Posts filed under 'Introduction'
Kitty tried to slam down the phone receiver. Damm her lack of opposable thumbs and damm Barbie. They had been vying for sexiest toy title for years. Kitty thought she had Barbie beat when she went for the big time bling. But now the diva was topping her with a runway show on Feb. 14 in Bryant Park, complete with designer inspired Barbie clothes. What was the world coming to? Then Kitty sat back and purred – she still had her line at Neiman Marcus and a higher net worth (see November 17, 2008 post for more on net worth). And, wasn’t Barbie turning 50?
http://www.nytimes.com/2009/02/05/fashion/05ROW.html?_r=1&ref=todayspaper
http://www.neimanmarcus.com/search.jhtml?N=0&Ntt=heloo+kitty&_requestid=15797″
February 5th, 2009
In his inaugural speech, Obama quoted the Bible: “the time has come to set aside childish things.” The question is does that include an obsession with shoes? He asked the nation to grow up and cited our “badly weakened economy” as a consequence of not just “greed and irresponsibility on the part of some but also our collective failure to make hard choices…”
So yes, sadly, it applies to shoes – or at least our obsession with them. A poll of 1,057 women by the Consumer Reports National Research Center for shopping magazine, ShopSmart, found that U.S. women on average own 19 pairs of shoes, although they only wear four pairs regularly; 15 percent have over 30 pairs.
Carrie: [In shoe store with Miranda]: Where did all my money go?
Miranda: At four hundred dollars a pop, how many of these do you own? Fifty?
Carrie: Come on…
Miranda: One hundred?
Carrie: Would that be so wrong?
Miranda: Four hundred dollars times one hundred, there’s your down payment.
Carrie: That’s only four thousand dollars.
Miranda: No, that’s forty thousand dollars!
Carrie: I spent forty thousand dollars on shoes and I have no place to live? I will literally be the old woman who lived in her shoe.
Carrie, with her disregard for her spending habits – tossing off hundreds of dollars for things she doesn’t need and will, in all likelihood, never wear – might be incredibly chic but is a very bad financial role model.
Managing your money, taking control of your finances and living within your means requires hard choices. However, if you put off or don’t make the hard choices, they become impossible.
January 22nd, 2009
There are two kinds of interest: Simple and compound.
Simple interest means that when you borrow money, you pay back the amount you borrowed, which is called the principal, plus the interest. The interest is only calculated on the amount of the principal. The amount of interest you pay back depends on the interest rate, which is usually expressed as a percent due for a full year, and the length of time over which you borrow the money.
There is a formula for calculating simple interest: Simple interest equals: Principal multiplied by the interest rate multiplied by the length of time. While you don’t need to remember the formula, please note two things: (1) The formula only uses multiplication and, (2) You know what each of the things you need to multiply are.
Here is an example of how to calculate simple interest. If you borrowed 1,000 dollars (your principal) at a 10 percent interest rate per year (the bank’s fee), for three years (the time period), the simple interest rate is: 300 dollars (1,000 dollars multiplied by 10 percent interest, multiplied by three years, equals 300 dollars). The total amount you would owe the bank at the end of the three years would be 1,300 dollars (1,000 dollars, the original amount you borrowed, plus the 300 dollars interest).
Compound interest is like simple interest in that when you borrow money, you pay back the amount you borrowed plus the interest. However, unlike with simple interest, where the interest is calculated only once, for compound interest the interest is calculated at the end of each compounding period. A compounding period is how often interest is charged – which can be yearly, monthly, weekly and even daily. This means you are charged interest on the prior period’s interest as well as interest on the principal.
Here is an example of how compound interest is calculated. In the simple interest example above, we borrowed 1,000 dollars at a 10 percent interest rate per year for three years. If the bank charged compound interest instead of simple interest, and they were compounding the interest annually (once a year), we would use the same formula: Interest equals the Principal multiplied by the Interest Rate multiplied by Length of Time, but we would use it three times.
In year one: 1,000 dollars, multiplied by 10 percent, multiplied by one year, equals 100 dollars. The total amount owed at the end of year one would be 1,100 dollars (1,000 dollars, the original amount you borrowed, plus the interest, 100 dollars).
