Going out these days is so expensive. Whether it's going to the movies or going out for a few drinks with friends, the cost of these outings can end up adding up to sizable chunk of change. Why not opt out for a board game night? One of my personal favourites is The Settlers of Catan.
If that doesn't suit your fancy check this game out:
Warren Buffett is undoubtedly the best investor of all time. When people hear about Warren Buffett they wish to imitate his investment results and because of this countless books have written about his investing philosophy. To get a deeper understanding of how Warren's investment philosophy came to be, it's important to understand what Warren Buffett is like as a person. In Roger Lowenstein's "Buffett: The Making of an American Capitalist" he paints a picture of how Warren grew up, his development as a young adult, and his triumphs and failures managing his holding company Berkshire Hathaway.
Warren Buffett has always been a business person at heart. In his youth he used to buy a 6 pack of Coke from his family's grocery store for 25 cents and sell individual cans to his neighbours for 5 cents each to net a tidy profit of 5 cents. He also ran a paper route as a boy, which taught him the art of sales, how to make deliveries on time, and how to collect payments from customers. As a teenager Warren bought a few used pin ball machines and placed them in local barber shops, Warren eventually sold this business. After which he invested the money in a fixer up Cadillac that he would rented out. Throughout his youth he gained valuable experience running various businesses. One of Warren's most memorable quotes is "being a businessman has made him a better investor and being an investor has made him a businessman."
An important relationship that developed in Warren's investment career was when he went to graduate school at Columbia University, where he was mentored by Benjamin Graham, the author of Security Analysis and The Intelligent Investor. Benjamin Graham's investment philosophy made a lot of sense to Warren. Graham's investment philosophy was to purchase stocks that the market had undervalued. This was the "cigar butt" approach to investing, where you could pick up a cigar butt off the floor virtually for free and get a few puffs out of it. Warren followed this practice until he studied Philip Fisher's investment philosophy which was based more on valuing companies based on their brand value, the quality of management and other less quantitative qualities. Warren started looking for companies that were not only cheap relative to value metrics but also had a long term competitive advantage in its industry. This blend of investment philosophies is the reason for Warren's success.
One of the most incredible investment stories of our time is the story of how Warren turned a dying textiles manufacturing company, Berkshire Hathaway, into the world's most prosperous holding company. When Warren purchased Berkshire Hathaway he was still using the "cigar butt" approach to investing, purchasing the company because it was priced cheaply. The business was cheap because the textiles industry was dying in North America, losing market share to cheaper textiles manufactures operating in developing countries. Warren had tough management decisions to make in order to keep Berkshire Hathaway from becoming a failed investment. He could either keep plunging capital into the textile mills or start diverting precious capital to more lucrative investments. Fortunately, with Warren's incredible vision he chose the latter. Warren diverted Bershire's capital by purchasing insurance companies, which had a much better return on capital. Eventually all of Bershire's mills were closed, however what remained was the most successful holding company of all time.
A final note on Warren is that although he is one of the top ten wealthiest people on earth, he lives a very modest lifestyle. He has lived in the same house that he bought in the 1960's. He doesn't believe in giving his children a huge inheritance, in fact he believes in having high inheretence taxes so that the wealth one accumulates should return to the capilist system that helped create it. He believes in taxing the wealthy at higher rates. Warren himself plans on giving all of his wealth away to charity. He tap dances to work everyday and loves his job. If you're a frugal person than Warren's investment philosophy is for you and learning from him would be beneficial for your investment portfolio. If you study enough about Warren perhaps one day you will create your own Berkshire Hathaway.
David Chilton has returned with a sequel to his best selling personal finance novel the Wealthy Barber. The original Wealthy Barber was one of the first of its kind, telling the story of how a barber (seemingly low-income earner) ends up being financially secure by following a down to earth financial plan. The barber teaches his clients about how he ended up being in a strong financial position through diligent saving and living within ones means.
In David Chilton's sequel he no longer uses the fictional characters in his original book, but uses a more casual approach discussing personal finance, as if he were chatting to you in your living room. The good news is you can just close the book when you don't want to hear from him anymore, since it would be awkward to try to kick him out.
