All posts by Tucker Spillane

www.beatingbreakeven.com

The Next Big Thing in Crypto: Asset Tokenization

Last week, I got out of work and I headed over to 3rd ave to the Grant Thornton building to attend a seminar. The event was sponsored by ConsensSys and Balanc3, venture production studios that are focused on building and scaling tools and software products powered by Ethereum. They want to get operating systems around the world using their ethereum platform to innovate and expand business everywhere using Blockchain. I forked over $15 for the ticket because they were serving food and drinks!

The seminar was hosted by the ABC (Accounting Blockchain Coalition), a group whose main objective  is to “educate and empower its members to understand the impact and opportunities that blockchain technology brings to the accounting industry.” I wanted to see how other industries were being impacted by this technology, how they were starting to utilize it, and what this means for business long term. Grant Thornton is not one of the “Big 4” in accounting, but being #6 in the world surely makes them a leader in the industry. They have recently created a subdivision specifically for Blockchain technology and clients of theirs who have started to transact on this currency.

I would like to now summarize some of the main points that I took from the seminar:

Companies are popping up left and right by creating different tokens from the Ethereum open source platform. With these crypto currencies emerging, startups are converting 100% from the start, with protocols that pay employees 100% with crypto currencies instead of regular fiat currencies (dollar, pound, euro), while working on redesigning enterprise resources. One thing that the ABC looks at is how this can affect accounting procedures. One major roadblock will be taxes as people will have to report earnings, in regards to the cost basis and the realized gains and losses. The ABC is set out to help companies and individuals with account for these conversions.

Another point to keep in mind when dealing with digital currencies is that the recorded value of a certain coin is always changing, and therefore must be tracked for use at any given time. That is what the blockchain ledger is for. The value of 10 ETH will fluctuate regularly, so it is very important for accounting to keep track of current value based on a record of prices. Everything purchased needs to be recorded at a certain value so long as we are dealing with multiple currencies (USD/ETH). Things can truly only be streamlined when everything is seamlessly recorded on a permanent ledger. The ledger will help reduce the need for a lot of overhead in the audits.

The next part of the presentation was lead by Balanc3. Balanc3 is like a Quickbooks for the crypto space. They help to maintain a transaction log, similar to a balance sheet, for companies performing regular crytpo transactions. With all transactions recorded in the blockchain ledger, the balance sheet and other financial statements in the program can be constantly updated in real time to give the viewer an accurate representation of the company/token in real time.

Now the main part of the talk/presentation was asset tokenization. This world has a finite number of tangible assets, but there is endless opportunity in the digital space to work with and utilize those assets. Therefore, creators of the Ethereum blockchain have a lot of control. Businesses have started to create tokens and currencies to represent real world assets, in order to trade their value, quicker and easier. When I hear the word “tokens” I picture my 5 year old self at the arcade. In order to play games, I had to cash in  real USD in exchange for the silly arcade tokens that only  worked in the machines. By using these tokens and earning tickets, you had the opportunity to trade their value for prizes. Tokenization is essentially that, the conversion of real tangible and intangible assets to a digital token on a blockchain in order to trade for assets. Assets such as real estate, businesses, art, gold, commodities and many of these assets are hard to split up or convert into shares on a decimal level. Now buyers and sellers of assets trade papers and money that only represent part or all of the asset. Many times there are huge processes involved or red tape that limits access and availability to these assets. Things like paperwork, titles, ownership documents, liens, etc. If we already have the technology such as the blockchain why not switch to digitize the transaction similar to how bitcoin works? Startups, small tech businesses, and even major financial companies are competing to do what bitcoin has done which is basically tokenizing assets similar to what bitcoin did to the fiat currency initially.

There will be a digital footprint of all transactions. In this way fractional pieces of assets can be bought and sold in the form of digital currency or tokens. Transfers will happen quickly on a decentralized platform without the need of a central control.. Ethereum has quickly become the major breeder for tokenization because it was created as an open source platform, allowing businesses to create their own currencies for this specific purpose. Businesses are having “ICO’s” that allow investors to buy in the initial sale of these tokens with their current ETH and the use of “smart contracts”. You can lock in on smart contracts and utilize them for so many different business purposes. These aspects make Ethereum versatile and ready for widespread utilization in the currency marketplace.

