Michael Lewis on the End of Wall Street's Boom. This long article by Michael Lewis, writer of Liar's Poker is financial porn: It explains in lurid detail just how complex some of the financial instruments used on Wall Street are, and just how poorly the financiers themselves understood them. You'll be amused and outraged at the same time. (via Naked Capitalism, but I can't find the link anymore)
Archive for the ‘Personal finance’ Category
Just weeks ago, I was contemplating opening a savings account at IceSave - for people outside the Netherlands who haven't been following along, IceSave is an online savings bank owned by the Icelandic bank Landsbanki, which offered over 5 1/2% interest rate on its mainstream savings account product. Ironically, this was prompted by a mailing from my regular bank, the Postbank, which suggested I upgrade to a different savings account from the low-yield one I was using.
Why didn't I do it? I read up. I read up about how the banking guarantee system worked, and found that while the savings account would be covered by the same guarantees that banks in the Netherlands offered, i.e. the first €20,000 would be fully guaranteed by them and then the second would be 90% covered by the Dutch Central bank, actually getting to that first 20K in case of a bank collapse would be cumbersome. I also learned that the bank didn't have its act together, service-wise. Also that there were problems with the capitalisation and leverage of Icelandic banks - though I didn't pay much attention to the details there. So I went with ASN instead. Slightly less interest, but still more than competitive and safer - and also a bank that focuses on sustainable investments.
Readers in the Netherlands will already know that I really dodged a bullet there. This week, Iceland nationalised all its banks, IceSave suffered a bank run, shut its website down, and now there's even doubt whether the Icelandic central bank is even able to meet its obligation to guarantee the account holders' savings. Iceland, a tiny country with fewer inhabitants than the US state of Wyoming, is in a deep financial crisis and its government is now borrowing from Russia - which many speculate will want favours in return. Savers have organized to seize IceSave's assets but whether they'll be succesful is anyone's guess. The UK central bank has decided to step in and guarantee British account holders' funds for them. The Dutch government has decided to pass on that one, for now; it's already bought out a large bank and doesn't particularly want to hold the bag for another.
I'm sure that IceSave savers will get their money back... eventually. But it just goes to show that a little homework can save you a lot of trouble. And it doesn't have to be a lot - the above is pretty much all I know about the IceSave situation, and some of it may be misremembered from the many blogs I read. Just spending an hour or two asking around will be enough.
And listen to people who know these things already. My friend Kim, who knows a lot about Icelandic society, has been warning her friends off IceSave, and she reports that among the people now scrambling for their savings are some friends of hers who didn't listen.
Drawing that just popped up in my head the other day, after talking to Aggie about the economic crisis. Of course, after the drawing pops up in one's head, one has to do the hard work of drawing it - including research for things like wheelbarrows full of money.
When I googled for "Wheelbarrow full of money", I noticed something interesting. I expected to get only images of the German hyperinflation of 1923, but instead got a whole bunch of stock photos and illustrations showing succesful, wealthy, smiling people pushing wheelbarrows full of cash. I guess because the US has never experienced hyperinflation (yet), they associate wheelbarrows full of cash with wealth rather than with the collapse of a financial system resulting in poverty for large sections of the population. I have never personally experienced hyperinflation (yet) but to me as a somewhat historically educated European, the image of a wheelbarrow full of cash is not a happy one. Thinking about this has made me want to do more art relating to money, the lack or oversupply of it, and the different cultural assumptions and constructs surrounding it. There'll be more nekkid people in it, either to sugarcoat the theme, or because they've just lost their shirts.
Update: This drawing is now for sale through my Comicspace galleries. You will need to sign up with Comicspace to be able to see it (to certify that you are old enough to look at nipples) but the process is easy and does not result in you getting spammed. If you don't want to buy it that way, though, you can also e-mail me and buy from me directly. Price is set at $100 - not exactly a bucketload of money.
I have also made it available as a Print via DeviantArt, in a range of formats and at the default prices. There, too, you'll have to sign up to view and order.
Some miscellaneous things:
First off: there will not be a new comic next week. My 37th birthday is tomorrow, and my present to myself is a day off the treadmill. No deadlines, no accomplishment targets. I may or may not do any work, but I'm releasing myself from all obligations for just one weekend in my life.
