Easy Change

Blogging Wealthtrack 1/22/2012

2012-01-22T06:02:00.000-08:00

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

DFSAX

Timebanks and CSAs

2011-12-17T14:53:00.000-08:00

In this, the great recession that we're slowly (arguably) coming out of, I have realized that there is quite a bit of opportunity for us to learn about ways to make better lives for ourselves by leveraging new movements and ideas (some of which are really just re-made ideas from the past).

Two ideas that are really worth considering, in my opinion, is the idea of "timebanking" and "CSA". Both of these ideas were covered as part of a documentary that aired on "Now On PBS" titled "Fixing The Future". While these were only two of the ideas covered, I think it is a good short documentary that gives some hope to the somewhat difficult mess that we're in as a society.

The first idea that might help us is the idea of "timebanking". Timebanking is a system whereby you donate your hours into a shared pool with lots of local members and then are able to get a comprable portion of time from someone else. This is sold as an item that builds community, recognizes that everyone has some skill, and even if you think that you have a more valuable skill, it is worth noting that these transactions are tax-free, so there can be a significant discount by using them. Learn more on this website: http://community.timebanks.org/

The second idea that was mentioned was the idea of a CSA. This is Community Sponsored Agriculture--essentially a local farm. The advantage here is that you learn and are aware of the origin of your food. And this provides some availablity/value for the produce that might not be available otherwise since the food would have to be shipped and cause pollution. In my area these seemed a bit expensive, but to be fair, there's an element of uniqueness and value in it that offsets the additional cost if you either have kids or enjoy the experience, in my opinion. These CSAs often take a yearly fee and then provide produce each week for your family that is grown locally. Learn more about them at this site to see if you're interested: http://www.localharvest.org/csa/

Personally, I am looking into both of these to see if there's a way that I can use these resources locally also.

Yes! You Should Keep Saving

2011-11-09T17:50:00.000-08:00

Recently I was browsing an internet message board (Net Worth IQ) and I realized that for the rest of my life I will find personal finance fascinating because so many people have so many different outlooks and perspectives.

One person's recent question was essentially: Should I Keep Saving since it doesn't add much to my Net Worth as a percentage of the total?

My response is as follows:

I think that the real thing you're driving at is whether or not you've reached "critical mass". Bob Brinker uses this term to indicate the tipping point where your investment "dividends" are putting enough out in order to do two things:
1. Generate enough income for you to live your current lifestyle
2. Put out additional income on top of #1 such that the total principal grows enough to keep up with or ahead of inflation.

The main point here is that you should keep putting the 1k in each month -- not because you think it will up your net worth by 1, 10, or 50%, but because you want to get to critical mass. Critical mass enables you to be the boss and be literally 100% free with respect to your money from any kind of tragedy/job loss/etc.

I hope that helps! To that end, perhaps networthIQ should be tracking not just the growth in net worth, but also how much is from "income" vs "dividends" and what a persons' velocity of increase is.

Computer Virus Woes

2011-09-29T18:01:00.000-07:00

So, this past weekend I was looking at funny pictures. I highly recommend the site PetsWhoWantToKillThemselves.Com. It had me giggling all day as I kept thinking about some of the photos on there.

At any rate, over the course of the day, I determined that there was some sort of virus, malware, or rootkit installed and my AVG Anti-Virus started going haywire. Wanting to take no chances, I quickly backed up my files and decided it was time to wipe out my computer.

Of course, it is always tempting to try to salvage it to avoid doing crazy reinstalls of everything, but I decided that in this case it would be better to just go for broke. Being an IT guy, I was able to do it myself, but it totally took the whole day, even though there was no real issue or crisis to it. It just takes a really long time. And one thing it made me realize is that I should get back into doing that more often because the money was decent compared to the amount of effort it took.

A Debt Reduction Christmas

2011-09-16T04:29:00.000-07:00

Being debt free is sexy. There. I said it. Nothing is more attractive than someone who has their financial house in order. It often indicates this person is self confident, has drive and motivation,and most importantly, knows how to execute. Who doesn't want to be with someone who knows how to execute?

All that being said, what is the best thing that we can do in terms of reviewing the debt reduction strategy for Christmas. The first, and it bears repeating is that you should reduce spending on Christmas and avoid putting anything on credit cards.

The next two ideas are more novel and could really help with your debt reduction.

1. When you are asked what you want for Christmas say you want some help paying off some debt. Give you friend/relative the address and account number of the bill and have him/her pay an amount equal to your gift. Some might think this is tacky or smells like a hand out but I disagree. This is admitting you need help and directing resources someone wants to freely give to where there is he most good.

2. Ask for food and gas gift cards. Obviously these are things you will be buying anyway and this will free more money in the month after Christmas to pay down debt.

If you try these ideas, you just might have a very happy new year when it comes to your money.

Its a Dogs Life

2011-08-23T16:52:00.000-07:00

So, with the past week there was a big financial change -- a new puppy. So far it has already run over 1500 dollars and there are many more bills to come. To say that it was expensive is a huge understatement; to say that it was totally worth it, is completely true.

For those interested in getting a dog, be aware of the expenses involved with the amount of vet bills and things of that nature. Even the preventative medicine is not cheap. On average, the expenses run about 30 dollars per month for a total of 360 dollars yearly, not even including the vet bill, accessories, food etc. In general, it makes sense to budget about 100 dollars monthly for the dog, and that is what I plan on doing.

As for the enjoyment and exercise and zest for life that it brings, I don't know if there is a price you can really put on it. And that was something that I really didn't understand until this week.

Life Insurance Redux

2011-06-23T19:59:00.000-07:00

So, now that I have joined a credit union, I realize that it may be time to once again take a stab at increasing the life insurance coverage. Currently, I have a group term policy through work that is decent and would allow the payoff of a large portion of debt and make things manageable, but I certainly wonder if having a little bit extra might make some difference. The other thing that you never know is what the situation will be with jobs in the future. So, for that reason alone it is tempting to look at more insurance.

This was a pleasant surprise but the thing that I thought which was rather interesting is that this policy is considered group term life and yet there is an application and a lot of medical questions. I am not sure if this is a soft thing or if this is something that really will pan out. Of course, I will need to call them to find out more information on it, but so far, I've gotten a large amount of offers from this Credit Union -- even more than my regular bank.

My original idea behind getting a credit union was the idea that I would be able to get more favorable treatment with respect to the eventual small car loan I expect to take out (More on that later), but I think now that it might be more trouble than it is worth. We'll see.

Bank Fees Ate Me Alive

2011-06-11T20:13:00.000-07:00

Recently a review of the bank account revealed that there were some fees charged on my bank account each month. I was completely annoyed by this because I was sure that this was not something that should have been happening and instead was something that was just going on due to my lack of paying attention. In reality, this was an account that I didn't check on very frequently. After spending some time in the local branch (and time is rather scarce), I was able to get a representative to resolve this. At nearly 20 dollars monthly, the fees were no small potatoes.

But the story, unfortunately did not end there. After about 6 weeks, I noticed that the charges began again. This time, I went to the branch again but was shocked that there was only one representative working and it looked like it could easily be another hour in the lobby before I would get it resolved. I left and attempted some miracle working by talking to the customer service via the bank's internal email. It worked! So, in this case, the bank doesn't get an A, or even a B. However, I will not switch yet, but I am thisclose. And believe me when I say that I will keep watching.

Lesson learned: keep track of fees and activity on all of your accounts regularly!

Quantitative Easing Round Three

2011-06-07T19:27:00.000-07:00

It appears that we have another round of Quantitative Easing in the works. If you've been listening to any of the money shows over the past several months, you'll note that most of the major players were not anticipating that! However, a recent update from the Bernanke indicates that the possibility of Quantitative Easing Round Three (QE3) is a very real one....but not in the near term. This article from International Business Times does a good job of explaining the thought process around a possible QE3 and why the timing is not likely to be now.

All that being said, the CPI is up and the price of energy is skyrocketing. It is not an easy thing for people to get to work in cars that are not efficient. However, that is not stopping people from certain segments of the political/media spectrum from announcing dirty secrets about Clean Energy. I find that Google News has a great mix of stories from all over and this story -- the increased energy costs is certainly one to watch.

Because of all the things that impact the prices of both stocks and also things we buy every day, the two biggest factors that I can see (and neither of which I can influence) are gas prices and Ben Bernanke's Fed.

Car Payoff

2011-05-28T10:36:00.000-07:00

It has been a long time coming and I would be lying if I said that I hadn't really been looking forward to it. After about two years of payments, finally enough money being in the emergency fund, there was enough to pay off the car. And that, about 26 months early! The best part was the phone call from Toyota. The service rep asked if there was any interest in buying a new car. Of course, they would offer a discount of 1% on any financing needed.