 

Soure: http://www.nasdaq.com/article/how-tokenization-is-putting-real-world-assets-on-blockchains-cm767952

 

Bitcoin, Ethereum, And Other Cryptocurrencies Aren’t Just For Nerds, You Too Can Invest Like I Did.

Lately, everyone who knows me knows I can’t shut up about crypto currencies. Tired of sharing my excitement with uninterested parties, I thought I’d share my knowledge of cryptocurrencies and blockchain technology with other millennials like you who could really benefit. I am really passionate about this topic for so many reasons. Now this topic is very broad so I will be keeping it surface level here and provide an overview of my experience with the emerging technology thus far.

My interest in cryptocurrencies really picked up about five months ago, when my boss pulled me aside and told me to read up on the newest crypto technology called Ethereum. To start with some background definitions, a cryptocurrency is a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds. A crypto currency is unique in that it operates independently of a central bank. You can think of this as a monetary unit that only exists and is valuable in the digital space. One of the unique aspects of this currency is that it is not regulated by a centralized base, as the US dollar is by the Federal bank. Instead, Ethereum is decentralized by the mere fact that it exists within Blockchain technology. A blockchain is made up of a network of computer users that jointly manage the digital transactions of currency created by a universal ledger of accounts that cannot be erased. The universal ledger is a record of all transactions that have occurred since inception of the Blockchain.

What I just said probably made your head spin, if you’ve never heard of these topics, but i needed to get the formal definition out. The blockchain is the technology that these currencies are built upon and whenever the currency is traded, there is a permanent digital record that is kept to keep track of what took place.  This record happens instantly and cannot be changed or modified. This ledger of records is decentralized and universally recorded, which is the brilliance behind the technology.

Now at this point I had heard of bitcoin from way back in 2013 when there was a lot of buzz about the new technology, but I never really invested much thought into it before. I’m sure some of you have similar memories, maybe you heard of the Silk Road, the bitcoin crash or other scandals. But up until recently Crypto has been getting a lot of buzz because businesses are starting to catch on and realizing that the world can really utilize this technology for business applications. After doing preliminary research on Ethereum I was interested and started checking the currency rates every day against the US dollar. I noticed the market was very volatile. I was interested when the price of Ether jumped up from $83USD/ETH to $183 USD/ETH in the span of a few days. This is where it hit me, REAL MONEY COULD BE MADE! The market was extremely volatile and going back and forth like crazy. Yes, money was my primary motivation for taking an interest but it wasn’t until I started learning about the technology behind the cryptocurrency before I knew that this was going to be something big because even if Bitcoin and Ethereum fail, the principles and the guiding technology is what would prevail. This is when I fell down the rabbit hole.

I did what everyone else who was in the know was doing. I downloaded an App called CoinBase and threw in $1,000 just to see what would happen. I purchased half a bitcoin and a number of Ether Coins and some Lite Coins. These are the three main coins available for purchase on the popular CoinBase App. I was able to quickly double my investment in the coming weeks. At this point I was hooked. At first it did seem like I was winning the lottery but what I realized and was told before was that the currencies were highly volatile. Also i had been invested in the stock market for quite some time and had to wrap my mind around the fact that these currencies were not shares of a company but exchangeable currency pairs. Because of the volatile nature of these currencies you have to have an appetite for risk. Everyday I would gain/lose hundreds of dollars in unrealized gains and losses. But after a while you start to notice trends and patterns that you can use to your advantage. You can see when to hold your investment or buy the dip. My biggest recommendation for anyone would be to try out the market. When i initially put my first investment into the market if forced me to pay attention. I was seeing headlines i wouldn’t normally read and focus in. What was causing the value to rise and fall? What technological advances have occurred since? The material and future ideas were so intellectually stimulating that I had to dive right in.

Personally I believe in the technology more than anything and that is why I decided to get some of my savings and invest in these three currencies. Blockchain technology and the idea behind a universal permanent ledger for transaction verification will be crucial for the development of future technological infrastructure in our everyday lives. This is one of the biggest reasons I am focusing my time and energy into studying this technology and investing in these currencies.

 

I’m Obsessed With Money And I Still refuse To Play The Lottery.

