Category Archives: Featured

Bitcoin: Back to Basics, A History And Summary

 This past week Bitcoin reached a high of approximately $19,500. Seems like “bitcoin” is the internets newest mainstream buzz word.

Let me take you back a little:

On May 22, 2010, a developer bought two pizzas using 10,000 units of a then-little-known digital currency called bitcoin” (Price, 2017). A developer, Laszlo Hanyecz, used 10,000 Bitcoins to purchase two large pizzas from a Papa Johns. Although it was a very simple transaction, the event had started the cryptocurrency craze around the world because it showed the idea of cryptocurrency was in fact possible. In the early stages of bitcoin, people were skeptical about the possibilities. To many, it seemed like monopoly money with no true value. The skepticism was about whether Bitcoin and other cryptocurrencies were going to be accepted and if there were truly any benefits.

Bitcoin is the most well-known cryptocurrency in today’s world. “On October 2008, A person, or perhaps a group of people, going by the name Satoshi Nakamoto published a paper outlining a peer-to-peer electronic cash system” (Abridged, 2017). The idea of Bitcoin was born and developers continued to work on making the idea a reality. In 2008 the idea of creating a currency that no government had control over was unthinkable. People from all different demographics shared an equal amount of concern about the digital currency. The bases of currency and money is trust. The two parties participating in a transaction must trust and agree upon the true value of the paper with the number “5” written across the top. In the United States, the citizens all trust and agree upon the value of the money we use; however, many citizens were concerned about how bitcoin was going to change the currency system. The developers continued along with the new idea and by 2010, Bitcoin was able to be used to purchase goods; however, the value of one bitcoin was worth less than one cent and many stores didn’t accept it as a form of currency.  As time went on, the progression of Bitcoin continued.

Bitcoin is part of a larger type of currency called “digital currency” or “cryptocurrency”. With paper currency and money in every country around the world, the government controls it. The government is able to oversee the process of transactions and sets guidelines for the use of the money; however, this is different for cryptocurrency. Cryptocurrency is, “divorced from governments and central banks”(Weller, 2017). With paper money, the government is in charge of regulating the “value” of money and trying to control the economy with it; however, cryptocurrency is very different from that. The idea of cryptocurrency is that there is no government attachment to the currency. No government owns cryptocurrency, this means that there is no third-party regulation of the coin. The one thing that controls the digital currency are the users of it. Cryptocurrency is based on peer-to-peer interaction. The users regulate themselves through technology set in place by the developers like blockchains and smart contracts. To many, cryptocurrency seems to be a useless and corrupting; however, the introduction of cryptocurrency will change how the world handles transactions of money and currency.

The word “cryptocurrency” has a secretive and illegal connotation and the idea of no third-party regulations scares many people from supporting the digital currency; however, the technology behind cryptocurrency, blockchain, allows for peer-to-peer interaction, giving more transparency to the movement of money. Marvin (2017) writes, “Think of blockchain as a historical fabric underneath recording everything that happens exactly as it occurs. Then the chain stitches that data into encrypted blocks that can never be modified and scatters the pieces across a worldwide network”. The Blockchain allows for every transaction to be recorded at the exact moment it happens with no third-party altercations. Meaning no one has complete power over the information being recorded. The Blockchain also has a public ledger that gives everyone the right to see the transactions, increasing the transparency. And finally with the information being stored on different networks all across different networks, there is no single point of failure. If one computer’s information gets hacked, the network removes that computer from the system and reconnects with other computers that are safe. With the implemented technology set into place, third party regulation is no longer needed, restoring the democracy in money.

