Monday, December 10, 2007

Preparing For Payoff

Things are going really well. In addition to a slow, but sure increase in net worth, things are becoming easier in terms of bills. After some recent calculations, I've determined that there will be enough money in this coming month to completely payoff my car loan. It seems a little premature, but the idea of getting completely out of debt on the car is so exciting I cannot wait to do it.

Last week, I was able to call up and get the payoff amount and I ran the numbers for the checking account and found that I had just about enough in there to cover it. Originally I thought I had more than enough, but it turns out the amount was just right. So now I am in a situation where I need to be able to wait a couple more days, but in about 2 weeks, the loan will be paid off.

But the Real Payoff comes in 2008. For me, the real payoff will be the extra several hundred dollars that I save each month by not having to deal with that bill. The real payoff will be knowing that there is that much less for me to worry about earning. For me, the real payoff is knowing that I will not have to write that check, sending that money to pay interest and principal for an asset that has long been used and continues to depreciate.

I've come to realize that there is a principal that is not talked about much in personal finance. I first noticed this principal in a book by Suze Orman. The idea is that money and energy are related. By putting energy into your finance, you can make your wealth grow. I've noticed this first hand in the past two years. I pour over my statements, I contrive ways to save money, and I focus my energy on paying down debts. The payoff has definitely been worth it. This loan being paid off is just another milestone. Putting time and energy into money in many ways for me, seems like one of the best ways to spend time and energy.

Friday, December 07, 2007

Finding My Way Into Vanguard

So, recently, my situation has changed and due to some restrictions related to employment, I have to get rid of some of my retirement holdings which are currently invested in ETFs. ETFs are nice alternatives, in my opinion, for people like me who really cannot afford the minimum requirements for investing into more standard mutual funds. So, rather than deal with the minimums, it is easy to open up an account at a brokerage firm and then purchase individual ETF shares which trade like stocks.

Personally, I bought VTI and VNQ. I've always liked Vanguard, and I think that these are nice solid index funds with low expense ratios that I was comfortable with. However, now that I am not allowed to own ETFs, I need to get my money into mutual funds, but I still don't have the minimum required. What to do? Using Vanguard's website I was able to do a screen that captured my major requirement: minimum investment. Fortunately, there IS a fund by Vanguard that has only a 1000 dollar requirement for minimum investment: VGSTX

So, that is my plan. It may not be my favorite of the Vanguard funds, but it beats the other loaded and expensive funds that are out there. I probably should look at T Rowe Price and some others too, but I feel like this is good enough. And it is likely that soon I will have enough so that the minimums won't be an issue.

Monday, December 03, 2007

E-Statements from banks are great. 4 Reasons you should use them

Not long ago I switched to electronic statements for my bank accounts. I chose not to have them sent to me directly, instead, I will go to the website and download them in pdf format. I think this is a great idea for a few reasons:

1. It saves time because I don't have to open them up each month.
2. It saves paper.
3. It prevents me from having to file them away and hang on to them for years on end.
4. It means there is less mail with my personal information floating around out there.

Have you switched yet? You should consider it. I think you'll be as pleased as I am.

Friday, November 30, 2007

On Buying a Lifestyle...with a Fixed-Rate Mortgage

Despite all of the back and forth about sub-prime mortgages and the housing bubble, I am feeling just fine. The reason is that when purchasing, I followed some old advice:

Don't expect to flip. In general, I've been told by many people that you shouldn't buy a home unless you plan to hold on to it for 7 years or longer. If the market does well and you decide to sell, fine. But if you want to be sure not to lose money, don't buy something that you only want for a year or two. I've been in my current location for more than 3 years. I like it. And I have no intention of leaving in the short or medium term.

It seems to me, that real estate, like any asset class, has its ups and downs. But as a practical point, I don't look at my home as an asset per se. Rather, I consider it to be a fixed expense that I need to survive, much like food and water. Therefore, as long as the payment is reasonable and it functions to keep me warm and sheltered and comfortable, that is all I need. The real problem has entered when people started looking at homes as truly an asset. I mean, you wouldn't try to "flip" your car right?  To me, its the same thing.

Purchasing a place to live with a fixed mortgage was what allowed me to really make sure that I could buy my lifestyle. Once I got the loan, it had nothing to do with housing markets, appreciation, interest rate cuts etc. Nothing matters anymore. The only way you get the squeeze once you're in a fixed rate mortgage is property taxes and/or insurance rates which can change. But for most people, these don't change much. Rather, their budgets are nice and predictable and I'm grateful to be in that category.


Wednesday, November 28, 2007

A Macro View? Don't Run and Hide. Just Ask The Right Questions

So, its been a while since I've written anything and I think it is interesting to start looking at some macro ideas. I'd like to sum up a couple of conversations I've had recently about the economy.

With a friend over the holidays, we were discussing the economy and people were asking me what the best thing to do was. I told them that I thought that the time to "prepare" and "react" to this situation is long since gone. People that are leveraged in investments or real estate are going to have a hard time unless they have liquid cash to weather the storm. An emergency fund is key here and most people don't have serious free cash flow to save money right now, especially with the cold winter and holidays coming up.

So, the takeaway for people in trouble is to do the same old boring things:
1. Build an emergency/freedom fund to handle these lean times that we're in.
2. Cut spending and increase earnings so that you can have a good "cushion" of free cash flow each month. You might want to aim for 10 or 20% on top of what you're already saving and contributing to retirement. Right now I am at about 5% (plus additional monthly savings and retirement), but I'd like to see that number be even higher.

The second conversation was about foreign trade and how it relates to the economy and inflation. Inflation runs amok when economies run hot for too long and money is too easy to get. In the end, it is easy to understand why the combination of lower housing prices (due to excess demand) and the problems with financial stocks are contributing to a souring of the economy (at least in terms of Market Volitility). But the real question is whether or not we can/will spend our way out of it. I learned something new in this article.

http://articles.moneycentral.msn.com/Investing/StrategyLab/Rnd16/P2/ChangeWaveJournal20071128.aspx?page=2

Consumer Spending is the main contributor to GDP. And GDP is the way that we earn money. GDP is what gives our economy stability because it shows that the US is producing and therefore can collect taxes. Our ability to collect taxes shows that our paper dollars are worth something. To me, this number, GDP, is what I am interested in. And knowing that our GDP is 70% based on consumer spending, makes me even more interested to see how consumer confidence is.

This article details that although total spending is up, consumer confidence is at a two-year low.

http://www.bizjournals.com/phoenix/stories/2007/11/26/daily19.html

Instead of asking whether or not Santa Claus is poor this year...the real two questions people should be asking are:
1. (personal) How secure is my job? What sectors of the economy (finance/construction/retail) might cause a possible downsizing?
2. (macroeconomic) Are people going to keep buying large, durable goods like cars, dishwashers, etc that make up large amounts of consumer spending?


Friday, November 09, 2007

Bringing Money on Vacation

So I am about to go on vacation; plane leaves tomorrow. And since this is a blog about money, I thought that I would talk a little bit in this post about my plans for the vacation and how I plan to manage the money.

1. I plan to bring several hundred dollars of american money to convert to foreign currency in an airport exchange.
2. I plan to bring several hundred dollars of travellers cheques in american currency which I will likely exchange at the hotel or a bank during my stay.
3. I plan to use a credit card for major purchases and to pay for parking when I return.

Even though this vacation will be somewhat expensive, it will be quite fun since the money has been diligently saved up in order to really enjoy it. Furthermore I feel comfortable with my progress toward financial goals so this will be a real treat.

Of the options above, here's why I am doing each. First, I like to have some currency on hand. Second, I like to have additional currency that is available in the event of a stolen wallet etc that I should be able to get back quickly. Third, I like to avoid some of the fees that I will likely incur with the first two options. The third has some fees too as I read in this article.

http://www.epinions.com/content_1371775108

But in the end I am comfortable with this three-prong strategy. What do you usually do when travelling abroad?

Wednesday, October 24, 2007

Wow, that’s awesome. How long did you save to be able to buy that?

I just read this entry (
http://www.iwillteachyoutoberich.com/blog/an-annoying-email-i-got )
over at I Will Teach You To Be Rich and I think that it is brilliant.
So many people I know never save up before they get luxury items. This
is a fundamental difference from those who are "into" personal finance
versus those who are not. The quote and concept and explanations that
Ramit points to here are the core of people who are serious about
personal finance and those who aren't.

Over the past two years I've become quite addicted to personal
finance. I really like knowing where all my money is going, and what
it is up to. Did it stay out past it's curfew, is it getting into
trouble with the neighbor's money etc, etc. The bottom line is that
for many of us, our wealth just isn't high on the priority list.
Instead "paying the bills" is important. Or perhaps even "getting a
better paying job" is important.

Small things don't really matter. What matters is how aware you are of
the choices you make. Nearly every action I take has some kind of
effect when it comes to my personal finances. In short, once I started
caring about the entire system and making changes for the better,
things turned around for me. It seems to me, THAT is the point Ramit
makes here. Tiny bits of advice don't change the overall behavior.
Awareness and caring are the critical steps. Pay yourself first etc
are just tools to achieve goals once you decide to care in the first
place.

Tuesday, October 16, 2007

Payoff Complete - Ideas on Education

Well, the payoff's finally complete. With the advent of electronic banking, I've been paying many of my bills using my bank's online bill pay. I like the convenience of knowing exactly when the amount is going to hit my account. This is easy to plan since most of my bills that are paid this way are actually paid as an electronic debit instead of a check. However, for some institutions this might not be possible and therefore a check will be cut. So, for your situation, mileage may vary on online bill pay.

