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Weekend Reading – Dec 28, 2007

Even though this week was slower in terms of traffic and blog posts in the blog world, there have been some great links that I would like to share with you.

Happy Reading!

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FT About the author: FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 9 comments… add one }
  • Avatar Patrick December 28, 2007, 9:47 am

    Thanks for the mention! :)

  • Avatar The Financial Blogger December 28, 2007, 9:53 am

    Hey FT, thx for the mention.
    In regards to FP’s article, have you not considered that you should not get taxable income at the end of the year? I mean, all landlords I have seen as a banker never declared a penny to the government. There is always something you can deduct from your rental income that makes you “lose” money ;-)

    Maybe you should get yourself a good accountant ;-)

  • Avatar Canadian Dollars December 28, 2007, 10:06 am

    Hey FT, just curious if you’ve considered incorporating for the purposes of your other passive income. I’m not sure what other bloggers out there do with respect to their incomes earned from monetizing their blogs, but for those like John Chow I think it would definitely be in their best interest to incorporate.

    As for me, I don’t earn enough to even consider that an option. That being said, I’m blogging more to give a voice and for others to give me feedback as I learn than for pure monetization.

    Will look forward to your reply. All the best!

    • Avatar FrugalTrader December 28, 2007, 10:41 am

      Hey Cad$, yes I would expect that bigger bloggers incorporate their blogs due to liability protection. It’s funny that you ask b/c i’m in the process of researching what exactly is involved with incorporating.

  • Avatar FourPillars December 28, 2007, 11:35 am

    Thanks a lot for the link!!

    Mike

  • Avatar Gates VP December 29, 2007, 4:54 am

    Holy smokes, did I ever miss a debate on the “should personal property be included in net worth?”!

    Well, FWIW Jonathan brought up the debate here as well. And many of the arguments seem to be the same both ways. I have a great big reply on that blog, but I can do the quickie version here.

    The fundamental formula is simple:
    net worth = assets – liabilities

    So all of the arguments basically settle around the very definitions of asset and liability. Given that the layman’s definition and the business definition of asset seem to actually differ, it’s no wonder that nobody can agree.

    What makes the whole thing worse, is that people (in general) are actually really bad at detecting liability, b/c most of us never do any type of “depreciation calculations”. Here’s the classic example.
    1. I’m driving a 5k car with worn tires. I buy $600 of tires and put the car up for sale, is it worth more or less?
    2. I’m driving a 5k car with new tires (installed yesterday). After 1 day of regular driving, I buy $600 of new tires. Is my car now worth more or less than 5k?

    It seems trivially obvious that replacing car tires should change the value of the car, but who knows how much? Nobody’s car is actually @ “Bluebook value” (or whatever book you use), it’s all just a baseline. And this is happening everywhere.

    If I replace my entire wardrobe (everything!) for $3000 tomorrow, it’s not worth that much next December. It “feels” like I still have 3k in clothes, but I really don’t, some of it is going to wear and need replacement at some point. But who do you know actually calculates that number with any measure of accuracy?

    The same reality is true with houses and cars, just on a bigger scale. People are notorious for complaining about the cost of car/home repairs as if these costs were somehow “unexpected” rather than simply liabilities which they had ignored. Owing $1500 to the bank on a car loan is no different than having driven the car for a year without any maintenance. It “feels” different, but really that car is accumulating a “liabiliy of repair” with every mile that you drive.

    So do you include personal property in net worth? Probably, but it’s likely not “worth” what you think it’s worth and it’s probably depreciating at a rate that you’re not tracking correctly (unless you’re a CMA doing your own paperwork). So at some point you have to do an “accurate” guess of your major assets and discount that number by a percentage based on liquidity, volatility and rate of depreciation. And then you have to ignore things that “not material” or relevant to your net worth and you have to scale these out as you grow.

    Figure that out and you’ve got the holy grail of “net worth”… sounds easy :)

  • Avatar Canadian Capitalist January 1, 2008, 1:14 pm

    Thanks for the mention and Happy New Year to you!

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