Every few weeks someone from my office makes the rounds to each cubicle to collect $5 for the PowerBall jackpot. Small talk breaks out at this time and everyone starts fantasizing about leaving their job, sailing around the world, buying sports cars, partying with their friends, etc. Everyone gets jittering with optimistic thinking; “it could happen” or “what if we win?” I mean winning the PowerBall could mean hundreds of millions. (By the way, i’m not talking about the $1 scratch offs your aunt gives you for christmas, you shouldn’t play those either, but they are fun once in awhile.)

I don’t play. When they stop at my desk, I politely decline. I don’t want to hand over my $5 of hard earned money. I won’t win. No one wins. Even if your numbers are chosen and you win the grand prize.

Here are some facts that you should remember when you are fantasizing about what type of mega-yacht you are going to buy:

  • The odds of winning the grand prize are 1 in 195,249,054. This alone should stop you from buying a ticket. My 5th grade math teacher was right when she used to say “The lottery is just a tax on stupid people”.
  • Lottery winnings are taxed like income. When you collect your earnings, you will really only be taking home approximately 1/3 of your stated winnings if you are lucky.
  • 70% of lottery winners spend all their winnings and proceed to lose the rest of their money within seven years. Many end up going bankrupt.
  • The hype is hard to ignore: I’ve heard it so many times “come on dude why not?” or “you’ll be so pissed if we all win..”,  it’s because money adds up. $5 seems small but If you set that 5 dollars you spend on the lottery every month into a money market fund for the next 35 years, you will have an extra $20,000 when you retire.
    • The probability of winning is so low that the certainty of having $20,000 at retirement is a much better payoff with almost no risk.

To me, these are great enough arguing points for not wasting my money on such nonsense.

Say you were lucky enough to actually win the lottery. The problem is that most people would have no idea how to conduct themselves. They are not experienced enough to use their winnings properly or correctly. There are so many implications that could cost you many good parts of the life that you live now.

  • Spending and excitement would become a drug, when dopamine is depleted and the rush is over depression sets in. Your happiness will have peaked and you might not recover. You will keep spending to achieve that same initial rush.
  • You will probably lose friends. People will see you and treat you differently. You will be the rich friend who was just lucky. People will come out of the woodwork to ask you for money. Their personal ATM, “what does he care”. 90% of winners lose good friends.
  • There is nothing better than the feeling of earned money. Money that you win is not money that you personally earned and that is the most defining factor. $30,000 is a lot different to a 30 year old than it is to a 12 year old. When you win the lottery you are the 12 year old. You will most likely make decisions with an immature mind set.
  • There was a study done that shows that poor households, with annual take-home incomes under $13,000, on average, spend $645 a year on lottery tickets, which comes to about 9% of their yearly income.
    • Don’t let this be you. Lottery collections will happen in an office near you, so stop wasting $5!!!

Sources

 

 

Why Constantly Tracking Your Income and Spending Will Give You More Focus on Financial Success.

If your life is anything like mine, there comes a time every month when you don’t know if you can actually afford anything. When you hand the bartender your credit card, you silently pray that it doesn’t get declined. This is usually around the time when you are waiting on a paycheck, have just paid off your credit card statements in full, but still owe your landlord rent for the month. During this time you have no idea of your financial standing and are too lazy and scared to look. So you continue to stress and you continue to pray.

As I looked into ways to eliminate this monthly stress, I read a lot of articles that focused on the importance of consistency, goals and budgeting, etc. I also began reading a book called ‘The Power of Habit’ by Charles Duhigg. In this book, Duhigg explains why we have habits in our lives and how the habits we keep become the distinguishing factors between failure and success. With motivation to change my habits and a goal to become more aware of my finances, I began a daily budget tracker. On March 1st, I made a commitment to track all of my finances to the penny, every single day.  

While this task might sound daunting to some of you, I can assure you it becomes second nature in no time. There are plenty of finance tracking apps out there, but I wanted to keep it simple and use Excel as I suggest you do as well. As you will see below, I created a table with the days of the month across the x axis and a list of income and debt sources along the y axis. Laying everything out has helped me become grounded in the reality of my financial standing, which has in turn motivated me to take more action towards achieving my financial goals.

How to go about tracking: Open your spreadsheet and then open all of your banking, credit card, stock trading apps on my phone. If you do not currently have electronic access to all of your funds (assets and liabilities), I would download these and keep them on your home screen With these open, simply input the data into the appropriate rows on the spreadsheet.

