Easy Change

So there has been some unexpected family news lately that sort of puts a big question mark on finances for the future. It is a health related issue and as a result there is an outside chance that there could be a shock to the household monthly income. In anticpation of this possibility the numbers have been run and we could do ok for a long while if things went badly. I will work to avoid that but it has also served to show me how important it is that I continue to practice gratitude. It really helps keep perspective. Recently I updated my net worth with my new 401k values but I am somewhat skeptical and I realize that all of that money is risk money and it really gives me some reassurance to have some cash on hand and some money in the bank. For Christmas, I am giving out some bonds to kids in my family who will not be getting gifts. Some kids already have enough toys and the bonds are hopefully a good way for them to learn how to invest.

So after nearly nine years it is time to replace the living room furniture. This is furniture that I got when I first moved out into an apartment an it has held up extraordinarily well. This time in making the decision it seemed like something more adult, more contemporary was in order. But I have to say that I think that more than the style, I'm excited about the comfort. For the first time since moving in to the condo, it will be filled with furniture. And I finally fell like a grown up. What's more, the cash was on hand to buy it. It is completely amazing to me what you can do with a steady income and low fixed expenses. You cannot help but get ahead. The budget was blown by a grand. But considering the value, it was totally worth it.

It seems that I gave been on this personal finance journey for several years now and over the past several years I have cut, recut, and cut even more expenses. I have focused on insurance and lifestyle, investments an retirement. All of this has been a fantastic set of achievements for me personally. In fact, given my personal situation, I don't know if anyone could have their financial house in much better shape. I basically rate myself at B plus. All this has made me realize though that the point of all of this is to have a better quality of life. So, I am working on gettig better at this by starting to purchase selectively. This year I have bought an iPhone, a new pc, and also now a wow subscription. The new phone has some serious practical applications and before the purchase I used pre paid phones which are nice but are very low end with few features. The new pc was overdue. My prior pc wad seven years old. The wow subscription seems the most frivolous. But with the cost amort...

This morning I watched Conseulo Mack: Wealthtrack and I found that it was extremely interesting advice about Diversification and Asset Allocation. The most interesting point is one that is probably proved out in your own investments and 401k: International Indexes and US Stock Indexes have extremely high correlations. One graphic at the beginning of the show shows that the correlation of the S+P 500 to the MSCI EAFE Index from about 2003-2009 is between 80 and 90% with some small changes. The point of this graphic really hits home for me. In my personal 401k, there is a basket of mutual funds to choose from, but if I am interested in equities, there's not much diversification necessarily when shifting from US to outside of the US for stock investing. A guest, David Darst, author of The art of Asset Allocation - The little book that saves your assets explained that asset allocation had to include a different asset class to prevent losses during the last downturn (I'm paraphrasi...

With the season of weddings behind us and having just finished working through my own big day, I thought it might make sense to share some of the key items that would make sense to consider if you're doing a cost-sensitive wedding. Of course, that first paragraph is a big disclaimer. But seriously, if you were not cost-sensitive, you probably wouldn't be reading this. Furthermore, anyone else reading this and thinking about a wedding should be cost sensitive in my opinion. Weddings are crazy expensive. Many vendors charge more for a service simply because they know it is in connection with a wedding and that people feel like they are going to spend through the nose on those events. Before reading this, understand that I am practical person before I am romantic. So, before the flames start coming about how I "don't understand," simply realize that these are my views. Take them or leave them. All that said, here are five ideas: 1. Keep the guest list small. Figure o...

Curiously, I recently became I'll and was forced to have a small surgical procedure done at my local hospital. While emergency rooms are rarely fun, I found this experience to be one that made me rather happy to have such a good system close by. I know that there is much being said in the healthcare debate and that many people will have other ideas. My experience is an isolated incident. For my recent life I have not had to experience it. The real concern now is the bill. Well, provided that it isn't exhorbitant, I will be happy. And for now, I am just glad to ne back to work.

