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Method to My Madness
By JD Bluefield | March 7, 2008
To get started, here is a breif rundown on how I apply my theory of Engineering Personal Finances and Investing.
Engineering: (en·gi·neer·ing) noun: The application of science and mathematics by which the properties of matter and the sources of energy in nature are made useful to people. Per Merriam-Webster.com
- Don’t lose money. It takes twice the effort to get back half as much. What does that mean? Well, if you lose half of $10, you now have to double the remaining $5 to get back to where you started. Anyone can lose 50% one a foolish investment very quickly, but how many investments can you find that can return 100%? Simply put, if you kept that money in the bank at 5%APR, it would take 14 years and 5 months to get back to square one.
- Compound Interest. Compound Interest is one of the most powerful financial tools that you must understand. You may not understand the formula, but the concept behind it is very simple.
- Reading is the fundamental to learning. Very cliché, but you’re reading this blog right now! Sure it’s much easier to get information from the TV, but always remember that he main function of television is 1) sell advertising 2) entertain (so you remember the advertising) and 3) inform. Accuracy is somewhere around 6). If I want information on real estate, I look for a book on real estate.
- Keep things simple. Just as clutter clogs up the home and impede movement around the house, but does the same for your finances and investing. By simplifying your life, things are much easier to manage. When things are too complex, they often won’t work or the payoff just isn’t there.
- Don’t let emotions cloud judgment. Just as quickly as you fall in love with a stock or house, it’s very easy to fall out. Gut feelings, tips and hunches don’t make you right, having the facts and crunching the numbers do.
- Desperation creates opportunity. Most people think that “sales” only apply to store items. In actuality it applies to anything and everything. I try to buy things only when the price is less than its value. When does this usually happen? When people/companies are desperate to get rid of something. This can be applied to cars, stocks, commodities and especially real estate. Example: Car dealers offer very little on trade-ins because they know you probably can’t afford two cars and will be desperate to sell your original vehicle immediately.
Topics: Engineered Living, Goals, Investing, Personal Finance |
One Response to “Method to My Madness”
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March 12th, 2008 at 12:46 pm
Great stuff, can’t wait to see more.