You can also build out a graph as I have done below, that will pull in your inputted data and adjust accordingly. Keeping tabs on your daily spending is a cool way of learning about who you are as a person and what you value the most, by what you spend most of your money on. So many of our purchases these days are mindless because we keep our finances out of sight and out of mind. This is why when we open our bank account after a month or so, we wonder where all of our money went. This routine allows me to see where my money goes every day and how my investments are growing. Saving money is a checks and balances system if you will. Through tracking, as you learn about your losses/gains on a daily basis you will be able to clean up your spending and increase your savings. The first step to financial success is confronting reality and taking responsibility for your spending.

Below are some screenshots of exemplary tracking.

May 1 May 2 May 3 May 4
Cash (estimate) $350.00 $328.00 $317.00 $298.00
Checking 1 $800.00 $788.00 $812.00 $806.00
Venmo $45.00 $45.00 $58.00 $62.00
Savings $1,500.00 $1,500.00 $1,500.56 $1,500.56
Brokerage $1,289.00 $1,290.00 $1,311.00 $1,298.00
401k $12,785.00 $12,790.00 $12,811.00 $12,806.00
Total Assets $16,769.00 $16,741.00 $16,809.56 $16,770.56
Credit card debt -$4,876.00 -$4,800.00 -$4,811.00 -$4,750.00
Student loans -$26,000.00 -$26,000.00 -$26,000.00 -$26,000.00
Total liabilities -$30,876.00 -$30,800.00 -$30,811.00 -$30,750.00
PNW -$14,107.00 -$14,059.00 -$14,001.44 -$13,979.44

FOUR Financial Lessons from the Homeless

New York is one of the biggest financial capitals of the world. Finance is everywhere in this city, whether in the billion dollar hedge funds that are making million dollar deals or the restaurant owners calculating bar tabs, brunch receipts or tenants saving for the unruly rent they owe their landlords at the start of each month. 

One lesson I have learned from observing the homeless on my street, is that being a pure minimalist has its benefits. These people carry with them only what they need and nothing more. It would be inefficient to carry around dead, excess weight. We as millennials need to understand why excess is bad and recognize how our spending habits are based on desire instead of necessity. If we all became more aware of the things that we buy and their ability to clutter our lives, we might start to realize that material goods do not help us meet our goals or delay the process.

The second lesson we can learn from the homeless is how we can market ourselves well to attract the attention of others. I regularly encounter homeless individuals on the subways and in the streets. They are holding signs that tell their story or are yelling at passengers about their specific misfortunes. Many of them have had a lot of practice doing this, so they know what works and what doesn’t. They are forced to put their best foot forward and try and try again to sell the bystanders on a few dollars of investment into them. They are essentially pitching themselves to an audience of investors, like you see startups do on Shark Tank. When you want money for an investment or business, or are trying to land the perfect job, you need to market yourself to your best ability. This means looking the part and connecting with the given audience on a personal and real level. The homeless live it everyday. Their survival depends on it.  Since yours doesn’t, if you were to apply the same sincerity and passion into improving your current state, you would likely get very far.

The third lesson is utilizing the resources around you to the best of your best ability. I was in the train station one time and a homeless man was cleaning all of his clothes in the bathroom sink. Since the station is a public facility, this was free to him. He was being resourceful. I also see many homeless people using public places for shelter or the public library for entertainment to pass the time and read or subway seats as beds. We as millennials also have boundless resources around us that will cost us little to no money to utilize things such as books, mentors, the internet, newspapers, other people in our field willing to help us if only we just ask. Many of us do not use these resources to our advantage as we should.

The fourth lesson is that homeless people ask for what they want. If asking doesn’t work with one person, they try and try again. They are relentless because they need to survive. They will badger so many people and most of the time it works. I know because I see so many people fall prey to their tactics and reach into their pockets to grab money. Its human nature to feel empathetic towards other people and want to help them out. Ask for what you want and if you get denied ask someone else.

The final lesson to consider is that homeless people use a cash based accounting model. These days everyone is in debt. Debt is a tool, but most of the time people, especially people our age, abuse this tool. Homeless people collect cash, use that cash and simply go and try to get more when they run out. They don’t just put their purchases on a credit card. People need to realize that we should only spend what we have available. Try carrying around a specific amount of cash each day, spending only what you need and nothing more. Don’t always be putting the little things in life on a credit card because it creates bad habits that are hard to stop.

