Category Archives: Financial

Spending Account 2

In a land far-far away called ThisPlaceDoesn’tExistVille……everyone spends the same amount of money every month.

That means of all 12 months of the year, a person will spend maybe $4,000/mo for living/fun/bills. Like this:

January spending: $4,000
February spending: $4,000
March spending: $4,000
November spending: $4,000
December spending: $4,000

BAHAHAHA!! In RealWorldLand however, that shit NEVER happens! It’s more like:

January spending: $4,000
February spending: $3,000
March spending: $4,000
November spending: $7,500
December spending: $11,500

Notice those last few months shoot straight up.

Well pretty much EVERY year ever, I notice my spending goes sky-high in the last quarter of the year….and I’m not alone in this.

In October/November/December you tend to: Travel places to see family, buy lots of gifts, go to lots of parties, stay in other places…..basically A LOT OF SPENDING HAPPENS.

But years ago in college I did one smart thing, and that was create a separate spending account JUST for occasions like this.

I called it The Spending Account 2.
(ok…the name wasn’t so creative, but you get the point)!

In college I started stuffing in about $300 bucks a month to the Spending Account 2 account….so by the end of 12 months I’d have an extra $3,600 in the holiday season to spend.

At the time that would cover travel costs, allow me to buy some pretty decent gifts for everyone….and essentially lemme have some extra wiggle room to do/buy whatever I wanted for the holidays:

spending-account-2

Having The Spending Account 2 available for extra money made holiday shopping a lot more enjoyable, when you didn’t have to “budget” to buy stuff on your normal monthly burn rate.

If you have the option to create multiple bank accounts, I’d HIGHLY suggest you create a separate one that let’s you actually enjoy the holidays instead of dread it :)

Sincerely,
Neville Medhora – The Brown Santa Claus
P.S. You’re damn right I made a financial graphic using Emjoi!

Your “Investment” Account

As I’m doing this NevBox promotion, I got a small amount of people asking if I could sell more next month so they could buy it (when they got their paychecks).

Since I’ve already sent all the Malaysian-child-labor-slaves home after assembling the boxes, The answer is NO……but there was something more important about this question:

These people didn’t have $97 on-hand to improve the knowledge in their heads!

I’ve NEVEEERRR had this problem since I started making money…..not because I was super rich, but because I immediately created something called:

The Investment Account.

My “investment account” was simply a checking account I had with my bank (BankOfAmerica) where I would put 30% of all the money I made.

Yes, 30% of every shred of money that came my way….would go straight into this account.

Whenever it came time to make a purchase that would better myself in some way, I would use this “Investment Account” to pay for it.  

Since 30% of all my money went here, this account was always stocked with a decent amount of cash.

Any book, any internet course, any domain name, any newspaper/magazine subscription, app….or WHATEVER that would improve my life, would get paid for by this account.

And I wouldn’t nit-pick on how much something cost when paying with this account.

If something could possibly improve my life, I bought it immediately.  What better investment is there??

Things I’ve bought using my investment account:

  • Books, lots of them.
  • Tickets to conferences
  • Tuxedo to help crash parties
  • Internet courses such as KopywritingKourse
  • Newspaper subscriptions
  • Class clothes for classy events
  • A personal stylist
  • A Personal trainer
  • Accountability coach for business
  • Domain names
  • Software like Photoshop and Microsoft Word
  • Computer microphones, video cameras, video equipment
  • My MacBook Air and iMac computers

You can probably tell how all of these things either improve my life, improve my knowledge, or improve my effectiveness as a business person.

AND I REFUSE TO HEM-AND-HAW ABOUT THESE PURCHASES.  

My brain is the most important tool in my shed, and anything to improve it can pay off massively.  So to have funds available for all these things……I have been thankful for the last 10+ years to have had “an investment account” to pay for it all without thinking.

Do YOU have an account like this?
Do YOU have some funds dedicated solely to the improvement of your brain?

Sincerely,
Neville Medhora – A kopywriter with thousands of dollars to “make it rain, on my brain.”

FYI.  There are only 19 NevBox’s left this morning!  If you would like to grab one, I’d suggest you do it in the next few minutes.  The PayPal button will automatically stop working after the last one is sold.

