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Archive for February, 2008

My Number One Financial Tool

February 29th, 2008 at 10:24 am

I think my most important financial tool is my calendar. In my house, I am "defensive coordinator" ... I take the lead in making sure that the money that comes in STAYS in, rather than getting wasted on interest (paid or missed), late fees, penalties, or just missed opportunities.

I do not have an especially organized mind, and so I write oodles of reminders on my calendar. My husband thinks I'm a bit bonkers, but as soon as I become aware of an important date, I stop whatever I am doing and go to my calendar and write it down. Why? Because I learned the hard way just how quickly I can forget things. (And DH may think I'm bonkers, but I can't tell you how many times I have had to remind him of things he thought he would remember! I can't tell you because I already forgot!)

Some calendar notations are specific to a date when action must be taken:
- Days to pay bills or the rent
- Dates CDs are maturing
- Dates taxes are due (annual federal income, self-employment taxes, property taxes, city & state business taxes)
- Business Meetings
- Doctor or Dentist Appointments (who wants to pay no-show fees?)
- Dates library materials are due (who wants to pay late fees?)
- Dates to give the dog his monthly preventative, when his shots are due, or when his license expires (prevention is the best medicine after all)
- Driver's License and Passport expiration dates
- Date lease expires & deadline to give notice if moving out
- Election Days
- Day the postage rate increases (to 42-cents on May 12)

Some notations are general "on or around" reminders:
- Note to call a friend on the weekend, when cell phone minutes are free
- Order free credit report
- Take defensive driving course again to re-qualify for insurance discount
- Fund HSA or IRA
- Schedule a vet, doctor, or dentist appointment
- When it's okay to close a bank account without incurring an early-closing penalty
- When we can get a free carpet cleaning through our landlord

Some are notations in the form of a question. They are reminders to myself not to let things slip through the cracks, to followup if something has not been done:
- Did I receive that refund from Greyhound for my trip to DC?
- Did I get that prepaid gift card from Wachovia for opening the new account?
- Have I received that cashback bonus or those reward point redemption gift cards?
- Did Geico post the 10% discount for taking the defensive driving course?
- Did so-and-so reply to my account query?

On the last page of my calendar, I write notes that extend beyond the current year. Even tho' we are only 2 months in to 2008, I already have 7 notations for 2009 and later. Some of the really far away notations that just might illustrate that my husband is correct when he thinks I'm bonkers include the following:
- "2011 = Estate Tax exemption reverting back to $1mil??? Is there still no spousal exemption for non-citizen spouses? If our net worth exceeds $2mil, we need to think about what this means." --- Please do note the word IF in the preceeding sentence! Keep hope alive! Smile
- "12/21/2012 - 'End of era' per Mayan calendar" --- Please don't ask me what I think this means. I have no idea. Just thought it might be something to think about as the time gets closer Big Grin
- "~2013: Think about getting long-term care insurance (can pay for premiums w/ HSA)" --- This is a result of my decision to "revisit the whole LTCI question in about 5 years" --- Tho' if the world comes to an end in 2012, I guess it won't really matter, will it?


Peekaboo

February 25th, 2008 at 07:06 pm

Wanna peek at a boring investor's portfolio? ...

Are you like me? Do you sometimes wonder what is wrong with you because you aren't getting stratospheric returns on your investments? Do you slightly envy those who so confidently pick individual stocks, buy precious metals, and short put options on future Mars travel (yea ... I made that last one up)?

In the past I have been somewhat apologetic about the conservative nature of my investments. But no more apologies.

I am reading "The Number" by Lee Eisenberg. The Number refers to "How much money you need to secure the rest of your life." This book is not so much about creating a formula for determing your Number as it is an exploration of why coming up with The Number is so challening, and why it must be an on-going, lifelong process. It also offers interesting tidbits in to the world of those who sell financial products.

One passage in the book really jumped out at me (from page 129):

"Risk aversion. Overload. Hubris. That these qualities get in so many people's way, that they louse up investment returns, that they screw up the Number, is deeply regrettable, if only because they can be tempered by a trio of reliable, if boring, traits of character: moderation, balance, common sense."