I just think that there is a tremendous amount of pressure both from the company and from the society in general to stay in debt. I wasn't that surprised, but everyone loves to have someone in some sort of hock to them. And this, is the real crux of a personal issue I am struggling with. Dave Ramsey is so strongly against debt, it makes me wonder if there are some cases where it makes sense. Regardless of your feelings on this issue, it undoubtedly is better to not have any debt. And this month is the first month that there will be no car payment--I'm already looking forward to the bills this month!

Next on the list is to make sure that there is money taken and put into savings as well as continuing to pay on the remaining non-mortgage debt which is the student loan. After that, the next item will be saving money for the next car. The goal eventually is to start buying the cars at least 50% cash and it would be great to start doing that with the next one. I wonder how many people do that already.

Back From Trip to Europe

2011-05-27T21:01:00.000-07:00

So, recently I went on the trip of a lifetime. I say that with a straight face because I truly think that I will never return to that part of the world in this lifetime for that kind of trip. The trip was to Monaco, Greece, Turkey, Italy and Cyprus. Originally it was to include Egypt and Israel but due to unrest in that part of the world, those destinations fell through.

Since this is a money blog, I will say that this trip was quite expensive for us; there were four of us that went total, all friends from back in my college days. This trip last two full weeks and the cost I am including includes meals and tours and activities for each day. Most of the days were aboard a cruise where the food and lodging were provided as part of the cost.

All told, this trip cost more than 5000 per person, USD. I am not saying that to brag, but merely to indicate the amount of difficulty for that kind of trip. Put simply, that was a serious percentage yearly earnings -- far more than I have ever spent before on a vacation. (It can be justified if you don't do it but once in your life.) All that said, it was a wonderful trip and there were lots of things that I was able to see that I didn't even know existed and I am a lot happier about my decision to go.

To reduce stress, a friend in the group arranged the trip, paid for items on her credit card to get the bonus points, and was reimbursed by me to pay the bill; this worked out quite well so that we didn't have to deal with being frustrated about the cost after the trip.

Besides saving money for a longer period up front than a normal vacation, there was really very little in terms of special things that I did. We're in the process now of deciding whether or not to go again and at this point it is difficult to tell whether we will do this again; largely due to the financial implications.

3 Lessons Learned from My Banking Error

2011-02-06T07:11:00.000-08:00

This past week was filled with excitement, albeit the uncomfortable variety when I had to pay my bills quickly via my bank's electronic payment system and made a mistake which will be annoying at least, and costly at worst.

First, the week was a busy one in which I did not feel like I had the time I needed in order to do it properly.

Lesson Learned: carve out time in your normal routine to pay bills and check on finances. Not doing so will cause mistakes.

The mistake was a rather easy one to make: I paid one bill on my electronic banking instead of another bill. They were named something similar so the mistake was fairly easy to make. The result was a large credit on one account and an outstanding balance on another.

Second, I discovered the mistake but was so blindsided by it that I didn't handle it properly, immediately and instead intended to simply run up this month's expenses against the card with the credit. And thereby paying everything off within the next 30 days or so, no real harm done. This turned out to be incorrect as I had incorrectly identified the account that this had happened on.

Lesson Learned: Once a mistake is made, don't try to be clever. Just fix it (reverse it) as fast as possible. Being clever makes things more confusing and causes more problems.

All told, I should be able to call tomorrow and get this sorted out, but it is likely to take even more time than it would have were I to simply do the right thing in the first place and take my time with the bills. The situation is rather annoying, but I have to guess fairly common.

Thankfully, I tend to keep a buffer in the checking account of about 2-4 weeks worth of bills for just such a mistake. This has saved me multiple times.
Lesson Learned: Keeping a one-month buffer of cash in your account is well worth the interest you're giving up.

Holiday Shopping is a New Game of Chicken

2011-01-20T18:24:00.000-08:00

Thinking about the recent holiday this weekend has given me a bit of perspective regarding gift giving. Something that I had forgotten until I was recently reminded is how very much people really fill up their emptiness with the shopping and busyiness of the holiday season. I had a conversation with family members recently to reiterate the importance of a reasonable (read small) amount of gifts. For some reason, no matter how much I stress this, there is always resistance. I find the whole ritual can be somewhat frustrating. Gift giving becomes a stressful game of chicken with often little more than wasted money and hurt feelings.

Now that I have outlined the problem, what are the solutions?
1. For me, early and often discussions about the issue seem to help. Sometimes the gifts can be a way for people to try to make up for lost time and connections during the year. So to alleviate that, make more time for loved ones.

2. Avoid going nuclear. When doing the gift giving, stay consistent. Make sure not to increase each year either with your increased success or in response to what you got last year. Once you start increasing regularly, especially increases outside of your normal gift range, you've begun to set an expectation that is unrealistic.

3. Budget, budget, budget! There's no easy solution. If you're going to celebrate holidays at all, and not become someone interested in Festivus and merely an airing of grievances, you must move toward getting something in the way of a budget started. I find that this works well when I work toward adding buffer to my freedom fund.

Year and Week in Review - 2010

2011-01-02T10:32:00.000-08:00

This week has been relatively relaxed for me and I will admit that I have really enjoyed it. By my nature, I am a doer. I like to feel like I accomplished something; this goes along with my work ethic I suppose. But one thing that sticks with me about vacations is something that my grandfather told me and it still rings true: Vacations can be expensive. What he means is simply that the more leisure time you have, the more things you'll want to do with that time that take money. This can be things that are hobbies, travel, or even home repair. All of these things take money -- money that you'd otherwise save if you had been working instead. So in that respect, unless you alone in a public park, homeless, and not eating food on your leisure time, leisure time is expensive.

Well, this week I noticed that this still remains the case, but I feel like I did relatively well. For a full week off, I spent only about a hundred dollars for travel, food etc. Given that I normally spend about that much during a week at work for gas, parking, and lunches, I figure I probably did just fine. But I will say that it was a pretty conscious effort.

Christmas has strapped the finances, despite good and early planning. As expected, there were the "unexpected" gifts, food, excursions which all had to be paid for. And given a big trip that is coming up in a few months, I've resisted the temptation to let these debts linger on credit. I want to make sure my finances are strong going into this trip and that does not include credit card balances. While I'd like to think that there is nothing wrong with the level of spending, I know that this could be improved. I am continuing to work on ways to reduce the cost of my lunches by "brown bagging" it, but it is difficult. There was very little expense on Christmas decorations per se however. Wrapping paper and ribbon for 10 dollars was probably the biggest expense.

Besides my finances, I've also begun to take a fresh look at my health; I found that it was a bit lacking since I had not been going to the gym as regularly as I should. So I took the time and decided to start back again. The membership is not exactly cheap, so I should make the most of it.

Looking Back At Prosper

2010-12-05T11:29:00.000-08:00

Given the time of year, things are drawing to a close and one of the things to think about is what has worked and what hasn't as far as your personal finance plan goes. For me, one of the things that I tried about 3 years ago was using propser loans. My record isn't that bad, and in some ways, Prosper did exactly what I wanted it to--it secured a series of funds to achieve a higher interest rate than I could get otherwise if the money remained entirely liquid.

You can see my track record with prosper. For many people, like Pensonier, it doesn't work out so well. Personally, for legal reasons, it is not possible to invest with them anymore. As for me, I am withdrawing the money now and slowly building up my roth IRA for retirement by dollar-cost averaging. What is most telling about the process of lending money is that there is so much involved in making the loans, that it really tricks you into thinking that the investments are somewhat safe.

Personally, for the amounts I was lending, the most I could do was look at the information available and considering everything that I have going on, it certainly was more of a hobby than what I would consider a really good investment. On some level, it was a lot of fun, and really informative when the whole credit crunch happened over the past few years, this experience of lending on Prosper really brought it back home.

Now, I continue to invest for retirement as I stated and also continue to build up my emergency fund and also set aside money for large, short-to-medium term expenses that I know are coming. So, in all, I think that prosper was valuable, but more as a tool to learn about credit and see what it is really like on the front line for people needing to borrow money; knowing that you have money out there that people are paying back makes you even more sensitive and aware of the flows of the macroeconomic data etc since you wonder how it could affect your investment. As for me, for now, in this economic climate, I am happy to pay down more debt and save my dollars before lending them back out.

Blogging Wealthtrack - Nov 21, 2010

2010-11-21T07:02:00.000-08:00

Consuelo Mack: Wealthtrack is fast becoming one of my favorite shows to watch on the weekend. This weekend, Consuelo had on David Einhorn from Greenlight Capital, a firm that made its name by shorting large firms during the fiscal crisis and made a killing doing so. Greenlight Capital is a hedge fund, and its investors have been quite happy with the returns. But while he is known for being short, Greenlight capital is about 1.5 long versus 1.0 long in terms of a mix of investments.