Driving class is going well, though it doesn't always feel like it. My instructor is sending me into more difficult areas to navigate and is finally letting me pay attention to traffic. As a result, it feels like I'm stagnating, because the more difficult things I'm doing don't go smoothly. I find some of it hair-raising, in fact and come home from the class all tired and sweaty. Give me a stretch of road I'm familiar with, though, and I do notice a difference.
I do now believe I should have done this much earlier. Not so much because learning ability declines with age (it does, but not by as much as people think; indeed, the biggest factor that causes adults to learn more slowly than young people is that adults typically aren't immersed in a learning environment), but because it's much more difficult for me to find the time and schedule the classes than it would have been 18 years ago. The cancellation rate on my classes is about 50%, because I can only make it outside ordinary work hours, and those hours happen to be difficult for my instructor to make.
Grocery expenses today: €21,10. Not bad, especially keeping in mind that I was able to buy for the pantry: various dried bean/lentil products will keep me fed for months, and I did the shopping while hungry (I had no breakfast foods in the house, which meant I had shop before breakfast) which is normally a big no-no. The general frugal advice is not to go grocery shopping while hungry. I overcame this problem by sticking to the periphery of the supermarket as advised by Michael Pollan and giving myself very little shopping time. Compared to the farmer's market, the selection of fresh produce was poor, but I got enough of what I needed for this week's meal plan (cauliflower korma, spaghetti bolognese and dal curry, each for multiple days) and probably will have to go back only once to buy odds and ends.
I got an € 609 tax refund, which is less than I expected. But I'll also be getting part of the nationalised part of my health insurance premiums back, which could well make up most of the total. If you actually look at your tax form, the actual income taxes in the Netherlands are pretty low in the lowest bracket or "box". Most of what you pay is for health insurance, which is a separate bill (and is topped up by a part that you pay to private insurers. Yep, it's a complex and expensive system, but as compromises between private and socialised medicine go, it could be worse). I'll be spending the refund on rebuilding my financial buffer, which has suffered a bit from my plane ticket and the cost of driving lessons. On the personal finance front, I'm also untangling the final issues with the rent of the studio, which I will be leaving on October 21. And I'm thinking of having another go at budgeting. I tried that in February, but I don't think I was ready for it at the time. Now, though, I've realised that my plans for the future will make it essential to save a lot more money than I do. Also, I have become aware of how much anxiety about money stresses me out. I have never had any significant debts, but I have no significant assets either, which means that it doesn't take much to cause my buffer to run out. Time for me to start dealing more intelligently with money.
Yesterday's financial decluttering sure delivered results fast: my tax forms are filled in and ready to send (after scanning them so I have a copy), and let's just say that if my calculations are accurate, which they should be because it's, you know, my tax form, I'm a happy pauper indeed.
I don't keep paper copies of my forms and haven't done so for a while... but I do still use paper forms. They're multi-platform, portable and I find them easier to use than the Tax Administration's various PDF's, web apps and standalone apps. As long as they keep sending me paper to fill in, I'll keep using it.
The other day, in the midst of what looked like becoming an ongoing conversation about tightwaddery, I posted about decluttering for the first time in months. That's no coincidence. There are four aspects of my life that I tend to get antsy about at the same time: money, clutter and mess in the house, my terrible time management, and my terrible organisation. These subjects are closely related: my disorganisation and clutter affect my ability to budget effectively; my poor time management affects my ability to budget, but also my ability to increase my income and my ability to fix the other problems.
Last evening, I did some financial decluttering: I went through the many files in the desk safe and threw out:
- anything that was more than 10 years old (10 years being how far back an audit might go in theory);
- anything sent to me by the Tax Administration, the local authority, my insurance company that was strictly informational except the very latest version of the document in question;
- anything that was the debris of my financial administration, i.e. empty tax return papers, "sketches" of my old tax returns, scribbled notes, etc. It's possible that these things might be involved in an audit in the future, but I'll take that chance.
