Saturday, December 29, 2012

Kitchen Remodel - Priming the Pump

So, around September of 2012, I was out to a nice dinner on the water at a restaurant with my mom and stepfather. During this time, over the course of dessert, a delicious cheesecake and cappuccino, we discussed the idea of renovating our aging kitchen.

Previously, my mother had remodeled her kitchen as had my in-laws, so I was fairly familiar with the process, or so I thought. Immediately, my mother seized on the idea and encouraged me. I felt fairly confident that things were going well and would continue in such manner so that we would be able to afford a modest remodel and so I suggested that we go forward.

As I continued to discuss it, we began to make tentative plans to secure a contractor to discuss the overall vision as well as plans to our local home depot store to look at various materials and see if we would be interested in going forward on the project (depending on the cost of the materials needed).

This remodel included all aspects of a remodel other than change of floor plan for the kitchen. In short, it involved removing all of the components down to the studs and then replacing everything -- cabinets, appliances, floor, backsplash, paint, curtains, and trim. Even our kitchen closet got a make over.

Over the next couple of articles I will describe the various decisions and detail some interesting points about the consultation we had at home depot and what I learned, what I thought I knew but really learned, and what I never expected. All of this will hopefully help you if you're reading this and you're considering a kitchen remodel and have concerns of a practical or monetary nature.

Sunday, September 02, 2012

Silver and Gold: Insurance against Uncertain Outcomes

It was incredibly clear to me after a cookout this past summer that I was not nearly as diversified as I had thought I was previously. Let me back up a minute. Our household owns all sorts of various investments. This is not uncommon for people in their early thirties who have professional, white-collar jobs. People have retirement accounts in various mutual funds with different brokerage companies etc. This is not news.

However, it became clear to me this past summer that there was something wrong with this idea that all of my wealth was outside of my control. Namely, it was electronic. I found that this was somewhat disturbing to me when I began to consider all of the various changes that can happen so quickly in the financial markets and with the currency changes that are ongoing (There's talk of QE4 coming.)

Over the past several years I began to watch Consuelo Mack Wealthtrack and I find it to be a phenomenal show for people who are really interested in learning more about the markets and what makes investing work. One of her guests has said that gold is an insurance against uncertain/unexpected outcomes. So, as I began to think about my investments over the past 15 years, I began to realize that everything was electronic. And should the electronic-ness fail, then there are likely to be major losses of my investments and that would be it.

The whole enchilada. Everything that I have worked for my entire life, gone essentially in an instant. This is certainly an unlikely problem from my perspective. However, after 9/11, after the 2008 financial crisis, and after some personal events, I have grown to understand that risk is all around us all the time and we must grow comfortable with that. To that end, I have finally, despite my constant feelings that there are too many "goldbugs" out there, bought some metals.

Personally, I feel comfortable owning a little bit of this stuff. It is not an investment for me. It is insurance. And to that end, I hope I never need it. And I hope I die having never used it. Personally, I think somewhere in the neighborhood of 1-3% of total assets is the right amount. What is interesting about that percentage is that if the electronic money becomes worthless or, more likely, worth less....then the metals will become worth substantially more so that this somewhat compensates.

There are many companies out there that sell metals. I personally opted for three things:
1. Buy a small amount first.
2. Buy physical metal that can be stored easily/safely.
3. Opt for amounts that would be usable in an emergency.

I wanted to make sure that I had something that was useable and that there would be no problem where the "coin" denomination was so big. They sell various sizes of these down to 1/10 of an oz of gold.

What finally made me change my mind? In short, I don't know. Maybe it was my age. Maybe it was my net worth. Maybe it was the political climate. Do I think it is a perfect solution? Not really. I still think if things go to hell in a hand basket, everyone's pretty much in it together. Ultimately, I think that is a good thing; it keeps everyone's interests aligned.

Wednesday, July 04, 2012

Did I Really Clean Up on this Dyson?

So last night, a glass broke in the kitchen. Not terribly exciting....and actually quite annoying when you really just want to relax and not have to do chores. This quickly turned into a project involving fixing the vacuum cleaner because it was clogged and doesn't get emptied regularly.