Have Sales Gone Down In the Poor Economy?

Here’s a question I’ve been getting more and more geared towards my business House Of Rave:

Have your sales gone down in the poor economy?

It’s actually a fantastic question and relatively interesting to hear different answers from different business owners.

So, have your sales gone down in the poor economy?

MY ANSWER:
YES…..but not in the traditional sense. Let me explain:

Most people expect that sales simply stopped coming in after the economic downturn, this hasn’t been true even though House Of Rave sells things people buy only on disposable income.  In fact, if you never told me there was a “recession” going on, I probably wouldn’t have noticed too much….people still order all the time (although I’ve seen a very significant drop in big orders from large corporations).

The MAIN problem I’ve had which takes a DIRECT shot at lowering my sales is all the cool products are out of stock.  Almost all of my previous best sellers are no longer being manufactured.

HouseOfRave sells “hard to find” and “unique” products….which often means “they don’t sell it in big stores”.  This has been great so far, but a problem I’m seeing now is manufacturers are on tight budgets and don’t have the capital required to mass produce slower selling items.  I may be able to sell 10 per day of an item, but a manufacturer might need to sell 10,000 of them per day to keep cash flow moving.

….so unless an item can move HUGE quantities quick, the product might be discontinued.

This has been the predominate way that my business has been affected.  The cool part is, with more marketing and more effort I’ve been able to maintain and grow both the profit and sales of the business, but it’s required more effort than in the past (keep in mind I used to put NO effort into it at all).  Before, I would just slap products on the site and they sold….it doesn’t seem to be quite as easy anymore.

Many smaller manufacturers and product patent holders are going out of business now.  Think about it, to manufacture just ONE simple product you must spend hundreds of thousands of dollars for materials and labor, store them, then find people to buy them.  Before you make even one CENT from the product, you could blow through a half-million dollars on credit.  If the product is a flop (note the importance of beforehand PRODUCT RESEARCH) you’re screwed…..and I’m just using the example of small-scale manufacturing of novelty products.

While my business doesn’t have the extreme overhead of these manufacturers, I feel their pain indirectly when a cool product of theirs goes out of stock.

2009 In Numbers

IN 2009 THERE WERE….
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154,458
Unique visitors to NevBlog according to Google Analytics.

442,307 Unique visitors to NevBlog according to Plesk Stats on my server.

84 Number of posts on NevBlog

5 Days spent homeless.

11,453 Miles put on my car.

87 Gigs of bandwith transferred to HouseOfRave customers.

377,176 Unique visitors to House Of Rave according to Google Analytics.

722,329 Unique visitors to House Of Rave according to Plesk Stats on my server.

$35,244 Amount of money I spent to live.

54 Times I rode the Cal Train

$1,892 Money spent on iPhone service.

1 Time I almost bashed my face in doing back flips on videotape.

Lousy Interest Rates = Spend

When the economy sucks, the government will generally lower interest rates so it’s more enticing for you to SPEND money rather than SAVE.

Well they’ve done that big time right now, and I did a little sleuthing around at some of my non-risk-bearing accounts.
Example:
About 5 years ago I set up an Emigrant Direct account because internet banks usually offer higher interest rates than most traditional banks…and I’ve pretty much forgotten about it.
I stashed away about $25,000 in that account and checked it recently to be greeted with:

1.2% annual return??? HAHAHAH!!

This means my roughly $25,000 will earn $300 for a whole year of sitting there. Meanwhile the inflation rate right now is “officially” between 3-4%….and in reality is probably much higher.

So while I earn $300, my money loses $750 in value (at least). The account is no longer a “No risk” account…it’s now a money pit.

Well that’s a losing proposition, so while I already have an investment account I use to throw into businesses that make me money, it looks like I’ll be almost forced to put some of that money to good use.

However with all the current tax breaks encouraging businesses to spend right now, taking money out of permanent savings accounts and spending them on money-making endeavors seems a smart idea right now.

Shopping spree time :-D

How Much I Spent in 2007

A little while back I figured it costs me $24,160 to be alive each year based on my 2007 spending totals. That number was for the basic neccessities, but for some reason I never tallied the actual amount I spent in 2007.

