Awhile back I read the book "The Smartest Investment Book You'll Ever Read" by Daniel Solin. It was a quick and very informative read, and I do recommend it.
In a nutshell, it explains why you should invest in low-cost index mutual funds and stay away from stockbrokers, and why asset allocation is so important. (I heard about this book on the Vanguard Diehards Investment Forum.) I was already a believer in low-cost index mutual fund investing, but this book helped solidify my beliefs and it was a real eye-opener about stockbrokers ... It offered the insider scoop on the tricks some brokers use to make their clients think they are smarter than they really are.
At the back of the book was a really interesting questionaire to help you determine your ideal asset allocation. It was very, very different from any other asset allocation quizzes I had done.
The ones I had done before were really simplistic: Age, years to retirement, and risk tolerence (I'm sure you've all done those things on-line). But I always felt those quizzes missed so much. I'd find myself asking: "Wait! What about the fact that our expenses are so low and we save a huge chunk of our net each year? Doesn't that count for something?!?" Intuitively I always felt that the stock/bond allocations spewed out were riskier than what we really needed. [60% stock, 40% bond was the most conservative I ever got with those simple on-line tools.]
Well, at the back of Mr. Solin's book there was a detailed but easy-to-follow questionaire that I completed, and it came up with a result of 10-30% stocks and 70-90% bonds as our ideal asset allocation. Well, you could have knocked me over with a feather, and I do wonder if that may be a bit too conservative. But it definitely gave me something to think about and helped validate what I had been feeling intuitively. [In case you're wondering, Mr. Solin does recommend up to 90% stocks for some people, so he's definitely not anti-stock. It's just that his formula takes so many variables in to account, and in some cases he recommends something fairly risky, and in some cases like mine & DH's something extremely conservative.]
I hesitated to blog about this before because I knew you all would want to know what the formula was, and it's too complicated for me to explain and I didn't want to in any way infringe on Mr. Solin's intellectual property.
Then, our friend Broken Arrow posted a question on Asset Allocation on the forums, and that got me thinking about this book again, so I started looking around on-line, and lo & behold, I found the questionaire published!!! So, you all can take it yourselves and see what numbers you come up with.
Here is the link, thanks to baselle teaching me how to make one:
Feel free to share what numbers you get and what you think of the results.
Archive for October, 2007
Awhile back I read the book "The Smartest Investment Book You'll Ever Read" by Daniel Solin. It was a quick and very informative read, and I do recommend it.
There's a part of me that is very reluctant to talk about giving since it can seem like bragging, but this blog is anonymous and charitable giving is a part of PF, so here goes ...
DH & I have selected a few organizations that we donate to annually. But occasionally we give a bit extra when there seems to be an extraordinary need.
Now that the evacuations in Southern California have grown to such a large scale, this seems to be one of those times when those of us who have our own financial houses in order should reach out and help the poor families affected by this disaster.
So, the pooch & I are off to take a walk, and we will be stopping off at the mailbox to drop off a check to "United Animal Nations" which (among other things) assists in the rescue & sheltering of animals during disasters. I know their coffers will be seriously reduced during this disaster, and we want to do our little part to help in rebuilding them.
Next month, I am taking a 9-day (8-night) trip to Washington DC and New York City. I cannot begin to tell you how excited I am! I have never been to DC, and it is a place I have wanted to go for a very long time.
Over a year ago, when DH & I decided we would probably be relocating and I would have the opportunity to take some time off and do some travelling, we earmarked some of our savings as my travel fund. After doing some research and getting some GREAT advice from Savings Advice members, I decided that $2K would be a more-than-ample budget. [This is actually a fair bit less than what DH & I had originally earmarked, but I decided I just didn't need all of it.]
Today I sat down and came up with an actual itemized budget, and my total is $1,734. This gives me a nice fat 15% cushion I can go over without blowing my slimmed-down budget. If I can stick to the $1,734 number while still doing what I want to do on the trip, I will be thrilled. If I go over by a bit, that will be fine. Unless I've made some gross error in calculations, I don't think I will go over the $2K unless I have a real emergency or turn in to a careless spendthrift.