But when it comes to my student loan/credit card payoff which happened this week, it is a great feature. I scheduled the payment and I knew exactly when the money would hit my account. Now the bill is completely paid off and has given me even more wiggle room in terms of my measurement of free cash flow on a monthly basis.

The key here is what to do with the free cash flow. Currently, it appears that I will be doing some sort of a three-way split with the funds. I plan on increasing my retirement contributions. Furthermore, I plan on increasing my pay downs on other bills and also increasing my savings rate. The hope is that the car loan will also be paid off early which should help me accelerate even faster toward critical mass in terms of my finances.

I'm immensely proud of my accomplishment. Going to school and having to repay some serious student loan debt is a big incentive to make good decisions in school and with your money.

I think that this payoff is one of the main reasons why I feel somewhat annoyed at some people who get into professions that cannot pay the bills. In the end, the reason that everyone cannot be a basket weaver is that there are too many of them already so that the salary for this job ends up being low.

Please, before you get yourself into serious student loan debt, check out the salaries for the jobs that you will be getting. And check the availability of such jobs. One really good paying job in a field in a city isn't enough if there will be 40 graduates. Also do what you can to provide yourself an 'escape hatch' into either other related jobs or other fields (perhaps a double major or a minor?) so that you can get other jobs if your first choice doesn't work out.

Friday, October 05, 2007

Final Payment Soon

So, today I should be depositing a check that will allow me to make
the final payment for loan #2 for college. I will be using this
combined with some other miscellaneous income that I've transferred
over from my paypal account. And then there was one.

That one that is left is a biggie, but simply getting these things
paid off gives a huge sense of accomplishment. In retrospect, I think
that the transfer to a zero percent credit card was a great idea. It
gave me the opportunity to actually accumulate some forward momentum
since I wasn't fighting the tide of interest.

As for me, I went out to a celebratory dinner last night in honor of
the achievement.

Next up is my car loan. And with just over 3000 dollars left,
something tells me that I'll be paying that off early as well.

Wednesday, October 03, 2007

Don't Waste Time

Ok, I will admit it up front. This post is a short rant, but a rant
with some practical tips and ideas.

Frequently in my life I get bombarded by situations where my time is
wasted. And I cannot let it roll off my back all of the time. In fact,
it is probably one of my biggest pet peeves that people waste my time
without a good reason.

If I am going to be meeting you somewhere and you don't show up at the
time you said you would and don't let me know ahead of time, you're
wasting my time.

If I am going to be doing some work for you and you had told someone
else to do the same work and we both do it, you're wasting my time.

If I am waiting to make a turn and the person on the other side of the
road coming toward me has no turn signal running and then makes the
same turn as me, he's wasting my time. I could have went already,
except I had to wait because he/she didn't tell me what he/she was
planning to do.

Wasting other people's time for no reason is rude.

Key Ideas:

1. Personally, I really try to apply the golden rule to time. For me,
time can be just as valuable as money, and sometimes even more
valuable. Regardless of what people do with their time, it is probably
valuable to them.

2. Each time you interact with someone and you need something from
them, be aware of the time constraints. If you are not 100% sure about
when you need it done by, or how long it will take to get done, ask
those questions. It makes it much easier on everyone if expectations
are set up front which can be met.

3. Once you have expectations set, it is critical that as things
happen which change impact time that the information is communicated
as soon as possible to everyone involved. This gives people the
maximum amount of time to adjust.

4. Make sure that you let people know that you don't just appreciate
that they do something for you, but also that you know they are busy
and you appreciate the time that they spent on it, even if they are
not super busy. Calling attention to the sacrifice of time will likely
make them more aware of your time as well.

Saturday, September 29, 2007

The End Is In Sight

After a very long journey of about 7 years, I will soon be paying off
my second student loan. This loan is a private loan which
unfortunately did not have any tax-deductible interest so it was in my
plan to move this to a zero-percent credit card. I've done that and it
has made a huge difference.

Making progress wasn't super easy, but I took most of my extra income
and tried to put it toward this debt. For me, one of the biggest
benefits to paying off this bill would be the increased monthly cash
flow. Now it looks like there will be fewer than 6 payments left,
depending on how much I can pay toward it each month, since there is a
balance of 1290 dollars left.

The amazing thing about paying off debt for me is the feeling. The
debt actually feels like a weight. And as it is paid off, I feel more
and more confident and in control. I think that this just comes from
knowing that as time goes by, more and more of my money is actually
mine and not going to other people.

Wednesday, September 26, 2007

The Next Victim is You?

Check out this article about the war in Iraq.

http://www.examiner.com/a-953145~Bush_quietly_advising_Hillary_Clinton__top_Democrats.html

I'm interested in how this goes because there are a ton of factors to
consider in terms of the economic ramifications with regard to how the
war goes. This morning I learned that the president will be seeking an
additional 50 Billion on top of the 150 Billion already slated for
Iraq for this fiscal year alone.

From a mutual fund perspective, this is quite interesting. I know that
many of the mutual funds that invest heavily in Aerospace and Defense
have done quite well as a result of the Iraq expenditures. In fact, I
know someone who has seen gains of close to 30%. This is amazing stuff
really. But if you are addicted to those gains, its best to keep an
eye on the ball in terms of what is going to happen in Iraq.

It appears that Bush is trying to advise the candidates that there
simply might not be an easy way to flip a switch and be out of Iraq in
2008. If the war continues, it will continue to bloat our national
debt figure. This was just recently increased.

http://money.cnn.tv/2007/09/12/news/economy/federal_debt_limit.ap/index.htm

In reality, it is worth considering whether or not this can continue.
As more and more money is spent on these types of programs, the cost
to simply service the debt (that is, the interest) is out of control.
While the economy grows, the hope is that there is more and more money
made so that there is more production to generate tax revenues to pay
the debts incurred by our nation. However, the other hope may be that
we have inflation, since inflation will mean that those dollars that
we owe are actually much cheaper in terms of real goods and services.

Interest rates were just dropped, so this in theory is supposed to
help the economy. However, we've already had a long period of steady
growth. And with the increased inflation that comes with a rate
decrease, the real question is, how much longer can the economy grow?
And if rates aren't increased, will we end up in a hyper-inflationary
period?

And with the likely successor to the presidency being a democrat,
possibly Hillary Clinton and a universal healthcare plan which will
also carry a cost, my impression is that none of these big trends
seem good for anyone's wallet.

Friday, September 21, 2007

The Importance Of Resources

I've never been more aware of how precious your precious resources can be until very recently. For me, my most precious resources are my health and my time. Thankfully, I am in good health overall. My time, however, has become extremely scarce and that has had a direct impact on my financial situation, for the good and the bad.

The Good

The reason I am so short on time is that my full-time job has become hectic. I've had the opportunity to prove my worth and I've been subsequently rewarded and recognized for that work. The nice rewards come at a price though. And when your already-scarce resources are depleted even further, you start to wonder what the true value of those resources are.

The Bad

This brings me to the bad part of being so busy. The lack of time has really forced me to divert the focus that I had on my other side projects which were devoted toward passive and multiple income streams and get back into all-in-one bucketing in terms of income. This doesn't provide enough diversification for me. In some ways, I'd trade 60$ from one large income source for $50 at another in some cases. The trade off for more diverse sources of income is worth it to me. I feel more comfortable that way.

The Not-So-Ugly

For me at the moment, this is a problem. I have too much work to do. For many people, this is a "high class" problem. Its much like having too much money or a house that is too big that you don't have time to clean it. I can complain, but it starts to seem somewhat pale in comparison to people who are starving.

Conserving your resources, especially scarce ones, is key, however. Personally, I am managing this by taking time off and resetting expectations. If there are commitments that I cannot escape, I will commit and do them. If there are things that can be re prioritized or altered, I will do that. All of this is done with excellent communication. In that vein, I would like to thank people for continuing to check this blog. And although the posts will be rather sparse in the upcoming months through Christmas, I would like to thank you for visiting.

There's lots more for us to learn and it should be an exciting ride.

Friday, September 07, 2007

401k Changes

I just got word from my company that they are changing my 401k options again.

I am a little excited because there is finally an option that is an
S&P 500 fund. This is the first time that we have had any fund that is
designed to track one of the major indexes. I like this idea because
it really makes it a bit simpler to keep track of.

Thankfully, the options that they are removing is one that I didn't
particularly care for anyway due to my age: a dividend-focused fund.

In the end, I checked my retirement outlook today and things are
looking quite good. Currently, I am planning to work part-time into
retirement and that helps quite a bit with defraying the costs of the
first few years of retirement until later on when it may no longer be
feasible anymore.

my current allocation for my retirement account according to fidelity
is 91% stocks and considering my age of late twenties, I think that
this is quite reasonable.

Sunday, August 26, 2007

Do Better With Your Time

Recently, I've been extremely busy with some work commitments. The
interesting thing for me is that this increased work activity has
really helped crystallize some of my feelings with regard to time. And
these ideas are a critical part about my view on personal finance. I'm
curious to know if others feel similarly.

Time is money. That is, Time, in some way, contains energy. Money, is
also energy. In the act of working, I am able to compound and increase
the amount of money that I have. I am exchanging my time and effort
and thought which are components of my work, for the productivity that
I produce. And this production gets me money from my employer.