This morning on the Fox Business network they provided a very interesting infographic that shows the spending on various program by NASA. I've been convalescing for the past few days and during this time I have been watching the show called the universe. One of the experts from this show appeared and made an appeal for NASA to allocate some of their resources to this important task. When sold as an insurance policy, it seems like a no brained. Many people think that NASA is important for the value it provides to motivate kids to get interested in math and science. Personally, I am not sure that holds much water. There was no NASA during the time of Newton or Copernicus or gallileo. Here are the stats: Space operations: 5.8billion Science: 4.5billion Exploration: 3.5billion Aeronautics: 500million The amount needed for asteroid servaillence is in the hundred million range total. That is over many years. I think that is good insurance.

The reality of healthcare and much of life is that much of it is a crapshoot. Emergencies can happen and make critical work quite difficult to complete. For instance I recently experienced this first hand when I was experiencing stomach pain this past Sunday night. It developed into and was diagnosed as appendicitis. Normally, this would not be a big deal, but knowing that I had a significant amount of work due at the end of the month, it became clear that I would need to use my backups. What I mean by my backups is different for various circumstances. For existing projects that are currently in use, this means to make sure that there are people and processes in place to do whatever is needed to handle day to day tasks. For projects in development, this means having documentation available that shows next steps. This documentation can provide what is needed to proceed forward even if I am not available. These backups are critical for important projects and tasks that must continue no ...

So, after a couple of years, prosper is gone. I can't say that I am terribly surprised. They are still around and doing business but they are no longer lending any significant amount of money, according to Eric. I'd like to say that I am surprised and that this was a great site that just went badly, but in many ways they reaped what they sowed. Personally, I invested several hundred dollars there and my money would have been safer and made just as much, if not more in a bank CD with a lot less stress and hassle. Of course, it would not have provided me with the diversion of looking at loans and trying to size up who was a good credit risk, but that's not really what we should be interested in doing when it comes to our investments. Investing (at least for me) is not gambling. Now many of my loans are almost done and I've made just short of 2.5% on my money but with tons of hassle. And if there is just one more default, I will be negative. This sucks. And it would be eas...

In dealing with my quest to become more financially secure, I have to admit that there are times when you think that it is all about the amount of money in the bank account or how much debt hat you pay off. For me recently, things have been going quite well at work and I think that it is a good idea to step back every once in a while and revisit your priorities. For me, I realized that my personal financial goals would suffer if my priorities were not taken care of first and foremost. My priorities are probably more simplistic than most people. Food, shelter, and basic health top the list. Without those things everything else is just a bit pointless. After that I need companionship. Some people say they don't. But I know that I need more than others. The point of this post is not to get touchy feely. Instead I want to recognize how important it is to maintain good relationships with family and friends. It is critical if it is a priority for you. Therefore do not be shortsighted by ...

One of the key factors in my personal finance adventure has been dealing with the concepts of estate planning and also retirement planning. There are various calculators out there for helping you estimate your needs at retirement but I take a somewhat different approach. My approach is that instead of looking at the amount of money you'll need and saving enough to get you to that goal, I first look at what I am saving and see what it could possibly get me in retirement. Of course all of this is a forecast. Currently I'm forecasting for six percent returns and two and a half percent inflation in this exercise. Then I see what is available when I invest in this way on a monthly basis for the next thirty years and take a four percent distribution divided by twelve as a monthly withdrawl down out of the accounts. Many people might think that this is the same old thing. But I try to be pragmatic. I will certainly try to stay on track but life throws curveballs. My method lets me ch...

Ben Stein wrote a great article on yahoo finance about this topic. http://finance.yahoo.com/expert/article/yourlife/178987;_ylt=AojOTBf8MTYC2QDenJZuT.e7YWsA In the article he writes: "A short while ago, I said in a public forum that while I did not doubt that in a society as rich as ours, no one should be denied health care, and that health care was a right, I still had some questions about the administration's plan. This had been my feeling for all of my life, i.e., that health care was a right, and that if necessary, it must be paid for by the taxpayers if some people could not afford it." Put simply I don't think that simply because the united states is rich compared to other countries that the defenition or right changes. A right in my opinion is life (this does not imply anything about quality of life), liberty and the persuit of happiness. I also believe strongly in the right to own property and no one elses moral obligation to provide healthcare to everyone sh...

