Thursday, December 16, 2010

Stock Gamble Comments

Lots of good comments on the Stock Gamble update.

I agree that buying/selling stock in short term moves is not for most people. Frankly, it is not for me.

But, this is something that Mr. Sam is interested in doing, he is using a small amount of money, he is researching, tracking and has a plan. So I support the experiment, because I support Mr. Sam. I also recognize that Mr. Sam's plan is a gamble and I'm prepared for him to lose the full $5,000 allocated to him. But, I feel that it is a worthy gamble because I want Mr. Sam to be more engaged and involved in our personal finances.

I also agree that it is very difficult, especially for a small investor to "time" the market, but that doesn't mean that someone can't find and undervalued stock, buy it and set up a limit order for when it hits a certain value. If you do that enough times, rolling profits in from prior buys it is possible to make money.

I think the issue of when to sell a stock is interesting and one I've been researching and plan to post on soon.

Wednesday, December 15, 2010

Retirement Monies

In January 2010 we had $318,424 in our retirement accounts, 401K/IRA. I just updated our profile and we have $421,849 (not including the small trading account). More than a $100,000 increase, mostly due to market returns.

But, looking backwards, we still have not recovered to the asset levels of mid 2008 (pre-crash). During the summer of 2008 we had $1.6 MM in assets, winter 2010 we have $1.5 MM in assets. Overall net worth is in the same range @$950,000. So, two years (of hard work) later, we are just about in the same spot.

Sunday, December 5, 2010

Stock Gamble Update

Well Mr. Sam sold our stock.

  • He bought the stock on 9/2 and spent $4992 (he had a budget of $5000).
  • He sold the stock on 12/3 at $5868.
  • Gross profit of $876, he has calculated a $525 net profit or an 11% return over 90 days.

His next move is to take the budget, plus profit and purchase two stocks in the next couple of weeks. He is already researching his next purchases.

Wednesday, November 17, 2010


I've been missing in action here due to work and travel (work and personal) and posting is likely to be light until the end of 2010. We are also having home internet network problems so it is difficult for me to access the internet at home and I don't like to blog post while at work.

But, I do have good news to report. I have received a 5% salary increase. Yay, yippee, yeehaw!! Just a year or so ago, July 2009, I had a 10% pay cut (everyone in my company took the cut due to the economy). In January 2010, I received some of that 10% pay cut back and in March 2010 I was returned to my full salary, plus I received my January 2010 step increase in March 2010. I hope this means that the economy is improving. The news doesn't seem to be any better and Florida is especially hit hard by the real estate bubble.

Wishing you all a wonderful Thanksgiving and holiday season and I'll be trying to do some more regular posting along the way but I need to earn that raise the last few weeks of the year.

Thursday, October 21, 2010

Debit vs. Credit

I am not a fan of credit cards, but while I don't use them on a regular basis I do recognize that there are times when it makes sense to use credit over debit. This CNNMoney article provides some decent guidance as to when to use debit and when to use credit.

(1) Planning to make a major purchase. I generally agree, any purchase over $1000 or electronics/appliances purchases we use our credit card. However, I don't make the purchase until I have the full purchase price saved up and thereafter I generally pay the bill before it is due.

(2) Travel or gas. I generally agree, we use our credit card for booking hotels, rental cars, flights, etc. Often time we will use our debit card upon check out, when the final price is known and agreed to, but I have run into the problem of holds by hotels in the past. I've not had any problems with gas stations though.

I can't really get behind the other two stated reasons to use credit (1) rewards and (2) you don't montior your checking account close enough.

Sunday, October 17, 2010

The Three D's

Somewhat similar to Dave Ramsey in both the goals of the program and the spiritual basis. This CNN article describes a church's "Dfree" program.

The three focal points of debt, delinquency and deficit represent the cornerstones of family financial strength.

First, debt: Americans owe a lot of money. The levels of family debt are threatening our ability to develop any meaningful wealth or to pass that wealth on to future generations.

Second, the commitment to eliminating delinquencies means that we, as a congregation, are pledging to pay our bills on time. Late payments lower our credit scores and this causes us to pay higher interest rates even on good debt such as mortgages.

Lastly, to be free of deficit living means to live within our means and thus eliminate the need to close our spending gaps by using high interest credit cards or --even worse -- alternative financial services such as payday loans, pawnshops and rent-to-own schemes.

While, the plan is nothing new. The best part of this program, in my mind, is the goal to popularize debt free living and the community support provided by the congregation.