Blockchain technology has many other uses besides cryptocurrency. Blockchain is simply a way to record any type of digital transaction that exists between two peers. The technology can be incorporated into many other uses, for example banking and accounting. Ittay Eyal, a researcher in the Department of Computer Science at Cornell University, states “The fact that there is a single agreed-upon chain onto which all transactions are placed means that one cannot double-spend the same coin in two conflicting transactions”(Eyal, 2017). Since digital currency is a set of algorithms and codes, there is a chance for counterfeiting that is hard to detect. This is the largest problem with cryptocurrency; however, the blockchain corrects this. When the same bitcoin or digital currency is used again, the blockchain recognizes this since every previous transaction is recorded on one public ledger. There is no confusion because all the information is on a single ledger. Also, the basis of this technology can be incorporated into online banking and accounting. The reason many accounting companies don’t prefer digital accounting is because of the ease of alterations by unauthorized users; however, the blockchain prevents this from happening. Since the blockchain is encrypted and stored on a network of computers throughout the world, there is no single point of access. This protects the business’s accounting information.

There are many pros and cons within the cryptocurrency world. In the video called, “Bitcoin: Pros, Cons and Coins” created by Forbes, both Bitcoin merchants and investors weigh in on the topic of the pros and cons of cryptocurrency. The pros presented throughout the video were ease of transferability. Since cryptocurrency is digital and peer-to-peer, the digital currency doesn’t have to go through a third-party when completing a transaction. This means that there are no fees attached to the transfer of the currency. Also with no third-party control, like countries, there is no need to exchange for a new type of currency when doing a transfer of currency. Another pro to cryptocurrency is developers and hackers are invited to test the limits of the security around the coin. The developers see the flaws in the system and making updates to the technology; however, cons are present. One of the cons of cryptography is the fluctuating prices. The volatility makes it very hard to price and keep track of the values of transactions since the values are always changing. The price constantly changes because of user’s actions. Since the users of bitcoins constantly buy and sell bitcoins, the value changes. The changing values make it difficult to continually update the values of one’s cryptocurrency.Another downfall is security of the currency. In order for the security of the currency to work, the developers must stay ahead of the speed of computers.

The two large pizzas that were purchased with 10,000 units of bitcoin would now be worth $100,000,000. As cryptocurrency becomes increasing popular, many people are taking to investing in it. Since the values of the currency continues to go up because of supply and demand, people purchase the digital currency and hold on to it. Skoyles (2015) writes an article about the process of investing. Skoyles writes, “At the moment the most common approach to investing in bitcoin is to just buy some.” The biggest problem with investing in cryptocurrency is the volatility of the currency. The value of the currency can decrease by a dramatic amount.

The words “bitcoin” and “cryptocurrency” have been thrown around the last few years. Although many people share fear of the idea of a digital currency with no regulations, the introduction of  digital currencies into the new world of technology will have many benefits. In the world of money, peer-to-peer transactions allows for an increase in transparency between the two parties. This is all possible with taking out the third-party and having the blockchain. There is no regulation; however, the blockchain gives the users a secure platform for transactions by recording every transaction at the exact moment and by storing the information on different networks throughout the entire world. The blockchain technology can be implemented into the world of banking and accounting. Digital currencies and the technology behind the currencies will influence the way world controls money.

 

 

Sources.

An Abridged History of Bitcoin (2017, November 19). In New York Times. Retrieved October 30, 2017.

Eyal, I. (2017). Blockchain Technology: Transforming Libertarian Cryptocurrency Dreams to Finance and Banking Realities. Computer (00189162), 50(9), 38-49. doi:10.1109/MC.2017.3571042

Soppe, Taylor. “Bitcoin: Pros, Cons and Coins.” Forbes, 2014. Accessed 13 Nov. 2017.

MARVIN, R. (2017). BLOCKCHAIN: THE INVISIBLE TECH THAT’S CHANGING THE WORLD. (Cover story). PC Magazine, 91-113.

Price, R. (2017, May 22). Someone in 2010 bought 2 pizzas with 10,000 bitcoins — which today would be worth $20 million. In Business Insider. Retrieved October 30, 2017.