Finding the right tool to be productive can mean the difference between being average and being a superstar. Although it still feels early, I think that the iPhone is that tool for me. I tried palm pilots and I've played with blackberries. The cost is significant but worth it. It can be very easy to get caught up in the aspects of the phone that make it entertaining. Bringing games and other aspects of computers together really makes it a productivity tool. So I don't know what else to praise it for. But those are not the real reasons I like it. The very text that I'm typing right now is the reason. Becoming adept at the keyboard is a bit of a learning curve. Butit is no different than the palm or the blackberry. And the quick composition of text makes the iPhone an all-star. Now that I have this tool I can always work on something that interests me or even chill out with a game. But more than that, it is all in one. For me that I don't have to carry a separate item li...

Ok so great. We finally are over nine thousand on the Dow and everyone is wondering if this is the right time to get back in. People find themselves rejoicing because those 401ks are starting to look better. They are not alone. I am right there with everyone on this. The main difference is that I am not going to change my strategy in the wake if a good few weeks on wall street. The new rules still apply for me. Cash beats credit. And there's no security like money in the bank. And getting in position to have many choices in case things go south is the best balm to soothe the wounds of any disappointment in any part of life. So all of the above having been said, I am finding myself more interested in my retirement contributions. You see, I am not getting any younger and I think that it is worthwhile to get as much saved as early as possible. Many people cite compound returns as a motivating factor and it is true that it matters. Over the past few months though, it has become increas...

Financial Primer When I think back on my financial situation growing up, I never really understood how many issues that there are when it comes to money. Understanding the major financial concepts early on in life and having some tangible, concrete understanding would have been much better than some random experiences and emotions. Just understanding these important aspects as a young person and how to handle them correctly can contribute to financial well being. Income Income is the way money enters your life. Usually, this is in the form of a job, but there are also other sources of income like gifts, bonuses, interest income, and investment income. My concept of income was rather skewed as a kid. I didn't usually need much money. I like to think that I wasn't that greedy. I generally was happy if I had a bike to ride and some sticks and balls to play with outside and some video games to play with inside. I never got a steady allowance per se, so by the time I started learnin...

I've been using a tool to track my household net worth for years and I think that it has been an enormously helpful tool as a motivating factor for helping me to make the correct decisions. The tool I have been using is NetWorthIQ. You can view a small sample chart that they produce. But I think that more than the chart, it is about the motivation that the chart provides. Besides providing a simple line of how your net worth has grown or shrunk, it shows how your net worth can be impacted by the events of the day and how well you've navigated those storms. Personally, the great opression of 2008/2009 has been awful. It has left me feeling somewhat void. My feelings are not that unique, and my approach is not that unique. From the perspective of making money, it is difficult because the people that tend to do well are people who are far out on the risk curve, people who are doing something different. So, with the net worth tracking tool, I am able to determine that my approach,...

One of the possibly most historic bills in the history of the united states. It could be compared with the new deal and other initiatives like that. Interestingly, many people who were once big supporters of Obama seem to have now withdrawn support. Popular opinion among political pundits is that he was elected as a left center president but has now begun pushing a radical agenda. In some versions of the legislation, people making over one million dollars will be taxed an additional five plus percent. In reality, the problem is the additional burden will impact the average American. In short order this legislation will transform not just healthcare but the entire economy. Personally, this feels like the biggest economic issue since the stimulus. By standing by and doing nothing, we are giving our legislators a blank check. I think that is a mistake. I've written to my reps and I urge you to do the same. Right now the decisions to spend money will impact us and our future generatio...

This week Wealthtrack's Consuelo Mack had a sit-down with PIMCO's co-CIO Bill Gross. This was part of a new series of interviews with great investors. It was an interesting episode where Consuelo Mack pointed out some of the clear and present dangers for the United States of America: 1. An increasing reluctance on the part of large foreign nations to take on more treasury debt due to the lack of good real returns and the lack of strong returns on the US investments. 2. Increasing debt levels of the United States being rather sticky since the only way to really combat them is to re-inflate the economy and then pay down the debts with cheaper dollars. Interestingly, Bill was asked the question whether or not there were any investments that he was excited about long term and he answered with a resounding "No." When the conversation drifted into why that was the case, it seemed that the "mean" return for investments long term would be in the 6-8 percent/5-7 perc...

