Personal Finance QuickTake: Ex E*Trade CEO Cashes In...

Fortune Magazine Online ran a great story last night about the former head of E*Trade's Golden Parachute. In recognition of his ability to drive E*Trade down 84% by entering into super-risky sub-prime loans Mitchel Caplan received a severance package worth $10.9 Million in cash plus lifetime medical.

Let me go on the record ( I guess I am anyway since this is on the web) that I believe a CEO should share in the riches if a company does well. I expect to get paid in my job I do not begrudge someone their money for doing the same. I also understand that, like with professional athletics, the a company will pay someone very well if they can help the team, because it is a good investment. If I was paid $10 Million, but I increased shareholder value $1 billion, my pumpkin head is gonna rest easy...

That being said, their is such a thing as admit you were wrong, even with the best intentions, and parting ways. I believe in severance as long as their was no wrong doing. But if you lose 84% of the value of a company, have the decency to leave a couple bucks in the till on your way out...

Personal Finance by Micheal Scott of The Office...

I am a big fan of The Office, both the British and Us versions. There is one episode from this season that is sticking in my brain as I sit and hear many of my fellow office workers talk about budgets and getting their finances in order and start managing their money better.

In the episode Micheal realizes that he is running out of money. His finances in shambles he overhears that some people's finances got so bad that they had to declare bankruptcy. Believing that this is an actual declaration ala Ye Olde Town Crier (not to be confused with Jon Cryer) Michael address the room and yells, "I am bankrupt, I am declaring bankruptcy!" Luckily Oscar takes pity on Michael and decides that he will take a look at Michael's finances and see if he can help him out.

The next scene show Michael looking at an Excel chart like the one in the picture. save that it is three instead of five columns.

Oscar: Micheal, this first small column is what you spend on your needs. You know the basic necessities of live like shelter, food, etc..

Oscar (points to next column, twice as big): Micheal this column is what you spend on things you don't really need, like dining out, etc..

Oscar (points to third column, well larger than the other two combined!): ...and this column is what you spend on things that nobody needs, like backup Magic Sets...

The point is many of us, especially those of us struggling with our finances, have a hard time discerning between our Needs, Wants and Desires. We don't lay these out like a hierarchy that they are, we run to what feels better, rather than what is better for us. Like the kid ( mine!) who is always full until Ice Cream is available!

Here is the Life and Liberty guide:

• Needs - Don't get these and you...well die. Air, food water, shelter. The basic needs of life. Not I Need to be seen in a 535i BMW...not really the same at all.
• Wants - Things that make our life more comfortable, a refined need if you will. I want to eat pizza, it is good. Food sustains; pizza is a preference of a type of food.
• Desires - I desire to eat pizza from Wolfgang Puck's in Las Vegas, then see a show and retire to my suite for a massage...

Now it is OK to desire all of the better things in life; trips, fashionable clothes, Mont Blanc Pens, awesome watches (both my desires). But not at the expense of your other lower level priorities.

In other words a trip to Europe is a desire, contributing to my IRA so I don't eat Dog Food when I am 70 is a Want, much less making sure I have my own shelter (a Need).

So when you are budgeting and managing your money, really think about where in the priority chain the purchase of Your backup Magic Set is...

Personal Finance QuickTake: $100 Barrel Oil

$100 per Barrel Oil has a lot more to do with your Budget than just your Car or Truck petrol cost. It literally touches Everything you do on a daily basis.

Yahoo Finance had a good article last night talking about some of the potential issues, but it doesn't go far enough. Don't want to be an alarmist but don't forget about these three key areas too:

• Food - Until they get transporters dialed in, the only way that food makes it from crop, to warehouse, to grocery store is on trucks, planes and boats. Given that Food is a necessity it is easier to pass on fuel surcharges here than most places and it is usually directly passed on.


• Clothes - Polyester may be called different things then we were kids, but a lot of the microfiber in the world is still partially oil derived.


• Plastic - Raw plastic pellets is way higher. Expect higher priced toys, CDs, DVDs, etc..

No one is "off the grid" enough to say they don't eat or use plastic, or use most other synthetic fibers. It is all manageable, but it will take even tighter watching of your money and budget.

Just remember everything has consequences, but having a plan in a storm is always better than not having one...

$1,000,000 and Paris Hilton Shows Up...