This post will actually be the first time I’ve really tracked what I personally spent for the year. I’m very good at keeping a tight track of everything I spend for the month, so these numbers are quite accurate.

Jan-07 – $1,415
Feb-07 – $2,214
Mar-07 – $5,441
Apr-07 – $2,895
May-07 – $1,965
Jun-07 – $2,694
Jul-07 – $1,461
Aug-07 – $3,505
Sep-07 – $2,415
Oct-07 – $3,105
Nov-07 – $1,280
Dec-07 – $1,615
2007 TOTAL – $30,005

I often pay bills like car insurance, health insurance or gym memberships 6-12 months in advance, so the numbers vary quite a bit sometime from month-to-month. There’s also zero debt on my books, so these numbers are not inflated by credit card payments, car notes or anything like that. These also don’t include business spending (those numbers get more fun)!

In the post which calculated $24,160 in living expenses, I stated, “That’s just to live, doesn’t even account for going out, travelling etc.”

The total discrepancy between the estimate and actual number is less than $6,000 for the whole year, and since I know I spent more than $6,000 going out and travelling for the whole year, that means I’ve been good at keeping my monthly costs low.

Here’s a fun game for younger people to play:
(I would hope all older people already have this figured out):

1.) Tally last years total expenses.
What does it come to? That number = EXPENSES

2.) Now suppose for a moment you lost all your current income sources.

3.) Do you have at least enough money to cover EXPENSES for the next 12 months?

If yes; good.
If no; that’s your business.

I’d like to see a comparison of Noah’s monthly expenses from the time he was in the SF Bay Area compared to living in Austin now.

Advice To A Soon To Be College Grad

A close family friend (Burjis) whom grew up like a brother is about to graduate from college with a degree in electrical engineering (which I think right now are the highest paid graduates). He’s recently started asking me question about money, but I sensed he didn’t really didn’t know what to start asking.

Even more sad, was I didn’t know what to tell him, or even where to point him.

There’s a million and one books on the subject, but of course they’re all too long and detailed to give any practical advice which can be acted on in the next few hours (although reading them is a great way to start).

So after feeling bad that I couldn’t immediately impart any valuable knowledge, I decided to write down what personally helped me when I was ready to graduate college.

My own brother Ashdin will also be in the exact same boat in one year, so I figured this is a good time as any to give this sadly un-discussed subject a shot.

So this post is dedicated to Ashdin and Burjis:
———————————————–

Just FYI:
I’m a little different in that I never started a job hunt (didn’t want to, need to or plan to), but at the age of 25 I’ve seen many close friends go through it, take jobs, and many of them regret their choices.

I can count the people I know my age who like their job on one hand, and still have several fingers left over.

So are the things that helped me most during those pre-real-world-transition years. If you want more detailed advice, go read a book (which is coincidentally tip #3).
————————————-

I think the single most valuable thing you can have near graduation is options. This means you have a sufficient amount of money in the bank to live for a while without having to immediately accept a job offer just because they’re giving you a $3,000 bonus, and you have several different good job offers. This is why people usually end up in bad jobs, because they’re desperate.

If you manage to find your dream job before you even graduate, awesome.

By all means possible, avoid being desperate once you graduate. The list below is what I think helped me attain that.

1.) Save money
Stupidly simple advice that is in the #1 spot for a reason. If you go out on the town use a flask, only pay cash for your spending (so you can phsyically see and feel how much you are spending), don’t waste money on dumb stuff, use your money wisely. Whatever it takes.

I absolutely guarantee not spending a little money now will help A LOT later. If you work an internship, immediately put 50% or more away immediately before you can spend it. Let your friends spend $100+ several nights a week at the bar…good for them….your eye is on a bigger goal.

2.) Split up your bank accounts
It’s free and is possibly the greatest financial move I ever made, and you can do it online or at the bank in 15 minutes. Seriously, do it right now. It gives you a MASSIVELY better idea of how much money you can allocate to certain activities.