 

Take Control of Your Financial Future By Paying Yourself First

One of my most memorable lessons from my childhood was when I learned the importance of “paying yourself first.” Many of my peers and friends have complained about their money problems; bills weigh on their mind and they become stressed living paycheck to paycheck. While it is important to stay cognizant of costs and expenditures, too many people make paying their bills their number one priority.This leaves them treading water just to keep their nose out of the water. This is definitely not detrimental, but it will not leave you on top or help you reach your more long term financial goals. I’m here to tell you why it is more important to pay yourself first before paying any bills.

The common routine for many millennials is to set aside money every month for costs, such as rent, transportation, etc. and then treat the leftover money as free spending to blow. Instead, I am suggesting that you first set aside an amount, “personal bill” and then using the rest to supplement bills and other costs. Creating this kind of system will change your mindset about your money. First and foremost you will be saving and secondly, you will be more calculated and thoughtful about how you spend your earrnings. Putting your money in a personal account will prevent you from spending carelessy.

An easy way to start this spending transformation is to go to the bank and open up an account specifically for your savings goal, whether it be a car a house, business or your future. These accounts can be set up so a percentage of your weekly paycheck is directly deposited. This can also be accomplished by setting up a a pre-tax or Roth 401K account. With these types of programs, some of your “extra” money will go directly towards yoru retirement fund that you will be able to acess around the age of 65. As I’ve written about in previous blog posts, a 401k adds a percentage of your paycheck and in many situations your employer will also match your contribution up to as high as 5%.

By focusing on long term financial goals and redesigning your spending/ saving schedule, you can really improve your financial standing. Having a personal account can also bring more security and allow you agency to act on larger investment opportunities that could present themselves in the future. With this mindset, budgeting becomes a crucial component to your life. You should always be adding your savings or “profit” into your weekly and monthly budgets. You want your personal account to be a guaranteed resource you can draw on, so maintenance and continual deposits are crucial. Your other finances will naturally accommodate and adjust for this extra profit and you will in-turn become more intune and financially savvy.

A further benefit to “paying yourself first” is the secondary psychological effects from having saved money. It can be a great feeling to know that you are now controlling your own financial security and this can in-turn guide even more smart choices for how to save and invest money that comes your way in the future.

Why You Need To Look Into Tax-Free Spending Accounts Now

 If you are currently employed, you should at least take a look and see if your employer can offer you  these spending accounts and you could save more money for yourself and give less to Sam.

Flexible Spending Accounts

“Approximately thirty-five million Americans are covered by a flexible spending account (FSA).* FSAs are employer-based programs that allow consumers to set aside tax-free dollars to purchase medical products and services – from bandaids to smoking cessation programs and tens of thousands of products and services in between (FSAStore.com)”.

This is yet another program offered by your employer so you can make them work for you. Sites like FSAstore.com let users purchase everyday items such as glasses, contacts, thermometers, bandaids, sunscreen etc. basically all out-of pocket health care costs with tax-free money.

Your employer will front you up to $2,550 from your annual salary in the beginning of your plan year. The amount can be up to $2,550, but the one trick here is that you have to use all that money you set aside by the end of the year or else it will be returned to the employer. So, you have to hedge your bet that you will use the allotted money within the year time period. (FSA Calculator)

If you normally buy the many products approved for flexible spending accounts, then this is a great program and can save you lots of money (up to $1009.80). Depending on your employer, they may offer you one of two options:

  1. You may receive a “grace period” where you can get up to 2.5 extra months to use the money in your flexible spending account, or
  2. You may be allowed to carry over up to $500 per year to use in the following year (healthcare.gov).

Commuter Benefits Accounts

If you are a millennial living in the city, flexible spending accounts also have good commuter benefits. I know that many New York companies have transportation reimbursement program where they will reimburse you for public transportation (this also applies to all major cities). This can be a great way to use tax-free money for your daily commute. This year, New York City increased subway fare. Even more reason to save as much as $550 (39.6% tax bracket and 116.5/month for MTA subway pass) using your commuter benefit options with your employer. Look into Wageworks.com for more information.

If you haven’t heard of a these spending accounts and are interested in saving money on things you would end up purchasing anyways I strongly recommend you look into a tax-free.

Sources:

https://www.healthcare.gov/flexible-spending-accounts/

https://www.fsastore.com