However, the first dollars that I make each day, week, or month are
the most valuable. Then the ones that I make at the end are the most
valuable. (Forget about taxes for a minute.)

The reason is, the first ones help me have a place to live and food to
eat. And the last ones are the ones that I can use to really improve
my life long term by saving, investing, and planning for the future
(both short and long term).

Obviously, you want to earn those first dollars first so you can
survive. But its the dollars you make at the end which make you
"happy" in the sense that they secure not just your todays, but your
tomorrows as well.

All of this is important because I realize that lately, I have given a
tremendous amount of my time (which is energy) to my work
committments. And although I go through this from time to time, it is
easy to start to wonder why it is worth doing. And the simple answer
is this:

I don't know how long I will live, but I think it will be a long time.
And I don't know how long I'll be able to really work, but I'm sure it
will be less than I'd like.
So why not make myself as comfortable as possible, by saving more than
I need right now while I can, so that later, when I do need it, it
will be there?

I challenge everyone to do better with their time. Time should be
spent doing something of value; something that makes you really happy.
Or if not that, then it should be spent so that you have the things
you need to live. And if not that, at the very least, it should be
spent accumulating so that at some point in the future you can do more
of what makes you happy, while doing less work.

Thursday, August 02, 2007

Emergency Fund Strategy

In terms of building an emergency fund, I've found that the "freedom
fund" strategy seems to work best for me. Although I keep almost all
of the savings in the same high-yield savings account, I allocate it
to different buckets.

Each year, I consider what the "big" and "unexpected" expenses will
be. This could be weddings and holidays, vacations, tax bills, etc
that will have to be paid throughout the year. If I am unsure, I look
at last years bills and inflate the total by a few percent. Then I
round up a little bit.

So, if I ended up with a total of 189/month would be needed, I'd make
my goal 200/month saved for these kinds of expenses. Then when they
come up, if they are less than that month's 200 dollar deposit, I just
take it out of that month's deposit. If it is more, I withdraw the
difference from the account. And if it is less, I deposit the
difference into the account. The whole time, this money is sitting in
an account that makes a nice interest rate.

The nice thing is the interest I'm making. Since these bills happen
fairly regularly (every month or two), the money is somewhat short
term. But for the short term, I make interest on the money that is
then applied to my "emergency fund". All of the interest from the
high-rate account funds my emergency fund.

This is a sum of money that I keep aside, never to be touched except
in a real emergency like a job loss, medical emergency, natural
disaster, fire etc. Currently, my goal for this fund is to have 3
months of expenses in this risk-free savings account. That, combined
with other savings and "freedom fund" money (also in that account) and
curbed spending in the face of an emergency could easily get me
through 4-6 months and I'm comfortable with that.

Once all the goals are met and debts are paid down, the goal will be
to create a fund for investing. Debt reduction will be a major
component of what happens with my finances for the next several years,
however, since I still carry a large student loan debt load. It was
money well spent, but I intend to continue to seriously attack the
balance so as to reduce interest payments over the life of the loans.

In addition to my "freedom fund" deposit, I also deposit a small token
of money into the account that I apply only to my emergency fund
target so that I always can be sure that this goal is being worked
toward. Here is a percentage breakdown of how I manage.

Emergency Fund:
1% of monthly income (deposited)
.05% of monthly income (interest)

Freedom Fund:
3% of monthly income (deposited)

The nice thing is that by having both a "freedom fund" and an
"emergency fund", you don't have to worry as much about the emergency
fund because you've already handled most of your major "emergencies"
in your freedom fund.

Categories in my freedom fund include:

Car Expenses
Excise Taxes/Water Bill
Christmas
Clothes
Entertainment
Vacation
Home Repair
Medical/Dental
New Car Down Payment

Wednesday, August 01, 2007

Homestead Insurance

For those of us who own homes and or condos, some extra protection is almost always welcome. For me, this came recently when I went and *finally* got an item crossed off my todo list of financial planning: Homestead Insurance.

Without going into excruciating detail as to where the idea came from and all of that (You can read about that stuff <a href="http://www.sec.state.ma.us/rod/rodhom/homidx.htm">here</a>. Since I live in Massachusetts and I have this available, I finally took advantage of it. Clearly if you live in a different state, the laws are going to be different, but it might be worth checking to see if you have something similar.

As for me, now that this is taken care of, I can rest a little easier. Of course, depending on your situation, the way you handle this is different. I would be certain that you understand your situation quite well before making any kinds of decisions about doing this; and when in doubt always consult a lawyer. But for me, I found the process quite simple and the staff were quite helpful.




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Friday, July 27, 2007

Finances and Current Real Estate Markets

It still is amazing to me in this real estate market that things are still doing as well as they have been over the past few months (the last couple of down days in the market notwithstanding). Here's what I've been thinking about.

The problem, as I see it, with many people is that they bought more than they can afford. Surely, if you can barely afford your 'monthly nut' when it comes to your mortgage, it is going to be a bad scene for you when other expenses creep in like increased property taxes or an accident or a sudden layoff or medical emergency.

Regardless of the nature of the emergency, it is important to realize the importance of common sense when it comes to purchases.

Remembering that the nature of our capitalist economy (which I happen to like, thank you very much) is that people are going to be making money during every transaction. If they aren't, they won't last long.

When you buy a car, you get hit up by the sales guy for sales (commission) and then the financing guy for the loan (loan interest).
When you buy a house you get hit up by the real estate agent (commission) and the mortgage broker/bank (loan interest).
When you go to college, you get hit up by the college (profits) and by the financial aid office (commissions on loans? or perhaps perks) and the banks (interest on loans).

The bottom line is that all of these things which seem like "good things" to do end up costing you money. And if you aren't extremely vigilant, you will be sunk. I've been sunk before and it is not a pleasant feeling. Do yourself a favor by being extremely skeptical, reading everything, and asking people to explain all of the money that something will cost you before you sign or do any deals.

As for the current situation with housing, even if people were careful, they still might be stuck going forward. Here's why:

1. Housing is still down. Real estate in many areas is hard hit and people are having to reduce the price of their homes/condos, and in some cases take losses in order to sell.

2. Due to the increased inventory, as more people have problems like emergencies, job changes, etc and need to move, they have a harder time selling for "legitimate" sales that have nothing to do with financial hardship really. But in the end, carrying multiple house payments or trying to juggle finances for longer than anticipated (perhaps 12+ months) while trying to sell, but still not selling due to reason 1, they find themselves losing the house due to foreclosure.

3. Now due to #2, there's even more houses on the market. But now the economy is starting to slow down, and in some cases, unemployment has started to creep in and even more people default and face foreclosure.

4. As a result of foreclosures, prices have started to hit bottom and people with cash have started scooping up properties for prices as low as 75 or 70% of what the original value is.

5. Some time passes and the economy and housing market comes back. You rejoice. You're ready to finally sell because you think you can get what you need to get in order to sell. Unfortunately, the guy from #4 bought a place like yours for 70% of what you paid. Now he is looking to get 95% of what you paid and decides to sell, making a tidy 25% profit in under a year or two. You, unfortunately are stuck waiting until all those guys have discarded their properties.

Many people would have helped themselves quite a bit by understanding the fine print and true costs of the deals that they were getting into. I really hope it doesn't play out the way I've outlined above, but I don't really see how it doesn't.

Tuesday, July 24, 2007

Core Inflation results in Overinflated Ideas

One of my pet peeves lately is the idea that the economy is doing so great because of the low inflation rate. Core Inflation is hovering around 2.2 percent and that is being heralded as great news with regard to the overall economy.

The problem, as I see it though, is that the inflation that I feel in my monthly/yearly budget continues to increase at an alarming rate. As a simple exercise, I've been tracking all of my expenses for the past year and a half. My household food expenses were averaging somewhere around 200 dollars per month about 1.5 years ago. However, now, the average is often closer to 325 per month. This means that there is a significant increase in the price of food. This is about a 35% increase.

Thankfully, food is not the big expense in my budget, but it is getting to be that way. If it continues to creep up at this level, by the end of 2008 I will have a monthly food budget of about 440 dollars per month.

Unfortunately, I have not been tracking gas expenses, but those too have been creeping up. And my monthly commuter pass went up by 50 dollars per month as well. That is a 600 dollar per year increase.

The reason that these reports really burn my toast is that 2.2% is no where near the amount of real increase in regards to overall inflation. Property taxes and services all continue to increase in price as well. In the end, household monthly expenses are increasing at a rate of about 5% each year. As debt continues to be paid off, this is a manageable number, but once debt is completely paid and money can no longer be "saved" by paying off debt and eliminating interest payments, these increases will become problematic.

Planning for Retirement
The idea that real, average-joe inflation is 2.2% is a bunch of hot air if you ask me. So I have no intention of using that figure. Instead I reworking my plans towards planning on 4 to 5% of real average-joe inflation because 2.2 or even 3% is dramatically under estimating it, in my opinion. And although it doesn't seem like that much, toward the end of a 20 year retirement, those 1 or 1.5% differences will make a big difference. I worry about people that think they can get away with a 2 or 3% increase. I think that is overly optimistic.

Wednesday, July 18, 2007

HD Share buyback?

Since I am relatively new to investing in plain stocks (my investing before this has been exclusively in mutual funds via my 401k retirement account), I have never encountered anything like this before:

Today I received an email offering a purchase of my shares in HD. Granted, I don't own many shares of it so I have no intention of taking up this offer, but I still find it quite interesting that I've never really heard of this before.Here is a partial copy of the email I received.

<snip>


Below is information regarding a tender offer for your holdings in "HD".  This offer expires on 8/16/2007. THE HOME DEPOT, INC., A DELAWARE CORPORATION (THE "COMPANY," OR  "HOME DEPOT"), IS OFFERING TO PURCHASE AT A PRICE NOT GREATER THAN $44.00 PER SHARE NOR LESS THAN $39.00 PER SHARE, NET TO THE SELLER IN CASH, WITHOUT INTEREST (IN INCREMENTS  OF $0.25).
</snip>

The rest of the email is information explaining how to take up this offer if I should choose to sell my shares. I was familiar with the concept of share buybacks. But I wasn't familiar with the actual process of how it worked.

Wikipedia has a great article explaining dutch auction share buybacks. Now I'm curious to see how the stock price changes over the longer term with this buyback going on.

Thursday, July 12, 2007

This Tax Change Sounds Dangerous

I read...
this story
this morning about how the big shots in Washington are looking to change the way that taxes are handled for the managers of large hedge funds. I find it to be pretty interesting when you start thinking about it.

Certainly it is tempting to simply say that since these people are rich, and they can afford it, lets tax the heck out of them. However, I think that this kind of thinking is a mistake. I studied Economics in college and found it fascinating since the beginning of my studies. But when I read this story, some major red flags popped out for me.

If you take the tax break away, you certainly will be getting more income in the short term. However, my gut tells me that there will be a long period of lost money in the long run because less people will want to continue doing business since it is not as lucrative. This will ultimately result in less revenue. Furthermore, many of the ultra smart, ultra rich people will have smarter experts that will still find ways around these laws and shield their money. So, I don't think it is really worth making a change like this.

I generally don't like the idea of punishing the rich. I don't think it usually works. Rich people know how to protect their money. And furthermore, I hope to continue to amass more and more wealth. Sure, I'm not a hedge fund manager, but when you start getting tempted by the money that these people are generating, its only a matter of time until people lower down on the "Rich" cycle are going to get hit up.

Wednesday, July 11, 2007

Understand Your Interests

One of the interesting things that I've "figured out" over the past few months with regard to my debt repayment is the importance of paying early on daily compounded balances. I've been doing this myself over the past year and it really makes a difference.

The first question for all of your debts should be "how is the interest compounded?" For many debts, the interest is calculated each month on a monthly basis. For others, it is calculated up front for the life of the loan and then factored into your payments. Prepaying effectively does nothing to save you money on interest.

If however, you have credit cards, it is likely that you have a type of interest calculation that is called the average daily balance or two-cycle average daily balance method. If this is the case, paying off your balance earlier in the month can save you money.

This tip is not about paying extra principal per se, although you obviously should do that. Instead, the tip is about how you handle your cash flow. Let's say, for example, you normally pay your bills two or three times per month, lets say on the 10th, 20th, and 30th. And in this example, your monthly credit card bill is usually paid on the 30th of each month. If you pay it on the 20th of each month, you are saving yourself ten days worth of interest.

In a month situation where you carry a 5000 balance at 14% compounded daily and plan to pay down 500 dollars of principal, here's how that would help you:

If you wait the full month between payments, your interest will be 1/12 of the 14% of 5000, which is 58.33
Instead, if you wait only twenty days, your interest will only be about 1/18 of the 14% of 5000, which is 38.89.

That means that you are saving about 19.34 in interest by paying 10 days early. Of course, keeping that interest down makes sure that the next payment reduces the principal even further. Therefore, if you have money in your account, and plan on paying that credit card in a week or so anyway, just pay it now. You will really help yourself out with interest over the long haul.

The one caveat here is that you want to make sure that your payment is not TOO early. If it is too early, it will be considered a double payment. For example, if your payment due date is the 30th and you try to pay on the 5th, be careful. Depending on how your billing cycle runs, the payment may arrive so early that it is considered a second payment on the previous month. Then you may have to pay again in that month. And if you thought you paid, but you didn't, you will then be late and they will really get you with late fees and high interest default rates.

As always, I am not a financial adviser. If you have questions about your interest and payments you should contact your creditors and read your agreements in order to make sure you understand how this strategy might help you.

Tuesday, July 10, 2007

Coffee or Freedom?

I'm back off Dunkins. Well, sort of. Since things were going so well lately in terms of finances, I found myself getting a little bit too comfortable with my morning coffee routine. If you add it up, its about an extra 10-12 dollars per week that I was spending on my morning cuppa. Then in the afternoons, I might run down and get a starbucks as well. Another 6-8 bucks per week. All told, I was spending close to 20 dollars per week just on coffee or tea! This seemed ridiculous to me even without any of the latte factor hype.

In the end, I've decided that I will try to switch back to my old ways of making coffee at work. I use the coffee-single "tea-bag" type coffee. Its not as good as Dunkins, that is for sure. But, I think that in the long run I will be happier knowing that I didn't waste 20 dollars a week on something that I really didn't need to have every day.

I think that once I get rid of all my non-mortgage debt, I will be more relaxed about these things, but for me, getting out of debt is something that makes me much happier than a cup of coffee.

Monday, July 09, 2007

Back On The Horse: Gardening and Exercise

This weekend was quite nice for me. I was able to wrap up several projects and get some plans made for new ideas that I am working on. My goal is to generate enough extra income to get my loan (see my NCN chart on the right) down enough to be paid off around tax return time 2008.

I reread Rich Dad last week and again, I found it inspiring. I think it is a great book for people who are looking for inspiration to be entrepreneurial. I'm not particularly fond of the real estate ideas in the book, though. But I think that is more of a personal preference than a statement about the ideas themselves.

I started exercising again and I am happy to be able to return to that. If I can avoid straining any muscles like that ever again, I will be happy. The upside of not exercising was that I was able to catch up on my reading and I've been tearing through the Harry Potter books in anticipation of the movies. I am curious to see how they try to capture so much detail and action into a short movie, once it comes out.

As for gardening, things are going well and my lettuce is growing best of all of my vegetables and will be ready for harvesting in about two more weeks. With any luck, that will give more space for my pepper plants which are in the same pot, to grow more and still have time to yield some peppers before the end of the season. Like anything, I've learned quite a bit this year with planting vegetables and I am looking forward to an amazing garden next year, now that I've learned so much.


Friday, July 06, 2007

How Much I Ate

Recently, I was totally shocked at the fact that the price of milk in my local supermarket went up over 4 dollars per gallon. Granted, it was a brand, not the generic (which still hung dangerously close around 3.80), but still this seemed crazy. And recently, I was calculating my budget and it appears that I was spending on average about 50 dollars per week on food. This seemed a little nuts. And this doesn't really even include the coffees and food that I buy outside of the office or home.

This brought me to think about how much (in terms of cost), that I was eating. So, I have recounted all of the food I ate during a day in the not too distant past to give you an idea of what I am dealing with here. And I really have to confess that I don't eat as well as I should, all the time. But frankly, who can afford to eat right if 60 bucks a week barely gets me this...?

 .33 corn
1.29 1/2 pesto sauce mix
 .60 pasta
 .20 olive oil
 .50 milk
1.50 cereal
 .05 filtered water
 .35 plum
 .35 ice cream sandwich
1.79 dunkin donuts coffee
4.29 leftover calzone


Grand Total: 11.30
Even without the take out type food, it is still over 5 bucks...and I didn't even eat that much that day!

So, as an exercise, you might consider estimating the costs of what you are eating. It is interesting to consider not only how much of the food was healthy, but also how much money you spent on home food versus food bought away from home.

Thursday, July 05, 2007

Net Worth Update for End of June

Net Worth

June has marked a serious improvement for net worth. Largely due to some unexpected income, It was possible to make a serious dent in a student loan. The remainder of this loan is sitting on a zero percent credit card for a few more months and large payments are now going to be directed at it in an attempt to pay it off before the end of the year. That may or may not be a reasonable goal, but I expect that it is.

http://www.networthiq.com/people/easychange

Business investments continue to do well. I'm satisfied with my paypal interest rate as well as the amount of savings that is now accumulated. I'm also happy with Prosper, of late. The total savings means that given a job loss that there is easily 6 months of expenses saved. This is a huge milestone in terms of emergency fund planning. Of course this will continue to go up and down, but knowing that there is a real cash cushion is something that everyone should be striving for in my opinion.

New Thinking

I'm rereading Rich Dad for the third time this year and I am struck by the simple notion that fear and greed are the emotions that trap us when it comes to our money. I find that this is absolutely true for me. Last year I felt afraid and had no control over my financial situation. Now, I feel empowered. I have educated myself and continue to do so. I am continuously working to realize my dreams -- and accumulating the wealth necessary for them.

This has resulted in watching the following Finance Metrics like a hawk:

1. Total Net Worth
2. Total Free Cash Flow (monthly - budgetting)
3. Savings Rate (savings to income ratio)
4. Retirement Projections (contributions and how much you plan to have when you retire - monthly income)
5. Goal Progress (debt reduction)

As a result of tracking all of these metrics, it becomes much easier to find holes in the financial situation. If you are not sure where your holes are in your budget, I'd ask if you are tracking these figures. I feel that tracking these over time gives me real data that tells me if I am moving down the correct path with personal finances AND if I am making enough progress.

The real issue for many is that they aren't moving fast enough and are doing nothing to pick up the pace. Time is a huge factor when you consider compound interest. Once I really understood that, it has made me ravenous in terms of finding additional income and other ways to accelerate my progress.

Net Worth News

In major news, Bill Gates is no longer the richest man in the world. He has been ousted by Carlos Slim. If you're curious who the richest people in tech are, check out the link:

http://mashable.com/2007/07/04/10-richest-people-in-tech/

Tuesday, July 03, 2007

Exercise and Finding More Income

Well, I've hopefully given myself enough time off so that my body can heal. I started yesterday with extremely light exercise and I am planning on working my way back up. It has taken a huge amount of self-control to not do something for these past 10 days. I feel like I am missing out somehow by not doing anything really active.

Today I am able to get out a little bit early and I plan to meet some friends this afternoon, but I will be using the time until then to work on some pet projects that have been brushed aside lately with the hope that they will eventually yield me some additional income.

My consulting work has been rather slow, of late. And the my situation with side work may well be drawing to a close so it is critical for me to find additional sources of income in the near future so that I can continue my debt repayment. Again, this is not money needed for expenses, but only to continue accelerating my plan of getting out of debt fast.

Additional Income Pain

Originally I had hoped that elance and other sites would be a good way to get additional jobs but I am finding that the difficulty I experience when browsing those sites is not terribly unique. I personally have a hard time when I have to compete with people who can afford to work doing technical or design jobs for 5 or 10 dollars an hour. That just isn't worth it for me. Apparently, this is a similar issue for other people who use these services. I'm looking for quick hit jobs that can generate income, but not tie me up for months or years into the future unless I choose to be. I like the freedom that comes with doing this kind of work on the side. But I wouldn't want to be stuck doing these side projects for main income.

Doing What Works

My personal experience is that getting clients really requires referrals (which I've had success with) and also doing high-quality work that serves as a reference. This is also doable, but can be frustrating depending on your clients. The advantage of price is simply over. There are way too many people in Asia or Eastern Europe who will do the same work for pennies on the dollar. I don't begrudge these people for doing the work; its great if they can do it. I simply need to focus on doing things that will grow my opportunities for side income rather than repeating the same cycles which lead to low levels of reward.

Friday, June 29, 2007

You CAN Start When You're Young

When I was younger, I used to talk to my grandfather quite frequently about money and money issues. He started teaching me this stuff when I was in high school and college mostly. But it was really interesting when I look back on it because I always felt like he was out of touch. I always felt like he was not really able to understand how difficult it was to actually save money and have that much "extra" left over. I mean, even during my best times, I had only a few hundred dollars of extra money. In fact, it wasn't until I was out of college that I actually had more than 1500 dollars to my name at any one time.

My grandfather was wise, however. He touted the idea of index funds. He described to me the ideas associated with great books from Mr. Bogle. And the ideas make sense to me now more than ever. Unfortunately, I didn't jump on them at that point in my life. It wasn't until I was in my mid twenties that I really started to realize the real importance of investing. I still have enough time to do some amazing things with investing and working hard, but the main point is that you CAN start when you're young.

If you don't have the minimums for some of the mutual funds you want to invest in, don't be discouraged. Instead, try to save up over 100 dollars (better yet two or three hundred) and then deposit the money into an online brokerage account with low trading fees.

I don't get any kickbacks from these companies, but I've been using Sogo invest for my personal stock investments (non retirement) and sharebuilder for my roth. Since sharebuilder has a fee for roth accounts, you might want to consider simply opening an ING account until you get to a few hundred dollars.

Start small. When you're a kid or young adult in high school or college, there are many times that you get small amounts of money for special occasions. Instead of spending all of it, simply take a dollar once per week out of your discretionary income and put it aside. Then when you get large chunks of money either as gifts or paychecks, try to save 10 dollars per chunk.

Each time you get a decent amount set aside, put it in the a high yield savings account. In this way you won't have to change your habits very much but in the course of 6 months if you have some sort of job, you will likely have between 100-200 dollars to start with. I wish that I had started this kind of habit earlier on in life. I don't really think that I've done that badly with my money, and I am doing better each day. But what seemed impossible when I was younger--saving money and investing--now seems simple and obvious.

For a great example of how young people can become investors on their own, check out <a href="http://www.pencils2.com/pencilsfund.html">Pencils Fund</a>

Thursday, June 28, 2007

8 Reasons You Don't Like Yahoo Finance

From reading various comments, I've decided that it is time to put together a list of reasons that Yahoo! Finance is somewhat annoying to many pf bloggers and other readers out there. With any luck, this will help to improve the finance writing that is being produced. I find it quite annoying actually that many of the ideas and comments go ignored and unanswered by the people in charge over at Yahoo Finance and the authors. These are not all my opinions, they are pretty much gathered from the various comments for the articles.

1. There's nothing new. -- This is by far the complaint that seems to top the comments list. I see some variation of this complaint on almost every single article that is written. This is something that I absolutely have to agree with. What is most interesting about this complaint is that very few of the writers really make an effort to develop original advice content. Most of the writers who are developing new content are using their personal experiences to "spice up" the same old advice.

2. Everyone's in bed together. -- This is another common theme that pops up on the comment section. Often, people are talking about careers, or about money, or relationships and the article becomes a sales pitch for their latest client or some new product that is being offered. This really offends lots of people, myself included. Your clients should not be mentioned by name in the article, in my opinion. The information can be made just as valuable without selling the client. The problem with mentioning by name is that people don't know whether or not the authors are doing it to be "shmoozy" or to genuinely feed information to users.

3. Oversaturated -- Theres too many career columns. There's too many columns that deal with investing. Its really that simple. There just isn't that much to write about that you need 3+ columnists in each of these categories, especially when you take point one into account.

4. Non-Expert Experts -- The problem with most of the "experts" on yahoo finance is that they are not all really experts, per se. This is a major theme in many of the comments. These people have become successful finance writers. That is certainly true for most, if not all of them. And perhaps that is why Yahoo! Finance wants to talk to them. However, when it comes to being interesting and providing clear content, it makes sense to get financial gurus who have *made* it before. One person who is notably absent is Jim Cramer; this is likely because he has non compete deals with his other organizations, but it makes sense when you think about it. He is someone who has made large sums of money by investing. Certainly one or two of the others may have made significant sums by investing as well, but largely they are making money by writing. There is certainly nothing wrong with that, but they are not what some of the people are looking for -- financial gurus who can talk to them about investing etc.

5. Great Expectations -- Regardless of whether readers admit it or not, we expected Yahoo! Finance to be different. Not different from other services out there, different from what it is. I think there is this expectation that we are going to get content like Jim Jubak et al. from MSN Money or The Fool writers etc. These types articles talk about investing and understanding the market, all with the assumption that you know how to manage your money at this point for the most part. The tough part is that most of those types of investing articles come with a subscription to a service that you have to pay for.

In the meantime, perhaps people that want real personal finance types of advice should be looking at quality blogs like The Simple Dollar and Free Money Finance rather than Yahoo! Finance. And if they want investing information, they can read Jubak and a few others over at MSN Money. I've liked their stuff so far, and it's free. There's also several good blogs that deal with this content as well; although the overwhelming trend from the PF Community seems to be leaning to passive investing and no-load index funds and index etfs.

www.thesimpledollar.com
www.freemoneyfinance.com

6. Concrete v.s. Concept -- Many of the articles are written in a boiler plate format. When writing to a large audience, it is quite tempting to provide these kinds of boiler plate articles. The article is generally setup with a simple amount of information and then follows with a series of themes on how to change your thinking, each backed up by some prevailing wisdom or explanation from the author or link to some resource where you go to learn more. Many of these articles assume that people have everything that they need in order to be successful, but instead, it is often the case that people need concrete steps that they can take to improve their situation, not simple advice to change their thinking. Readers yearn to learn new concrete things they can do in their life to save money or earn more or become more productive. Most of the articles just don't offer that.

7. Bait and Switch -- Often a title is catchy and the content of the article doesn't even come close to meeting the content implied by the article. Granted, this is not a problem that is specific to Yahoo! Finance, it is simply something that seems to be an obvious complaint that pops up in their messages.

8. Out of Touch -- The problem that seems to creep in for many comments on these articles is somewhat difficult for others to appreciate, but for those that write it, it's the cold, hard truth. That won't work for me. The reasons and descriptions and litany of explanations differ, but the end result is simple. The comments describe a person who doesn't make enough or who is in a place in their life where that advice just doesn't work. I will grant that some people are just making excuses. Others are genuinely in the wrong place to take the advice and the articles don't connect with the readers who leave the comments.

One classic example follows: "Try being a single parent of three, making almost minimum wage, and SHOW me how to save a penny. Some people have more bills than they have money. Even with government help." --Ms Playful

I think that is a great example. The issue here is that this person is already underwater. Telling someone to start saving 10% of their money when they are already underwater is a great way to seem out of touch. Ms Playful probably needs more substantive, personal advice and help than this. It is quite possible that she is in serious debt and feels totally overwhelmed, having to support 3 children and herself on meager wages.

So that's it: my list of why you don't like Yahoo! finance. If you think these reasons are not valid, please leave your comments. I'm really interested to know why you don't like Yahoo! finance or perhaps even why you do!

Tuesday, June 26, 2007

Taking A Break

This weekend was pretty good, but there is definitely still some stuff that needs to be done. I have caught up on a bunch of things lately though so I feel pretty good. Due to a slight injury, I've stopped exercising for the next week or so. I'm hopeful that my body will heal and I will be able to resume afterward. We'll see.