Skoyles, J. (2015, Apr). Should I invest in bitcoin? New Statesman, , 21. Retrieved from https://search.proquest.com/docview/1679884099?accountid=14679

Treleaven, P., Gendal Brown, R., & Yang, D. (2017). Blockchain Technology in Finance. Computer (00189162), 50(9), 14-17. doi:10.1109/MC.2017.3571047

Weller, Chris. “Bitcoin is going wild — here’s what the cryptocurrency is all about.” Business Insider, 27 May 2017. Accessed 1 Nov. 2017.

IOTA Moves to the Top 5 in Market Cap Thanks to Microsoft.

I have been fooling around with cryptocurrencies for a while now and a few days ago one really just caught my attention. IOTA. The coin a which is a play off the phase “IoT or Internet of Things” is a coin/cryptocurrencies created to be traded between different machines on the “Internet of Things”. This coin caught my attention because it does not use classic Blockchain technology that we have seen on other very popular cryptocurrencies such as Bitcoin, Ethereum or LiteCoin, instead it uses Directed Acyclic Graph technology, which is a blockless ledger. IOTA refers to its DAG technologie as “tangle”.  Confirmation times are fast and transactions are basically free. As of Dec. 2017. The market cap made it the 4th largest cryptocurrency by market cap, which is around $12 billion. IOTA was created in 2015. These coins are not able to be mined so there was a set amount that was created 2,779,530,283,277,761. In May 2017 IOTA was listed on its first exchange: Bitfinex and is now also listed on Binance as well.

I follow a lot of tech/coin personalities on Instagram and this was getting a lot of attention. At the time the coin was selling for approx. $3 dollars and in a day or two went to $5.5 and has since retracted to mid $3’s. Since I first started trading crypto I had only used the widely popular american exchange “coinbase”. Because this currency doesn’t sell as a fiat currency pair such as IOTA/USD I had to first convert my USD to ETH or BTC and then trade indirectly on a separate exchange “Binance” which is a UK based platform. Binance is one of the top 5 crypto trading platforms in the world according to Coinmarketcap.com.

Another big reason this coin has become popular is because in the past week Microsoft made a big announcement that they were going to collaborate and partner with IOTA coin. This made the currency grow in value with a 90% increase in market cap basically launching it into the 4th position. IOTA has previously partnered with large companies such as Samsung, Cisco, and Volkswagen. Tangle will help with the large process of trading information Business-to-Business between these large corporations using the technology. The tangle system is designed to allow users to create transactions by validation (making sure all transactions are secure, immutable and without fees). The no-fee part of the technology model is huge for information sharing between businesses because tiny micropayments for information between businesses cannot be handled well and complicates the transactions on a large scale. IOTA hopes their technology and the tangle structure will allow a widespread of micropayments for data between companies. This will allow for the transfer of data and information from all kinds of IoT devices with little to no fees to give a greater feeling of interconnectedness between smart technology machines.

Sources:

https://en.wikipedia.org/wiki/IOTA_(technology)

https://coinmarketcap.com/currencies/iota/

https://iota.org/

https://www.cryptocoinsnews.com/iota-price-explodes-after-microsoft-partnership-announcement/

https://cointelegraph.com/news/iota-partners-with-microsoft-fujitsu-others-for-iot-data-monetization

Top 5 Cryptocurrencies by Market Cap

The number one, I’m sure you’ve heard of it is Bitcoin. Bitcoin currently has a market cap of approximately $95 Billion as of today. The one that started it all. Created by the psyudenym Satoshi Yakamoto and released in 2009. Bitcoin is a cryptocurrency that allows for peer-2-peer payment transactions and built on the Blockchain ledger technology, a digital payment system and was the first currency with the ideal of a decentralized monetary platform. There are nodes around the world, mining these bitcoins by recording these transactions on a distributed public ledger called a blockchain. Miners are incentivized with more Bitcoins. Bitcoins can be exchanged for other currencies and in some places other products and services. Bitcoin has been gaining world popularity since the beginning. The currency has seen positive and negative reviews but as of lately has been gaining popularity and value as more companies and leaders are seeing new uses for this technology.