Yes-yes-yes! Validation! Here's to being reliable and boring! My investments have been seriously thought out, they are working for us, and ... well ... they are very very boring, but no longer embarrassing to talk about.

So, for anyone interested, here is a peekaboo in to the portfolio of this very boring investor. [Why do I feel like I'm about to strip naked in a room full of supermodels?]

1. Cash: Cash makes up the single biggest chunk of our portfolio. Our cash is in MMAs and CDs. [In the past we have had T-Bills as well, and we likely will again in the future ... But not right now, because frankly the yields suck at the moment.] We keep much more cash on hand than the average person needs to. These are the reasons cash is essential for us.
- Cash flow for my husband's business. Squeezing off the business cash flow wouldn't exactly be killing a golden goose, but it certainly would be killing a good ol' laying hen. Smile
- Cushy General-Purpose EF ... one year's living expenses plus ... again, more than the average person needs ... because DH is self-employed and has no guaranteed income.
- Cushions in budget categories where irregular expenses crop up: Medical/Dental/Vision (we have a HSA), Auto Maintenance, Pet Care.
- Cash for the purchase (in cash) of our next house
- Cash for the purchase of furnishings once we have purchased above-mentioned house (we sold almost all of our furniture prior to our move).
- Cash for the purchase of our next car (we are currently getting by with one car, and plan to get by with one for as long as we comfortably can. But we know sometime in the not-so-distant future we may feel a strong desire to buy a 2nd.)

2. TIPS (purchased directly from Treasury Direct): A very slender portion of our portfolio, but worth mentioning since they don't fit in either of the other 2 categories. And they are a little pet investment of mine. As with the T-Bills, we are not purchasing any more at the moment because they are just too white-hot popular.

3. Mutual Funds (almost all in the form of tax-deferred investments) ... This is where our boring investment style really shines! We have 3 Vanguard funds, and they are all funds of funds or balanced funds.

Life Stragety Conservative Growth (VSCGX) = 80% of Portfolio (YTD Return = -3.33% / 10 year return = 6.23%)

STAR Fund (VGSTX) = 18% of Portfolio (YTD Return = -4.84% / 10 year return = 7.38%)

Balanced Index Fund (VBINX) = 2% of Portfolio (YTD Return = -4.23% / 10 year return = 6.01%)

BTW, if I had my druthers, we wouldn't have the VBINX fund. However, we needed to keep a very small portion of our investments completely distinguishable from the others for tax-related accounting reasons, so we chose that fund becaue it most closely resembled our chosen funds, VSCGX & VGSTX.

Also, as simple as our choices appear, a ridiculous amount of time went in to making the choices, and it's a somewhat amusing story (which I'll share at another time).

-----------------

Here's the Morningstar X-Ray breakdown of just our mutual funds (percentages rounded off to nearest whole number, therefore total does not equal 100):
Cash = 8%
US Stocks = 40%
Foreign Stocks = 7%
Bonds = 44%


Lg Cap Stocks: 25% Value / 27% Core / 29% Growth
Mid Cap Stocks: 5% Value / 6% Core / 5% Growth
Sm Cap Stocks: 2% Value / 1% Core / 1% Growth

Bonds: All high credit quality, 85% intermediate-term, 15% long-term

Expense Ratio: 0.28%, compared to expense ratio of a similar hypothetical portfolio of 1.42% [This alone is enough to make you break in to a big ol' grin, isn't it?]

----------------

I will be the first to admit that those returns are not one bit sexy; certainly nothing to brag about over on the forums! But I wanted to show that sometimes boring, reliable investments are just fine.

Here are some facts about where we stand:
- Every on-line calculator I can find says that we are on-track or ahead of the game in terms of accumulating what we will need for retirement.
- An analysis prepared for us last year by a CFP, using only our mutual fund investments (not including our cash) showed that we are at 140% of where we ought to be.
- A Monte Carlo analysis that was run for us 1-1/2 years ago showed a 70% success chance of success ... and again, that did not include our cash savings, which presumably (barring any huge business losses) will go in to the retirement funds some day and make our chances of success much higher.

