportation. But, I LIKE driving, probably much more than most people. I love love love the freedom that my car gives me. I enjoy that it is truly my space. No roommates, no mother, and no sister. And, if I do need to transport people, the Tucson is far and away better - the backseats in the Civic are actually kind of a joke.

The Tucson also does more to communicate an image of prosperity, which may not be the most important thing, but is also not inconsequential to personal goals that I have recorded elsewhere.

I Will Teach You to be Rich

I'm reading Ramit Sethi's I Will Teach You To Be Rich, which is basically a primer on personal finance aimed at people in their 20's and early 30's. The material seems to be just as relevant to me even though I'm a little older than the intended audience.

Here is a link to his website: http://www.iwillteachyoutoberich.com/

Here is the 6 week plan, which is basically the structure the book is based on.

6 Week Plan (copied from page 12)

In Week 1, you'll set up your credit cards and learn how to improve your credit history. [Even though this is one of those areas where I've been pretty good, it's worth going through the process of optimizing my credit profile.]

In Week 2, you'll set up the right bank accounts, including negotiating to get no-fee, high-interest accounts. [Interested to read what he has to say here.]

In Week 3, you'll open a 401(k) and an investment account (even if you have just $50 to start).

In Week 4, you'll figure out how much you're spending. And then you'll figure out how to make your money go where you want it to go. [I've already started tracking my spending, so I'm one step ahead].

In Week 5, you'll automate your new infrastructure to make your accounts play together nicely.

In Week 6, you'll learn why investing isn't the same as picking stocks - and how you can get the most out of the market with very little work.

I really like his step-by-step, keep it simple approach. I wish I'd paid more attention to this sort of thing back in the late 90's when I first started making decent money.

Rich Dad/Poor Dad

I finished Robert Kiyosaki's Rich Dad/Poor Dad last night. While the book is interesting and kind of a fun read, I don't think it will be a foundational book for me. While I definitely buy into the central theme, which is that the wealthy and the poor/middle class think about money and risk in fundamentally different ways, the book itself is just far too lacking in specifics to be truly useful. To be clear, I don't think the book is really meant to be a "how-to" manual. But, even so, Kiyosaki needed to include more specifics to back up his claims, including more information about his own background and credibility. The examples he does give, mostly from his own experience in real estate, are sorely lacking in detail.

This is basically what I got out of the book:

1) He advocates financial education and general financial literacy. The rich think about money differently than the rest of us, so we need to learn to think that way. This mostly involves understanding the concept of cash flow and the concept of moving money out of the expense column and into the asset column.
2) He identifies 4 components of a solid financial education. These include: a) Accounting, b) Investment Strategy, c) Market Behavior, and d) Law.
3) His points about the 3 key management skills are very legitimate. These include a) managing cashflow, b) managing people, and c) managing your own time.
4) He advocates the benefits of corporations as tax shelters but, per John T. Reed (see below), watch out for getting yourself into tax fraud by following his advice too literally.
5) He's also really big on learning how to spot opportunities. This actually goes along with his advice spending time to educate oneself financially.

This web page actually does a pretty good job of Cliff Noting the book: http://www.richdad.us/

Is Kiyosaki Credible?

The big problem with taking Kiyosaki too seriously is that there is just way too much substantive criticism of him out there. This was surprising to me, given that I've seen him on PBS so many times.

Here, for instance, is a link to a 20/20 story on his method: http://abcnews.go.com/2020/story?id=1982669&page=1. While I think the test in the story was stupid, the fact that he would agree to that sort of a test makes me really question his judgement.

In another example, the author John T. Reed goes further than 20/20 with this critique. Note: I have no idea who John T. Reed is, but the critique is quite detailed. As a side note, the article seems to make it clear that "Rich Dad" is probably a fictional character. I think that's actually fine, but Kiyosaki should have made that clear from the outset.

Finally, ff you look up Rich Dad/Poor Dad on Amazon and go down to the 1 star reviews, you will see some very detailed reviews that rip him apart.

Of course, all of that criticism doesn't mean that he's wrong. But, the picture just isn't pretty when you look at the criticism that's out there and combine it with the lack of specifics in his examples, the lack of complete transparency about his own background (including his business failures and successes), the mystery of who this "Rich Dad" character really is (or was), along with his own seeming lack of regard for his "Poor Dad" real father, who seems like an extremely admirable individual.

Conclusion:

The key, when reading this guy, is to understand that he's really just giving you the big picture. Someone like myself, that has the ability to read critically, can get some good information from this type of book. For less critical readers, the book may be doing them a disservice - giving them the impression that getting rich is easy. It's disturbing that he's sold something on the order of 23 million copies of his books. The useful parts of this book could probably be boiled down to a 15-page pamplet.

Up next: Ramit Sethi's I Will Teach You To Be Rich.

Introductory Post

I have another blog at http://dudedoescrossfit.blogspot.com/, which has worked marvelously as a tool to keep myself accountable and on track with regards to my physical fitness and weight loss goals. In fact, journaling that stuff every day has become a true pleasure. I'm including that link here on the off chance that I attract any readers that may find that sort of thing interesting.

Since journaling has worked pretty well for the physical fitness stuff, I've decided to create this blog as well and use it to track my thoughts and actions as I try to improve myself in the area of personal finance and career direction, which I see as two sides of the same coin. I'm also going to try and use it to track my daily spending. The plan is to track every single thing I spend money on in an excel spreadsheet and then summarize that each week here on the blog. While I don't necessarily want to cut out all of life's little luxuries (Lattes, taco truck, etc.), I do want to improve my awareness of where the money I'm making now is actually going so that I can start making more purposeful spending decisions. Briefly put, my current income is $75K/yr with the possibility of a $1K bonus every six months. With that income, I should be able to afford a pretty decent lifestyle and and also save and invest every month. But, for the last year or so I've pretty much been going from paycheck to paycheck. Additionally, as my income goes up, this sort of process should allow me to take better advantage of that and direct larger and larger portions of my money to savings, investments, etc.