Friday, December 12, 2008

The Wilton Rose

So I learned how to make a rose out of icing today. It's both harder and easier than it looks. I wish I had a picture of the first one I tried to make. It looked like a cabbage. Now they just look more like carnations. That's all I really have to say about it.
P.S. The class I'm taking requires a specific design with only a small amount of flexibility so the nasty ugly rainbow one from earlier was not of my choosing. Even worse than that, however, was last week when they felt it needful to teach us how to make clowns...ugliest and scariest clown cake I've ever seen. Worse than you could probably imagine. The good thing is that the techniques we learn are applicable to other designs. So I guess there is that.

Learning from the mistakes of others

Like most married couples, Michelle and I talk about money a lot. A lot a lot, in fact. And with the financial crisis going on, I've come to a firm conclusion: If it had to happen, it couldn't have come at a better time for us.

Now, I don't mean to be insensitive to people that have lost their job. Frankly, I'm worried that things might not look a lot better in two years when I have to get another job. But I'm glad that we have been able to see all of this happen before we made some of the mistakes that people just a little further along in life than us have made.

A couple of years ago, I was having lunch with a smart friend who was getting a finance degree at BYU. We talked about people who were taking out mortgages on their home to invest in stocks or bonds (under the logic that the interest rate for the house was lower and tax-deductible). He said, "It's a terrible idea to pay off your house sooner than you have to." I asked him, "What if you lose your job later and can't make the mortgage payments?" His answer: "Yeah, that's the only drawback." Some drawback.

Note that this was a smart friend who actually studies finance at a school owned by a church that emphasizes frugality as though it were a sacrament. At the time, I didn't even think he was wrong. "Hey, maybe times have changed" I thought. Well, guess what? Staying out of debt (or at least borrowing carefully) is just as important as it ever was since time immemorial.

These are the lessons I've taken from recent events, either for my own sake or for my future kids:

1. Homes are a consumer good, not an investment.
If you are putting money in a retirement account, then 200,000 is twice as good as 100,000. That's because a retirement account is an investment (ostensibly). Homes aren't. Sure, you might get lucky and see the price go way up in a few years, but over the long haul, the value of homes typically move only at the inflation rate (you can look up the charts yourself if you don't believe me). If you didn't have to live in a home, there'd be no reason to buy one. When you buy a house, you're spending money, not investing it. So financially speaking, a $100,000 house purchase is twice as good as a $200,000 purchase. This sounds simple enough, but almost everyone forgot it, myself included. Thank goodness I didn't graduate three years ago when I might have felt the need to buy instead of rent.

2. Don't borrow to buy more education than you need.
I've been reading about lawyers making $45,000 a year with $150,000 in debt. Dodged a bullet on this one. I could have gone to a slightly higher ranked law school for about $20,000 a year more, probably $25,000 when you count urban living expenses. That's $75,000 more debt than I currently have, for a school that wouldn't have gotten me a better job than the one I have now. No thanks. (amazing to think it was a close call at the time). The correlary to this is as follows: If you have no plans to make good money someday, don't even think about taking tens of thousands in loans. Go to a state school or get a scholarship. If I had the debt I do now, but I were a Spanish teacher rather than a lawyer, I'd be sweating gallons right about now.

3. Paying off a loan is better than investing money.
Most financial advisers tell you to pay only the minimum on your subsidized student loans, because the interest rate is so low. Then you can invest what's left over. I think this is self-evidently wrong. I have a subsidized loan with a 7.5% interest rate. If I pay extra on that loan, that's a guaranteed 7.5% annual return on investment. Is there a bank or investment firm in the world that can guarantee a rate like that now? As soon as this hit me, we called our IRA and told them we would stop contributing for the time being.

4. If you don't need it, you aren't saving money by buying it at a discount.
When Michelle and I moved up here to Alaska, we considered buying an HDTV because, "we're out of school now, our TV is ancient, we'll be spending time indoors, and it's only $700 for a pretty good one...Hey, wait a second, don't these Flintstones vitamins we've been taking look suspiciously like stupid pills?" Luckily we thought better of it, and guess what? You don't need HDTV to enjoy "The Office". Does anyone really want to see Dwight Schrute's face in any greater detail?

Does anyone have thoughts on this? I think we make so many financial mistakes because everyone's afraid to talk about finances with people they trust. If so, some frank discussion is in order.

Thursday, December 4, 2008

Reasons to be thankful for my wife on Thanksgiving

I know this is a belated theme, but I figured it was best to wait until we had some pictures from Thanksgiving. By the way, we went to two Thanksgiving dinners. This is us at the Gardener home (I'm the inebriated-looking fellow on the left. Will I ever look normal in a photo?).
1. She is beautiful (See pictures)
2. She knows how to make an incredible pumpkin chocolate cheesecake pie (yes, you read that correctly). It won the dessert contest at the first Thanksgiving dinner we went to. 3. She is always looking to improve herself. A couple of months ago she mentioned that she sometimes wished she had gone to culinary school instead of teaching, so that she could try making cakes professionally. I sort of casually mentioned that there are all kinds of teaching resources on cooking that she could use without actually going to culinary school.
Before I knew it, she was signed up for cake baking and decorating classes at the nearby Michaels store. The cake below is the VERY FIRST CAKE that she made. It was delicious. 4. She tries very hard not to laugh at me. Sometimes. Like when I can't go more than a couple feet without falling during my first stab at cross-country skiing (or any kind of skiing). This was the day after Thanksgiving, in a city park here in Anchorage.
5. She works two part-time jobs so that we can burn through our credit cards (the right way). This one paid for a good portion of our Euro trip, but it's a thing of the past.
6. She is perfect. Most of you knew that already.