Here are the numbers. The first 4 items I already know the actual cost, and the others are what I am budgeting in each category:
Mileage to & from the airport (DH will be driving me there and picking me up) = $48
Airfare = $311
Lodging = $840 [I do realize this is a lot. I am picking up the tab on a place large enough to accomodate myself & my siblings who decided to tag along on my trip.]
Bus between DC & NYC = $35
Food & Beverages = $180
Local Transportation (Shuttle bus, Metro) = $70
Admissions = $25
Film & Photo Development = $30
Gifts = $100
Souveniers = $50
Misc = $45
I've given myself pretty generous gift, souvenier, and food/beverage allowances. I've also added $5/day in the "misc" category as "mad money." So, I think this is a budget that is doable and won't cause a moment of feeling deprived.
If there's anything I've overlooked, please let me know!
Since beginning my househunt, I have run in to just about every type of realtor.
At the high end of the scale are the sharp & courteous (but not overly friendly) professionals who really seem to really know the market. Some are knowledgeable about building techniques, geography, and even interior design.
At the low end are the ones that seem to either ignore me or are distracted by something else, and aren't able to answer basic questions. These tend to be the Mercedes-Benz driving, rhinestone-studded-jeans wearing, French manicure types.
In one instance, a group of FOUR ladies were setting up refreshments at an open house; they were so busy getting ready for "their guests" that they could barely stop to answer the questions of an actual potential buyer that was standing right there. I did fill out the guest registration form, and FIVE days later one of the women called me --- she was not even a realtor but a mortgage broker pushing her services. I tried evading her questions ("No - We don't need help arranging financing" etc) but finally just came out and said we'd be paying cash. She thanked me and said good-bye --- Then, lo and behold, 15 minutes later the agent Emailed me letting me know how pleased she was to have met me --- yea right!!! blech
Well ... anyway ... Today I had a most interesting realtor encounter, like nothing I've ever experienced before. Pretty soon after I walked in to the open house, he was showing me a list of all homes for sale in the area with stats including how long they had been on the market (this is the kind of information I love). He also explained about how different areas around Austin have different types of soil and so construction in some parts is more stable (extremely interesting). He eventually asked "What are you looking for?" (the usual realtor question) and when I replied "a bargain" he paused for a second, kind of stared at me and then asked: "Are time & money on your side?" I replied "Yes" and then he said the words that no agent has ever said to me: "You guys should be looking at short sales and pre-foreclosures" ...BINGO! How did he know that is exactly the kind of thing we are interested in? Very interesting indeed.... Perhaps because he himself was not very polished (a bit of a slob, actually) he knew to look beyoned the fact that I came in wearing a Tshirt, plain tan pants, and no jewelry/makeup/manicure. Or maybe he just got lucky. Or maybe he says that to all the buyers these days. Who knows? We'll see what kind of follow-up he does. I'm still not convinced that I want to work with a realtor, but if I did, it would be someone like that: Someone who gives me hard core information, is trying to help me find a real bargain instead of trying to be my "new best friend," and who really listens to what I say and responds accordingly.
Who doesn't hate spending money on things that are completely unnecessary?
I avoid bank fees, late charges, penalties, and interest like the plague.
Even tho' it's sometimes a pain in the "you-know-what" I know one of the best ways to avoid those things is to stay on top of government rules.
The fact that I got 2 parking tickets in my 20's still bothers me --- What a waste of money --- If only I had been smarter I could have avoided them! [Knock on wood, I've never had a moving violation.]
Since we arrived in Austin, my dog has been licensed, and my car has had it's safety inspection and has been registered. Next stop: Driver's license! When all is said and done, I will have "rendered unto Caesar" about $145 not to mention the expense of driving around to take care of those things.