This vacuum has been in our house for about 4+ years and has generally done a good job but has had a few rough moments where we really thought it was done. In on circumstance, a plastic piece broke that held the hose and only with a copious amount of super glue did that damage get fixed.

Now that there is a dog in the house in addition to the cat, I really wanted to make sure that I got a vacuum that could handle the pet hair so I chose the lightweight dyson DC24 animal bagless vacuum. I have an amazon card and due to the triple points, I generally prefer to buy items from them. Unfortunately, Walmart had a much better deal where I got a 90 dollar e-gift card for the same product/price.

Whether or not a Dyson is a worthwhile investment remains to be seen, but for now I am pleased to not have to deal with that old vacuum in the near future and it will probably be converted to the garage/car vacuum for now because I have a hard time throwing something away that still "works", but is just a pain to deal with.

Stay tuned and I will post on how I like the new product. And for the record, Dyson has not paid me anything for this post. However, I also think that people should take a look at the Amazon Rewards Visa card if they are good with their credit card payments and paying bills on time. There is currently a 30 dollar instant rebate to sign up for this card. I am quite pleased so far with the flexibility that this card offers by giving extra points for restaurants and gas, two of my largest purchases.

Tuesday, June 12, 2012

Condo Fees Are Fed to the Dogs

Currently I live in a suburban town in southeastern Massachusetts with a condo association with a ridiculously low condo fee. There. I said it. I am sure that like any organization, there are people in my association who are happy and some who are unhappy.

A year ago, I was elected to the board of trustees of my condo association. That was certainly the case then; people were unhappy at the way the property looked and how much service they were getting for the money spent. However, now it is very clear to me that the amount of money that is being spent is not enough to cover the basics on the property. What is the result? People end up spending large amounts of their time and frankly, wasting large sums of money on the property.

Condo fees in townhouse style condos typically go toward building maintenance, plowing, and landscaping. In our complex there is no pool, no clubhouse, no exercise room or other shared space. The net result is that the fees can remain relatively low. However, there are people who are not keen on paying money in order to keep up a nice condo. This is a problem for owners who want an overall nicer complex.

This, like many things is something that falls under the Tragedy of the Commons category. Common areas like driveways, exteriors, and common landscapes are items that those who choose to pay less, pay late, etc still enjoy while everyone else pays more. Of course there are options for handling late payment, but it is difficult and in smaller associations, it is difficult because your neighbors are not strangers; they are literally next door. In some sense, it brings real, deliberate meaning to the phrase: all politics is local.

This, like many things in life is an example of how an ounce of prevention is worth a pound of cure. I don't expect that things will become easier to handle over time; and the larger the problem, the more intense it becomes. In short, I hope that things get better in the economy, because there are many folks out there who are struggling to pay their bills in the short term, and in the long term, it is not likely to get better.

In terms of strategy, at a local level, I don't see any solutions other than the following, which are much like those being done by governments and organizations small and large throughout the world:
1. Raise Taxes (fees in my case)
2. Manage projects tactically -- in my case it means doing things quickly to prevent problems from becoming larger.
3. Consider alternatives; in my case, there are some jobs that are being done by volunteer efforts to reduce the overall cost.

At the same time though, I am interested if there are any other strategies that have been considered for budget crunches and also what your fees are if you live in a condo/where it is located.

Tuesday, June 05, 2012

Time Horizons for Investing in your Personal Finances

One of the most important skills, indeed, the most important skill when it comes to personal finance is the simple rule: Spend less than you make. This is a simple rule that works for handling all personal financial situations. If applied correctly and the wisdom that it imparts is correctly understood, it can determine the course of your financial future.

Personally, I am continuing to work on ways that I can spend less than I make. For this to happen, I need to accurately understand all of my expenses and all of my sources of income and determine how I can track it and ensure that I take steps until my income is larger than my expenses. I have reached this point many years ago and the progress has been positive since then and I consider myself lucky.

Now, I am proceeding down the path and I realize that there are two aspects to this constant quest--a shorter term aspect which consists of very specific steps that can be taken in the very near term. Then there is also a longer term view of this goal that I am currently involved in which causes me to do quite a bit of head scratching as I try to figure it out.