One of the more interesting things that happened in the news recently is that Bernie Madoff was finally convicted in what was basically a shut case. Many people have decried the punishment he received though: a hundred and fifty years in prison. His representatives were taken aback by this judgement but it seems reasonable to me. According to the article I read online, there was not even a single person who wrote to the judge prior to sentencing in support of Madoff. Not his family. Not his friends. In the end it seems that Madoff is utterly alone. Unfortunately Madoff took a lot of people. And certainly some of these investors should have known better. But, if you even ignore that, aren't we forgetting the people who probably were otherwise involved? I will be much happier when I find out that the accomplices are brought to justice also. Read the news story here. All that this story does is underscore the fact that people need to be responsible for their own actions. No one else w...

Today I ran into an old friend from a previous job. I think that given the state of things, now more than ever, it is important to maintain the network of past colleagues. Unfortunately, I haven't been taking the time to do that, but it is definitely something that I want to do. If you have a group of people at your workplace, it might even be worthwhile to start some sort of regular meeting with them outside of work so that as people leave and move on to other pursuits that everyone can stay in touch. I have done this with the people from one job and I think that it is very helpful.

I'll confess, that now, as we are easily in the midst of a down economy (some would say we're coming out of it), it is easy to become somewhat down. For me, this has not been a simple matter of just putting my head down and becoming more of a hard worker. Instead, this has made me realize a few things. Perhaps you have had these observations as well, in which case this will be somewhat of a confirmation of your ideas. First, this economy hurts more than just the people who have lost their jobs. In many ways, this down economy hurts the people who still have jobs in several ways. First, in families that are usually dual income homes, there may be a sole bread winner now. This adds to the stress for that individual where there is fear that there could be a job loss. Second, in all situations, there are people who are still working at some companies where there have been layoffs etc. As a result, there is just as much work but fewer people to do it. In fact, due to hiring freezes ...

Recently, the unexpected happened. One of the cars broke and started to feel like it was going to completely break down somewhere on the side of the road when there was no one around to help. Personally, I am not a huge fan of living with stress. In fact, I'm nearly 100% convinced that this is the cause of many health problems. So, when I can avoid the stress, I do. In this case, having a car that was unreliable and just waiting for a final breakdown was not appealing to me. So, after deciding on a car and what we thought would be a reduction in sticker price and trade-in, we went and found the car dealership closest to where we live, walked in, test drove, and finally bought a car. In short, we did it in a single trip, single transaction. Fortunately, we were able to afford it and had good credit. Other people are not so lucky. The big lesson learned is to not wait until the last minute. The car had already started showing signs of getting worn down and needing repairs. A repair b...

One of the most basic things that I've realized this past month is related to health. For the past few weeks, I've been busy but have been unable to do something that has become so much a part of my life that I really miss it. And it has become second nature to me. The thing I'm missing is exercise. Since I usually arrive home late from work, I find that there can be some pent up stress associated with work and also with my commute. After starting an exercise regimen, I found that my stress was under control. I started slow, and I followed up with my doctor to make sure that I was really doing the right thing. After about two years of exercising, I've never had a bad experience in terms of a serious injury. Then, about two weeks ago, I was afraid that had changed. After what seemed like a normal exercise routine, I must have pushed too hard. The next day I was showing signs of pain. I can't say that it was not completely unexpected. I didn't spend enough time wa...

One of the things I remember when I was in the process of getting my first mortgage before any refinances etc, is that they said that you had to plan to have about 1% of the value of your home in addition to mortgage payments set aside. This money was to handle the upkeep of such a home. Fortuntately, I have been in the position that there hasn't really been a ton of upkeep. The roof was replaced which was a pretty big expense and there were a few other minor things. However, when all is said and done, it was pretty reasonable given the quality of the space that this money had purchased. Even now, in the midst of spending a tidy sum on redoing the two bedrooms, I can't help but feel like this is money that needs to be spent; it is not extravagant and it should help the value of the place as well as the quality of life overall. So far, these have been the expenses: 2300 dollars for new carpeting (original was over 15 years old). 120 dollars for paint 200 dollars for new curtains...