But just imagine the costs of not doing them and paying fines or penalties ... I can most definitely file these expenses under "money well spent."
Almost all of the time, I enjoy being frugal.
Sometimes it's because I enjoy the creative challenge of coming up with ways to reuse things or do things just as well but less expensively. [For example, squishing leftover bits of soap in to usable balls or creating my own condiments with items on hand.]
Sometimes the reward is so great that even tho' something is a lot of hard work I am willing to do it. [For example, having a garage sale or moving ourselves.]
Sometimes it's all about having a positive mindset and realizing that spending a lot of money isn't always better. [For example, enjoying cheap entertainment like walking the dog or reading a book from the library.]
Sometimes it's an intellectual challenge, which I find enjoyable. [Shopping around for the best deal on purchases, whether major ones such as a house or car, or minor ones such as cereal.]
But ... I will confess ... Once in a blue moon it is NOT fun. Sometimes I do it just because it is the right thing to do, because it keeps me moving toward my over-riding long term goal of financial security.
So ... you're probably wondering what this dreaded chore is that has me writing in a less-than-positive way? IRONING DH'S DRESS SHIRTS!!! Laugh if you like, but I just don't like ironing those things. I think it's because the payoff for the effort involved is so ridiculously low.
I don't mind housecleaning ... Yes, it's work and not always fun, but the reward is a nice, clean, sparkling home! I don't mind cooking simple meals, doing the dishes, laundry, etc, etc. I'm not a huge fan of yardwork but the payoff is great and it does provide a pretty good workout so I'm happy to do it. I don't even mind ironing simple, flat items like hankies, table clothes, etc. But those darn SHIRTS with all their little bits ...collars, cuffs, fronts, backs, and whatever you call that little thing that goes across the shoulders ... each little part has to be ironed individually, and all that turning and ironing this way and that ... all that time and effort involved and all you get for it is a shirt that is not wrinkled. Big whoop.
When we first got married we were less frugal minded. We were both working long hours at semi-yuppie careers, DH wore a dress shirt to work every day, and we took his shirts to a cleaners to be laundered. As we started getting better with our money I started ironing his shirts when I had the time (I'd say I ironed about half of them at that point); if I fell behind on the ironing or was out of town myself, some shirts still went to the cleaners. When DH's former employer switched to a business-casual dress code and he only needed dress shirts for client meetings and business trips, we stopped taking shirts to the cleaners at all and ironed them all at home. Since DH started his own business, he needs dress shirts only when he travels (plus occasionally for a really important meeting). The number of shirts needing ironing has gone down, but that hasn't helped my opinion of it. I still really dislike it!
If we ever reach the point where we are "set for life and then some," I seriously think I will start sending his dress shirts out to the cleaners again. [How's that for a silly "when I am rich" fantasy?]
In the meantime, I will continue ironing his dress shirts, and will continue reminding myself that it is for the greater good!
When you move, it's always interesting to see the sort of mail you get that is addressed to the previous tenant.
Today at our new apartment we received a "Frederick's of Hollywood" catalog addressed to a man. I realize he might have been buying stuff for his SO, or he might have even been a cross-dresser, but can't you just imagine that he was a frugal fella who figured getting the catalog for free was much cheaper than subscribing to Playboy?
Just added a new category, house hunting, since that is currently one of my biggest PF-related projects.
DH & I spent all afternoon yesterday visiting some new developments in the area, just starting to get a feel for the market. We noticed that some builders were offering pretty significant discounts for 30-day closes which means they are hungry to get cash in their pockets. Since we don't need financing (something we of course will not reveal to any seller's agent until an actual offer is made) and can close any time (we do not care if it is 7 days or 3 years from now) this seems to be a moderately good time to be a buyer.
This afternoon we are going to hit one particular city in the greater Austin area and visit as many open houses as we can.
At this moment, we are not looking for a house to buy, just getting a feel for the local real estate market.