Unfortunately, there isn't a lot of new information in this sequel. He still preaches a lot of the maxims you'll see in other personal finance books (i.e. The Automatic Millionare by Bach) such as: pay yourself first, live within your means, credit is a dangerous thing when not used properly, don't try to keep up with the jones' and always save for a rainy day/retirement. There are a couple tidbits of wisdom and it is a very quick read with very short paragraphs and chapters.
One insightful thing Chilton mentions is how income is sometimes confused with wealth. Having a high income is great but if you also live lavishly it can be difficult to save. Plus the income won't be there indefinitely especially if you plan to retire (we can't all work forever) or if you lose your job. Wealth on the other hand is something that you build over time by diligently saving and making good investments decisions. The idea of wealth is having your money work for you, the idea of income is working for money. There's a big difference and it's important not to get the two confused. I would highly recommend reading the original Wealthy Barber but would suggest passing on the the sequel.
The host of CBC's Dragon's Den, Kevin O'Learly has come out with an autobiography entitled "The Cold Hard Truth". For those of you who have never watched the show, it would be the American Idol of venture capitalism. Keven O'Learly is one of 5 panelists who decide whether a new venture is worth staking their own money on. All the panelists have entrepreneurial experience, building up multi-million dollar companies. When a prospective start-up company pitches their idea, they are hit with a barrage of hard to answer business finance questions from the "Dragons". There is no doubt that the "Dragons" know business and that they've gained knowledge from where it counts, main street.
So what can we learn from O'Leary? O'Leary built his fortune on a variety of software products. He himself was never a computer geek, but was the marketer and business force behind the products. His first venture was selling printer software his business partner developed. They snagged a huge client, Hewlitt Packard, and with that deal they were earning royalties on every printer sold. Later he developed and marketed educational software packages.
Throughout the book he preaches the message that the only thing that really matters (when it comes to business) is money. One story that comes to mind is when O'Leary is trying to get their educational software on the shelves at Wal-Mart. Wal-Mart is absolutely ruthless when it comes to giving up retail space. Being the best low-cost provider of consumer goods in the world, everything comes down to the dollars and cents.
When O'Leary met with a Wal-Mart executive to talk about putting their software on Wal-Mart shelves, the executive told him that he would put his product on the shelf if they could sell it for $30 a unit. O'Leary said they currently sold it for $60 and that it wasn't possible to cut the price so low. The Wal-Mart executive said it was going to either be tube socks or his software sitting on his shelves and that every inche of shelf space was precious. If he wasn't willing to cut the cost then his software wouldn't enter their stores and the meeting would be over. O'Leary and his team ended up developing a version that could sell for the price Wal-Mart demanded and they ended up selling millions of units.
Business is a tough environment and it takes a thick skin to thrive in it. O'Leary had been very successful at it and has a keen eye for value. He makes an important point that money although crucial in buisiness, isn't everything in life and that money can really only buy you two things. The first thing is the freedom to do what you want and never be bossed around. The second thing that money can bring is the ability to help others. Other than that money can't replace the things that bring us the most joy in life such as good health, friends & family, and valuable experiences. The cold hard truth is that we all have to make a living somehow and that the reality is money is a huge driving force in the decisions we make. We need to seriously contemplate what money can and can't do for us and know when to choose between our time, ambition and values. The Cold Hard Truth was really entertaining and definitely worth borrowing from your local library.
Happy new year and thanks for making Cash Saving Tips the #1 cash savings blog. This year will be filled with new and interesting ways to save and make that dollar go the extra mile. After all we work hard for our money, so our money should work equally hard for us.
Be sure to stay tuned for lots of book reviews and great cash saving tips! There have been over 100 posts over the years. It may be time to compile them into some sort of publication. If anyone out there has experience in publishing and editting please contact me at reynoldtor@hotmail.com. I would love to turn these posts into a practical cash savings book.
2012 is going to be filled with great savings tips!
Here are some wise words from the Oracle of Omaha to start the year:
