Wednesday, December 24, 2008

Money Magazine Makes Cents

For several months I've been reading money magazine. While I thought initially that it was a good option, I felt that it was a little bit junior for the more seasoned pf enthusiast like myself.

In reality, I think it is a difficult market right now for pf. The market is down and asset classes have been hammered everywhere.

The majority of places are talking about harvesting losses and doing rebalancing while avoiding wash sales.

These make for interesting chat but it is not new. This month's issue of money mentioned an interesting topic though which might be worth considering.

Put simply, people who have converted to a roth ira earlier in the year may want to switch back to the type of account they had preiously to save tax costs if their accounts have tanked.

I will leave the process of finding the article in the Jan 2009 issue as an exercise for the reader. Even though this doesn't apply to me, it was still great info.

Sunday, December 14, 2008

Refinancing Realities

Yesterday, I was in the position of wanting to make the most of my day off and I decided to try and refinance the mortgage...or at least learn what the steps would be if I chose to do it.

So what caused me to think this would be a good time to refinance? I have been watching the financial shows very carefully and I thought that the rates had dropped into the mid fives and a rate that low would be a big savings. My experience showed however that the experience described on TV is not available for everyone.

I placed a quick call to my mortgage company and learned that there was a limit now for people refinancing. This limit for my bank is a limit of ten percent equity...which would be an easy goal if we did not have the housing bubble collapse. And in order to determine whether or not I met the criteria, I would have to front the cost of an appraisal...a risky venture.

The point of this post is simply to share my experience. Perhaps this will motivate people to check on refinancing for themselves. The savings each month can be significant if it works.

From a selfish perspective though, I just keep hoping that the next congress passes some kind of relief for people refinancing without such a high equity limit, but a good credit score.

Saturday, December 13, 2008

Prepare for the worst

Normally, I try to keep things upbeat here in this blog. Today I want to remain positive while still taking on an important and difficult issue, namely, job loss.

Personally, I am quite fortunate. I have not lost my job and no one that I know has lost theirs either. Recently I read a poll on the cnnmoney.com website that showed close to 75% of the people have either lost a job themselves or know a close friend or family member who has.

Dealing with unexpected job loss after it happens is a topic that could easily span many posts. Here, I will focus on steps you should take if you suspect you may be vulnerable.

First, and this is a good idea all the time, is to try to remain positive. Negative thoughts and actions help no one.

Second, prepare a disaster list of steps. This should be a list of luxuries or lifestyle adjustments which you would start as soon as you lost your job.

Update your resume and reconnect with old friends, collegues, and extended family to help a job search.

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This message is from a Virgin Mobile customer. Enjoy.

Thursday, December 04, 2008

Staying Ahead This Season

I think that it would be really easy to ignore budgets during this time of year. Some might say that this is obvious due to the need to buy gifts for the holidays.

Looking at various sites and comparison shopping are always good habits. I think there is a factor for overspending that is being overlooked. That factor is monetary policy.

Simply put, there is more money sloshing around than there has been in a long time. This is to combat the powerful wealth destruction of the financial crisis. But this makes things cheaper and you buy more and then when main items like food and gas go up again...as they surely will in the future...it sets you up for trouble.

Just look at your spending and compare with your budget. It might save you more than just money.

Wednesday, November 26, 2008

Buy Bonds for Xmas

Christmas is right around the corner and this year, I am getting an early start with Christmas shopping. Unfortunately, others in my family are the same way. In fact, some family members have already bought entire shopping bags of toys for the little ones in my family. So, to avoid adding to the clutter, I've decided to give zeros for Christmas.

Zeros (or zero coupon bonds, in other words, EE savings bonds that you can get at the bank where there is no interest paid out regularly...) are a great option if you have someone in your life that already has met a quota of reasonable amounts of toys/gifts for Christmas.

Deals abound this year, that is certain. So shop around both online and in the brick-and-mortar stores and resist the urge to buy lots of items that people don't need just to fill up the space under the tree. In the end, I think that nearly any decent investment aimed at the long term (like a zero bond) is the best choice for the little kids in my life.

There may be some advantages if used for education.

There are options if the money is needed for a down-payment on a car or house though.

Certainly the interest rate is not great; and if inflation is a real concern, perhaps IBONDs are a better bet. Buying these electronically was also an option, but for now, I opted for the old fashioned method of buying them at a bank.

Wednesday, November 05, 2008

3 Freedom Fund Categories

A Freedom Fund is a great supplement to the Emergency Fund. It stands to reason that there are categories of upcoming expenses that are likely to come up within a year or two and you can easily save for these expenses, a little each month, above and beyond your normal savings.

This past weekend, the cat got sick and required an ER visit which totalled over 300 dollars. This was an unexpected expense -- the reality is that most people can't easily absorb it. My budget is certainly tighter now this month, but it is not undoable in any way. Fortunately, the experience has showed me it is a good idea to review the expenses to see what, if any need to be revised.

The first that you might be overlooking (if you're like me) is pet expenses. These can run into thousands of dollars, so it is important to budget for this so that a pet-emergency doesn't totally ruin your finances.

The second is an inflation buffer. This seems a little strange, but the reality is that our normal adjustments don't work and are not always sufficient. Normally, I try to adjust my budget once or twice yearly at the end of the year and/or during raises. But sometimes, there is no additional money and prices continue to climb. Simply save some money that you can use in the event that inflation spikes unexpectedly on daily items like heat/food/transportation etc. This is not emergency money since rising prices is not an emergency.

The third is a car-replacement fund. Obviously, the goal is always to pay off debts, including car loans. Once the car is paid off, you'll want to save money in a fund to handle maintenance. Unfortunately, the car will not last forever and while it is tempting to simply spend the 'car payment' money, but this should be (at least in part) set aside to help defray the cost of replacing the car in years to come.

These are three somewhat strange, non-emergency categories that I have in my freedom fund now. What categories are there? What has been your experience with your own freedom fund?

Saturday, October 25, 2008

Prosper Goes Quiet

This evening, I decided I would log in and check on my current portfolio of prosper loans. Not long ago, I railed against prosper and now it appears that there is definitely something big going on over at prosper. The message from their website:

start of message
Prosper Filing Registration Statement; Enters Quiet Period

Prosper has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future.

Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. If you're an existing lender, your current lender agreements will be unaffected; your existing loans will continue to be serviced; you'll be able to track and monitor your loans; and you'll be able to withdraw funds from your Prosper account.

If you're a borrower with an existing loan, you will continue with your current borrower agreement and be unaffected by the registration process. If you're a borrower seeking a loan, you will still be able to create a new loan listing, which we will endeavor to fulfill through alternative sources. As the appropriate securities authorities may consider a new loan listing to constitute the offer of a security, we are unable to post new loan listings on our site until our registration statement becomes effective.

A successful registration can take several months, but we assure you we will do our best to move forward as quickly as possible. Until this process is complete, we're required to be in a quiet period and will be unable to respond to press, blogger or other inquiries about Prosper or the registration filing until it becomes effective.

We apologize for any inconvenience this may cause, and want to thank you in advance for your understanding and support.

end of message


So after reading this short, relatively vague explanation, it makes me really curious as to what they are actually doing. It is not entirely clear if this site is going to start offering different kinds of loans like bonds or what. But I definitely think that there is something big going on and I think that the need for secrecy seems rather odd. In the end, I have to wonder if there isn't something a little more sinister going on here? Like perhaps being bought/influenced by some big bank or hedge fund that actually owns the company and is perhaps now cash-strapped?

I have no information or real idea about what the state of prosper is as a company, but a cryptic message like this really does not help the average lender and I'm disappointed. In this economy, I expect companies that are responsible for literally tens and hundreds of thousands of dollars to keep customers well informed. That announcement above is not clear and we can do nothing but wait.

Regardless of what happens, I've already lost too much money in prosper and I'm starting to withdraw money now. And this announcement makes me even more comfortable with that position? I mean, what feels more safe to me? Money invested in signature loans over the internet or money at my brick-and-mortar bank where I can talk to a teller in person?

Friday, October 24, 2008

In for Two Dollars

I'd like to say that this was going to be good news. It isn't. I just found out, on the way home tonight, that my parking as a commuter in the great state of taxachusetts is going to be going up by 40% starting in less than a month.

MBTA Increases Already Exorbitant Parking Fees is the link to the web page where they shamelessly announce it. My curiousity gets the better of me though. Do they really think, in this economy, in this recession that it is a good time to charge even more for these services, the services that help people work and actually generate real tax revenue?

I'm not completely oblivious; Massachusetts and California were both in extremely dire straits and they needed to get short-term loans at high rates. Details are available at la times website. But in the end, it is not the increases that bother me so much as their size. People can absorb a small increase of a few percent. You adjust your budget, you make small lifestyle changes.

However, this change amounts to more than 600 dollars of net income for me per year. That is a 40% increase all at once. Almost no one can easily absorb that kind of change without giving something up. And for people on the lower end of the income scale, the change is even more acute.

Tuesday, October 21, 2008

Don't Be Fooled - Even A Credit Won't Save You

One of the more advanced topics in personal finance is the use of credit cards for your own benefit. Some people are involved in applying for credit cards and moving the balances around to get balance transfers. Others are simply using cards that have the best interest rates and reward programs.

Now that I am credit card debt free, I have chosen to continue to use a single credit card because I get rewards on the card which can be used later on for higher-education related expenses. So, this is what I have been doing for the past year or so. Every time I buy essential expenses like gasoline or groceries, I buy them with the credit card and pay the balance each month.

Recently though, I've become aware that credit cards have resumed their dirty tricks and have started moving around the due dates of the statements. This means that inadvertently, you can miss the payment date and be slammed with late fees and extra interest. So, I decided to fight back. I wanted the rewards but I didn't want the risk of being late on a payment. So, I started pre-paying my card by a couple of weeks when I knew I had purchases that were on there.

I was foolish though. Banks, and especially credit cards, always win! This past month, my card had a 93 dollar credit balance in the middle of the month. Less than 5 days later, there was over 100 dollars worth of charges on the card. However, on the date that there was a credit balance, they zeroed it out and cut a check for the credit. Then, the charges hit and now, here I am, wondering whether or not to pay the card.

Now I have to cash the check and send it right back to the credit card company.

1. For me, it makes sense to carry the "credit" balance for a week or two at a time on the credit card. It makes me no money in the bank checking account and I use the card usually 2-3 times a week. There's always new expenses.

2. Obviously, it seems like a ploy by the company to rack up the balance and then charge me late fees and interest when I don't pay enough or don't pay on time.

Moral: Be careful. Carrying a credit won't save you.

Friday, October 10, 2008

Save The Economy

You'd have to be living under a rock at this point to be unaware of how scary the situation is with the global economy. That's right, GLOBAL. Even though we like to segment our countries into developing and developed...and give them even fancier names like 'frontier', the reality is that this current situation shows just how coupled all of the world's economies still are.

The big concern for many at this point, and many of the government officials is the fact that the credit markets are not yet flowing. Instead, all of the money is being locked up nice and tight at banks and they are not lending. In the end, I am interested in considering prosper and some of the other peer-to-peer lending sites.

In the event that these banks do not open up lending, we will be in a severe recession quite fast. But for the average person, there is a genuine concern that there might not be enough money for their boss to get enough cash to make payroll, or that there might not be money to get the new car their family needs.

What I am considering here is whether or not prosper is a good idea here. My gut feeling initially several weeks ago once this downturn was that perhaps sites like prosper would help to curb the problem of funds availability. But, what I've noticed personally is that I am not as free with my lending. And even those who are fortunate enough in this market to get loans are finding that they are much, much more expensive. The credit problems elsewhere have definitely come home to roost on that site.

Prior loans are no defense either. Three of my loans are late and it looks like there is very little hope of them being repaid. Only one or maybe two of them seemed risky to me at the time. This makes me think that some of the delinquency is due to the overall slowdown. So can prosper save the economy? I don't know. We'll see. Personally, I'm doing the same thing as the banks, paring back my prosper loans.

Saturday, October 04, 2008

Staying Focused, Staying Confident

In the craziness that continues to happen in this economy, it is important to stay focused and remember to review your overall plan. Focusing on this plan is a big part of making sure that you are able to withstand all of the news and panic that is running amok lately.

For me, personally, the plan is pretty straightforward and so I figured I'd share it with you.

1. Pay all bills. Not just on time. Early. Period.

2. Never commit to debt that I am not extremely comfortable with paying off in 3 years or less. The only possible exception to this is a mortgage in the event of a move.

3. Continue paying down outstanding debts, focusing mostly on the smallest debt until it is paid down. Personally, I do not focus every free penny on debt paydowns like some personal finance experts advocate doing. I think that the importance of a significant emergency fund is just ignored during these broad statements about debt reduction.

4. Continue building the emergency and freedom funds with approximately 10% of net pay each month. Emergencies happen, and it will feel great to have money for these items when/if they come up. Although as a general rule, I try to pad the monthly budget so that most minor emergencies can be absorbed without tapping the fund.

5. Increase contributions for retirement accounts in small increments; currently focusing on slowly increasing the roth ira contribution until it is maxed out.

6. Continue to seek out additional sources of income; and cultivate the value I add for my company at work and improving my life. This step is something that I think people can forget. When layoffs happen, they keep the people that are the most valuable to the business. When raises happen, they are given to the people that are appreciated based on what they bring to work each day.

So in the end, there's really no magic. Just keep doing what I'm doing. And I'd encourage everyone to do the same thing. Most of what happens 'out there' is beyond our ability to seriously influence. This bill passing even though a large number of constituents voiced their concerns is a good example. So, do what you can control, by sticking to your plan.

Tuesday, September 16, 2008

Its Time to Get Greedy: 3 Steps For Uncertain Times

This week has been quite a ride already and we're not even half done. Lehman Brothers is bankrupt, B of A buying Merrill Lynch, and AIG not looking so hot, searching for some emergency money.....

One of the most important things you can have in this kind of uncertain time is an emergency fund. Not only should you have it, it should be big. The next best thing you can do is cut expenses and do all that you can to shore up your financial footing because who knows where the financial axe is coming from?

I know that for many people out there, it is simply too late to do much in the short term about their emergency fund and way too difficult to figure out what to do to move their money around in any significant way.

There are 3 things small things you should consider doing though, right now, before the summer ends in order to start picking up some stability in these uncertain times:

1. Make sure that your "safe" money is really safe. If its safe money, it is in an account that has FDIC insurance. Check their site to make sure it is a bank with insurance, and check the bank to make sure that all of your money meets the criteria for the insurance.

2. Spend money on maintenance. When money gets tight, it starts to become tempting to go longer between oil changes, skip doctor/dentist visits because they are expensive with copays etc. This is exactly the time when you cannot afford to forgo these items. More than anything, times are uncertain and maintenance inevitably saves money by fixing small problems before they get big. So fork over that 30 dollars for your cleaning now, and avoid a 300 dollar filling later.

3. Get another "job". What I mean here is simple. I believe that we're going to see longer periods of less jobs. It almost never hurts to have more money coming in; nearly everyone can find a way to make more money. If you have multiple income sources, you're less likely to be hurt during a possible job loss or spike in prices. There may be a time soon (if it is not upon us yet) where jobs may be harder to come by. Swoop in on any job opportunities now, while they're out there...at the very least, its a jump on the money you might want to have for the holidays.

All of these steps are geared toward your greed. The reason for this is rather simple. In order to live to fight another day, you need to conserve as much as you can in order to be positioned correctly to take advantage of any opportunities that present themselves when the market tide starts to turn. This is exactly what Buffet does by accumulating cash.

Monday, August 25, 2008

I Was Completely Snowed

So, tonight on my way home, I needed to get some gas. I pulled in off the highway and stopped at a small gas station and figured I was in for a good 45 bucks to fill my tank. I squeezed the pump and let my mind wander and then the pump popped because the tank was full. I hung up the pump and looked at the price and was shocked. It was less than 40 bucks to fill my tank.

Normally, when you pay less for something, it is a thrill. And I was quite pleased as I pulled away. The annoyance only came once I realized that I was so happy. I was completely snowed. After months of paying higher gas prices -- prices that were around four dollars per gallon -- it felt great to pay 3.60.

This is not a blessing or a deal though. This is still painfully expensive. And I don't think that these temporary decreases in price are a very good indication that we'll have cheap fuel for long. I'm with other people that think that our heating bills this winter will be significantly more than we had paid last year.

Call my view cynical, but I think that this was just a breath of air before we plunge back into the long hard increase in gas prices. And I for one am not going to take this level of prices for granted long term.

Sunday, August 10, 2008

Net Worth Taking a Beating

In the latest net worth post I made, I found, unsurprisingly, that my household net worth continues to decline. This in the face of a painfully slow economy, a housing slump, and a languishing stock market.

Here's the link to the details:
https://www.networthiq.com/people/easychange

In short, this month marks a nearly 3.5% decrease in overall net worth. However, all that being said, I feel richer and more secure than I have in a long time. So, what does that tell you?

I've made two interesting observations from this:

1. People are aware of the behavioral finance concepts now...especially those who are really 'in tune' with personal finance. That is, if me and my neighbor each has 100k, I feel worse than if I have 50k and he has 10k. The idea being that it is not simply enough to have lots of money, you need to have more than your neighbors to feel good. On some level, it feels a little sad to me, but alas, this is how most people feel/think...and I confess, I am not very different...so I need to make a conscious effort to not feel that way.

The point is, in this case, that I feel better because although I am struggling, I know that it isn't as hard for me as it is for other people, so that makes me feel better.


2. For me personally, having a big net worth is nice, but more important to me is the feeling of security. That is what having "money in the bank" is really all about. And right now, I feel comfortable with my job. And more and more of my consumer debt is paid off. So, even despite the economic slump, as each month passes, it seems to become easier and easier to weather occasional emergencies that would have completely wiped me out a year or two ago. For example, a recent assessment came for our condo association. It was an extra 650 dollar bill. Yikes! But with having other debts paid, there was enough to pay it off out of miscellaneous money in the account...without even dipping into the freedom fund savings that is set aside for those emergencies.

Overall, despite all the reasons to be sad, I still find it hard to be unhappy right now :)

Monday, July 21, 2008

Addicted to Saving

Lately, there has been a huge change in lifestyle for me. My side work has declined in volume (largely by choice). As a result, I have the tradeoff of less money and more free time. The realization of this new lifestyle came to a head this past week when I was on vacation at home.

So, I thought that this would be a great time to find some things that needed to be done around the house that I had not gotten to lately. I fixed up the front garden and was able to also work on my back deck and get it stained.

I am also looking at ways to improve and make even more out of what I have. Lately I've become seriously addicted to rolling change. Saving change is a great way to save money without noticing it. In my house I have a 5 gallon water jug that gets all the extra change and occasionally a dollar bill. But, the problem for me now is that I know that this money is money that is not "earning" anything. If you find yourself having extra time on your hands, consider getting your finances in order by making sure your "cash" accounts are in appropriate accounts for the goals that the cash is for. Money stuffed under the proverbial mattress is probably not a good long term strategy.

More valuable than fixing any particular problem or actually finding myself able to save more money is the serious reduction in stress that I have experienced. Work is a wonderful thing to do, but working to the point where you have little time for anything else can be quite difficult and stressful. I'm not sure what will happen next, but for now, I am just trying to relax with the extra time.

Saturday, July 05, 2008

On Living Better...

I think that the goal of personal finance in my life is to help me live a better life. I am not talking about just having more money and being able to buy more stuff. Although there is an obvious component of being able to purchase more goods. But I think more important than the stuff is the ability for me to know that *I can* purchase these things without worrying. Removing my fear about spending money is one major goal of my personal finance journey.

The second goal is to incrementally make my life better. Whether it is to have more choices for food, more places where I can travel, or even more people I can help with various issues in their lives, these things are all things that come from having more money. And the abundance in my life is due to better financial skills.

Realizing weaknesses and improving myself is another goal of personal finance. I notice this trend more and more in the PF community at large. Even my mother is a good example. Once you tackle your finances, taking on your health or your career or other parts of your life doesn't seem so overwhelming. Progress in your entire life is easy provided you do it in small increments.

Maintaining all of these changes can be the difficult thing. That is why so much of the establishment in the personal finance world spreads so much of the same 'wisdom' that people get tired of hearing: don't use credit cards, pay off debt, avoid co-signing loans, etc. These tidbits of wisdom are really meant to do one thing: help you avoid falling backwards. The importance of continual small steps forward is critical. Any minor setback can be handled if the momentum forward is strong. But, if at any point you lose hope or feel overwhelmed, that could be the end of the journey.

More than anything, the lifestyle improvements for me and the smaller amount of fears are more than enough motivation to keep going no matter what. I can't even imagine owing lots of debts now. And with each dollar of debt I pay, I feel even more alive. I've removed more obligations from my list and also freed up the income I'll make in the future so I can spend it however I want. The freedom to live makes life a lot better.

Friday, June 20, 2008

Planning to Prosper

It has been quite some time since I wrote about Prosper loans. Prosper, like many sites now available, is a site where peers can lend to other peers. Prosper effectively removes the banks from the transaction and that is the value that they are selling.

The upside for the borrower is a lower interest rate than would be possible through a conventional loan. This is ultimately where I think that the average lender is starting to get screwed. I don't blame prosper here. As a borrower, it is enticing to see that you have a chance to make serious money in double digit percentage rates on a loan when your high-yield savings account is yielding only 2 or 3 percent.

The upside for the lender is supposed to be a higher interest rate and therefore more income per dollar invested. However, it is easy for the average investor to consider returns without considering some of the more fundamental concepts of Modern Portfolio Theory.

Risk and reward are related, even within the Prosperous world of peer to peer lending. To their credit, Prosper has improved their site by adding in calculators that help users understand the total return for their investment. But the loans are still bid up, and bid up quickly. As with most investments, these things are personal.

Plan for reality with prosper though. My experience shows that even with serious scrutiny, these loans are often not worth the paper they're written on. Twice I've seen serious delinquencies and sometimes they are paid off dramatically before the due date. While I am thrilled that this helps people get out of debt, it can seriously eat into your returns.

As for me, my hand at picking decent loans has not been great and I would prefer to put future investment dollars into a more traditional form of investing. My words of advice would be simply to beware of the idea of diversification through multiple loans. The reality is that all of these loans are dependent on the economy generating income producing jobs for these borrowers to work at and make the money to repay them. Let's face it, if they had the money, they wouldn't need the loan! From that perspective, multiple prosper loans is not really diversified.

Sunday, June 15, 2008

Buy it With Cash Now

I read this article about inflation recently. In a nutshell, inflation is a serious concern at this point. And we're not talking about that wonderful 'special' inflation that excludes the cost of food and energy. This type of inflation is absolutely ridiculous because for most families, the inflation on those two items alone is what is effecting their heating, transportation, and food costs.

This is not an article about inflation measurement. I think that everyone needs to accept the fact that prices have gone up significantly in a short period of time for the average US citizen. For the average person, this can be a difficult situation to deal with. So, I'd like to describe some anti-inflation strategies. Some of these were talked about this morning on Consuelo Mack: Wealthtrack as a means to describe anti-risk investments.

The first basic idea is simple: If you know that the value of the dollar is declining and/or prices are rising, spend the dollars quickly before they lose value. Granted, you don't take this to extremes, but on a practical level, if you plan to do certain projects in the near term anyway, you might be able to lock in prices by going through with your purchase earlier.

The second idea is to evalute your liquid cash and where you're keeping it. Many different options exist for what is considered 'safe' money. When inflation is high, the value lost over time is really tangible. Therefore, investing in different types of 'safe' money is even more appealing to the average person.

The third major concept is an idea that Suze Orman recently revisited on her show: the emergency fund. Frequently, financial writers and experts tout a three to six month emergency fund. Now Suze recommends a 12 month emergency fund. Although I think that this is somewhat a reaction to the issues with the economy, inflation definitely seems to indicate this might not be a bad idea. If you expect the value of savings could decrease over time, it makes sense to have more in order to have the same level of security that you're accustomed to.

Sunday, June 08, 2008

Loan Payoff

Well, with a recent windfall, it was possible to retire a significant bill which was costing about 250 minimum in cash flow each month. However, this was a bill that was being paid extra on, so strictly speaking, this is more like a 500 dollar increase in monthly cash flow. Getting debts paid off is really great for three reasons. The first reason is the increase in cash flow.
The second reason it is great to pay off debts is the emotional feeling. In reality, the debtor really is a slave to the lender. And I know that people will feel that this is a somewhat dramatic stance to take, but I feel like it is true. Each time I pay off a debt, I feel more and more free.
Finally, the great thing about paying things off is knowing that it is over. In a strange way, finishing a debt is like crossing the finish line on a long race. And when extra income comes in, it is like a windfall, a burst of energy that cannot be missed.

Thursday, May 29, 2008

Preparing For The Future

I've taken the first big steps this past memorial day weekend with regard to estate planning. I've drawn up a will and durable power of attorney and went to the bank to get the documents appropriately notorized. Since I am young, I truly do not anticipate needing these documents any time soon. But given that this has been on my list for a long time, it is good to make sure that this is taken care of.

The next step is to get my own personal life insurance policy. I have some through work, but I want to be prepared and have that coverage even if I got laid off or something else happened. So, that process is now underway as well.

In the end, just taking the steps themselves is extremely empowering. I've faced the fact that I won't live forever and I am ok with that. It makes me really grateful for every day I have and also makes me appreciate all that I have accumulated.

Sunday, May 04, 2008

Wealthtrack Review - May 04, 2008

One of my favorite things to do on the weekend if I am not already busy is to watch Consuelo Mack: Wealthtrack on my local PBS station. This show features investment and finance gurus from all different major firms like Merrill Lynch, BlackRock, MorningStar etc.

The reason that I really like the show is that it focuses on two very interesting parts of finance. The first is the economy in a macroeconomic view. Too often as personal investors focus on personal finance, they become deeply entrenched in the ideas around debt repayment, debt snowballing, 401ks, IRAs and other types of personal finance.

While all of these items are critical to personal finance, there becomes a point where the average person begins to have money to invest. And in order to know where to invest, it is critical (in my opinion), to understand the global economy, particularly at a macroeconomic view. Of course, it is fairly well known that the past is no guarantee for the future, but I am still bullish on personal, ongoing education and awareness when it comes to personal finance.

Frontier Markets
There were two interesting things I learned on the show this morning. The first is that there is a series of markets called Frontier Markets. These are markets in very new stock markets like Khazakstan, Vietnam etc. These markets are often only a small part of existing emerging market mutual funds, although products that feature these types of investments are likely to be introduced soon.

Inflation
Also, while inflation is a major concern for the US Economy, I find the interesting fact to be the change in the relative value of the dollar. Compared to other currencies, the dollar has lost approximately 10% of its value year over year. What does this mean for real value? Of course, no one will say that we've seen 10% increase in the price for anything except gasoline. And the Fed's measure of inflation continues to say that we're in a period of low inflation.

When this comparison was raised on the show, one guest put it rather simply. And I'll paraphrase here. The real driver and indicator of inflation is wages. And currently, wages have have only been increasing by about 3% each year. Therefore, there is not that much more money chasing that many goods.

Oil Prices
This type of inflation, demand pull inflation is the one that some people are worried about.
And this, many people believe, is the real result of higher costs in oil over the long run. And therefore, the inflationary forces will happen whether we have the money for it or not. That is simply supply push inflation where the costs of goods (raw inputs) are more expensive.

If that is your real concern, you might be tempted to look at the Fed. But certain people (see these links), are claiming the Fed has no control over oil. At least, this is the implication:

The econbrowser take

The NY Times Take

A wealthtrack guest submitted this contrary point of view: If the dollar is weak, then it is natural for people to flee into other assets that hold their value better when there is speculation that the value of the dollar could continue to plummet. Therefore the real question is whether or not the dollar will continue to fall, or if its value will return. And the other interesting consideration is how much of the value of Gold and Oil and other commodities has been part of a speculative bubble and how much of it is real, perceived, lasting value over the long term.

There are lots of questions, but not too many answers at this point. Maybe that is why the many people believe that the Fed is going to pause. I mean really. Who isn't confused at this point?

Sunday, April 06, 2008

Latest Reading

As I talked about early on when I started this blog, I started my financial journey when I read some of the various big name personal finance books. I started with some books by Suze Orman and also with Rich Dad, Poor Dad. I still like these books and feel that they have their own viewpoints and information to offer.

As I started branching out into various types of investments and more of this end of personal finance, I wanted to learn more about stocks and other types of investments. I went with a big name and read the current Jim Cramer book that was going on at the time.

I like watching CNBC and the like but more than any specific show, I really feel like there's a major point that is critical to keep in mind with regard to personal finance. And this is it: You must continually educate yourself with regard to personal finance, reading, learning, and evaluating new ideas and investments with a critical eye.

Its not simple enough to read these books, watch these shows, or consume the information. Not all information is gold and not everything that is written about (even on good shows) is a good step for you individually. This is particularly true for people that are interested in getting into certain types of more risky investments.

Here's a look at my latest reading list so you can see what I've been reading lately and what is on my current reading list:

A Random Walk Down Wall Street - Burton Gordon Malkiel
The Black Swan: The Impact of the Highly Improbable - Nassim Nicholas Taleb
The Age of Turbulence: Adventures in a New World - Alan Greenspan

My hope is that in future posts I will be able to provide some highlights of these that I've particularly enjoyed.

Monday, March 31, 2008

Quarter One Review

This quarter has held quite a bit of interesting stuff. As per usual, the updates to NetWorth continue. Although net worth got over 100k total, I was worried that things would become more difficult with the big drop in the markets. In a strange twist, although net worth dropped, it did not drop below 100k.

Big expenses this month have included a new plasma tv (since the old tv broke with a big blue spot that burned in to the center) and a recent purchase of a sliding door. With any luck, things will continue to go well as the financial education continues and the debt continues to be reduced.