As for Quantitative Easing, Einhorn referenced the fact that the Fed is targeting inflation, but notes that there is a problem with it. The problem is that the inflation might come, but not where you expect it to. It may come in clothing, energy, food etc. These would be things that everyone needs, not things that are real luxury-type items that people are looking for to increase demand.

On Gold, to Einhorn, Gold is money. "The merit of gold is that given [the current crisis] is how we want our assets denominated." To Einhorn, "gold makes sense as a diversifier and is the type of money that Ben Bernanke cannot print more of."

All of these are insights that are quite exciting. I'm quite pleased on some level that I was able to read into these events correctly, at least according to Einhorn's statements, but the fact is, I wonder what the correct next step is; that is a real concern, especially for someone like an individual investor with only a modest sum.

Health Care Costs Climbing -- like everything else

2010-11-19T18:46:00.000-08:00

Just this past week I was on a visit to some family a few hours away and I was pleased at how efficient the trip was. The cost of the fuel to get there was not overly expensive and good planning kept the costs down to something reasonable. Due to space constraints, I opted to get a hotel room for the night but this was planned for in advance. I use the same chain each time to accumulate reward points.

However, about half way through the weekend, I noticed that I was getting a cold and felt like I had a sore throat. Cut to a trip to the pharmacy to get a package of cold medicine. Even the store brand, which was on sale, still cost about nine dollars. The costs of these things really are increasing. That is the very reason why I find comments that there is no inflation to be dubious at best.

Statistics from the Dept. of Labor when it comes to the Consumer Price Index (CPI) tell a more accurate story than just waving-of-hands types of comments. The CPI shows, in short that there are many increases in common goods that most people buy regularly.

Furthermore, despite the CPI values, there are some reports that indicate the FED may even be targetting an inflation rate of 4-6% for a couple of years. Regardless, there is strong concern that the QE2 move of the Fed printing more money (600 Billion$ in this last round) might cause the USD to lose some of its standing as a reserve currency.

Getting Back In Control With A Regular Update

2010-11-08T17:58:00.000-08:00

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.

Blogging WealthTrack

2010-06-06T06:00:00.000-07:00

One of my favorite shows to watch on the weekend is WealthTrack with Consuelo Mack. It is a show offered by Public Television and it has been rated the "Best Money on TV" by Money Magazine (which I used to subscribe to).

According to this morning's episode, recorded in January of this year, US Household Wealth fell 11 Trillion Dollars in 2008 or, put another way, a whole 18%.

What is the new target number? That is, how much money do I need to generate every month/year in order to live? How do I get to that number?

Harold Evensky, Author - Retirement Income Redesigned
Marybeth Franklin, Kiplingers Personal Finance
Jonathan Clements, Director of Financial Education CITI, Author - The little book of Main Street Money

1.Segment their money - not all at the same time for same purpose
5-10 years of retirement, guaranteed income
"Buckets of Money"
2. 6-10
3. 11-15
4. Alternative Investments

But where do you keep your assets? For Franklin, the error is clear. Many people have their assets too consolidated, putting all of their money in IRAs/401ks. Cash in regular taxable account provides great flexibility with regard to taxation.

All of the experts agree to the common idea of restricting to 4% of your income for your first year withdrawal. This is a rule of thumb that works for perhaps 90% of the cases, but this wouldn't work for the past couple of years, which were the other 10% of cases.

The big takeaway from this discussion? The idea of an immediate annuity: Just 100K can generate 7%, which pays out for the rest of your life.

The biggest challenge for people? Being able to relinquish control of their principal to make a long term decision about their money like an annuity.

Twelve Month Milestone

2010-05-14T19:29:00.001-07:00

This week I finally did a calculation that I had not done in some time: worst case scenario. This is a calculation that I do in order to give me some confidence that things are in a good state if the worst case scenario that I am interested in protecting against happened. Simply put, if there was no income because of a job loss, how long could the household be operated without any additional income.

In this scenario, my goal is to determine this kind of scenario under realistic conditions. Put simply, I wouldn't be accelerating my debt repayments, continuing my savings plans, or doing anything other than the base payments on all of my fixed expenses.

Given these parameters, without additional income, we have over 12 months of running room. This is a good feeling and is the first time that there have been that kind of savings. It is a really nice feeling. Does anyone else track this kind of figure, I wonder? Personally, after net worth and saving's rates, this is one of the biggest things that gives me a sense of security.

Pacific

2010-05-12T16:13:00.000-07:00

The past few weeks I have been watching the mini series "the pacific" on HBO. There are a couple of things that strike me abot this as I was talking to a co worker about this that I thought might be very interesting in terms of personal finance.

The amount of television you watch certainly seems to impact your situation in terms of personal finance. I notice that I watch more tv now than I probably did a year or two ago. I think that some of this is because I haven't played as much poker which I think saves money but I also think that I would be stupid to not consider the productivity aspects of it.

The other aspect of it was simply how easy it is to get caught up in worrying about things that in comparison to soldiers worrying every minute on a battlefield just seem a bit trivial. I hope I can maintain that perspective.

A nice thing that I found out about today was that I have recalculated my household liquid cash and it has now reached the 1 year mark. With additional funds I am looking at Vanguard for no load mutual funds as I keep saving.

Continuing Education At The Price of Sleep

2010-05-07T20:34:00.000-07:00

So there has been a personal trend for me in my career over the past few weeks and I thought that it would be worth mentioning here. Many who follow personal finance have browsed through some of the major blogs and books that talk about a few themes that I strongly believe in:

1. Don't waste time. Time is a huge asset. Even people who do not have a job, they have something that is quite valuable: time. In short, even when unemployed, this is an opportunity to improve yourself and your skills. Put simply, whether or not you're working, it is really important to not waste time.

2. Remember your value. In short, the skills that you get in many jobs are skills that must be continually improved and refined. If you're not doing that, then you're setting yourself up to be in a bad place in the future when you're lagging behind your peers in the field.

For me, number two came home to roost this past year. I've been in my current position for some time and although I've been working hard, I have not been able to get any outside help and learn anything interesting to continue growing in my field. So, this means that I am going to be working behind the eight ball until I could fix it.

So, in order to fix it, I returned to some of my college texts and decided to review them. This sounds a bit corny, but I am one of the few people who actually went to school and ended up doing a job directly related to my degree. So that is pretty good I'd say. The reality is that things are not that outdated that my books that I already had (remember it is about being frugal when possible), were a bad starting point.

This served the goal of helping me get back into learning about my field and also serves the purpose of avoiding spending money until I am sure that I will commit. So, today I finished my first book and I am in the process of working on two others that were purchased. I expect that these will take longer since they are the first time though.

Now that I've gotten back into the habit, I am much happier. I feel like I am making some productive use out of my commute again and this makes me happy. The only cost appears to be the loss of some sleep :)

258 Million Dollars

2010-04-23T19:22:00.000-07:00

One of the largest US Lottery prizes in history was claimed recently by a man who works in a small convenience store according to MSNBC. I think that it is pretty amazing when you think about it. Chris Shaw is a guy who is working and can really really use the money. I hope he gets his health and kids taken care of and really is able to improve his long term quality of life for him and his family going forward.

Even at a lump sum, the payment is over 120 Million dollars which is quite respectable. I think that many people would be able to make a serious lifestyle change with anything close to even just a million, so 120 million is impressive.

Many people often feel like winning the lottery is like a curse. It is unfortunate but many people lose their lotto winnings. So the best thing to do in these situations is be slow, deliberate, and have a group of advisors who can really help you manage any kind of dramatic new wealth. With a good plan in place, it is far more likely that the money will be used by you, rather than using you!

Unemployment's Unexpected Consequences

2010-04-23T17:46:00.000-07:00

As I was browsing the web this week I came across an article that I found quite astounding. The article was online at The Atlantic magazine and dealt with the socio-economic impact of unemployment on neighborhoods and the long tail effects going out ten, twenty, and thirty years.

What I found interesting about the article was the premise. That is, the idea that unemployment was a problem that was rather long-term in nature was something that quite honestly I'd never really given much thought to. However, given how long and deep the downturn has been (e.g. even in the face of an upswing in the stock market, many people still are out of work), it is not hard to believe that there will be some longer term effects.

This article about unemployment takes this concept and really explores it to the depths.

The idea begins with a common example, that men (and people in general) often feel that their job is a major part of their identity. And in a protracted period of unemployment, that can go away. The article cites examples from
The Unemployed Man and His Family, by Mirra Komarovsky

Her research revealed deep psychological wounds. “It is awful to be old and discarded at 40,” said one father. “A man is not a man without work.” Another said plainly, “During the depression I lost something. Maybe you call it self-respect, but in losing it I also lost the respect of my children, and I am afraid I am losing my wife.” Noted one woman of her husband, “I still love him, but he doesn’t seem as ‘big’ a man.”

The article is long and is worth reading as it might give you some insight into the issues around unemployment and may help you realize how important it is to value steady employment (if the current situation wasn't enough motiviation already ;))

Saving on Food Makes for a Financial Feast

2010-04-19T18:43:00.001-07:00

So I will admit that over the past several years I have been quite fortunate in the sense that the money was not a huge worry for me; I always knew that I had enough money to buy my next meal. And while I don't think that I am ungrateful for my situation, I definitely think that the availability of food has made me a bit more complacent than I'd like to be.

That said, I decided that I could accomplish some real goals with regard to money if I changed my habits toward food:

1. I want to stop eating out of convenience so much. This will require planning.
2. I want to reduce the amount of food that I waste. A recent trip through my canned goods revealed nearly 20 dollars of completely wasted food. The picture here is just a sample!

3. I want to start eating healthier foods. I think that in the end, this will force me to eat more vegetables which should actually reduce the costs of my lunches (see goal 1).

My plan is not to commit to any specific goals, but simply to try to chew on some basic tactics:

1. Instead of buying chips at lunch, buy a big variety bag of chips and eat one each day. This should save about 50 cents per bag total and also reduce calorie consumption.
2. Instead of eating all lunches out, cut back at least one meal per week to eat in the office with food brought from home.
3. Instead of eating all breakfasts out, begin to bring food/coffee from home to reduce costs.
4. Instead of buying snacks with lunch, buy a package of snacks and bring from home.
5. Similarly, I will attempt to pre-cook/prepare meals at home and bring leftovers to work to reduce wasted food.

Total Cost of Eating at work (Note I work in a populous North Eastern US City):
1.29 snack
6.50 avg. Lunch
3.00 avg Breakfast.

About 10.75 each day for food. Some days less, but this is about the average. And since this is about food, I won't even mention transportation costs. Both categories eat up tons of money and the service is totally consumed! This is insane!

So, even if I can cut this back by about 1/2 on average each week, that should save 20-25 dollars per week. And over a full year of 48 weeks, that could be 1200 dollars without changing habits all that much. It may not seem like much, but when many of the other key items have been done, and guaranteed returns are hard to find for investments, 1200 dollars to me seems like a feast!

Need a Prom Dress? Chew Gum!

2010-04-16T16:41:00.000-07:00

I just picked up this story on the net tonight and I thought it was really worth sharing because this is really innovative, I think. Go here to read more about the Gum Wrapper Prom Dress. I think the story is very cool and timely with Prom right around the corner for some students.

Cheap Eats: Quick Corn Chowder

2010-04-15T17:15:00.001-07:00

One thing that I have really begun to focus on lately is the idea of saving more money with regard to cooking costs. I have a whole separate post related to money saving food tips.

As I suggest in the recent food article saving money on food can often be about finding tasty recipesthat are cheap and quick to prepare since those are the main barriers to good healthy and cheap eating.

One such example is a recipe that my mother taught me when I was little and I still cook it today: Quick Corn Chowder

1. Mince a small white onion and combine with 1 1/2 TBSP of butter in a medium sized sauce pan.
2. Keep onions on medium heat for about 5 minutes stirring frequently so they do not burn.
3. Combine a can of pre-sliced or pre-diced whole potatoes and two cans of sweet cream corn.
4. Optionally, if you want more corn, you can combine another can or half-can of whole kernal corn.
5. Fill one of the empty cream corn cans with milk halfway, and swish around to get the extra and pour it into the pot.
6. The other can should be filled about halfway with water and swished and combined.
7. Cook on medium heat for about 20 minutes stirring frequently or until corn is desired consistency.

Makes 3-4 bowls.

This is a great meal for under 5 dollars to feed 2 people, especially when served as a lunch (great for Football games!) with a side of bread and butter.

iPhone packs huge value

2010-04-15T04:41:00.000-07:00

More than I had expected, my iPhone is becoming a bit of an entertainment device. When you think about it really this kind of makes sense because there are more applications for the iPhone everyday. But what shocks me is that as an entertainment device, the iPhone packs quite a bit of value for someone like me who is committing several hours a day on public transit.

Even when I get to work I am able to use the iPhone for music and I find that to be perfectly acceptable since the additional drain on the battery is mild and it has not really resulted in any additional charging. I also continue to use my existing ipod for any longer term music listening.

More than the music, the applications are a huge value! One example is a recent game I bought: Monopoly. This game cost three dollars on the iTunes store and then I have replayed it tens of times and I own it forever. If I can manage to find several games like this, the amount of value I derive from the iPhone is then quite high. And that doesn't include the other uses like phone calls, text messaging, and even updating my blog!

I will be the first to admit that I balked at the cost initially of the iPhone and if I didn't have a job, it would not make sense. But after considering the value, I think the iPhone is well priced. If you're in the market for a new cell phone, give the iPhone a try. I think you'll find it far superior to most other phones out there with a lot more versatility.

The High cost of Healthcare: Solution Search

2010-04-08T15:41:00.000-07:00

The cost of healthcare are out of control. And there is not much that can be done about it. Now that the new plan has been passed we have added millions to the pool of people being covered and the reality is that we have not improved the facilities. Instead we are decreasing payments to the the providers by the government. It is an expensive proposition that's for sure.

People are concerned about the dollars and cents. I am too. But I am concerned about the long tail effects of deliberately forcing doctors and phamacies to operate below profit margins. Even the ideas that government can force corporations to take less profit if they happen to be insurance companies is a dangerous idea I think.

Put simply: do you have a 401k? Then you probably know that you likely own one or more of these companies. And if you want to retire, you need good returns from these stocks.

Compensation and bonuses should be limited to some degree though. The SEC has some control here. Also we should be seriously considering tort reform and real improvements to the system like determining whether or not we have enough providers available in the right locations to discourage ER visits.

All of these are ideas that should be looked at to reduce the real cost of healthcare which comes as the tail grows long. What alternatives do you propose?

What to do when you're New Money!

2010-03-30T17:16:00.001-07:00

So, if you've already figured out what to do with your savings, and you're aware that you should pay yourself first. But the question is what to do when things get busy and you're already on automatic with your money?

Even the best plans need some occasional changes and tweaking. So, make sure that you're taking the opportunity to revamp your freedom fund and expense estimates each year. I find that the best time to do that is tax time.

This year, I reduced my additional increase from 3.0% to 2.0%. Inflation seems to be in check and fortunately, things seem to not be expected to change in the near term. So, I determined that I needed to save approximately an additional thousand dollars in my freedom fund in order to stay current.

Then I did something similar for my emergency fund (or e-fund as some like to call it). Once those two were satisfied, I had to decide what to do with any additional funds that I might have available. One option that many like to use is to finish up contributions to the ROTH. I have not maxed out my retirement accounts and there certainly could be no good argument against doing so.

Furthermore, I still have some student loan debt which could be paid off rather easily. However, I have a debt snowball on this debt and I didn't want to accelerate the payments further. So, instead, I opted for a taxable account invested in mutual funds at Vanguard. I've had good experiences so far and I chose a very low risk account and decided that this would be better long term than leaving it in a bank with a paltry 1.25 or so interest rate.

Along with the minimum to open the account based on that type of fund, I also set up a monthly automatic investment. I like the idea of this being automatic just like my 401k and Roth IRA so that there is no temptation to skip it some months. So far, I'm pleased with the dividends and since it is a relatively lower risk fund, I think that it will easily outpace my ING direct account...and for money that I can afford to take some risk with, that is not too bad.

What do you do when you come into new money at this point?
Would you ever forego retirement contributions with extra money?

Is European Debt Greek To You?

2010-03-26T16:52:00.000-07:00

The press has been covering various countries and their possibilities of defaulting on their debt for some time. Last year, Iceland had a financial crisis that caused many to become quite nervous that it could cause a series of defaults across Europe.

Lately, the big target has been Greece. For quite some time, the burgeoning levels of greek debt have made many investors nervous. A country, like a company or a person, can spend more than they have, but must borrow in order to do so. Companies can borrow by issuing stock or bonds. Countries can borrow by issuing bonds or other similar securities. All are forms of IOUs.

In the case of Greece, the increased debt levels have made people nervous because they seem to be at a level that could never be repaid. This fear was lessened to some extent today with a new agreement that provides some backing for Greek debt. Read Bloomberg's Greek European Union Accord article to learn more.

What does this all mean for the average personal finance enthusiast? In reality, there is not much we can do about the government spending in other countries. However, we CAN and should hold our own government accountable to the tremendous spending that we're undertaking as a nation. At last count United States Debt was at an astonishing 41,000 dollars USD per citizen. This is not sustainable and the amount of interest paid daily on that debt is staggering. Over 6,100 dollars US is just the interest on that debt.

In simple terms, we can view the United States as a company. And we're competing with European, Asian, and Latin American countries to produce goods and services and get the best price for them. However, we're not doing well if we have a huge debt burden because it leaves us over a proverbial barrel when it comes to spending on real needs down the road. That is what has caused Greece to need this bailout. Unfortunately, the US is too big for anyone to bail us out. Even China, a large consumer of the US debt, is starting to buckle under the weight of its dollar reserves.

I hope this was an interesting post for you; I know that it had been a long time since I'd thought about the crisis in Iceland and this has certainly motivated me to become more aware of the political landscape in advance of the November elections!

Trimming Subscription Costs

2010-03-15T18:46:00.000-07:00

One of the easiest ways I find that you can spend money is through recurring expenses. Although it is something that I am aware of, it is something that recently began to creep back up. When I first became really interested in personal finance a few years back, I really thought that there would be a bit of work to be done and that a simple magazine might help. I subscribed to Money magazine and probably got something like 16 issues for like 12 bucks, who knows? Even after factoring in the entertainment value, I have decided to not renew. Much of the content feels recycled and the choices that they are highlighting seem to really be geared to people in retirement or with kids which doesn't really fit my life at this point.

Another subscription I've curbed is my World of Warcraft. I really enjoyed playing the game for a few months and also seeing all of the new content that had become available but the game has lost its appeal for me so I've quit. Perhaps I will go back, but not right now.

And the last subscription that I've worked down is the Netflix. I've been using this less and less for several weeks and I am actually finding that the online rental service seems to be the most valuable and I get that even with the lowest subscription level so that is what I switched to.

Overall these subscriptions don't count for all that much, approximately 30 dollars per month in savings which is not the end of the world, but I figured there was not any point in wasting the money. I'm curious to know how the economy has impacted other subscription-based services.

Suze Orman Goes Too Far!

2010-03-13T13:24:00.000-08:00

I've been a fan of Suze Orman for years. When I first started working after graduating college and then I started to make some money, my experience with other members of my family, mostly my grandparents, showed me that I needed to figure this money thing out.

So, I set out to understand how money works and I found Suze. Many financial gurus are out there and for the most part, much of the advice overlaps, but Suze really seemed to be right along my line of thinking. I bought the books, watched the show, and despite the fact that I feel like I've largely outgrown it so long as I follow the lessons, I really wanted to check up on how things were going.

I went to the CNBC website and found an interview where she said this:
"I do really live within my means. I have absolutely no debt. If I don't have the money to write a check, then I can't afford it. I never, ever, ever spend old money, so I'm only allowed by my own standards to buy something new with new money that comes in. So, if I sell a home, I can't take that money to buy a new home. That money I already had, that goes into the investment account. If I want to buy a new home, it has to be with new money that comes in."

Now here, in my opinion, Suze goes way too far, for some people. Many people are very comfortable now with the idea that you're supposed to be spending less than you make and that it is not important to impress people. The great recession that we're in has been a tremendous shift in mindset for the average American consumer. But the idea that you have to only spend new money is something that will fly in the face of most people's thoughts on money.

I agree with this concept. The idea is simple, you need to make sure you're doing everything to live within the means based on what you're making today, not what you made 3, 6, or 12 months ago. This is one of the fundamental problems with many people's personal financial situation.

In the face of a salary cut or a layoff, people continue to live the lifestyle that they had at 100% income levels. What Suze is saying here is a bitter pill to swallow, but it reflects a new economic reality that we'd all be better off accepting now and living by: a loss in any kind of income needs to be balanced more than 100% by reductions in expenses.

Most people have discretionary expenses: cable, internet, cell phone, dinners out and entertainment, the list goes on. However, it makes no sense to spend on these things when you've just lost hundreds or thousands of dollars monthly in income. Where will that loss of income come from? And what if things get worse and you lose your other income or have an emergency?

What Suze says here is advanced, but it is critical. A good credit score and a nice healthy emergency fund makes no difference if it is not managed judiciously in the face of a real emergency like a loss of income.

Personally, I've taken the same principal and applied it the other way. If my income increases, I typically wait until I've gotten 3-5x as much additional monthly income before I commit to a discretionary expense. Then I know that the expense is sustainable and that I'm continuing to save and invest enough extra that I should be able to reward myself.

For example, if I wanted to go out to eat one additional time for 45$ each month, I'd usually wait until I made about 150-200 dollars additional (and that I was saving/investing it), net each month before committing to spending that money.

Thriving in a bad economy

2010-03-11T17:34:00.000-08:00

It has been a very long time since I last updated and I've accumulated some stories that I can share about the past few months in my next several posts. I hope that they will be found to be useful and interesting.

After a very long period of time, the economy has come back. It seems now, although there are some small shifts day to day and week to week, that the stock market has found some sort of steady point. Of course, there are many that think that this could all change and that there is still a chance of a double bottom.

All of this is really a side show in my opinion. What matters most to people is what is happening in their own personal financial life. That is, what is the most important thing in each person's life that keeps them from being happy. For many right now, it is a combination of a lack of a good-paying job and/or an overabundance of expenses.

This past six months has been quite good; expenses remain low and the debt snowball continues as I am working toward paying down my student loan and mortgage. My car which has been paid off for some time continues to run (It's a Toyota) and I am grateful for that. Furthermore, the taxes just got filed and I got a fair return back so I'm quite excited.

My chart on Networth IQ shows the real issue here though...even with all of the recent activity and continued work toward goals, it is still difficult to reach past the prior highs of a couple years ago. However, I continue to contribute and keep the faith that things will be going ok soon. You can keep up with my progress chart here: Net Worth Chart

Wrestling with life

2009-11-20T15:22:00.001-08:00

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.

New furniture

2009-11-03T05:10:00.001-08:00

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.

Back to World of Warcraft

2009-10-28T06:26:00.001-07:00

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 amortized over the number of hours, forty or fifty cents is a good expense for entertainment.

What have been your expenses? Have you started swinging back toward spending in the midst of all of these good deals?

Blogging WealthTrack

2009-09-20T06:28:00.000-07:00

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 paraphrasing). "If you had high quality bonds - Municipals - with adequate allocation and cash, those folks cut their losses in half...down 12-15% rather than 38%."

Another guest, Richard Bookstaber, author of "A demon of our own design" stated the issue succintly. "Diversification works really well until it really matters." In short, If you think that you're diversifying, it doesn't matter when there is a crisis. Two things matter in a crisis. Risk matters and liquidity matters. He also stressed that diversification and deleveraging (in other words, taking risk off the table) are two different issues.

In the end, I was interested in internalizing this point and deciding how I should change my strategy (if at all) for retirement investing. Inflation definitely appeared to be a medium to long-term concern for the guests.

The one investment for each of the guests:

David Darst: Inflation Protection, WIP, SPDR DB Intl Govt Infl-Protection
Richard Bookstabler: Inflation proctection, 20 Year TIPS.
Mark Cortazzo: Templeton Global Bond A Fund (TPINX)

Wealthtrack Action Point: Decide which flood (crisis) protection you want in your portfolio....
extreme 100 year, ST Treasuries, etc
30-70 year, corp bonds, gold, etc
10-25 year, broad;y diversify, change according to preferences.

Of course, the one-investment choices all focus on inflation, so I think that this is an interesting point. Do we really think that inflation will become similar to Turkey or to a South American country?

5 Ideas For Keeping Wedding Costs Down

2009-09-17T15:58:00.000-07:00

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 out what you're going to do at the low end and then chop another 5-15% of the total. In other words, make the hard choices at the beginning about who to "not invite" and simply have that discussion with your significant other and family members.
2. Avoid cash gifts if practical. Most people tend to give cash when they are not sure what you need. If you have something you need to buy anyway, register. This will likely get you a gift instead of cash and you'll possibly end up with more value than if it was just cash.
3. Exploit your relationships. Almost everyone knows someone who can help out with something. And when it comes to loved ones and friends, everyone is usually more than willing to help. Use those connections to score free labor, discounted centerpieces, etc. Every little bit helps.
4. Consider avoiding the rehearsal dinner, gifts for the wedding party, or other expensive "traditions" that might not mean much to you. Or, perhaps just scale them back. No matter what you decide to do, you might be able to shave some of the cost off by simply adopting a "do less" attitude.
5. Pay cash. Like any vendor, some vendors can provide a cash discount and even if you just write a check, you can avoid interest fees. This will also force you to only spend what you can really afford. My personal feeling is that it should be in the 2-4 months worth of net income range. Anything more than that is likely too much if you're paying for it yourself and you don't have much in savings. (I'm talking <= 12 months of expenses.)