In other news, this weekend was a great opportunity to relax and take in some sun. I enjoyed sitting out with my plants and having coffee in the early morning. And a quick walk down the jetty where I live without treating myself to a lunch out was a healthy and frugal activity this weekend. I also was quite productive on the side in order to move some projects forward for side income which is a huge part of paying off debt at this point.

Amazingly, this month's finances were all but wrapped up by the 15th of this month, so I am looking forward to getting the final pay of the month and 'closing out the books' lol. It marks the halfway point for the year and I think that there will be quite a few causes to celebrate in terms of financial progress. Moving forward, I think that there is a ton of work that still needs to be done, but it is really important for me to remember that it is a process.

To ensure that my plants don't all get eaten, I am planning to mix up a soapy water mixture as an alternative to an insecticide to save money and also make sure that my veggies stay as natural as possible. Believe me, I was rather chuffed upon discovering a bug on my nice lettuce this weekend!


Saturday, June 23, 2007

Not Getting Discouraged

Lately I've been somewhat discouraged. In short, I hurt my back while exercising so my exercise routine is down the drain and while I tried to 'work around' the problem, I'm convinced that I am making it worse, so I have decided to stop exercising until I feel better.

Yesterday, I was out for lunch with an old college classmate. It was a great time and we were able to catch up about friends and people we knew etc. But after a little bit of time, we talked about finances. During the lunch I discovered that despite how well I was doing with paying off my debt, I was apparently quite behind.

He did an amazing job of paying off his college loans right after college. I had mixed emotions at that point. I was happy for him, but irritated that I hadn't done the same thing. I guess this is why it ranks as one of the biggest financial mistakes I've made. It is also why I crusade against student loan debt and work very hard to talk to people I meet about their college debt situation.

If I can help anyone through the pain I've dealt with, I will. But after dealing with it, I realize that my situation is not bad since I have been aggressively paying off debt. Sure it wasn't a great situation, but the money wasn't wasted entirely since I own a condo.

The important thing to realize about your financial situation is this: there's always someone doing better and doing worse than you. Look to those doing better for inspiration, not a measuring stick. And look to those doing worse as someone who you can educate (if they want it) not scold or discipline.

Removing the self-judgment once the problem is identified and being worked on is key in order to progress financially and feel stronger emotionally going forward. But then again, sometimes I need to be reminded of old lessons.

Wednesday, June 20, 2007

Planting Vegetables in a Potted Garden

Well, not long ago, I decided to plant some big pots of vegetables while I did some landscaping in my front area. I had two nice big pots that were already available and so I decided that it would be a good idea to go ahead and plant some vegetables so that I would have some nice eats during the summer. For the vegetables that I picked, I decided on peppers, cucumbers,  string beans, and lettuce.

Of course, one of the pots was unfortunately one that had no holes in the bottom and lots of rain threatened to wash out these newly germinated plants. But, after a trip to the store and a quick transplant, they seem to be much better. Now all of the plants are doing well 3 weeks into the planting process. Although some of them are a bit close to one another so I might end up moving them apart to give them more room. But the news so far is encouraging and I am hoping to save some money on groceries in the fall with lots of nice, fresh vegetables.

Understanding the up front costs is a major issue though. First there was the dirt at about 5 bucks per bag. Then there was the seeds at 1.29 per package. And then there was the pot which was like 5 bucks. So it is not likely that I am going to "save" any money this year. (The water is a non issue because the regular usage falls under the cap so it is a flat fee.)

Next year is when I expect to hit a good upside. There will be no up front costs and it will be all profit since I didn't use all of my seeds from any of the packages. One good thing is that the seeds for the beans were from a couple years ago and they germinated just fine.


Vegetable Swapping is also a likely possibility if I get enough because my neighbor is also doing a garden and so is my mother and some of the veggies that they are planting are different than mine. That might also save money.

Monday, June 18, 2007

So Much For Delayed Gratification

This morning I was flipping through the channels and saw MTV had a marathon of Super Sweet Sixteen on. For those of you who don't know what this show is, it is a reality show where the star is a fifteen year old girl who is planning her sweet sixteen party.

Of course, the do tons of little segments with the girls asking for various gifts and different entertainment for the party etc. And I've seen the show before and although it is something that seemed a little ridiculous, I always just figured that was how the "other half" lived. This morning, however, was the topper for me.


::climbs on to soapbox::

It was a girl named stephanie who came across as an absolute spoiled brat. Who knows if that is really her personality or if that was just selective editing and the stress of the situation. But, even assuming that it was not all her fault, the situation just seemed absurd. She had an "invitation" party where she had a special costume and performers etc just to hand out the invitations.

And we're not even talking about the actual party itself. It was a themed costume party with dancing and masks and the whole deal in a very fancy place. Total price tag? 300,000 dollars. That's right. Three hundred thousand dollars. I wanted to be sick. What any sixteen year old girl could have done to deserve that kind of party at age sixteen is impossible for me to comprehend. Most kids are lucky if they get a party that costs more than a thousand or two thousand dollars. Instead this girl is getting one that costs 200-300x what most lucky kids are getting.

We really need to reconsider what we are doing as a society when we have these kinds of outrageous expenses. I am the first person that will defend your right to have extravagant parties and spend your money the way you want to.

But I think that doing things like this is harmful for the kids both financially and psychologically AND also bad for society in general because it sends this message that this is normal and that things like this should be expected to be done by parents for their kids. Neither one of these statements is reasonable or fair.

If you're going to spoil your kid, at least lets not make a display of it on TV.

::off soapbox::


Goodbye PMI?

PMI, as most of you probably already know, is Private Mortgage Insurance and is basically designed to protect the lender so that if anything happens to the borrower, that the lender is assured to get the value of the loan back. Unfortunately for me, when purchasing the condo I live in, it was not with enough money to avoid the PMI. The PMI is no laughing matter as it sucks away close to 150 dollars per month. Since I've lived here over three years, that calculates out to about 5400 dollars. It is a horrible waste of money. Unfortunately, the real estate market has been relatively flat where I am and the appreciation is going slower than I would have liked.

In order to get PMI removed, you often need to have another appraisal done on your property. And luckily for me, a few things have been done to the property (new steps, new landscaping, and a new roof) which might improve the appraised value. But the first step is calling my mortgage company which I dutifully did this morning. The nice customer service rep told me that I will be getting a letter within 15-20 days explaining if it could be removed and/or the process to go about doing so. And with any luck, I will not be paying that nasty PMI for very much longer and can devote that money into paying off other debts and/or investing for retirement.

Thursday, June 14, 2007

Great News - Making Progress on Student Loan Debt

Last night I was trying to figure out what the balance on one of my credit cards that I had done the transfer for my unsecured student loans was and I found out that it was much less than I thought. Originally, I thought it was about 1600 and then on the voice machine it said that it was only 890 dollars. I was pleasantly surprised. I somehow thought that it would be more than that but I must have made some payments in there somewhere that really knocked the balance down. So finishing that bill off should be an easy feat for the second half of this month since there seems to be quite a bit extra in the checking account right now. Once that is done, more than half of the balance of that loan will be paid off. Now I just need to get my No Credit Needed chart updated again. :)

Friday, June 08, 2007

New Debt Snowball Plan?

Everyone who is involved in personal finance knows about the idea of debt snowballing. Well, this process has worked quite well for me lately. I've maintained a chart over at <a href=" http://www.ncnnetwork.com">No Credit Needed</a> and I find that it works quite well as a means of keeping track of my debt reduction.

I've made posts before on how I dislike student loans and the process and how my particular situation was handled. I graduated with tons of student loans and even after consolidation, there were too many bills and they cost me way too much in interest and there was no one there to be an advocate for me. But now that things are going well, household spending is under control and the emergency fund is growing steadily in a high-yield account over at ING (submit your email on the right for a link to open an account and get a bonus), I've realized that the finish line really is not that far away.

About 18 months ago, I got really serious about personal finance. I knew the principals already, but practicing them was another story altogether. Now, things are a very different story. Instead of scraping by each month, there is money to spare even after savings and funding the e-fund. Right now, I am considering something drastic: stopping all regular contributions to the e-fund and savings accounts.

Originally, if I simply pay all bills at the current rate without accelerating at all, my final payment for student loan #3 at the bottom of this list will be paid in 20 years when I am 47. This makes me scared and angry all at the same time. So, I'm wondering if it might not be a bad idea to simply try to divert all money to these debts now that there is some cushion in the savings.

1246 (3 months) - student loan 1 paid
1446 (3 months) - car 1 paid
1746 (6 months) - student loan 2 paid
1946 (6 months) - car 2 paid
2396 (10 months) - student loan 3 paid

zero debt other than mortgage = 28 months (less than 3 years just after age 30).
 = 62,628 dollars of debt in less than 3 years.

This plan feels too drastic and over-dramatic for me so I will probably not be doing it. On the other hand, if there are any emergencies that come up, I could simply push the plan back by a month and use that month's payment to handle the emergency. So maybe it isn't that bad of an idea.

I still probably wont do it though. But just seeing that there is the potential there to do it is amazing. I've felt trapped by that student loan 3 for quite some time. Now it doesn't seem like such a big deal.

Thursday, June 07, 2007

Troubles With Giving To Charity

Charity and donating is always an interesting topic when it comes to personal finance. Some people donate time, others money. And regardless of what people give away, the reasons for doing so are almost as varied as the donations themselves.