In year two: Perform the calculation again, but this time use as the starting point 1,100 dollars – the balance at the end of year one. To calculate year two, multiply one 1,100 dollars, by 10 percent, by one year. This equals 110 dollars. The total amount owed at the end of year two is 1,210 dollars (1,000 dollars, the original amount you borrowed, plus 100 dollars, the interest from year one, plus 110 dollars, the interest from year two).
In year three, start with the 1,210 dollars from year two and perform the calculation again: 1,210 dollars multiplied by 10 percent, multiplied by one year. The total amount you would owe at the end of year three is 1,331 dollars (1,000 dollars, the original amount you borrowed, plus 100 dollars, the interest from year one, plus 110 dollars, the interest from year two, plus 121 dollars, the interest from year three).
The higher the interest rate, and the more you borrow, the bigger the difference between simple and compound interest becomes. Unfortunately for borrowers and credit card users, the interest on most long-term debts and all credit cards is calculated using compound interest. Banks know how much the difference adds up.
January 15th, 2009
One of the worst of the recent horrible headlines is the $50 billion dollar swindle perpetrated by Bernie Madoff. If you have not been following the saga, you should. It provides a valuable lesson about why understanding money and taking control of your finances is so important.
In a nutshell, Mr. Madoff paid early investors with money from later ones. He did this for so long, and on such a large scale, he convinced folks that whether the stock market was rising or falling they could invest with him and receive the same return – earn money on their money – without any risk.
Through understanding money, you understand the risks involved with investing. A higher return on investment almost always comes with a higher risk of losing your money. Most of us already know there is no such thing as a free lunch – or a free dinner. The same is true of investing: If something sounds too good to be true, it probably is.
January 9th, 2009
Today, Obama spoke about the current economic crises. He pointed out that “this crisis did not happen solely by some accident of history or normal turn of the business cycle … we arrived at this point due to an era of profound irresponsibility that stretched from corporate boardrooms to the halls of power in Washington, DC. … Banks made loans without concern for whether borrowers could repay them, and some borrowers took advantage of cheap credit to take on debt they couldn’t afford. The result has been a devastating loss of trust and confidence in our economy, our financial markets, and our government.” He’s right.
The recent economic headlines have been enough to make anyone nauseous. Money-savvy people are scared and financial novices are terrified. One of the most important promises you can make to yourself this year is to learn about money and personal money management. I realize learning about the economy can seem intimidating, math feels boring, and managing your own finances daunting – but if you can shop, you can manage your money.
Shopping actually requires you know more math than money management. For example to spend, you need addition and subtraction. To budget, you need addition, subtraction, and multiplication. To over-spend, you need addition, subtraction, multiplication and division. To shop, you need addition, subtraction and multiplication. Percents and decimals also help – especially if there is a sale! Notice that algebra is not listed; geometry is nowhere is sight (although one way to save money is to angle around the outer perimeters of the shoe department); trigonometry – forget it; calculus – don’t need it.
So make a commitment to yourself and learn about money. You’ll feel even better than you do when your skinny jeans fit.
January 8th, 2009
With all the screaming headlines about the collapse of the economy as we know it, it’s a good time to pause, stop and reflect on how the headlines affect you; and, more importantly, your love of shopping. What’s a Fashionista to do? Yes, “Recessionista” is the new haute word and yes, these days $1,000 + handbags do seem excessive and even a tag vulgar but sometimes a girl wants what a girl wants.
What to do? Go back to the basics. When you shop plan, focus and splurge only on investment pieces. Go lower scale for trendy items.
Now that I have your attention, I have a confession. This blog will be as much about finance as it is fashion. Planning, focus and investing are also ways to manage your money. But I promise not to put you to sleep! Watch – I’ll jolt you awake faster than a double espresso with three words: Shopping, shopping, shopping.
“Shopping isn’t finance,” you say. Yes. It is. Here’s how: shopping takes money and money is finance. Understanding money allows you to shop (and meet your insatiable need for that Louis Vuitton bag). Understanding money is about understanding some basic financial concepts. So, if you check in with me you will gain an understanding of basic personal finance and ultimately better shopping.
If you have so many shoes, but so little money, then this blog is for you.
October 24th, 2008
Next Posts