The short term and long term are different for everyone, so I understand that these posts will not be applicable for everyone, but as with nearly everything in personal finance, this is personal. I find that anything in the next month is short term. Our year is divided into twelve months, and personally, I find that this length of time is how far out I tend to make my plans for work, finances, and social life.

The long term for me tends to be between 12-24 months. This is because it becomes extremely difficult to forecast what will happen in my life in terms of life-changing events as well as with the economic situation more than a year out. I think that this is true of most people as well.

I personally believe that the likelihood that forecasts turn out as expected approach about 25% when they are for periods greater than 2 years into the future. For me, for that time horizon, or, put another way, this time tends to be an utter waste of time to do forecasting. Additionally, this time horizon tends to be the amount of time I have set aside within my emergency fund. That also provides a great deal of stability within my forecasts. After a disaster, I would have that period to be determining next steps.

The value of forecasting is that you can construct various worst-case scenarios and determine what your possible reactions would be in the short and long term:
- Job Loss
- Health loss/Injury
- Minor Car/Home Repair
- Natural Disaster

All of these scenarios (and probably more) should be considered and planned for both short and long term. But forecasting doesn't stop there; planning for both the short and the long term can impact your investing as well. Furthermore, the time horizon that you're focused on has a dramatic impact on the types of things that you will be doing to improve your overall financial situation, which can include a lot more than just your investments. I'll talk about these in two subsequent posts about short and long term plans.

Tuesday, May 22, 2012

Lookback: 11/8/2012 - Getting Back In Control With A Regular Update

I found this post recently and I thought it was quite interesting to look back and see how reasonable and accurate it was since about 2 years have passed since it was written. So, I leave the full post here for you to read and my ideas/comments are at the end.

To say that this month has been difficult with the spending would be a huge understatement. Just this past weekend I went overboard on the spending with clothes and christmas shopping. What's more, the car needed new brakes this weekend--420 dollars! Yikes! Yes, Christmas shopping. I know that it is early, but I still intend to be prepared and get it out of the way. That said, there are huge cutbacks this year. I'm hoping this update with help me get some perspective.

First off, in our own families, we are keeping the gifts much smaller. Even though I normally give bonds to my nephews and neices I have decided to not do that this year. The bonds are normally quite small and we need to make sure we're being more careful with our money in this economy. No one knows what the future holds.

While the stock market has bounced back, it certainly seems like we cannot feel certain about anything. Volitility seems to be quite high over the past few years, so who knows what will happen in the future. And as for personal finances, I continue to be conservative to a point. I continue to maintain a large sum parked in non-interest bearing accounts just for safe keeping. Besides this, some money is in a relatively safe mutual fund geared toward income.

A recent check of my budget showed that I was dramatically out of whack with what my expenses and my income was and that makes me really strongly want to rethink some of the purchasing that I was planning on doing in the near future. When the home was first purchased, I was told that you should expect to put in about two percent of your home's value each year as upkeep in addition to the costs of your mortgage, insurance, taxes and fees. Even with the home prices having declined as they did recently, this seems pretty steep. I don't know. I certainly wish that I had the money to both continue to improve the house and also aggressively pay off debt.

While debt is continuing to be paid off, it has been difficult to get excited about the progress. And opportunities to make a little extra money like I did a few years back seem to be fewer and fewer so that I don't feel as confident about my ability to pickup a few hundred extra dollars to pay down a bill. But then again, it seems like this is the case with everyone.

All of those things said, I am doing the following to get back in control:

1. Bring lunch from home.
2. Attempt to eat out of the office no more than once a day.
3. Track the paydowns of loans aggressively to stay motivated.
4. Continue to stay active/positive at work and life because the implications are far-reaching.

So, I think it is interesting to note that I am actually quite lucky and the things have been going quite well. For #1, I frequently bring breakfast and lunch from home. Probably about 2 days per week for breakfast and 1 day per week for lunch on average.

For #2, see one.

For #3, all items have been paid off except the mortgage which was recently refinanced! Woohoo!