Ethereum has a market cap of approx. $28 Billion, Ethereum has gained wide popularity especially this year. The currency was developed by Vitalik Buterin. A developer who used to work for bitcoin but left when he realized he wanted to create a more app friendly platform that users would be able to build off. Ethereum is open source, which means that the original source code is made freely available and may be redistributed and modified. The reason that this is important is because vitalik wanted other developers to use the ethereum platform to build other tokens and currencies based in the network. The platform is blockchain-based and features a smart-contract functionality that makes this currency widely popular. “Smart contracts are computer protocols intended to facilitate, verify, or enforce the negotiation or performance of a contract.” These enforces that proper inputs result in proper outputs in an exchange within the network. The ethereum blockchain also has its own token called “Ether” which can be traded on all main crypto exchanges. The Ether is also used to reward Ethereum Miners who complete and verify computations and hashes of other users. Ethereum was proposed in 2013 and the development was funded in late 2014 by a crowd sale.

Ripple has a market cap of approx. $9 Billion, which makes it the third largest in terms of market size. Ripple is the name for both a digital currency (XRP) and an open payment network within which that currency is transferred. The platform and currency is still in beta testing. Ripple was created to allow people to transfer money across the system seamlessly, through people, banks, Credit, etc. Many of the creators of the coin have a Bitcoin background. Ripple was Released in 2012, Ripple reports it enables “secure, instant and nearly free global financial transactions of any size with no chargebacks.” The tokens represent value in fiat currency, crypto, and many other units of measurement, even things such as mobile minutes or frequent flier miles. The Ripple network was built on a decentralized Blockchain ledger without a central hub for seamless transfer of currency along the network. Ripple became popular because it was endorse and used by companies such as UBS, santander. Ripple is advantages among other competitors because of its low currency price and its security

Bitcoin Cash is the fourth largest coin in terms of market size with a market cap of Approx. $5 Billion. Bitcoin Cash was created when On July 20, 2017, Bitcoin Cash (BCC) was created when there was a “Fork” or upgrade in the public ledger of the original cryptocurrency. The issue was the scaling of the original Bitcoin’s block size. Bitcoin Cash is a P2P electronic cash. The currency has different rules that were upgraded from the original bitcoin that allows “the continuation of the Bitcoin project as peer-to-peer digital cash. The currency has upgraded consensus rules that allow it to grow and scale differently from the original Bitcoin product.

Litecoin Is coming in at #5 in size with a market cap of $2 Billion. Lite coin is one of the three currencies that is trading on the widely popular exchange, Coinbase. The cryptocurrency is also a P2P  and an open source decentralized platform that was basically inspired by and very similar to that of bitcoin. In terms of differences Litecoin has also adopted SegWit technology and the lightning network. SegWit is the process by which the block size limit on a blockchain is increased by removing signature data from Bitcoin transactions. When certain parts of a transaction are removed, this frees up space or capacity to add more transactions to the chain.These both basically call for a larger number of transactions to happen with much greater speed. One major advantage that LTC has over bitcoin is its fees are close to zero and payment processing is much much faster. LTC was introduced in October 2011 by a man named Charlie Lee, who used to work for Google. As we mentioned earlier LTC became the first of the top 5 largest currencies (in terms of market cap) to adopt the SegWit technology. A few months later, The first lightning network transaction was completed sending 0.00000001 LTC from Zurich to San Francisco in under one second.

 

Sources:

https://en.wikipedia.org/wiki/Litecoin

https://litecoin.org/

https://www.bitcoincash.org/

https://coinmarketcap.com/coins/

https://en.wikipedia.org/wiki/Ethereum

https://ripple.com/

https://www.coindesk.com/10-things-you-need-to-know-about-ripple/

https://en.wikipedia.org/wiki/Bitcoin

. https://en.wikipedia.org/wiki/Ripple_(payment_protocol)

 

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