Health concerns

2009-08-28T09:17:00.001-07:00

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.

Out of this world spending?

2009-08-20T07:25:00.001-07:00

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.

Keeping a backup plan

2009-08-18T09:30:00.001-07:00

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 matter what. So, in considering these types of tasks, you can make sure you have a task backup plan by doing the following:

1. Keep a plan or task list updated for important projects.
2. Designate and train at least one reliable resource to help you in an emergency.
3. Maintain good relationships with key people for the task. A backup plan is useless if the person who is backing up is not trusted.

These are the steps I take and they worked well for me during this recent illness. What strategies do you try?

Prosper for Dummies

2009-08-15T14:48:00.000-07:00

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 easy for you to point at this tirade and say it is sour grapes, and that would be partially true. But there are many people out there who are far more hurt than I was. These people have lost on the order of twenty percent of their principal according to Eric's Site.

In short, I won't do this again. These sites are probably all scams; I wouldn't trust Lending Club and these others either. They all want to make a big interest rate and pay no attention to the risk. And if the REAL risk were factored in, the interest rate would be so high that people would scream usury. The system is broken and what seemed like a good idea a couple of years ago is now just dying a slow, painful death.

Priorities

2009-08-08T17:07:00.001-07:00

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 spending all of your time, energy and money on other persuits, even those generating income.

I found his out again in my life when I started to spend too much time on my work and business persuits to the detriment of my personal priorities. My own experience is that I do best when all is in balance. So, if you have the means, keep the balance from the start; it can be harder to recover once you become distracted from what's important.

Taking breaks is critical also. When you consider that the people around you have different priorities, it is easy to get frustrated and burnt out even if the people are behaving fairly and rationally. If people are not behaving his way, not keeping your priorities in order can be even more dangerous.

Situations within families, clubs, jobs can all be quite distracting without a good handle on priorities. And for me, this can be true even with the best of people. Some people call this process introspection. But whatever you call it, managing your priorities and spending your money, time, and energy appropriately is what will ultimately leave you feeling fulfilled with your life. It has for me lately. And that has helped me do better across all parts of my life.

Forecasting for Retirement: my approach

2009-08-03T15:12:00.001-07:00

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 check in on what is happening now. And mostly the value for this approach is that I can learn to live with what I will most likely have instead of being a dreamer about what I should have amassed.

The burden is on me. If I make a mistake I have no one to blame but myself. And when I use other calculators like the one on fidelity website, they focus on expenses. But I can't forecast that as accurately as I would like. I would like to think however that the forecasting that I can do is better suited to my situation than he generic forecasting done by large financial firms with a one-size-fits-all approach.

Another major aspect of the approach is that I expect to shift to a buckets of money strategy as I get into my forties and fifties where risk becomes much more of a concern. In short though, I think that the stock market holds real promise. And not despite the fact that there could be a strong retrenchment soon according to noted financial advisor Jonathan Pond, but because of it. That is, the idea of another retrenchment is somewhat exciting as another buying opportunity. In reality, the money in some sense is made in those down markets.

The morality of healthcare

2009-07-30T04:26:00.001-07:00

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 should get in the way of that.

I do think that there needs to be some work done to make it more affordable but that doesn't mean giving it to everyone for free. If the government can decide what is a moral obligation and that you can be taxed extra to pay for these services that you don't use, there is no incentive to manage your wealth correctly!

iPhone as a productivity tool

2009-07-28T07:08:00.001-07:00

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 like a heavy laptop or notepad is a big deal. It let's me capture data how and when I want to.

My feeling is that this will make your time committing better. Even if you are in the car you can use the voice feature. I've experimented with some of the other features that there are in some of the iPhone applications. And the reality is that the people don't have much good technology to utilize the features. One example is a voice transcription software that I recently bought. The transcription was not stellar and furthermore the transcription took too long to process on the phone.

So, much like he Internet, the apple store is filled with stuff. Much of it is mediocre and the real gems are a rarity. But none of this detracts from the device. In short, if you are a desk worker and most of yorur productivity is done in front of a computer, then I would highly recommend this device to you. I've found that I use it as muh more than just a phone and that there is an incredible amount of time that can be put to good use with this device.

What's next

2009-07-24T15:14:00.001-07:00

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 increasingly clear that stocks may not be a sure thing even over the long term. But that's the best way I can come up with to invest long term right now with my own money. Unfortunately I am not a high roller so there is not much that I can do.

So, it may not be a sure thing but it is what I am doing in my 401k and Roth accounts using mutual funds. The exciting part of this for me is that my company just started offering very low expense ratio mutual funds. Now my urge to transfer to vanguard is somewhat diminished.

Financial Primer

2009-07-19T14:20:00.000-07:00

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 learning about income, I was 14 years old. I think this is far too long to go before you learn about how important it is to manage the amount of money you have coming in.

Expenses

Expenses were not anything crazy. A trip once in a while to the store to get candy with money my mom or grandmother gave me. Or perhaps money that I had saved from a special occasion. I never really had enough money to save until I started working when I was fourteen. Again, that was when I first started learning about expenses.

Interest and Saving

Once I started working at 14, I had to open up a bank account to keep my money safe. I started with a savings account at the local baybank which has been bought and sold several times since then. But the idea of earning interest on my money was something that seemed rather abstract. When you are making 4.25/hr, 1 or 2 percent interest doesn't really matter all that much. I remember thinking, oh, cool, 20 cents interest, now I can get half a candy bar. Even at that age I was disappointed about low returns on my money. But I didn't know about other options.

Somehow I saved my money from working until I had about 400 dollars saved and I used that in conjunction with money and gifts for christmas to buy my first computer. That computer was a great gift because having AOL made me really love having a computer, forced me to become a fast typer, a really important skill for people working with computers all day, and also made me interested enough to really continue working in computer-related fields through college.

Inflation

The concept of inflation didn't really hit me until I got out of college. Of course, for the first time, I was really making money and having to pay for everything. This was great, but I realized as well that I needed to make sure that I had enough money to pay for food and gas. And oh, geez, this seems to cost a lot more to fill up my gas tank now than when I was 17 in high school!!! These thoughts start to really come into play when you see gas prices spiking.

Credit Scores

In college, in my sophomore year I decided to get my first credit card. It was for a small purchases mostly. I knew that I needed to build up credit but I also knew that on my low-paying work-study job, I couldn't afford to pay a huge bill. So I kept the charges under 20 bucks. But then, the second semester of my senior year, my laptop that I used for college died. And I needed a computer to do my work and my programming. So I bought one. It was a refurbished pc that I bought for about 300 bucks. But it let me work into the wee-hours without having to worry about the computer lab being closed. This was my first real experience with credit. Even now I wish that I had started a little earlier. It would have been good to start building a good credit history earlier.

Blogging My Net Worth

2009-07-19T05:45:00.000-07:00

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, while bad, may not be so awful. My net worth is essentially flat since this crisis began. And the vast amount of the destruction of worth is a result of the crash of the stock market. The value of my cash accounts (my fdic certificates of deposit and savings accounts) is stable. Furthermore, my home, while now worth less, is really only a loss on paper.

Paper losses, which is what many people feel is the case with stocks, are losses you can tolerate. Tolerating these losses only happens if you are in a position where you don't need to sell the assets. The key to avoiding selling such assets is to avoid leverage. As such, I've avoided debt like the plague other than a mortgage and I've been paying off student loans and auto loans and other debt with wreckless abandon. All of this is motivated at consistently and carefully growing my networth.

The importance of this strategy comes back to one point that most professional investors agree with when it comes to money: Don't Lose Any! So, this is my feeling also. I look at the net worth chart as a scoreboard. If I lose in one category, I want to have gains in another that offset the change. In the end, only time will tell if this crisis will end quickly. Many people feel like the changes in March 2009 are indicative of a good possibility that is has now ended, but only time will tell.

Healthcare on Life Support

2009-07-15T17:02:00.001-07:00

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 generations more than most decisions in the past decade. Please contact them and weigh in. It will help your money more than most other things you can do.

Wealthtrack for July 5th 2009

2009-07-05T06:05:00.000-07:00

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 percent range.

But on the other hand, it seems that there are other options for investors who are still seeking double digit returns, according to Gross. He pointed out that with his own personal money (and for his "poor" relatives) he'd recommend bank preferred stocks and closed end funds (some of which are managed by PIMCO and invest in corporate debt). These would offer double digit returns.

As always, I found that this was particularly interesting because it points out something that I've personally wondered about for a long time: does it make sense to hold large amounts of government backed debt or even government backed savings? I have an interesting take on this, so consider whether or not you have the correct level of savings. I'll talk about this more in an upcoming post.