For #4, I've recently been working on a new way of approaching life and it has really been working for me for the past 6-7 weeks so I am really looking to keep it up.

What about you? How have you done on your goals? Do you make good progress? One of the classic tips to achieving goals is to write them down, and honestly, until very recently, I had forgotten that I wrote this. So, that is pretty good advice--it seems to have worked for me!

Friday, May 11, 2012

Buying a New Car

Thankfully, I have been debt free except for mortgage for over a year, and without a personal car payment on my own car for more than two years. My car is approaching 200,000 miles and knowing deciding what kind of car to buy has consumed a lot of time for me and I find myself wondering what the best kind of car is to get when the time comes.

Budgeting the money for a new car is a major motivation for this. And in order to know how much to budget, I have to consider what kind of car I will purchase which is the subject of this post. In terms of changes since I last bought a car, I now have a pug. As a result, there is more fur than you can shake a stick at and I am considering a car with a hatchback/cargo area for the dog where he could be safe and comfortable as opposed to being stuck with having a bulky crate in the back seat.

Other than that, I know that I want to maintain with either a small or mid-size car, but nothing larger (although truth-be-told, I'd love to have one) but I just refuse to spend the additional cash on it at this point. My results for consideration also have gas mileage in mind since I have about 20 miles of commuting each way.

For consideration, I am looking at:
Toyota Matrix
Honda Fit
Nissan Rogue
Toyota Prius
Toyota Corolla

The difficulty with such a range is that the price points for the more expensive cars like the prius can be anywhere from 8-10K more than the less expensive cars in my list. One thing is almost certain for me though--I will almost certainly buy new. As someone who has seen that people have a used cars (and had been driven around in used cars growing up), I never cared for the feeling that transportation is questionable. For my purposes, I want it to be reliable without worry. Finance Fox buys only new used cars, but I have found that the idea of having a new car that is reliable, that I hold for the full payment term, payoff early, and then drive for an additional 2+ years can also work out quite well.

Thursday, May 10, 2012

Re-evaluating Freedom Fund

One of the biggest things that has made it possible for me to be able to improve my personal financial situation is the maintaining of a freedom fund. A freedom fund is a different bucket of money that is used for clear and present expenses coming in the next 12 months. This is entirely separate money from your emergency fund.

The Emergency fund is some bucket of money that is set aside as insurance against loss of income for unavoidable expenses. When something happens and the income is lost, it is difficult to adjust lifestyle immediately. In fact, when you typically lose your income, there can be difficulty adjusting because you now have larger amounts of available time and this may coincide with some residual depression/anxiety resulting in an uptick in spending.

If you're anything like me, there are a series of expenses that you'd cut immediately if there was a loss in income. Then there are probably a series of expenses that you'd cut only if absolutely necessary. Then there are the absolute necessities.

When it comes to real costs and real inflation, the biggest problem usually comes down to pure necessities since all optional expenses are usually reduced or traded off and therefore considered highly elastic from the point of view of economics.

Essential expenses are the ones that cannot be avoided:

Medical Care

The emergency fund should handle the expenses for these categories for some period of time. For me, the emergency fund is a 1 year fund. That is, without any income, I could handle all of the essential expenses for a year.

Non-Essential expenses are those that would be easily cut: Services (haircuts, pet grooming etc.), cell phone, netflix, cable, entertainment, vacations. Obviously, this will be different for everyone.

Recently, I've realized that the amounts that were set aside for freedom fund and emergency fund were smaller than they needed to be for my intended goals. This is largely due to the fact that unemployment is lower in terms of the amount provided than expected and also because the amount of money for healthcare is larger than expected.

In the end, it means that about an additional 5K needs to be added to meet my goal of a 1 year fund. Furthermore, additional monies need to be added periodically in order to keep pace with inflation.

Sunday, May 06, 2012

Will the stock market adjust?

This weekend, Donald Luskin had an interesting and compelling piece in the Wall Street Journal that forecasted the impending doom to stock and bond prices were we to see the adjustments that are slated for the end of the year. I encourage you to read Donald Luskin's piece to see if you agree with him. Then come back here....its ok. I will wait.