LAX Nightclub in Los Angeles paid Paris Hilton $750,000 to show up to their club and party on New Years Eve. The article didn't say how much it paid for her to leave afterward...:)

I actually understand why the Club did it. From a marketing budget perspective it actually makes sense. A hot club has a one to two year lifecycle. You have to get the high paying players in and away from last years "hot" spot. The power of referential selling lives!

This wasn't the only club doing this either. All over LA, Vegas and New York clubs lined up all the "B" talent they could: Ex-American Idol-ers, Ex-MTV VJs and various Reality show winners/rejects.

So I don't blame the club, and if I was the "personality" I would take the money (and so would you). So who is to blame?...consumers. In this case those consumers who believe that their self-worth is tied to where the can get in and where can they can be seen. Often these are 20-somethings that can ill-afford the lifestyle, but thats OK, "Life Takes Visa (r)!"

I am going to let you all in on a secret most marketers won't tell you...You really don't need most of this...merchandise. There is a reason all of these companies spend millions to advertise, cause you spend billions buying what they sell!

"Do I really need this" should be your mantra each and every time you grab that Credit Card. I bet if you ask yourself this, 50%+ (or more) of the time you will say you don't. In order to be successful in Budgeting and Money Management you have to really be able to compartmentalize Needs, Wants and Desires.

Once we do that we free ourselves from our debt chains and really begin living.

That being said I am available next New Years Eve to open your club, for just $28,800 ;) ...

Budgeting Time is Harder than Budgeting Money...

First day back at the office from vacation, and as always...all great plans last about five minutes into a battle. I hope I budget my money this month better than my time!

I thought that I stayed up with emails pretty well on Ye Olde CrackBerry, but apparently...not so much. I run about 200 emails in aday, but with the "Out of Office" on it usually is not that bad. Well I came back to over 700! After chopping out the "Crap" and the "Who cares" that leaves 200 I HAVE to do a real response to...I have 78 left.

I am kind of being pulled all over today, which at least means I was missed. This is coupled with trying to wake my Brain today! I truly believe someone is leaking Radon Gas into here!

After 5 other meetings and one more to go, I will have about 2-3 hours of Homework...Enough of my whining though. Hope to be much more efficiant tomorrow!

But like I said today budgeting my time has been well harder then budgeting money...much better posts tomorrow...promise...

Personal Finance QuickTake: Property Tax Cut?...

I thought I could start a new feature on my Blog that I will call: Personal Finance QuickTake. I have seen others call attention to news stories from around the web that tie to their key topic. In my case, personal finance and managing money.

For this first one it seems that many state and local government have been relying on property taxes more and more in order to fill their coffers. Given the booming paper price on some houses this has led to a quick ratcheting in rates around the country. Some have seen their taxes double or triple. Now it seem that even the government is feeling the pinch.

For homeowners, property taxes can be a real hit to your budget and manging your money!

Here is an article on Yahoo that explains more and lets you know what you may expect in the coming year...

December Final Debt Reduction Numbers...

Well the final numbers for December are in...and we did pretty well in regard to our debt reduction!

As of the end of December our Net Worth Increased $2570!

Here are the December high points:

• Paid off our #6 Snowball Debt! - Already rolled our snowball to our next debt on the list; The State Farm CC, we will now be paying about $100 over the minimum payment.
• Paid off a total of $1122 in Credit Card debt - Two more cards to go!
• Paid off $1191 in Loan Debt - Our consolidation loan has really helped to lower our average interest rate and minimum payments, so more can go into our snowball!
• Added $327 to savings towards 2008 Property taxes - Do not want to borrow to pay this off this year!

Points to Work on:

• Overspent Grocery/Entertainment this month by $100, due to hosting family for New Year's Eve - Well make it up over the next couple pay days
• Overspent Gas Bill -Ninja Bill Taking this out of January's discretionary fund (dining/Entertainment)
• Lots of travel coming up - Make sure to quickly process business expenses!

So we had a great month, especially by not going over on Christmas. The debt reduction will be out of the norm, but was paid for out of a bit of windfall on my check. Once you hit the maximum contribution to Social Security they stop taking it out of your check. In the past we would have spent this away as fun money or on Christmas, but now that we are on plan we took it all and applied it to debt retiring a credit card debt earlier than we hoped!

I don't expect January to move the budget needle as much, as my check goes back to normal and we have picked a lot of the low hanging fruit. I see Personal Finance and Budgeting as a marathon, not a sprint, but it does feel good to run every now and then...