If you are working on paying down your own debt, think about how you can make yourself accountable by setting up systems and by sharing your journey. My husband and I held each other accountable as we worked to pay off our non-mortgage debt back in 2007. But, we also talked about what we were doing with our parents, siblings, other relatives and friends. While it was a little embarrassing to share the fact that we had $50,000+ in non-mortgage debt, I soon learned that many, many of my friends had their own debt struggles.

I also like the focus on deficit spending, obviously it is impossible to get out of debt if you keep adding to your debt load each month by spending more than you are bringing in. The deficit step is one that I think a lot of plans gloss over. I found that by tracking our spending, using Quicken (but you can use a little notebook, Excel spreadsheet, any system that works for you), for a few weeks we quickly identified and targeted areas to cut. Also, our allowance system, which we still use, is another way to rein in deficit spending. By using an allowance we limited the amount of money available for day to day spending, and by doing so we reduced our spending and made more money available for debt service.

Friday, October 1, 2010

Stock Gamble Update

Well, it has been a month since Mr. Sam undertook his first non-tax advantaged (i.e. 401K, IRA) stock purchase (or gamble as some of you have called it). At present, if we sold today we would realize a net profit of @ $400 or a return of 8% in one month.

Obviously, we are not going to sell after one month so like any investment the profit is illusory until you sell it.

Thursday, September 30, 2010

A Follow Up to Definition of Rich

Well, the New York Times picked up on the same question I raised - whether it is fair to define a professional couple who earns $250,000 as rich. Interesting to learn that in the 1970s there were 25 tax brackets.

And here is one from The New Yorker that makes the point I've been trying to make: that is doesn't make sense and it isn't fair for LeBron James and a dentist to pay similar income tax rates.

Saturday, September 25, 2010

Big Ticket Layaway

I thought this article about big ticket layaways from CNN.Money was interesting.

I also realized that my most expensive piece of art was bought via "layaway" although that term was never used by me or the gallery. I had decided that I really wanted to purchase a particular work of art. True to my $100 rule*, I had waited many weeks or months before actually initiating the purchase. When initiating the sale I asked if I could pay over time and the gallery agreed. We set up a monthly auto payment on my debit card and I paid for the art over time.

How about you, have you ever utilized "layaway" for a luxury item (in my mind art is a luxury purchase).

*For those that are not familiar with the $100 rule, we wait a day for every $100 an item might cost. So a $1000 item requires at least a 10 day cooling off period. We also live by the $300 rule, any purchase over $300 must be discussed and agreed to between the two of us.

Saturday, September 18, 2010

Mid-September Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $20,614 (62%) (goal is $33,000)
(2) - $10,000 (100%) (goal is $10,000)(Completed)
(3) - $900 (75%) (goal is $1200)
(4) - $3083 (88%) ($9244 in our baby fund, goal is $10,000)
(5) - -$2276 (-33%) ($22,132 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $35,321 (61%)

Also, Christa asked if I could elaborate on our Baby Fund. Best case scenario, the Baby Fund will be used for "start up" costs like crib, decorating the baby's room along with birthing costs. Even though we have good health insurance, I understand from friends that the co-pays can run up since you have a co-pay for the hospital, the ob/gyn, etc. Worst case scenario, the Baby Fund will be utilized for fertility treatment costs. We have not gotten to the fertility treatment stage, but so far we are not pregnant so that is a possibility.

One of the reasons we got our finances in shape after we got married was so we would feel more comfortable moving forward with having a baby. So at this point, we are not delaying our efforts due to finances and the baby fund is just a way to save some extra targeted money for that goal.

Wednesday, September 15, 2010

How Do You Define Rich

I have been reading a lot about the income tax cut/tax increase debate recently.

One proposal that seems to be gaining ground is to keep the Bush era tax cuts in place for individuals earning $200,000 or less and a couple earning $250,000. The Bush era tax cuts would expire for those earning $200,000+ or a couple earning $250,000+.* It seems, from the reading I have done, that most people consider a couple earning $250,000+ "rich" and worthy of higher tax rates.

I'm not so sure I agree that a couple earning $250,000 should be lumped in with the millionaires and billionaires. First, as a married person I am seriously annoyed at the marriage penalty. I might agree that an individual earning $200,000, with no dependents, might be rich. But, I don't agree that two working professionals who each earn $125,000 is also subject to higher taxes. That is a major marriage penalty and I don't like it. If I were in charge I would up the threshold for a married couple to at least $300,000.

Second, many of these folks are folks who financed their futures, these are your medical school, law school, business school graduates and most of these folks took out big student loans to pay for their education. Some of these folks will be paying off their student loan debt for many years and they can't deduct the interest. I have friends who have $1000 per month student loan payments. Third, this working couple likely has a mortgage, a car payment or two, in addition to the student loans. Throw in a child or two and they are also likely paying big bucks in child care costs.