We will probably change this strategy several times before we actually purchase, but as of today, this is our buying plan: If we find a house we like, we would be willing to buy it if we could get it for 25% less than current market price. [That is based on our thinking of how much, given the worst case scenario, prices could drop over the next few years.] So, we will need to find a buyer who is in a bit of a hurry to sell for whatever reason. If they won't sell for that price (25% below what we think is fair market price), we'll just move on to the next house. It's not like there is only one good house out there; there are tons and tons and we can be perfectly happy in many of them. We most definitely won't be buying a house because we fall in love with it! We'll be buying a house that we like and can get a great deal on.
The trick for us will be to figure out what that current market price is!
Have We Reached The End (a poem by A.A. Milne)
"Have we reached the end?" asked Pooh.
"Yes, I suppose it seems so ...
"It is also the beginning."
Thank you to all of you who posted well wishes on our move! I am writing this from beautiful, sunny Austin, Texas.
The move could not have gone more smoothly.
My mother and brother came to our place on Thursday (Sept 27). We had our farewell party that evening, and it was perfect! Everyone had a great time and the food was terrific. Even tho' 2 people cancelled at the last minute, we still went $21 over our $500 budget because more wine was consumed and more people took after-dinner coffee or tea than I had expected. It was money I was absolutely delighted to spend. We received $350 in gift cards --- gotta love it, everyone knew that the last thing we would want was one more thing to have to pack! I was also given a small framed old family photo that had belonged to my late grandmother, which I was more than happy to pack and which I will treasure forever.
On Friday morning we picked up our rental truck, and DH & my wonderful brother got about 2/3 of our things loaded that day. On Saturday morning my family left town, and DH & I worked on finishing packing and cleaning and loading. We were comfortably on schedule so decided to go out to eat at DH's favorite Chinese restaurant.
On Sunday morning we did the usual last-minute stuff (including loading our mattress) and left early, a full 1-1/2 hours ahead of schedule and without any last-minute scramble.
We stayed over 3 nights in Motel 6's along the way. DH had decided he was not comfortable towing a car behind the rental truck (it was the first time he had driven a truck of any kind) so I did end up driving our car separately. It was easier on DH, and definitely easier on our pooch who got to stretch out across the entire back seat instead of having to lie on the floor of the truck between our seats. I was really glad we had previously sold one of our cars and were down to just one car, so that last minute change of plans was possible.
The entire drive went very smoothly, and we saw a lot of beautiful scenery along the way. We did not stop to do any sightseeing, and that was fine.
BTW, kudos to Discover Card's fraud division for calling me on my cell phone on day 2 to question the "suspicious activity" (gas purchases in Oregon, Idaho, Utah, Wyoming) on my card ... Nice to know they were watching out for us!
We got in to Austin on Wednesday afternoon. On Thursday we finished unloading and returned the truck. I waited to blog until I had the "essentials" (kitchen and clothing) unpacked.
What is amazing is that all of our possessions (including the paperwork and office machines for 2 businesses) fit in to a 16-foot rental truck with a bit of room to spare! Aggressively selling off possessions really worked out well for us; not only were we able to do the move 100% ourselves (with loading help from my darling brother of course), we were able to rent a small truck, and we are now living in an apartment much smaller than what I could have ever imagined back when we developed this plan to relocate. Not only did we save on moving expenses, our monthly expenses are waaaay down too.
This is something that you fellow frugalites will appreciate ... A couple days before our move, a friend came over and looked around at the boxes and packing supplies in disbelief [I had visited her house when she did her last move, and she was sitting on her couch watching TV while a moving company was packing up her stuff] ... She said to me, " ... xxx ... You have money, why don't you just pay someone to do this for you?" I held my hands out to gesture at the packing stuff and replied " ... zzz ... THIS is WHY I have money." To which she could just reply "Yea ... I suppose you're right."
Boy, it sure feels good to have this great big project almost completed (although I still have quite a bit of unpacking to do).
Next project: HOUSEHUNTING!!! WHEE!!!