Spend Less Than You Earn

So, lately I have been a bit obsessed by finances, investing, and saving for retirement.  I know this is a bit strange for someone who still has not officially started their "career" and not settled down by buying their own house, but it has been on my mind nonetheless.  I've been thinking about it for a while since we had some money sitting in a "savings" account, basically gaining no interest.  And plus, it is best to start young.

I watched a Frontline documentary last month on PBS called "The Retirement Gamble", discussing how many employees have seen retirement savings diminish due to falling on hard times and having to withdraw early, by mutual fund companies and others mismanaging their hard-earned money, or a combination of other factors.

One of the central figures that Frontline interviewed for their documentary was John (Jack) Bogle, the financial mastermind who created the Vanguard mutual fund company in 1974 after noticing what he calls "the tyranny of compounding costs" present in all other mutual funds.  He says the best strategy for investing in the stock market is to buy stock in the whole stock market and own it forever and this is exactly what index funds do.

Jack Bogle

Since costs really do cut into your long-term profits, it is best to find a low-cost fund that has the investors best interest in mind.  Studies have shown that low-cost index funds outperform most actively managed funds year after year.  Most importantly, past performance is not indicative of future success.  Even if you happen to choose a fund that outperforms the market, chances are that fund will not outperform the market long-term and this is where fees really cut into the investors margin.  On the other hand, index funds like the ones Vanguard offer can capture almost all of the markets value, while maintaining much lower operating fees (0.05%; 5 hundreths of 1 percent a year), as opposed to fees over 1% year in actively managed funds.  I was so intrigued by the topic, I checked out a few books written by Jack Bogle from the UCR library and read them quickly: John Bogle on Investing: The First 50 Years and The Battle for the Soul of Capitalism.  I suggest watching the documentary and reading some of his books if you want to learn more about it.

The documentary and books were very educational and enlightening, but one of things not discussed in them was the overall culture in America of spending more than you earn.  Buying things you don't have money for is not only allowed in our country, it is encouraged.  When you live in a credit card culture, you never have to wait for anything you want.  You just take out a loan and become a slave to your debt. J. Reuben Clark Jr. put it this way, "Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation. … Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands, or orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you."

If there is one simple rule to living a stress-free life when it comes to finances, it is to spend less than you earn. And then second, to invest your savings in the right vehicle.  The more you can save, the better off you will be.  We want to be on the other side of the ledger; the people earning the interest, not paying it.  In order to save more money, you can either increase the amount of money you make or decrease the amount of money you spend.  The bottom line is: just because you are making more money does not mean you have to spend more money.  A person making $50,000/year, who saves $20,000/year will be more wealthy in the long run than a person who makes $100,000/year and only saves $10,000/year.  Marvin J. Ashton stated in his booklet on finance for members of The Church of Jesus Christ of Latter-day Saints, "Financial peace of mind is not determined by how much we make, but is dependent upon how much we spend."

Book Review: "The Island of Dr. Moreau"

As part of my blog this year, I will review or recap various books I have read.  This is the first of those reviews.

The Island of Dr. Moreau, was written in 1896 by H.G. Wells.  This novel recounts the story of Edward Prendick, an English man with a training in biology, who gets marooned on a desert island with Dr. Moreau and his assistant Montgomery.  Prendick soon learns the island is also full of other humanoid creatures that can speak and walk upright, but each have something animal about them.  He discovers that Dr. Moreau has been creating these monsters through a series of vivisection experiments on animals (pigs, apes, bears, hyaenas, etc.).  These creatures are bound by "the law", which prohibits them from performing a number of actions that may trigger their animal instincts (e.g. no eating of flesh).  They also regard Dr. Moreau as their creator/God-like figure, who doles out punishment to lawbreakers.  I won't give away the ending for those looking for a good, short book to read.

For me, this book was about the dangers of unchecked scientific experimentation and also the warning shot of science replacing religious ideals in society.  When humans look to scientists as their idealized demigods, then things can go downhill really fast.  I am a biologist and I believe that science has an important place to play in society, but also that the scientific method should be kept within a moral boundary.  If scientists can gain ultimate power, they will abuse to create things that will have unintended evil consequences (we can think of the nuclear bomb as an example).  

Overall, I thought this was a very interesting read.  It was only about 130 pages, so it could easily be read in a few days.  I especially recommend this to all scientists.

P.S. There are 3 film adaptations of this book: The Island of Lost Souls (1932), The Island of Dr. Moreau (1977), starring Burt Lancaster, and The Island of Dr. Moreau (1996), starring Val Kilmer and Marlon Brando.  I haven't seen any of them.  If anyone can recommend or warn me against them, leave me a message in the comments.

Pictures Taken By Strangers

Have you ever had a stranger take a picture of you and not been too pleased with the results?  But you're too embarrassed to ask them to take it again?  And just say it looks fine so you don't insult them by saying they have terrible picture taking skills?  This is what you get.

What we wanted

What we got

What we wanted

What we got

What we wanted

What we got

What we wanted

What we got

My last and favorite was a picture exchange from a guy with a fancy camera.  I bent down in the snow to take a picture of him and his family in front of the temple.  He made me take it over because I cut off their feet.  He then proceeded to snap the same picture of us in the same spot.  Notice anything??