Madoff Madness

2009-07-02T04:49:00.000-07:00

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 will watch your money for you. And if you end up like madoff you will need to have at least some friends to write letters!

Old Friends and Maintaining Networks

2009-06-09T19:10:00.000-07:00

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.

Enduring the down economy

2009-06-08T18:24:00.000-07:00

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 etc, there are situations where there is simply not enough mobility within the company. People cannot be promoted, hired, and sometimes (for fear of not being able to replace the resource) fired. So, here we are with resources not being allocated correctly.

Third, there is simply less opportunity for investors. Very little is happening in terms of the velocity of money. Whereas a dollar went from your paycheck, then was spent and passed through something like 8-12 hands before it was sunk back into a bank account, now we're still seeing a serious decrease in economic activity as unemployment nears 9% nationally and those who are still working are saving.

All of this has me somewhat nervous. But given my timeframes, I am still investing in my 401k for retirement in nice diverse mutual funds. I look at what I expect to be slow, and perhaps even anemic returns over the next 12-36 months and I still feel ok about investing. I know that at some point, I will get paid off for being patience. I can see the wisdom of this especially given that I play poker...another place where you're paid to wait.

But even more than that, I am focusing on good places to spend my money. I am looking for bargains now for things that I need. I know that the inflation is going to come back; even gasoline has jumped a dime per gallon in the past week. So if you have projects that you're interested in taking on, I would start shopping for prices now. I don't expect to see much in the way of higher bank account interest rates as an incentive to save. And I do expect to see real destruction in terms of purchasing power.

But most of all, I have hope. I feel that I will learn from this some key lessons about self reliance and what I really need versus what I want. I think that most people like to say that they don't live an extravagant life or have many luxuries, but I think that this economy, and these times have shown that nearly all of us have something that is a luxury. Perhaps this will teach me to be even more grateful for what I have. Maybe as a country and a society we'll become more grateful as well. Here's hoping....

Buying a Car

2009-05-16T05:45:00.000-07:00

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 bill from only about six weeks ago topped 1000 dollars. So, it would have been much better to trade it in before those types of bills started cropping up because the trade in value probably would not have been much different.

I would follow the advice over at Free Money Finance on getting a car. It certainly seems like solid advice. So, like many things in life, the longer you wait to deal with the problem, the worse your situation will be.

There were many positive aspects though. And I think that one of the best things that you can do in life is to focus on positive things.

1. The car is brand new, eye-catching, reliable, and will hold its value better than the old car.
2. The monthly payment is easily affordable and is 100 dollars less than the old car payment.
3. We'll easily be able to pay it off early and finally be in a positive rather than negative equity position when we trade it in.
4. There will be savings on repairs as well as cost of fuel. So overall, a good deal.

Just Do It

2009-05-01T17:56:00.000-07:00

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 warming up usually. But, more than that, I realized that even if I had warmed up, that there could be injuries that "just happen". In the end, I have not had to go to the doctor, but I won't soon forget the incident.

Here's three ideas to think about with regard to your health:

1. Be aware of your activities and make sure you're taking the possible risk into account. Certain injuries could cause permanent injuries and generate disability.

2. Be grateful for your health, whatever the status. This incident has made me even more happy for the days when I'm healthy without any problems.

3. Ensure that you are realistic. In taking on a regimen of exercise, take into account your age, your warm ups and other types of adjustments you may need to make over time. Just relaxing and taking it slow might save you from hurting yourself.

All that said, I can't wait to get back to exercising. I feel like the tiny risk from exercise is well worth it when I consider how much benefits it has for my overall health.

For options that are easy and cost effective include the following:

1. Try using a bike to exercise outside. Using this over and over will allow for you to be able to experience a great workout at a reasonable cost.

2. Pick up some small dumbells with adjustable weights. Using this and looking up the exercises on the internet, you can get many different types of exercises done without even having to go outside.

3. Finally, if you do choose to attend a gym, make sure you look for values. Some insurances will even give a partial reimbursement, so look into this before chosing a gym.

Redecorating on a Budget - The Costs and 3 Tips

2009-04-20T18:35:00.000-07:00

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 and curtain rods.

After that, I'm expecting between 2500-3000 for living room furniture that will be used to go in the living room and some of the downstairs furniture that is still usable will come upstairs -- at least that is the plan right now.

Figure another couple of hundred dollars for curtains downstairs and then I think that the grand total will be in the neighborhood of 5500 dollars for redecorating 3 of the 5 main rooms in the house, including quite a bit of furniture.

These were the things I did that I think has helped keep the costs reasonable:
1. Reuse furniture if possible. Often times, you just need to change rooms and the furniture becomes usable again. I did this and used an old antique that was in storage.
2. When doing work with contractors, try to hire locally in a bad economy. You may get a better deal than with a chain. Be sure to include an estimate.
3. Shop around, even at chains you normally ignore. I was able to score very nice curtains at Bed Bath and Beyond that were not much more expensive than Wal-Mart curtains I bought for the other room, just by shopping around.

Loan Payoff and Change of Color

2009-04-01T16:19:00.000-07:00

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 milestones is to take some kind of reward. For me, this reward has been threefold.

First I decided to repaint a room in the upstairs of the condo. This is a good investment of time and money and I think that it looks great. A nice bright and neutral color. The amazing thing about this personal finance journey is that way it can permeate your entire life for the better.

Personally, I've found myself to be more upbeat and happy. Furthermore, with less debt, I am able to confidently make positive changes in my environment that require spending money for good reasons like repainting a room. And for the cost of about 80 dollars worth of new paint and supplies, the improvement to the room is simply amazing. I highly recommend making one or two small changes of this nature in your own environment and seeing the positive impact.

Second, I've decided to try to be more productive during my trips to and from the office. I've bought a small netbook computer which is compact enough that it allows me to use it comfortably on a cramped subway. This has seriously helped increase my productivity already since most of my work is typing of some sort.

Third, I've decided to upgrade internet systems. Now I am using the comcast internet cable in order to be able to have a better connection and keep everything on one bill. This is my first night using it and so far it is great and I really do notice a difference.

So What If You Can Call The Bottom?

2009-03-03T16:49:00.000-08:00

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 that people are so interested in bottoms is the idea that you can 'get in' at the bottom and make much more money. But in the price of 'getting in' is high when there are actual bills to be paid and the savings account balance is a paltry sum. This is the opportunity cost. When your lottery ticket costs only a dollar but you are holding one hundred, it is quite easy to make a bet. But, where most people are right now is someplace quite different.

Many people actually owe high multiples of what they actually earn in an average year. I think that all of this talk about bottoms and deflation is the proverbial tempest in a teapot for the average American family. Few families have the requisite 'spare thousands' required for this kind of action...and even if they did, how confident do you have to be in order to risk it given how volatile the markets have been of late?

Personally, I continue to invest for retirement with diverse mutual funds, save a little each month, and stick to my budget. It is old school, but I think it makes a lot more sense when compared to worrying about huge macro-level trends that are literally 30-40 years from playing out entirely. Furthermore, by paying off debt, I am dealing with items that are in my control without worrying about the scare-tactics that others like to deal with. They make great TV and radio, though.

Progress Update

2009-02-28T18:37:00.000-08:00

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, the only two outstanding debts that I have to worry about are the mortgage and the last student loan payment. Each debt paid-in-full makes me feel more alive and more grateful for each dollar I make. It is as if I have some sense that more and more of this money that I'm working for is actually mine for keeping and spending on things that I want, rather than making up for things that I've already taken/spent/used.

WealthTrack Wrapup

2009-02-01T07:21:00.000-08:00

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 sheet'. Russo continued this theme by explaining that a major factor in the decline in price of stocks is a result of multiple contraction. Multiples are one way in which it is possible to judge how much investors value stocks since they indicate an amount of value placed on future earnings of the underlying companies.

In response to the idea of a more frugal future, there was a major indicator from Forrester's point of view: savings rates. From his perspective, savings rate is hopefully a bellwether. He thinks...(I'm summarazing and paraphrasing here).."let's see if we get back to 6-8% savings rate where the consumer is building a base and then you can grow earnings on these larger companies again. Once you do that, you can shift from 'balance sheet' mode to the 'income statement' for growing earnings."

All of this was compelling for me to hear, on both a macro and a personal level. The idea of 'hearkening back to the days of Ozzie and Harriet' rings particularly true for me. I think that it would be somewhat encouraging to see the average consumer savings rate increase. Perhaps that would be a mustard seed in what looks to be a series of troubled months ahead.

Three Tax Tips

2009-01-28T18:51:00.000-08:00

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 increase your withholding at your primary job. This will help you by giving you some assurance that you will get a refund.