Do this anyway you like, but what I did in college was:

  1. General bank account: All money earned went into this account and was then distributed to the sub-accounts.
  2. Savings account: I didn’t know what I was saving for, but this proved to be amazingly valuable. When this account gets too big, I max out my Roth IRA with it.
  3. Spending Account 1: Going out, seeing a movie, having fun etc all came from this account. 10% of income was allocated here.
  4. Spending Account 2: I put 10% of my income to this account per month. This account strictly used for vacations and holiday spending (since buying gifts and going out during the holidays puts a strain on Spending Account #1).
  5. Investment Account: 30% of my money went here. This was money that could be used on anything that would help make money or continue my education.
  6. Bills account: 30% of my income went to this account. Paying rent, buying groceries (minus alcohol purchases or supplies for a party), gas, bills, insurance costs, phone bill etc. were all paid from this account.
  7. ROTH IRA: I opened one with Ameritrade even though I didn’t really know what the hell it was at the time. I just knew I needed it. It’s free and easy to open, and you can read a thousand books on how to squander the money in there. Point is, just open one now and learn about it later.
  8. Whatever you want: Open accounts that help you save for a cause like a ‘car account’ or ‘buying a condo in two years’ account. I opened many more, but the aforementioned 6 are the ones that helped kick it all off.

You probably won’t open this many accounts right away, but AT LEAST have 3 separate accounts for now.

3.) Read (about financial stuff)
Go to the public library (don’t bother actually buying these books) and start picking out books about personal spending. Go through at least two of these a month and you’ll start learning a wealth of different financial techniques and simple tricks. I’d say about 20% of what’s in these books is useful (and you’re both smart kids so you’ll know which 20%).

They mainly preach the same things, but they often throw in random gems of information. For example, I read the book “The Automatic Millionaire” which could’ve basically been summarized to this sentence: Setup your bank accounts to automatically transfer money to your savings accounts every month. Book done.

Read the stories, get inspired, learn from each book. I heard Jerry Seinfeld talking about all the books and classes he’d taken say, “I view all these things like supermarkets. I go into them, take what I need, then leave.”

I can’t stress how important it is to educate yourself on these financial matters. It’s enjoyable and will make your life a whole lot easier.

4.) The Investment Account
I liked experimenting with different small business ideas in college, so I create the Investment Account so I could use that coffer of money for anything I deemed would improve my understanding of something, satisfy my curiosity, educate me or make me money (primarily the last one).

I put a full 30% of my income into this account. In the past I have used it for piano lessons, guitar lessons, books, weird musical instruments, buying a tuxedo to crash parties in, making trips for business purposes and various money experiments for this blog.

Freely spend this account when needed. Investing back in yourself is absolutely imperative…and you’ve often gotta have money for it. I feel this particular account was a great help during those years.

5.) Have Job Options
Since I’ve never had a real job don’t take one bit of this advice…but hear me out:

Want to do electronics research…or maybe environmental design? Make sure you’re in the right place. Don’t be fooled by euphemistic job titles which sound cool but mean nothing. The term “Analyst” comes to mind.

The people I know who enjoy their jobs and learn the most from them are the people who made absolutely damn sure they get to do what they want on the job.

What I mean is they properly planned out the type of work environment they liked, what type of talents they’d like to develop, what industry they’d like to learn, and what type of work is the most intellectually stimulating to them. They then sought out companies which could offer this.

How could they do this? Because they had options. They had enough money to live for a while without having to take the first opportunity that gave them a starting bonus just so they could pay rent.

Oddly enough, these people were usually the FIRST to find great jobs and have offers thrown at them! I guess there’s something about a confident applicant who knows what he wants.

If the company gives you an offer you don’t like, you can tell them to, “Take this job and shove it” (of course never say that out loud…no matter how hilarious and satisfying it may be)! Your work will take up over 60% of your waking hours, you might as well get something worthwhile out of that time besides a check.

Don’t get ‘having options’ confused with laziness. The friends I see in good positions were also the friends who went to the MOST interviews and wisely and respectfully played company offers off each other.

…but I’ve never had a real job, so please don’t listen to me.

Good luck both of you, not that you need it.
-Neville

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In the comments anyone can impart their own advice to these young 20-somethings who are about to enter the working world. What worked for you? What didn’t work? If you could do it all over again, what would you have done?

Experienced advice is likely far greater than mine.