For me, what is most interesting about this piece is not the doom-and-gloom scenario that Luskin is talking about. Instead, it is about what to do next? I recently found myself wondering what the correct next course of action would be in light of such a decline and how I might reduce risk to be better positioned.

I am fortunate enough to be in the high end as far as US Household Income is concerned and measured. And of course, these numbers change all of the time and there is very little certainty about things. So, the question becomes, if you are lucky enough to be well positioned, you have more to lose if you're sandwiched. Of course, people with millions of dollars have even more to lose, but they are also less worried about short term volatility because usually they have paid off homes, cars, etc and while they would be smart to downsize in the wake of a major adjustment, many don't have to do this or worry about it.

My question isn't whether or not the stock market and bond market will adjust....the question is what is the correct thing to do in that scenario. Can I change my behavior to improve the outcome ? And, more importantly, can I time the market correctly in order to take advantage of this? For me, the answer is a resounding no. I am unable to trade frequently and there are too many variables for me to be able to maximize this. Perhaps you are different, and maybe you will be lucky. I think it is just as likely that you'll end up taking a bath though.

Wednesday, April 11, 2012

Free Kiva Loan

Kiva is a wonderful site that provides opportunities for regular people to provide loans to people in other far-off places, often in developing countries with the goal of helping their businesses become more self-sufficient.

Kiva borrowers have a very high payback rate -- I think it was in the high 95+% so the loans are relatively safe. Of course, there is no interest, so there's not any goal of making money. Instead, the goal is to provide access to cheap credit/capital for these businesses. This is something that we have here in the United States at very low cost.

If you want, you can use this referral link to sign up and get a free loan opportunity worth 25 dollars.

Saturday, March 31, 2012

Tax Time 2012

Its nearly April 15th and I have not yet begun to procrastinate about finishing my taxes. In short, I need to get it done this weekend in order to make sure that I get it done on time. Otherwise, we'll be in big trouble.

I've been working on figuring out whether or not there is anything that I can do to make it easier for the next time, but I think that the most obvious thing I can do is stay more organized. This particular year there were a bunch of things that were out of sorts:

1. Lost my W-2 and had to get it replaced.
2. Didn't get an appointment with an accountant early.
3. Wasn't sure whether or not I was going to be eligible to contribute to a Roth, and out of panic, took the money out. Then it turned out I was fine, and I should have left the money in! What an utter waste!

For next year, I will make some changes to make this process easier next time around.

1. I will avoid the roth entirely so I don't worry about the eligibility issues.
2. I will make sure that I get paperwork in order this year so that important items are not lost.
3. I will make an appointment early for an accountant if needed.

All things considered, it is not nearly as bad as it could be. One return is done and filed. Another return should be a piece of cake and then back to smooth sailing!

Sunday, March 04, 2012

Pug Rescue - Oklahoma

One of the things that I really like about the internet is the ability to connect to organizations and efforts that are often halfway across the world. One major thing that I have noticed as a change in my life has been when I got a dog this year. He is less than a year old and was purchased at an AKC breeder so that I felt confident in his genetics etc. However, that does not mean that I am heartless and don't understand the importance of rescue for animals.

In fact, one such organization came across my inbox today and I thought they were worth donating to since they were handling such a difficult situation. There are many dog rescue organizations, but this one really stuck out for me because it is the same breed as the one I own and also because the sheer volume really is staggering. Here are some links for the organization; please donate if you are able. I am sure they need every penny they can get.

Sunday, February 05, 2012

Blogging Wealthtrack 2/5/2012

This morning I watched WealthTrack with Matt Mclellan, who is now running several First Eagle funds, including the global funds which has some amazing records for the trailing periods.

He provided some new ideas that were very compelling for me...but the main idea that I like was this: The real risk is not investing because there are no real risk free assets. This, simply put, is that with the real inflation numbers taken into account, preservation of capital is impossible, Mclellan states, unless you invest.

Put simply, the challenge and fear for most individual investors is that there is entirely too much volatility in the markets. Looking at a good overall measure of volatility in the market, the VIX as a component of certain ETNs, you can look at this as an example:

In the end, McLellan argues, you must construct your portfolio from good individual businesses.