So, maybe being boring isn't so bad after all! I feel pretty good about where we are, and I believe that with continued "moderation, balance, and common sense" we have a pretty good shot at having a secure future. How did we get here?

Rather than looking for the next hot investment, we have focused on:
- Spending less than we earn [This is where everyone has to start. If you don't do this, you are not going to get to your Number. Sorry, it may not be fun, but it's true.]
- Having game, both offense (earning) and defense (keeping big & small spending down, saving, and investing) --- DH is offensive coordinator, and I'm defensive coordinator, but we both play on both sides.
- Running a business
- Sensible investing

Having said all this and having let all of you peek at my boring portfolio, I know I must not rest on my laurels. We have some dreams that don't fit in to the standard "retire at 60 or 65" formulas. I have some ideas about changes I may want to make (such as switching funds from STAR to Conservative Growth), and I need to think about non-tax-deferred mutual fund investing (with part of the cash that we have set aside to buy our house, now that I think it's very likely we'll be spending less than originally planned).

The process continues ...

Food Price Obsessions (and other tidbits)

February 23rd, 2008 at 06:56 pm

Great Brunch Out: Today DH & I went to Olive Garden for an early lunch; we both had the all-you-can eat soup/salad/breadsticks combo ($5.95). We had a $4 coupon, so the total with tax & tip for 2 of us came to $10.34 ... Not too bad for a tasty lunch with lots of veggies (tho the lettuce was iceberg), no dishes to wash, and a date with my favorite guy! We don't eat out a lot, so it's always a much-relished treat when we do! [And in case you're wondering, we combined our brunch out with running other errands, so there was very little gas expense.]

Broccoli: Smile Oh I'm still smiling about this... It's been so long since I found a good deal on FRESH veggies! Super Target had a sale on broccoli, the cello-pack bunches for 2 / $3. I had a coupon that I had printed out on-line for $1 off, so I got 2 big bunches of broccoli for $2. Since they charge by the bunch instead of by the lb, of course I chose the heaviest bunches!

Staying Put: We decided to renew our lease, so we'll be staying put for awhile. We do think home prices will drop a bit more, we are completely contented where we are, and it's lovely having our costs so low, so why not wait?
I am kind of burned out on househunting, and am relieved that there is no reason to do any more of that until the fall, when we can get serious about looking (and then hopefully buying) again.

New Job: Forgot to mention that I got a job. It's intermittent full-time ... not contract work, but off & on temp assignments, challenging & enjoyable; I will likely stick with just this until we buy a house.

Travel Fantasy to Become Reality?

February 19th, 2008 at 11:19 am

I've been fortunate to have the opportunity to take many of my dream vacations:

- Alaskan Cruise
- France
- South Africa
- Japan
- Washington DC

(I've done other travelling as well, but these are the ones that fall in to the "long-time dream" category that had nothing to do with social obligations such as visiting family.)

I'm perfectly happy to visit my dream destinations just once, and I don't feel the need to travel constantly. When I went to DC in the fall, it was my first "real trip" in 6 years, and my one (and probably only) trip to that area.

I stretch out my travel enjoyment by immersing myself completely in all of the phases:

Phase 1. Before: Dreaming / Planning / Anticipating (Good for a year or more of happy times)

Phase 2. During (The Trip Itself): Taking it all in, enjoying the fruits of the planning, and being able to leave with no regrets about things left undone.

Phase 3. After: The Fond Memories / Looking at Photos and Souveniers / Being able to relate when you hear stories about the place on the news, etc. (Good for a lifetime of happy memories and a much richer existence)

There are several more places I would like to visit.

I've been to NYC before, but never during the holiday season, and I think it would be really special to see the shops all decorated, to see the Rockettes at Radio City Hall, and perhaps take in the Macy's Thanksgiving Day Parade.

I'd like to go to England/Ireland/Scotland, to see the lands of my ancestors, to see where JRR Tolkein lived & worked and what inspired him, and to visit the Princess Diana memorials.

But my biggest travel fantasy, the one place I feel almost an ache to visit before I die is ... believe it or not ... Cuba!