2. Know your deductions. Most people have specific situations due to business, retirement account, property, children, and dependents that impact taxes and deductions. Some of these things cannot be deducted after the fact though if there is not planning and proof. If you have had dramatic life changes, it can help to see a professional, if not to save money this year, at the very least to save money next year. An example for me is that the mortgage deduction shrinks each year so it is important to adjust accordingly.

3. Finally, make sure that you know your marginal tax rate. In the event that you are trying to make contributions to retirement accounts or do other tax planning, it is important to be aware of this. As salaries increase and income rises, these can change and start to make a dramatic difference. This is especially important for small business owners as the brackets can change by between 5 and 10%. A change this dramatic can effectively erase your profit margin for the final dollars you make each year if you're not careful.

Don't Discount Good Health

2009-01-17T18:31:00.000-08:00

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 telling you, you should probably take this common sense, preventative advice and follow it.

This blog is about easy change you can make to have a better life. I am realizing, even personally, that I was able to make some improvements to my health by exercising more consistently and taking even better care of my teeth. These things were not expensive in terms of money, but rather, more expensive in terms of motivation.

However, when compared with the cost and pain and emotional drain of having root canals, or some sort of heart surgery down the line because you chose to 'live fast', it certainly seems like prevention is the way to go. Not only is the the less painful and cheaper method (which avoids all sorts of Moral hazard), it is in your self interest. Take this opportunity that this new government, economic turmoil, and new year is giving us, and see if there is some positive change you can make on your life to improve your health!

Suze Orman's Action Plan 2009

2009-01-17T08:00:00.000-08:00

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.

What Happened to Moral Hazard?

2009-01-12T18:18:00.000-08:00

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 average American changed his mind about moral hazard? The argument is that this people have realized that it was wrong to feel that way and that we need stimulus and bailouts. I personally am not so sure. I am not convinced that people have had a massive epiphany since the middle of 2008.

I would submit instead that people are simply more self-absorbed now. Before, during Bear, people felt like it was happening to those big, bad investors and that it would have no impact on them. Now, people have seen their retirement accounts chopped in half in the midst of a significant economic slowdown on a global scale where credit is painfully tight. In short, people are too worried about how to eat to be concerned about moral hazard. So, I think that the amount of pressure on government officials is weak now that Obama is about to take office.

This doesn't negate the principal concept though; moral hazard still exists if we shield people from the consequences of their actions. Indeed, the current bailout and stimulus packages are projected to be approaching 1.7 trillion dollars. This is money that America will likely be trying to repay for the next 50 years. Isn't that a hazard? And we haven't even talked about Social Security or Medicare. What do you think? Are we on the right track with the TARP, the stimulus or is it too dangerous to continue down this path?

Counting My Blessings -- And How it Happened

2009-01-10T11:31:00.000-08:00

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, but in practical terms it means that you want to be someone who gets the work done, gets it done quickly and correctly.

2. Show initiative. Never say no to new work or challenges at work. If you're concerned about being able to do it, ask for help, but never refuse opportunities.

3. Be Grateful and non-confrontational. You have a job! Regardless of what you're putting up with, it beats being unemployed. While you want to be strong, you want to make sure you're being strong in order to do a good job, not just to be obstinate.

4. Add Value. This is a bit of a cliche, but you generally want to add value to the companies bottom line. No matter what your position is, you can add some value either by saving money or by generating additional revenue. Make sure you work hard on projects that are related to adding value and saving money and take note of your efforts.

5. Track your efforts; other people are. Come in early, stay late. Show that you're putting in extra time on weekends if needed, and never complain about the commute or extra hours. If you do this consistently, you're in much better shape. Other people may notice when you leave early so make sure that your work is without reproach and you'll be able to succeed.

The Next Financial Crisis

2009-01-04T06:41:00.001-08:00

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 information out there has made it clear that this is already happening.

What impact this would include is unclear. But it seems quite certain that there is a significant chance that this will further decrease retail spending over the next 12 months and that this will also increase the rates of bankruptcy. The ripple effects of this kind of situation is not clear. The FED has reduced rates to almost zero, but this does not matter if people cannot get additional lines of credit.

In this environment of decreased leverage, it is hard to imagine what the end-results of this will be....but I think that we're going to see the following trends over the next few years:

-- fewer stores and malls and an increased use of cash for transactions.
-- less consumer options; this will happen as more companies who were operating with little revenue are unable to survive.
-- options that remain will be of lower quality and higher prices as a result of decreased competition and also a desire to "recoup" costs associated with the down markets.
-- an increased interest in "safe" financial instruments like money markets and fixed income securities. Even though many people consider the demand for treasuries to be a bubble, it seems like there is going to be significant demand for government-type, safe, taxing-authority backed instruments. Income from these instruments, when compared with the yields found elsewhere is often as good or better, especially when tax-breaks are considered.

Looking Forward to 2009

2009-01-01T17:20:00.000-08:00

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 (nearly 8% last time I checked), that still means that 92% of people are employed. And those 90+% are the people who matter when it comes to getting this economy back on track.

The mentality of many people right now, myself included, is that there is too much risk. Risk exists in whole areas that felt rather safe 6-12 months ago, even if they weren't. Health seemed safer. Jobs seemed safer. The ability to get another job felt more certain. And the price of energy seemed more stable along with prices. In some way, the decrease in gasoline prices has helped, but it has contributed to my increased uncertainty. If it can go down so rapidly, why can't it increase in just the same manner? And when might that happen?

So how to react? Save. Then stop, rethink. Wait. Save more. Save even more. Look around, and save more. That is what people are doing. Reconnecting with family, friends, saving more, consuming less, and refocusing on what they think is important in life -- not stuff. However, eventually, things will get somewhat easier again and those people (myself included) will start to spend again. And once that happens, I think that we'll see an increase in consumer confidence. That is what I think will improve.

Besides that, I think that the changes that a new presidency will bring will also help. More than specifics, just the mentality that things are different will help. Again, perhaps it is just blind optimism, but I think that we're near the bottom of consumer confidence. Here is some interesting info from gallup. And if confidence goes up and people spend more, the economy (including job and stock and housing market) will recover over time. I'm not looking for instant gratification...just an end for this long downtrend.

Money Magazine Makes Cents

2008-12-24T09:49:00.001-08:00

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.

Refinancing Realities

2008-12-14T07:10:00.001-08:00

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.

Prepare for the worst

2008-12-13T14:10:00.001-08:00

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.

----------
This message is from a Virgin Mobile customer. Enjoy.

Staying Ahead This Season

2008-12-04T15:31:00.000-08:00

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.

Buy Bonds for Xmas

2008-11-26T20:02:00.000-08:00

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.

3 Freedom Fund Categories

2008-11-05T18:23:00.000-08:00

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?

Prosper Goes Quiet

2008-10-25T19:44:00.001-07:00

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?

In for Two Dollars

2008-10-24T17:43:00.000-07:00

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.

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

2008-10-21T17:48:00.000-07:00

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.

Save The Economy

2008-10-10T20:26:00.000-07:00

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.

Staying Focused, Staying Confident

2008-10-04T19:44:00.000-07:00

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.

Its Time to Get Greedy: 3 Steps For Uncertain Times

2008-09-16T17:16:00.000-07:00

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.

I Was Completely Snowed

2008-08-25T16:32:00.000-07:00

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.

Net Worth Taking a Beating

2008-08-10T12:47:00.000-07:00

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 :)

Addicted to Saving

2008-07-21T16:51:00.000-07:00

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.

On Living Better...

2008-07-05T13:17:00.001-07:00

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.

Planning to Prosper

2008-06-20T16:41:00.000-07:00

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.

Buy it With Cash Now

2008-06-15T14:50:00.000-07:00

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.

Loan Payoff

2008-06-08T16:05:00.000-07:00

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.

Preparing For The Future

2008-05-29T19:06:00.000-07:00

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.

Wealthtrack Review - May 04, 2008

2008-05-04T05:42:00.000-07:00

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?

Latest Reading

2008-04-06T08:06:00.000-07:00

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.

Quarter One Review

2008-03-31T19:01:00.000-07:00

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.

Preparing For Payoff

2007-12-10T06:48:00.000-08:00

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

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

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

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

Finding My Way Into Vanguard

2007-12-07T13:27:00.000-08:00

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

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

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

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

2007-12-03T05:57:00.001-08:00

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

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

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

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

2007-11-30T11:14:00.001-08:00

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

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

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

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

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

2007-11-28T09:41:00.000-08:00

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

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

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

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

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

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

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

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

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

Bringing Money on Vacation

2007-11-09T07:12:00.001-08:00

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

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

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

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

http://www.epinions.com/content_1371775108

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

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

2007-10-24T10:04:00.001-07:00

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

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

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

Payoff Complete - Ideas on Education

2007-10-16T09:02:00.001-07:00

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

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

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

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

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

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