Well another major hurdle has been met for the personal finance journey to get out of debt. Amazingly, the car loan is now paid off and there is a significant improvement in the ability to have free cash flow each month as a result. Doing a debt snowball is extremely daunting, but now, nearly 2 years after my original start, I am starting to really really see the benefits. Other than the mortgage, there is only one loan left, and it is a student loan that gets paid at an accelerated schedule. What this means In reality, there is not much to doing this other than paying off bills early and aggressively, but in terms of the psychological benefits, it is just amazing. I feel more free than I have ever felt and along with the emergency fund, having additional free cash flow makes it quite easy to feel I could survive comfortably for a large number of months if I were to suffer any loss in income. Taking Rewards One important thing to realize when making these kinds of big progress mileston...

The funny thing about nearly every decline in a market, whether it is stocks, bonds, or housing is that people are incredibly fixated on calling the bottom. In fact, just this past week, the market came back up over 7000 and there was a bit of hoping going on that the bounce was an indication of the bottom. I get it. I really do get it. But even if you think that you have a good chance of being right...and even if you are right this time and you think you can get out and back in at the right time, (There are many studies that say statistically that you can't do this reliably....) the more practical question for many people is: so what? Most people at this point are over leveraged with debt up to their eyeballs. It is a combination of consumer debt, mortgages, credit lines, and loans for education, cars, or even rehab projects on homes. It doesn't matter what kind of debt it is; the average consumer in America cannot afford to be in the business of calling a bottom. The reason t...

Well, like everyone right now, things are a little scary in this economy. So I'll take this opportunity to focus on some good things that are going on with my personal finances. In a huge feat, I've paid off the car loan (a year early). This reduces monthly outflow by 450 dollars (even though I was paying 600/month). Given the current climate of the job market and the situation with the politics in this country and throughout the world, it seems to me that the safest thing I can do with my money is to pay off debt and give myself more options and mobility. As for the net worth, that has finally come back a little bit with some big contributions for the 401k and the tax returns. Finally, after many months, its finally starting to come back. I'd encourage anyone who is worried about what to do with your money right now that looking at debt as a place to "store" your money is worth considering if you have a fully funded emergency fund (as I do). With these changes, t...

This week's Consuelo Mack WealthTrack was particularly interesting with three notable guests: Tom Forrester, forrester value fund - only value mgr to make money last year 1/2800; Thomas Russo, Gardner Russo Gardner; Randall Forsyth, Editor in Chief Barrons.com The main topic for this week's show was the credit markets. As usual for those who are investors, each felt that there was opportunities in this market. Even despite the negative return of the S+P over the past 10 years, there is even some sense among these experts that a reversion to the mean might actually indicative of decent returns in equities in the years to come. Of particularly interest was the way in which Forrester managed to eke out a positive return last year. His secret was basic: avoid housing and financials. As a result he shifted a large portion to cash and overweighted in other sectors like healthcare. Summarizing the reality of this past year, Forrester noted that 2008 was the 'year of the balance sh...

The time has come again where I am preparing to do taxes for 2008. This year, like most years in the past, I am actually looking forward to doing my taxes. Fortunately, my W2 form came a little earlier than the January 31 deadline , so I was able to start early. Many people recommend going to a professional to do taxes to avoid any mistakes. If you have a complicated return or are uneasy for some other reason, then I would definitely go that route. Personally, the first year I started my business, I made an appointment at H+R Block to get my taxes taken care of. As for the subsequent years though, I simply did the taxes online. Over the past several years of doing taxes though, I've definitely learned some key tips that have really helped. 1. Make sure you adjust your tax withholding. If you have a business, you may find that you tend to owe taxes. In this age of shrinking economy, you don't want to be in that position next year, so make sure to pay quarterly taxes and/or incre...