My Cuba obsession began after seeing the Bueno Vista Social Club on PBS. I'm a big jazz lover. [Surprise! I'm not ALL about money.] I have the CDs; when I play them they never fail to lift my spirits. I just pop in a CD, and before long, I'm fantasizing about sitting in a jazz club in Havana, sipping a mojito, surrounded by people of all colors of the rainbow who are enjoying life and each other's company.



Today Fidel Castro resigned. So ... I have allowed myself to become hopeful that someday before I am too old, relations between the USA and Cuba will thaw, the travel restrictions for US Citizens will be lifted (I'm not the sort to go on a "back door" illegal tour), and I'll be able to fulfill this travel fantasy of mine.


My DH knows of my dream (and now you guys know too), and he has promised that, if the travel restrictions are lifted, we WILL take a trip there together. In the meantime, I will enjoy my free travel fantasies, and will keep saving so that there will be no financial barriers to taking the trip when/if the legal barries are gone.
Viva Cuba!

Steam Free Mirror Challenge Update

February 17th, 2008 at 05:23 pm

I've been challenging myself to shower without getting any steam on my mirror:

http://scfr.savingadvice.com/2008/02/11/steam-free-mirror-ch...

Today I had given myself permission to steam up the mirror because I cleaned the shower & tub and then showered immediately afterwards.

But I've gotten so used to limiting my hot water usage that I managed to get the shower & tub scrubbed squeaky clean and get myself showered off without a bit of steam on the mirror! That was a pleasant surprise. For cleaning, I just filled a bucket with hot water and used that for wetting down the walls and doing all of the rinsing ... didn't have to leave the water running at all.

I noticed a super nice and unanticipated side effect of this steam free challenge ... The entire bathroom stays cleaner and is much easier to clean now! It makes sense ... no muggy, steamy environment in which ickies (that's the scientific name for them, right?) can multiply means a cleaner room.

Time to go Chocolate Shopping!

February 15th, 2008 at 06:17 am

Chocolate fans - Time to go buy that Valentine's candy on clearance!

DH will be heading off to the store soon to buy 1/2-price gourmet chocolates. He buys the most generic-looking (un-Valentinesy) boxes he can find, and gives them to his customers when he travels overseas on business.

He usually buys a box for me too. And no, I don't mind one bit that it isn't presented on "the big day." In fact, I like knowing that he didn't pay full price. Society in general probably thinks we're unromantic, but I know you guys understand. Smile

Happy Valentine's Day!

February 13th, 2008 at 10:50 am

Yes, I know I'm one day early ...

I've added a new section to my "About Me" bio (there on the left), where I'll be posting cool quotes I think about or come across.

The quote just added applies to all of us (I think), and explains why I'm so happy to have found this community.

We're all in different positions financially ... Some of us are hundreds of thousands of dollars in debt, while some of us are millionaires ... Some of us struggle to pay the bills, while some of us save for vacations and new cars ... Some of us have been in the investing game for awhile, some of us are just starting to learn, and some of us aren't even ready for the investing step yet ...

But each and every one of us is striving to do better ... We're not just dreaming about getting out of debt, or having a secure future, or becoming rich (whatever our individual goals are) ... We're actually woking at it! That's cool. And that's why I enjoy hearing everyone's stories and learning from all of you.

Happy Valentine's Day everyone!

Steam Free Mirror Challenge

February 11th, 2008 at 08:56 am

One of my current pet projects is reducing our electricity usage.

As Ima Saver suggested, I'm monitoring our usage by reading the meter regularly and writing the amount down, then calculating daily kwh. This really does work, just as monitoring your spending by recording every penny spent works.

I'm also turning off and uplugging things when not in use.

I decided not to try to cut back on laundry, stove, and dishwasher usage since we're already careful about those, and we're not about to start eating out more often just to cut down on stove & dishwasher use!

One area where I knew I could stand to cut back was hot water usage for showers, so I came up with the idea of a "steam free mirror" challenge for myself. Our apartment bathroom is smallish (just a single sink, toilet, and shower close together), so it doesn't take long for the mirror to steam up when showering. My challenge to myself is to finish my shower without one bit of steam on the mirror.

