Monday, October 26, 2009

WoW Financial, or "How WoW Economy Can Apply to Life"

I'm always amused by the irony that despite how much I hate math and how much my husband loves math, I'm the household financial guru.

I've been listening to financial guy Dave Ramsey, who offers strategies to "be a millionaire by retirement" in completely legal and tidy ways, and what he says about real world money can easily be applied to Warcraft money. (I'm less interested in riches and more interested in stability, but what the hell. I've always wanted to be rich so I can give to charities. Is that weird?)

The big super-secret financial tip? Work hard and don't do anything stupid.

He says it's not hard but you need to educate yourself on money just like anything else in life. Throwing your money around with no clue what you're doing is the easiest way to lose it.

He insists wealth is not about getting rich quick (which usually turns into getting poor quick) or even burying your cash in the backyard to protect it. You just need to read the proper strats and make the smart moves. Otherwise you'll keep wiping.

Just like you wouldn't (shouldn't) put your entire life savings in your cousin's diamond mine venture, a savvy WoW player knows not to invest in crafted epics the week before Cataclysm.

Rather, you invest in the smart things. A savvy player will invest in, say, herbs and ore and enchanting mats. Things people will never stop needing. A savvy real world investor will put his assets in a diverse number and type of stock baskets, so as not to be crippled if and when one fails. (The easiest way to do this is through a mutual fund, which is a fancy term for putting your money in a group fund under an expert manager. The best mutual funds are the older ones, according to Ramsey. The older the fund, the more rock-steady the managers will be. 50 year old funds survived ye olde stock market crash, for example.)

Ramsey also said that economic downturns where stocks plummet are not bad things -- just like downturns in, say, pet prices on the AH. Its like they're on sale. Just buy that 400g Azure Whelpling and wait a few months until it goes back up to 800-1000g. Same thing with stock -- it's a great time to buy and hold. Only noobs, he said, are flustered by prices plummeting.

The one rule I've found to be true in WoW economy -- you make as much money as you're willing to put the time into. If you're not willing to put aside time in your WoW schedule for making gold, you won't make gold, whether you're trying to play the AH or just sneak in a few dailies.

In real life, it's important to put aside time for budgeting and investment plans. Most people don't know where to begin and that's what financial advisers are for -- a good one will pay for himself by giving you sound advice. Ramsey says that when you're hiring a financial adviser, there's one simple rule: If you can't understand him, fire him. His job is to explain what the hell your options are, and if you can't explain what you're doing to a 7-year-old, you aren't ready to make a decision.

  • Don't put everything in risky ventures.
  • Buy cheap, sell high.
  • Educate yourself.
  • Take your time.

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