Everyone who has been paying attention is aware that the economy is in dire straits. From the serious tumble that the stock market took, to the completely tanking housing market, it is easy to see examples nearly everywhere that things are going badly. Fortunately though, the chances are, that if you're reading this, that you're in relatively good health. This is something that has the kind of value that doesn't have a price tag. There, I said it. Now think about it for a minute; you're good health is priceless. Recently I had someone close to me undergo a serious surgery. This has given me a new perspective on my health and also made me realize how important it is that everyone, no matter what their situation, do what they can to stay healthy. When you go to the doctor, you may be told to change your lifestyle, quit smoking, stop eating bad foods, etc. When you go to the dentist you may be told to brush better, or floss more. Regardless of what these professionals are ...

Recently I was in the position of being able to download the latest of Suze's books-Action Plan 2009.Although I was hopeful that it would be an amazing new take on money for the current economic enviornment, it was not the case. Personal finance stays the same over time and Suze's advice is fairly standard for those who are interested and are following personal finance. I suppose that the upside is that I am not in a position to worry. One nice feature of the book is that much of it is in question and answer format.

This week on Meet the Press, an contributor to Vanity Fair was one guest and she asked this very question. The concept is rather simple, it asks the question why America has become so content to spread the risk around? That is, if we fundamentally think that people who make bad decisions should bear the consequences of those decisions, then we must consider bailouts which significantly reduce and/or eliminate those risks to be a problem. Moral hazard is the term applied to such an event. Indeed, this is a fair question. Listening to broadcasts from the fall of 2008 would bring you to the same question when there was a workout for Bear Sterns. Some felt that any type of intervention, even in the form of a deal, was a bad idea. But others felt like this type of government assistance was a bad idea and was a moral hazard. This was a backlash which might have contributed to the U.S. government allowing Lehman to fail. Regardless of the whys and the hows, the question is now: why has the ...

Recently, I got some very good news with regard to work-related compensation. In this economy, and in this troubled time of unemployment, any good news is really great news. So, for us right now, we're looking at a bonus, albeit smaller than expected. In addition, there will be a three percent raise. So many people are losing their jobs, that there are not situations where people who even have their jobs may not be getting raises or bonuses at all. So, I'm quite grateful. I think that it is important that people are grateful for what they have and realize that this is a time to be even more conservative. In this regard, I'm practicing what I preach here. And even in a good economy, this type of behavior is a good idea. It will make you more likely to keep your job when times are tough and more likely to get a raise and/or promotion when times are good. I'm convinced that these principals are what has helped me succeed in my current job. 1. Work hard. This is general, bu...

This week, Suze Orman did a show called "Face it to Erase it". This show was not anything incredibly new but one point that she made toward the end has really made me consider some of the macro economic implications. For example, there is a significant, nearly 800 Billion dollar outstanding credit card debt in the United States. An entire show was dedicated to people with large amounts of debts, but it became quite obvious to me that the vast majority of these people who were calling in were likely in a position to be unable to repay their debts. And these are not tiny debts. 10, 20, 40, even 80 thousand dollar debts. Suze made the observation which was quite pointed; this is the next major financial crisis for the United States. This is important because of the fact that credit card companies and banks are in the position of adding a significant burden to individuals here as they significantly raise interest rates and reduce lines of credit. The callers and other informati...

So it is a new year and with each new year there is a new opportunity for change and improvement. I'm actually guilty of being quite optimistic. This past year, the economy was the main story, hands down. But I'd like to say that I think that things will look better in 2009. And even more than many people, I think that we're going to be quite pleased by about 6 months through 2009, sometime in the summer. I need to be very clear that I have nothing other than a hope and a prediction, no real solid evidence. It's just my feeling. The amount of wealth destruction that has happened as the global economy has deleveraged is staggering. So, I think that as we begin to add leverage again, we're going to realize that it was not quite as bad as we thought it was. I'm very specific in why I feel this way. I think that most people want things to go well. That is, I think there's more optimists than pessimists overall. And I think that despite the increased unemployment...