It has been almost two weeks, and so far I've been 100% successful! I either keep the temp lower (lukewarm), or shower VERY quickly at a higher temp. I also turn the water off for periods of time during the shower when it doesn't need to be running..

It's not total deprivation. If it's one of those days when I feel the need for a bit of morning pampering, if I'm quick enough and keep the temp low enough, at the very end of my shower I can turn the temp up and stand under the running water just long enough to say the Serenity Prayer and still have steam free mirrors.

HDHP & HSA Cliff Notes

February 8th, 2008 at 01:39 pm

In response to a question I received, this is a condensation of information I have posted elsewhere. Hope this little cheat sheet helps anyone shopping for a HDHP & HSA (or just wanting to learn more about them)!

HDHP (High Deductible Health Plan): I chose United Health Care. Blue Cross / Blue Shield also seemed like an excellent choice. I'm sure there are other good ones too.

HSA (Health Savings Account): Exante and HSA Bank seem to be the "big 2," but I chose HSA Resources Bank due to wonderful experiences with their parent company (Stearns Bank).


If you are thinking about getting a HDHP and HSA and want to learn more, I recommend the following sites.


For General Info on HSAs:

ustreas.gov/offices/public-affairs/hsa/ (US Treasury site; lots of info on HSAs; I found the "HSA Basics" tri-fold brochure to be especially helpful)

finance.yahoo.com/expert/article/millionaire/50127 (good article by David Bach)


For general information on health insurance:

healthinsuranceinfo.net


For specific state-by-state info:

nahu.org/consumer/healthcare


For quotes:

ehealthinsurance.com

Yada yada yada - Edited

February 6th, 2008 at 07:58 pm

1. Car Insurance Discount: Geico is good! After DH finished his on-line defensive course, they instantly applied a 10% discount to our auto insurance premium. I thought they would apply a credit to our next bill (for the period already paid for), but they cut us a refund check that we already received. Those guys are fast!

2. HSA: DH went in and got his teeth cleaned, and paid using our HSA. It was the first time we have used our HSA. He said it felt good knowing he was paying with tax-free money. He also said the dentist was great. The January edition of "Austin Monthly" magazine included a "Top Dentists" ranking, so I used that to select a dentist (called several rated as top general dentists in our area, and chose the one that was taking new patients and had the most professional office staff). Someone posted in the forums about dentists being crooks, but I've almost always had great dentists --- only had one bad experience and that was with a guy who was subbing for my regular dentist. I've always relied on personal recommendations when choosing a dentist, but since we are new here I thought the magazine ranking would be a good substitute for word of mouth. The only bummer was that the new dentist doesn't offer a cash discount, but I suppose if you are a "Top Dentist" you don't have to ... or maybe offering cash discounts just isn't as common here in Austin as it was in Seattle.

3. New Account Bonus: Haven't received my $75 prepaid Visa gift card from Wachovia yet (for opening a new account), and it's been 6 weeks... They said allow 4-6 weeks. Guess who I'll be calling tomorrow? Did they think I'd forget? They don't know who they're dealing with! Big Grin

(Update: Oops --- It's only been 5 weeks! My bad.)

4. Interest Rates: I have a CD maturing Friday. This is a little reminder to myself to try to not get upset when looking at renewal rates and deciding what to do with the CD funds. I already know rates are down, and I can't control the rates. I can negotiate but I can't control. I'll do the best I can and try to be thankful and proud that I have money in the bank.

5. House Hunting: Our current lease will be up in a couple months, so we are at a point where we have to decide if we want to renew the lease (and if so for how long), give notice, or go month-to-month. We went back to look at one house yesterday that we liked and was a good size & price, but ruled it out because of location (nice neighborhood, but in the middle of nowhere). It was disappointing because I had pretty high hopes for that one. Oh well. There are still two houses on our "short list," but I think both are more than we ought to spend, are too big, and will require too much ongoing expense in terms of maintenance, property taxes, etc. So, I am going to step up my efforts to find something small and affordable that DH will like.

