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Tuesday, April 15, 2008

Happy tax day

I have no idea how many of our readers do their taxes at the last moment. I did my taxes as soon as I was sure I had all of the paperwork, quite a while back now. Although I'm a tech guy, I actually do my taxes on paper with a pen. I made more mistakes this year than usual, but I believe I caught them all during proofreading.

I do use a spreadsheet to predict how my taxes will come out (and that guides how I make some of our investments) but I don't use any tax or financial software. They don't make tax software for Linux. Personally, I think doing my own taxes has helped me understand them better anyway. I've only used an accountant once to do my taxes and she missed $400 in credits I could have easily snagged if I had done it myself. Call that an opportunity loss of about $500 since she cost a cool $100 herself.

Linda Bindner, budding hacker

Linda turned around and asked me the other day who Steve Wozniak (founder of Apple) and Kevin Mitnick (world's most famous hacker) were. I asked her why she was interested, and she said that she was looking at a book Mitnick wrote. I was surprised to say the least, but I said, He wrote a really good book called The Art of Deception, all about social engineering. She is now reading my copy. It really is the apocalypse if Linda is reading hacker books. I predict next lions laying down with lambs.

Don Bindner, amateur economist

Personally, I read fantasy novels. Except when I read books on economics or investing. Since today is tax day, and I have read a lot of books about money, I thought I would give some a plug. If Linda is reading about hackers, who knows what everyone else might be reading.

1. The Richest Man in Babylon: George S. Clason. This is a surprisingly good book, and it is the first book I would give someone to inspire them to take control of their money life. I'd give it to my sister. Actually, I think I did give it to my sister.

2. All Your Worth: The Ultimate Lifetime Money Plan: Elizabeth Warren, Amelia Warren Tyagi. The Clason book might get you interested in taking control of your life, but I think this one gives you better tools to do something about it. Even if you aren't swimming in credit card debt, you could probably check it out. If you don't think a supportive nurturing approach will work for you, then I recommend the get mad approach of Dave Ramsey's The Total Money Makeover: A Proven Plan for Financial Fitness. I'm just not a get mad kind of guy.

3. Stocks for the Long Run: Jeremy J. Siegel. You're eventually going to want to think about investing. This is a classic about investing. It's a bit academic in tone, but it covers a wider variety of topics than most other books.

4. The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk: William Bernstein. This was the book that taught me why you rebalance. Oh, I knew you should rebalance, and I had read lots of arguments in favor of it. This is the book that convinced me. Rebalancing is essential, and if you don't believe it read the book. If it is too dry for you, then substitute The Four Pillars of Investing: Lessons for Building a Winning Portfolio by the same author.

5. Security Analysis: by Benjamin Graham. Everyone wants to be like Warren Buffett, and this is where he started. It might make you feel like you too can be a great stock picker, and you too can beat the market. While you're enjoying that delusion, you should pick up a few titles about Buffett himself like The Warren Buffett Way, and really bask in the feeling.

6. Read something by John C. Bogle, the inventor of the index fund. Learn that mutual funds exist to generate fees (not to make you money). They may make you money, but they exists to generate fees. He'll teach you that index funds rule.

7. Jim Cramer's Real Money: Sane Investing in an Insane World. Is it a great book? Maybe not, but I liked it a lot. If you pay attention, there are good lessons in there. Although he tells you how to pick stocks, he also tells you that you aren't good enough to do it and you should put your real money in index funds (because it is too important to screw up). He puts rebalancing in context you can understand. He talks about the dishonesty in Wall Street. And there are a lot of laughs.

8. The Retirement Savings Time Bomb . . . and How to Defuse It by Ed Slott, or perhaps his later book, which is probably a bit more practical but somehow not quite as entertaining. This book isn't about investing. It's about the vehicles we invest in, like 401(k)s, 403(b)s, IRAs, Roths. You only wish you had enough money that some of this applied to you.

I'm probably missing a few others (like Malkiel or Levitt, insert them here) but this is the one for last until I find a better last book:

9. Wise Investing Made Simple: Larry Swedroe. This is the book that cures you of lots of the things you learned from books 3-7. It isn't that there isn't truth in the other books, but as Obi Wan Kenobi says, "many of the truths we cling to depend greatly on our own point of view." You want Swedroe's point of view if for no other reason than he gets the point of risk across better than other authors I've found.

There you go. Your summer reading list. Read something and we'll go to lunch and talk about it.

It takes money to make money

I'm still on my April 15th theme. Can you tell I've been thinking about it for a few days? Well, if there is anything better than saving and investing your own money well, it is picking up a few extra dollars you didn't expect.

One place you can pick up $25 is at RevelutionMoneyExchange. It's an electronic payment service kind of like Paypal, and to establish a customer base, they'll give you $25 to open an account. I know, because I've already snagged my signup bonus. Use my referrer link and they'll give me $10 when they give you $25. It must be cheaper for them than advertising.

Another way you can grab $25 is to open an ING online savings account. If you deposit $250 they will give you $25 extra. You have to leave the money in for six months to keep the bonus. But $25 interest in 6 months is like a 20% annual rate. You won't get that anywhere, and the base rate which is only 3% is probably better than anything you've got. The best part (best for me anyway) is that if you let me refer you, they'd send me $10 for the favor. Seems like a theme among these online accounts. They don't have a fancy link, so email me if you want a referral, donDOTbindner AT gmail.com.

On the topic of online savings accounts, I also like Emigrant Direct, but their rate dropped to 2.75% and they don't give you a bonus. I've got ING and Emigrant accounts and either seems like a pretty good place to drop a chunk of your emergency fund for safe keeping.

If you read this far, I congratulate you. Linda didn't read this far, you can be sure. She finds this money stuff way boring.