I also sorted everything that was unsorted, which I'm afraid was a lot. It was the most tedious way I could think of spending a Friday night, but it did help me feel better about a number of things:
- I found out that I had everything I need to be able to file my tax return quickly so I can be on time for the extended deadline of September 1 (budgeting, time management, organisation)
- I also found out that I had paid National Health Insurance advances over 2007 and 2008, which I should be getting back now that I'm on a salary and paying taxes/national insurances by the month. (budgetting)
- Looking at my bank statements, I realised that for all the disorganisation in my budgeting cycle, there's one thing I'm pretty good at doing, which is saving. I put € 1600 in savings the month after I came back from Aggie's, and have enough saved up to cover a month and a half's frugal living expenses, a plane ticket (return) to the US if booked early and coverage for the financial time bomb I mentioned earlier. That time bomb will be defused once I've filed my taxes (budgeting)
So that's making me feel good about myself. I'm still not done with this round of decluttering and it's going to be a difficult one, because the last one was less than six months ago. But I need to do it just so I can move all the stuff from the studio there. There's a lot accumulated there over the past seven years.
More proof that the improvement areas in my life all relate: because I did not allow myself to go to the supermarket over my lunch break this week (budgeting), I was able to have shorter lunch breaks (time management) and I could use the time to make phone calls, dealing with some studio-related issues and contacting a driving school (organisation). That made my lunch breaks the one moment during the day when my own disorganisation didn't bite me in the ass constantly.
While discussing this post privately, Aggie pointed me to the Tightwad Gazette's website, which hasn't updated since the time when the earth was still cooling, and the blog The Simple Dollar, which, it turned out, is good enough to keep me reading for hours on end (though I'd like some higher ratio of meaty to brief postings - but I'm probably in the minority among blog readers). The Simple Dollar has the kind of strictly-finance stuff that always makes my eyes glaze over, but also lots of practical tips for reducing debt, budgeting and how to live frugally and enjoy it. I'll be studying it a lot in the next few weeks.
Last February, I got very interested in the blog of the You Need A Budget website. Their product is a range of personal budgeting tools ranging from well-designed spreadsheet templates to a fully-fledged application for Mac and Windows. I followed the blog for a while, subscribed to the course, kept detailed financial records for a few weeks, then decided that I probably didn't need a budget anyway. I need to reconsider that, considering how I managed to overspend this month compared to the targets I set for myself.
Both The Simple Dollar and YNAB are aimed at mainly American readers whose main goal is to live debt free. The Simple Dollar's main author has a life story involving a financial meltdown; I can't readily find the backgrounder on the YNAB site anymore (something about it began rubbing me the wrong way back in February/March, so I stopped going), but if I recall correctly, the author has always been concerned about avoiding debt. In any case, I'm not a perfect match to the sites' target audience. I've always been debt-free , and while I did have my own financial crisis last year, it resulted from my income drying up while I didn't have an emergency fund. So I could solve it by first going on the dole, then getting a job as fast as I could. Within three months, I was financially healthy and saving money.
The reason I'm now getting more interested in personal finance/frugality sites is that I have my own set of goals that involve having a lot more money than I have right now. My (modest) translator's salary allows me to live well, but leaves little space for what I really want, which is to travel and eventually emigrate. Before that, I want to take driving lessons, which in this country don't come cheap at all, and learning to drive after the age of 35 is probably going to take me a lot longer than it would have done when I was younger. I also have a few ticking time bombs in the form of rebates that I will no longer qualify for in the near future, replacement costs for household items such as my 20-year-old fridge and my computer equipment - stuff like that. Right now, I try to save 300 Euro a month at the start of each salary cycle, plus whatever I took out of savings again during the last salary cycle — so if I come up short during July and take € 150 out of savings, I put € 450 into savings as soon as my July salary comes in.
This month, that's kind of gone to hell. After stashing away that 300 Euro, I only have another 300 in disposable funds each month, and I kind of depleted that with the cost of a trip to Utrecht for a wedding, a gift for the bride and groom, dress footwear for the occasion (which I was going to buy anyway, but if it hadn't been for the wedding, I'd have held off for another couple of months), the new hosting plan for my website and a few other, smaller things that I'll need to track down. I'm not hurting, but a bit more clarity and restraint in my spending would help me a lot, especially in the area of not having to unexpectedly eat lentils for a week. I like lentils, but not every day.
There's one step I'll be taking this month; after a year of only being able to use it evenings and weekends, I'm giving up the studio I share with (as of August 1) four other artists. That's going to save me € 50 a month, and I'd done that immediately after signing on the dotted line for my current day job, that would have put € 600 in my pocket by now. That's one discount plane ticket to the US if I book early!
I'm also looking at the income side of things. I've decided that a second job is out, for the time being, and while selling my originals can deliver a nice bonus from time to time, it's not structural so I can't count on it. That's something I'm going to have to figure out.