... And 1 Step Back

February 3rd, 2008 at 07:13 pm

After calculating our Net Worth at the end of January, I re-calculated where we are on our "Journey to Balance Sheet Affluent." The result is shown on the sidebar, as is an explanation of the BA calculation.

This was a "one step back" quarter due to the performance of our mutual funds. Ah well, we are still ahead of where we wanted to be at this point, and we will keep running the marathon.

Speaking of mutual funds, I'm glad that we are invested in balanced funds and "funds of funds" ... Our asset allocation gets re-balanced automatically without us having to do anything. It eliminates that ever-so-tempting urge to do a bit of market timing in the guise of deciding when to re-allocate.

Some good news on the savings front:

- We did our second fillup since getting new tires filled with nitrogen gas put on our car. We got 30 MPG, so our mileage has definitely improved. There may be something to this nitrogen gas after all ... Does anyone else use it?

- Since I started reading our electric meter regularly (not every day like Ima Saver, I'm afraid, but every few days) and "whacking the mole" (unplugging & turning things off) we have cut our daily electric consumption by 13%. We're not using our heater (this is Texas remember), so that has nothing to do with it. I want to cut our electric consumption even more ... right now I'm challenging myself to see how quickly I can shower.

P.S. - The new blog color scheme is for tax season, a patriotic theme in honor of everyone who pays what they owe!

Why We All Must Save

February 1st, 2008 at 11:33 am

We all have many reasons we WANT to save:
- Retirement
- Children's Education
- House
- Car
- Vacation
- Etc, etc, etc --- The list is endless.

But it goes beyond wanting to save ... I believe we all MUST save. Driving home from the grocery store the other evening I started thinking about the rising price of food and how these increases must be affecting families of very limited means, especially those who have not saved any money. It makes me sad. I'm especially sad for the children of those families.

We all must save, because we have only limited control over the cost of essentials such as food and shelter. Without savings, how will we absorb a sudden spike in prices?

For example, let's say you are a family of 4 and your average monthly food expenditures (eating at home and dining out once in awhile) is a moderately frugal $500. [I know some of you will think this is an outlandishly high amount for a family of 4, and some of you will think it's not nearly enough. That's not the point. Plug in another number if you like.] If, over the course of a couple months, food prices rise by 20%, suddenly the same food is costing you $600, $100 more per month which equals a whopping $1,200 increase per year.

How are you going to absorb that extra cost while waiting for your next COLA or raise? And what if you don't get a COLA or raise? How are you going to pay an extra $1,200 per year for groceries?

You might decide to cut back on your food expenses, perhaps by eliminating the once-a-month meal out and switching to lower cost alternatives (more frozen veggies and less fresh, for example). But that probably won't make up for the entire cost increase. And you may cut back in other areas. But what if you are at a nearly bare-bones budget? There may not be a lot of places you can cut back. Are you going to make your children and yourself eat cheap food that is of poor nutritional value?

***If you have savings, you have given yourself the gift of a financial shock absorber in the event of dramatic price increases on essentials.***

You can rework your budget, perhaps cutting back a bit here and there while simultaneously allowing your grocery spending to increase a bit to partially keep up with rising food costs. [To use the example mentioned above, that family of 4 might increase their food allowance by $40 per month, make up $30 per month by making some changes to their food consumption, and cut back $30 in other areas. Where are they going to get that extra $40 a month without ringing up credit card debt? From their savings ... either by temporarily reducing the amount they save each month, or perhaps temporarily dipping in to it until they can find some new or higher source of income and replace it.]

I realize that blogging about the NEED to save on a "Savings Advice" site is like preaching to the choir, but I hope that anyone who might read this who doesn't have any money saved will take it to heart.

Please do whatever you must to accumulate some savings. Everyone's circumstances are different and for some people it is really challenging to save. But you must do it, even if it is just a little.

Even if it's just a little thing you can do to save, go ahead and do it! Skip the weekly Lotto ticket and put $1 in your savings jar. Walk or take the bus instead of driving and bank the gas money. Something ... anything ... is better than nothing.