Sunday, January 22, 2012

Investments 2012

As you might have noticed, I left a mutual fund ticker as a teaser at the end of my one of my earlier posts: DFSAX. This ticker is a mutual fund that is managed in part by Andrew Lo, a renowned MIT professor which is designed as a multi-strategy mutual fund.

Multi-strategy funds exist as a mechanism to reduce the overall risk in the market by hedging. Hedging/Multi-Strategy funds allow more freedom within the fund to choose different investments. According to Google, these are the top 10 holdings of the fund as of 1/22/2012:

Top 10 holdings
Security Net Assets
German Euro Schatz Futures Dec11 Xeur 8.25%
10yr Japan Govt Bond Ftrs Tse Dec11 Xtks 7.50%
3yr Australian Tbond Futures Dec11 Xsfe 4.22%
10yr Us Treasury Note Futures Mar12 Xcbt 3.41%
German Euro Bund Futures Dec11 Xeur 2.81%
Uk Long Gilt Bond Futures Mar12 Xlif 2.76%
German Euro Bobl Futures Dec11 Xeur 2.28%
Msci Taiwan Index Futures Dec11 Xses 1.10%
10yr Govt Of Canada Bond Ftrs Mar12 Xmon 1.04%
Asg Diversifying Strategies Ca Capstock Shares 0.97%

Without knowing very much about any of these, you can see that these are largely futures and that there is very little direct ownership in equities. This makes a lot of sense because this fund was offered as an alternative investment on the WealthTrack show on 1/22/2012. The idea here is that while you'd continue to strongly weight your portfolio within stocks and bonds, you'd provide a small weight to one or more alternative investments which are negatively correlated with the market.

If the market goes down, this investment goes up. While I've been investigating these investments for a long time, I certainly had not heard of this one before. Prior to this show, I had been looking at some small allocation into Gold or Energy focused funds.

I am pleased with my research so far on this name, because the initial investment is low at 3000 dollars USD, which is within my price-range. However, the A-shares, which is what I would purchase, come at a hefty 5.75% front-end load. While most shares have a load, many firms like vanguard offer no-load mutual funds. This means that I would lose 172.50 right off the top with my 3000 investment, bringing me to 2827.50. Then the remaining money would have to climb about 6.1% before I began making anything. This seems a bit excessive for me, so I probably will wait on this.

Blogging Wealthtrack 1/22/2012

This morning I tuned in to Consuelo Mack Wealthtrack. It is one of my favorite shows to listen to with respect to personal finance, but more tuned in on the investing side. I think that the subject matter is quite fascinating, although not as titillating as say the Suze Orman show (which I also happen to like).

On this week's show, Consuelo interviewed Phil DeMuth, author of the little book on alternative investments. I found that this was a very interesting author and he seemed like a down-to-earth kind of guy, which is a nice, refreshing change compared to many guests that appear on the show who sometimes seem like they are a little bit divorced from the plight of everyman.

Her other guest was John Hathaway, founder of the Tocqueville Gold Fund. During an interesting interchange, there was a comparison of a large sum of gold versus an equal amount of the assets of Warren Buffet's Berkshire Hathaway, and the preference seemed to be Berkshire for Phil. However, John Hathaway was quick to point out that gold had done much better in the trailing period.

Two common points about gold were countervailing points, however:
1. Gold has now earnings stream to buoy the price
2. In order for gold to see a similar run up that it has had percentage-wise, the world would have to be dramatically different than it is today.

Of course, alternative investments are good because they are alternatives to existing asset classes, something that many people are stuck with in traditional mutual funds that hold stocks and bonds. Phil recommended that your holdings in these alternative investments should be largely based on your experience and knowledge, indicating that perhaps you would start small around 5-6% and increase over time to 10-25% if you became really comfortable.

Personally, even if I really knew what I was doing, I think 10% would be my limit. For the same reason Gold can't run up, I don't want to bet against the market at that level. I have to believe that over the long term, things will continue to get better for everyone.

Go to to see the show/learn more. You'll be glad you did.