Recently I heard a report that discussed how local charities are being rated and there is a <a href="http://www.charitynavigator.org/">nice website</a> that you can go to to learn more about your favorite charities and determine how they are actually using your money. If you are anything like me, you want to make sure that your money is being used efficiently.

But getting to more pressing and current issues, the G8 summit is on. And one of the major issues being discussed is aid to Africa. I find this particularly interesting because people are actually working on providing more and more aid to Africa - often to combat the issue of poor medical care. But despite all the attention that Africa gets, especially now with the crisis in darfur, there is little opposition. But today, an article describing how <a href=" http://www.spiegel.de/international/spiegel/0,1518,363663,00.html">Aid to Africa hurts Africans</a>, I was amazed. Check out that article, especially the map for a different perspective.

This week, I discussed an issue that has been top of mind for me lately when it comes to charity. The issue is largely due to the fact that it was brought up in a book I'm currently reading: <i>Atlas Shrugged</i> by Ayn Rand. The idea is this: charity only matters (or has value in terms of virtue) when you give to someone that doesn't deserve it.

The book isn't clear as to whether or not the author believes this. The concept is brought up in a conversation in the book, but it really got me thinking. And I just don't believe that to be the case. A recent conversation with a co-worker really cemented the concept for me. In the United States, there are certainly people who are in bad circumstances beyond their control. However, there are also many, many people who choose to be poor, have a low quality of life etc. They do it out of complacency, out of boredom, out of laziness, or perhaps because their parents lived that way and they never really spent any time thinking about how to live differently. I can speak to this because I have people in my family who are in both situations. It is an interesting observation to make when it comes to people who 'need' help.

So this question remains: When should you donate? Is one dollar of a donation the same no matter who it goes to? And what determines the "virtue" of donating? Is it the state of the recipient and how he/she got to be in need? Or, is it your particular state that matters more?




Wednesday, June 06, 2007

Awkward Family Money Situations

I was about to write this as a comment, but its quite long and brings up a ton of issues so here goes.

First, check out  <a href=" http://hereverycentcounts.blogspot.com/2007/06/money-and-etiquette-why-are-important.html">this story at here every cent counts</a>.

Now on to my response.

I am just mortified by this story. I cannot even imagine that people with kids would expect someone in college to pay for their own dinner. I'm assuming that this is an aunt/uncle/great aunt/great uncle situation and that you are a young college student in late teens, early twenties with no full time job. All of my answers below are based on those assumptions.

If that is the case, they should *splurge* the 20 bucks for dinner. They are an adult here and as much as I believe that you should be independent, while you are in college and struggling for money, you should be treated on an occasion like this.

Big Question: How do your mom and/or dad and/or other immediate family members feel about this situation? If it was them taking out your cousins from this other family and they were treated this way, I'm sure it would not go over well. In fact, if you were an adult and one of their little kids was in college and went out to a dinner with you, surely they wouldn't expect their kid to have to pay! This just seems really hypocritical to me.

On a personal note, I think I would say something to this family female in private. First I would thank the family member for her generosity and give the 30 dollars back, cash. If it is a check, it could get lost or not cashed. You want to give the money and be sure that it is taken.

Then I would simply state that I was budgeting my meal because I don't have a ton of money. In the future, I'd prefer to not order tons of communal food because I can't afford it -- and frankly, I'd rather not go to these functions frequently in the future because they're just too expensive. Depending on the mood, you can be a little nicer or a little more cold about the situation. But either way I would make it clear that you love them all very much, but this is not the kind of event that you can continue to go to in the future until you graduate. Do this in person or during a phone call. Anything else is going to seem too cold.

This is not a snub toward them. Nor is it a self-deprecating statement. Rather, it is simply accepting your position and learning to be happy about living within your means -- even if that is simply not being able to afford to pay for other adult's food that you didn't order. ;)

As an aside: The only potential reason that I can think of for someone being rude like this to a younger person in the family is that the family themselves didn't have much money. But if that is the case, then why in the world were they going out to eat with all of their kids.

Tuesday, June 05, 2007

Net Worth Update

This has been quite a ride. Net worth for this month is up again, thanks to the stock market and the continued contributions to retirement accounts. After doing some increased contributions at the beginning of last quarter, I'm noticing very little difference in my paycheck, but the increase in my retirement account is quite nice. Of course I'd like to have more money in there, but the balance is quite nice.

As for my situation with debt, it continues to get paid down. I'm tracking that separately over at <a href='http://www.ncnnetwork.com'>No Credit Needed Network</a>. It feels good to pay it down, so I've taken quite a bit of the money from my side income and put it toward this debt. There is still quite a bit of work to do, but I'm feeling good about it right now.

Total net worth for my household is topping 60K right now.

http://www.networthiq.com/people/EasyChange

Friday, June 01, 2007

Coping with Setbacks

Fortunately, there was a little bit of extra income in my household this past month. This was largely because of the way paychecks fell etc but now here I am trying to figure out whether or not it makes sense to pull the trigger on a major lump sum payment on a credit card (this was transferred debt from a student loan). But now, here I am, stuck because some money has been eaten up (quite literally) in a hurry.

1. Dinners out
2. Unexpected medical expenses
3. Landscaping
4. Birthdays
5. Water bills

Of course, some of this stuff was planned for and some of this stuff was actually handled via the normal buffer that is built into the budget. However, where I was quite eager to put a huge chunk down against some of this debt, these expenses, which total over 500 dollars make me somewhat more hesitant.

If I decide to pull the trigger anyway, it is probably not that big of a deal. But I will end up using some of the savings to do this deal -- effectively loaning myself the money. And if I choose to go that way, I think that I will probably pay myself some interest as well. So it is a tough decision. In order to get a better feel for what to do, I've decided to wait on it either way until about the tenth of June. By then I should have a better feel for what is going to happen.

Of course, liquidating savings reduces the safety net, but then again, removing a significant 200 dollar expense each month by paying it off will also make things easier; more wiggle room each month. And this makes me quite interested in doing it.

Wednesday, May 30, 2007

Weekend Roundup - Reuse Old Computers and Plant A Garden!

The adventures this weekend started with a couple of seeds, but it really just shows that it was a pretty green weekend.

First there was the trip to the local home improvement store (shhh don't tell HD, but I didn't go there for my stuff, even though I own their stock yipe!).

Anyway, it was a pretty good trip and about 200 dollars later I had enough supplies to nicely redo the landscaping in front of the condo. It was a good feeling once it was all done, even though it was a lot of work. The total savings by doing it by hand over hiring someone was probably easily several hundred dollars.

In addition, planted some vegetable seeds and I'm hoping that they grow nicely. My neighbor is also going to plant some vegetables so we can swap back and forth. This will hopefully save some money on salads this summer/fall. We'll see. If things go really well this year, I will probably increase my efforts next year.

I also managed to get one of the old computers in my basement working again by installing linux for free. Linux is my choice of operating systems for old computers because windows 98 is now so old and no one is maintaining it that it just isn't worth the hassle. And I've found that Fedora handles pretty much everything I need so I'm pleased with it. So far I'm 2/4 on using it on old machines. The other two machines that didn't fare well is a result of old/bad hardware, I think.

But if you have an old computer, and usually run windows, you might consider trying to get it going again using a Linux operating system. You can likely still use it as an FTP server or a file server which will give you some more space for photos, videos, etc and save it from an untimely death and trip to the junk yard.

Friday, May 25, 2007

Crossing the Line: From Frugal and Fair to Tacky and Stingy

You have to read <a href="http://www.slate.com/id/2166765?nav=tap3">This week's dear prudence</a> to the end to get this question, but I totally agree here. In general, where there is a concern about how to split up a cost in a marriage, a common theme is to divide the costs proportionally to income. Similarly, there are other common schemes to avoid issues of splitting the costs of vacations and dates.

This question crosses into new territory when a divorced couple has to manage the costs of splitting up a week at the beach and letting their kids stay the whole time, plus one step child from one of the couples.

One of the two insists on a prorated schedule, but the other thinks that the first is being nitpicky. I had to include this because I feel like it is the absolute epitome of people crossing the line from frugal or fair into the realm of cheap and tacky. So here is my personal rant to this mother:

In this case, the step daughter is a friend of the other two children. I wouldn't dare to charge extra for this child just because of the fact that she is "not yours". Now if you were taking about 3 or 4 more kids, then it might be a different story. But two of the three kids there are yours.

Putting it another way, when it is your kids that are going to stay there, if they brought a friend, would you have the friend's parents pay for it when your whole family was going there? Of course not. The marginal cost is nothing except food. This means that this extra child really doesn't cost anything and you're just being tacky and stingy.

One common theme when it comes to money is you know you are crossing the line when your level of frugality puts people in an akward position despite having the money to avoid it. And if the position is awkward and inconveniences other people, then it is just above and beyond what is considered fair in my book. In this case, would you deny that kid a chance to be at the beach a few more days with her friends because of a pro-rated 40$ bucks or something like that? No, of course not. This is when frugality crosses the line.


If you really didn't have the money and needed it, that would be one thing. But that is not true here. And honestly, if you were "that close" to the edge on money, should you really be doing the vacation in the first place?

Thursday, May 24, 2007

Prosper Comeback

Well, things have turned out ok on prosper. After doing some checking up recently, I found that my loan that was late has been paid back. That is a good feeling for me because I was starting to get a little concerned since I expect only about a 5% default rate on my loans; otherwise it just isn't worth it for me.

