Jon Bon’s Money

            Louis Vuitton, Prada, Tag, I could go on. These are all name brand, high quality expensive products. They are highly recognizable, and are very nice things to have. Often these products are sought after because they represent a symbol of reaching some higher status.

            I am all for having nice things, and these things are very nice. I even bought a coach purse for my girlfriend. I would love to drive a BMW, and a Blackberry at times would be very convenient

            These products are great, but let’s face it they are luxury items. A luxury item is by definition: a refinement of living rather than a necessity. So we don’t need them, they might make life a little easier or nicer but they are not needed. You need a car to get to work, not a 50k German import. You need a phone to make calls (maybe) not a Smartphone to surf the net while waiting in line at the bank. You need something to carry your wallet and makeup in, but not something with a giant C stamped all over it.

            So therefore if we don’t need them then we want them. We want them because they are nice, and make us feel better about ourselves because they give us a sense of luxury and status. Coach, BMW, and Blackberry are today’s status symbol especially in the young professional age group. So we go out and buy (finance) these type of things with the intent of making ourselves looks better then our peers.

            I could go into debt to finance my BMW, pay my insane wireless bill, and dress only in Lacoste. But I care more about living within my means then what other people think of me. Lastly you don’t even have to be rich to buy (again, finance) these status brands. I could go out and lease a BMW tomorrow just in an attempt to impress shallow people around me.

            Don’t get me wrong, I love capitalism, and my hat is off to these luxury brands for making a quality products and then convincing everyone they have to have one. Just don’t call me cheap or poor when your car’s loan is more then it’s FMV, and I max out my Roth every year.

“Home Ownership is the Key to Wealth”

“Build Your Wealth through Home Equity”

“Your Home is your Best Asset”

I have heard all of these comments many times before. The National Association of Realtors (NAR) is blanketing the airwaves saying these exact things, and I disagree.

            It has only been in the past 10 years or so that home prices have exploded.  For the past 100 years home prices have really done nothing more then keep up with inflation. The graph below clearly shows that home values have been pretty steady for the past 100 years, with the exception of the Great Depression, and the current mess that banks, the fed, and people who don’t understand finance have gotten us into.  

            There might be a correlation between people who are wealthy, and the percent that own their home. Everyone knows that correlation is not causation. I believe that people are rich in spite of their houses, rather then because of them. I am in no hurry to buy a house. Yes I believe that I would enjoy it immensely and take great pride in it, but I can wait. I believe (know) that a home owner should view their home as a place to live, and not an ATM machine to draw equity from to take a vacation.

            Why pay rent when you can buy? This is a commonly asked question. When you rent your home you are borrowing a few rooms and maybe a yard, and you pay someone else money for this. What do you think the interest on your mortgage is? It is simply paying someone for lending you their money. So in reality you are indeed paying “rent” on the banks money.

            But you can deduct the interest! Sure this is true. You spend $1 to get 25 cents back in taxes. Wouldn’t you be better off just renting a comparable place for less then the cost of your mortgage? Trust me it can be done, the place that I rent cost a lot less in rent then it would in mortgage payments if I were to buy it.

            Oh god! Its hidden costs! Run for your lives!

Nothing is more annoying then a $20 service charge on your credit card or cable bill. How would you react if you got a $1000 bill for when your air condition goes out, or furnace kicks the bucket? I don’t even own a home and I can name plenty of hidden costs that I would worry about. That is why I rent and when my dishwasher dies, pipes break, or garage door opener refuses to open I just call my land lord. I let them come over the next day, fix it for free, and I don’t even have to be there.

            A home is a place to live. I will let other people take the risk and pay the bank “rent” for its money. I will be happy in my rented place, and if I choose to move I can relocate with no problems and not be stuck owning a home I can’t live in.

            Now I will buy a house, but prices have to come down a fair amount before I do. So if you choose to buy a house, remember it’s a place to live, and not the key to riches.

I care about the environment, but I care a lot less than some people. I will gladly switch to environmentally friendly products and habits if it saves me time or money.  I don’t believe in making large sacrifices in my quality of life, or the quality of a product. Being highly inconvenienced by having to remember to bring you reusable grocery bags to the store every time is not worth it to me. I actually recycle my plastic bags by using them a second time.

Green Products and Ideas that work:

High efficiency light bulbs, cost more, but you never have to change them

Energy Star washer, it will pay for itself in a few years after purchase

Adjusting the heat or AC to a more reasonable temperature

Saver Switches

Tesla Roadster an electric car that goes 200 miles on a single charge. Oh and did I mention that it goes 0-60 in about 4 seconds?

Green Products I won’t use:

Prius $6,000 more then a Corolla (which I would argue is a better car) with only 8 MPG increase?

Solar Panels that cost $20,000 cash up front, please….

“Organic” foods

Jury is still out on:

Heat exchange heating and cooling system

Chevy Volt

Horrible “Green” Ideas

Corn and Coal based fuels. Just because the government pays you to use it does not make it work. I would figure out a way to make fuel out of jelly doughnuts if someone would give me enough money for it.

Free Advice is Worth the Price You Pay

-Anonymous  

March 11^th Conversation from Cramer’s TV show

Caller: “Should I be worried about Bear Stearns in terms of liquidity and get my money out of there?”

Cramer: “No, no, no! Bear Stearns is fine! Do not take your money out. If there’s one takeaway… Bear Stearns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear! That’s just being silly.” 

Jim Cramer is a TV personality who runs a show on CNBC called Mad Money. It consists of viewers phoning in and asking his opinion about stocks and business sectors. Jim literally yells his options out, is very animated, and uses sound effects and graphics to get his point across. I have never been a fan of his show, but this investment strategy is “silly”. Bear Stearns value on:

March 11, 2008: $62.97

March 17, 2008: $ 4.81 

93% Drop in value, thanks Jim!