And now that my loan got paid, I made another small deposit into my account and I've bid on another loan. And I think that will bring the amount of money I will be investing in prosper to a close for a while. I will just continue to keep an eye on the money and if there is a significant sum, I might do another loan, but I think for the next few months my focus is going to be on paying down my personal debt.

Wednesday, May 23, 2007

Get More HD?

Well, last year I decided that I'd been investing long enough that I wanted to get some real understanding of how individual stocks worked when it came to investing. I had read Jim Cramer's Real Money which was fairly intriguing, but I didn't have the time in order to really give myself over to investing stocks like a day trader. I never really felt like I would have the kind of time that Jim described in his book to make it really worthwhile.

My resulting strategy was basic: buy stocks that seem pretty good over the long, long term. Expect that there could be significant losses along the way and that during those times, it might make sense to buy more.

Now here we are, several months later and Home Depot which I bought in the mid thirties has gone up to around 40 and come back down. We're not talking a ton of money here, just a couple hundred bucks. But, does it make sense to buy more?

Here's why I'm thinking it might:

1. HD continues to pay chunky dividends. (I'm not sure how long that will continue though since profits are down  .)

2. The housing market is going to come back, eventually. The growth of population creates demand for housing virtually ensures that.

3. Lowes is taking a beating as well, so it is not a competitive issue most likely.

4. HD has been quite high in the past during the go-go days where it was splitting. And I don't think that we've hit saturation yet. The need for home repairs is a renewable market and HD is a pretty big component of meeting that demand.

Again, this is all off-the-cuff thinking without any real analysis. But when you're dealing with small amounts and it is more of a game than serious investing. I still haven't decided whether or not to pull the trigger. Right now, it's watch and wait.

Tuesday, May 22, 2007

Carnival Of Personal Finance 101 is Up!

This go around, I submitted my recent post on moving back home to the carnival of personal finance: http://firefinance.blogspot.com/2007/05/101st-edition-of-carnival-of-personal.html

But I was amazed at how many great articles and posts there were in this edition. My Two Dollars wrote a post on bundled phone/cable packages that hit me squarely in the face since I had the cable guy over yesterday to fix something and he was trying to give me the sales-pitch.

http://www.mytwodollars.com/2007/05/17/does-bundling-your-cable-phone-internet-save-any-money/

I also liked this introspective post over at my wealth builder; it seems to speak directly to all of those killjoys at yahoo finance that expect their finance gurus to strike gold with some amazing new idea in every column they write.

http://my-wealth-builder.blogspot.com/2007/05/is-anything-really-new-in-personal.html

Let me know if there were any articles in this addition that you really liked.

Friday, May 18, 2007

There's No Shame in Moving Home

One of the major things that I notice that people deal with in our society is the whole concept of when to move out and start to assert their independence financially. The funny thing about this is that there are some seriously split opinions when it comes to this issue.

Some people feel like it is important for young people to assert themselves early by making themselves financially independent of mom and dad. I personally happen to be in this camp. I've worked since I was fourteen and since I was a freshmen in college, there has never been any extended (more than 2 weeks) period in my life that I haven't worked. And for about 90% of that time, I have worked two or more jobs concurrently. Of course, this all underlines a couple of key things about my personality. I have a good work ethic. I think that hard work is good for your self-esteem, your wallet and your soul. But on top of that, I have a sense of responsibility to myself and my family.

For me, many people who are not working are not working because they choose not to. Certainly there are circumstances where it doesn't make sense for people to work. Stay at home moms, students in college with a tough course load, or medical issues are all certainly reasonable explanations for someone not working, in my book.

I generally feel that once you are sixteen years old up until you retire or are financially secure, you should have some kind of regular income from working. Even if it is just working during the summer or school break, you should start to have some kind of income. And once you graduate High School, you are in the workforce. That means you should be working (unless you are in one of the categories I've described above).

How much is enough work? I think that is the key question when it comes right down to it. Personally, I think you need to look at the amount of money that you would generally consume if you lived on your own and aim to make at least 15% more than that. And therefore, do whatever it takes (not crime though, obviously) in order to make that much money.

For those who live at home, I don't think that there is any shame in that at all, as long as you are making that extra 15% more than you would spend living on your own. Lets do some envelope math so you can see what I mean, and why I think about it this way.

Lets assume you live on your own (but with a couple of roommates). You would spend something like the following:
600/month rent
125/month utilities
140/month groceries
300/month car
90/month car insurance
50/month misc taxes/registration/etc

For a grand total of 1305. Now, you might think that you can simply make 1305 and be all set. But the reality is that there are other unexpected expenses in life like weddings, birthdays, holidays, travel, and the like. Plus, you should want to be saving SOMETHING for the future. I know, I know. You're so young....its never going to happen. But even still, just the basic expenses require a good "buffer". That 15% gives you that. This gives you a total of 1500/month net that you need to make.

That extra 15% should be going into a savings account for emergencies, by the way.

But now, what about those that live at home? Since that was the title of this post, here's the point I'm making. Too many people live at home without accurately estimating how much they'd need in order to survive on their own. This means that they are spending way more on discretionary items than they should be.

For the example above, someone whose "real life" expenses are around 1500, might be getting away with only putting out say 600 per month by just paying for their car, cell phone, credit card, gas, and insurance. But real life is something entirely different and it is a lot more expensive. In this scenario, it might be a matter of not making enough money, or it might be a matter of spending too much of what you make. In either case though, it spells disaster; moving out will never really happen because it cannot be financed.

It is a tough reality check for parents/elders with people living at home and also for people that are living with their parents.

But for some people, living at home is a great thing. For example, if you can manage to make that 1500/month and only spend 600/month on expenses and make a nice, reasonable 5% return on your emergency fund, you can expect to tuck away over 10000 dollars per year or more. And if you get into that habit early, retirement saving will be a snap, even after a move out on your own.

So, as I say, there's no shame in moving back home. The only shame is being at home, but not doing the right things for yourself and your family while you are there.




Thursday, May 17, 2007

Budgets with Semi-Monthly Pay

I remember when I used to work at a job where I was paid bi-weekly instead of semi-monthly. For those of you who are not payroll nerds like I am, bi-weekly is when you are paid every other week. Semi-monthly means you are paid twice per month. People generally think of them the same way, but they aren't. The semi-monthly people are the ones who get the short end of the stick, in my opinion.

If you are paid semi monthly, most often it is on the (1st and 15th) or the (15th and last day of the month). This means that you need to make your money last for that period of fifteen days and cover all of the bills for the next period with that paycheck. Personally, I've found that the best way to do this is using excel.

Setup a spreadsheet in excel (or any other spreadsheet application) with a column for the title of your bill.
The next column will be for the date your bill is due each month.
The third column is how much the bill is for. Obviously, this is just an estimate since you are going to see different amounts on utility bills etc, but it gets the job done.

When the first comes and you get paid, just add up all of the bills that you need to pay before the fifteenth. Subtract that from your total, and write out the bills (assuming you are above zero!). Then what you have left is your extra.

If you find that you have too many bills due in the beginning or end of the month, call your creditors and ask for a change in due-date. They will usually oblige. Since your checks are coming in evenly, its usually best if your bills come in evenly as well.

Wednesday, May 16, 2007

Stretched Thin? Five Ways To Reduce Stress

There are certain things that you just can't put a price on. For me, one of those things is my health. I am one of the *those* people who stresses out and the result is that my health goes to pot.

Currently, I am juggling about 5 projects. Some things at work, some personal stuff, and also some side projects that I do in order to bring in extra money. I am not complaining, but simply writing this post to encourage those of you out there who are work-a-holics also, to give yourselves permission to say no.

This past week I got a call from my mother letting me know that one of her friends had a computer that needed to be fixed and I could fix it for some extra money. And after some consideration, I gave myself permission to say no. I just knew in that moment that I had way too many commitments already and this would just put me right over the top when it comes to stress.

Money isn't everything; Indeed, when you are sick as a result of stress, it isn't much at all. So I said no, comfortable that the small amount of money that I would get from that job is not worth the amount of free time and added stress that it would cause.

So, this brings me to 5 things I do to relieve stress which are helping me stay on my "work extra, pay off debt sooner" track:

1. Give yourself permission to vent. It might be a spouse, loved one, friend, co-worker. Whoever it is, allow yourself to vent during stressful periods. Its only complaining if you do it every day. Once in a while, everyone is entitled to a little venting.

2. Exercise. Do it. It forces you to spend time not doing something stressful and also is great for your body in terms of releasing toxins and endorphins :)

3. Clean up. If you're like me, the tendancy is to let clutter pile up and not clean for a while when life gets busy. But when the clutter becomes ridiculous, it can be a source of stress. Keep up on cleaning to keep your stress level low.

4. Give yourself a treat. Whether its food or a fun program or a small purchase as a splurge, if you are working a ton and making good progress, small splurges are a way to keep you motivated and not angry.

5. Take 1 day off per week. That means no work at all for an entire day. Obviously, this might be balanced if you work 7 days a week during the summer and then not at all in the winter.

But for me, yardwork/housework don't count here - but the idea is to give your mind/body a break. This will make you more productive during the other six days and hopefully make you happier while you are working. If you don't take this day off, this means you will be working for at least 13 days in a row. This will make small stress seem like huge stress. And for me, its not worth it.