Yes, these folks are in the top 5% of the country's population in terms of income, and I agree that they should pay more in income taxes than a couple earning $50,000 a year (which they already do). But I don't see these folks at rich or worthy of disdain or punishment.

Furthermore, the top fifth of households already pay 69% of all federal taxes. I was also surprised to learn that 43% of tax "units" (that is an IRS term) pay nothing in income tax or will have a negative income tax (of course they do pay other kinds of taxes). I fully support our progressive system and I believe that those who benefit the most, those who earn the most, those who have profited the most, should pay the most. But is it fair for the income tax burden to be so uneven, 43% paying nothing in income tax and the top fifth paying 86% of the income tax collected? See this article for more information.

What do you think?

* The tax cuts would expire for earnings above the $200,000 or $250,000 threshold, so the higher rates would apply only to those monies above the threshold.

Tuesday, September 14, 2010

Economics of Pants

As a professional person, I normally wear business or business casual attire (i.e. suits, dress pants, dresses, skirts, sweater sets, etc.). Such attire is not inexpensive, but I generally do a good job in buying good quality clothes on sale. Furthermore, much of my business collection consists of classic clothes such that I can generally wear pieces from year to year.

Recently I have found myself with 8 pairs of pants which, while they look good and fit good, require repair of the inside lining. So I have priced the cost to repair the pants, $30 each (includes a $5 volume discount of three or more) and I am trying to determine if it is worth it.

On average, the pants I am looking to repair probably originally cost between $60 and $100. Some of these pants I have, again on average, worn once a week or once every two weeks for the past 3 or 4 years. Accordingly, my per wear price, on the high end is $1.20 and on the low end is $.75.

At least three of pants are part of a suit which both increases the original investment cost and increases the replacement cost. If I paid $150 or $180 for a suit and the pants need to be repaired it makes more sense to invest $30 to be able to continue to use the suit for another 2-3 years. As a result, I've made the decision to repair the pants that are a part of a suit.

But what about just the pants, does it make sense to pay 50% of the original price of the pants, when they are three years old already? Should I just go out and buy some new pants? What would you do?

Friday, September 10, 2010

Updated September Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $20,014 (61%) (goal is $33,000)
(2) - $10,000 (100%) (goal is $10,000)(Completed)
(3) - $900 (75%) (goal is $1200)
(4) - $2944 (84%) ($9244 in our baby fund, goal is $10,000)
(5) - -$3261 (-47%) ($21,147 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $33,597 (58%)

Following up on my last post, here are the updated numbers for September. We are $6300 behind on our goals, which includes the $5000 we moved into a trading account. We will have to work hard to rebuild our emergency fund by the end of the year.

Hit to the Emergency Fund

Mr. Sam has been talking about doing some trading (stock trading) outside our 401ks and outside our IRAs. He wants to make more money and he thinks he can do so via the market. Mr. Sam has an MBA and he is a numbers guy, an analyst, so I have been encouraging him to investigate, contemplate, research want he wants to do.

Well last week when the market was down, we pulled $5,000 from the emergency fund (so the September numbers are not accurate) and he/we invested it all in one stock in a non-tax advantaged trading account.

I have decided that going forward I'll track it on my numbers updates. But, that means we are down $5,000 in our emergency fund and down $5,000 for our 2010 savings goals. Mr. Sam thinks we should keep counting it as part of both but I disagree.

I am not super happy about this move, but I want Mr. Sam to participate more in our personal finances, he has the MBA, he has the numbers brain, so I voted in favor (remember that any financial move over $300 has to be agreed to in our family) and we will see how it goes.

Thursday, September 9, 2010

Back to School Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $20,014 (61%) (goal is $33,000)
(2) - $10,000 (100%) (goal is $10,000)(Completed)
(3) - $800 (67%) (goal is $1200)
(4) - $2805 (80%) ($9305 in our baby fund, goal is $10,000)
(5) - $1739 (12%) ($27,433 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $38,358 (66%)

We are just a smidge behind. Should be able to close out the baby fund goal this month. We are on target, with our monthly savings, to max out our 401k and complete our prepayment goal on the mortgage.

The real problem is the emergency fund, which is about to get worse (I'll post about that this week).

Sunday, August 8, 2010

Is it better to take a vacation or buy a new couch?

Is it better to take a vacation or buy a new couch? The NYT tackles this question and the conclusion seems to be that people get more happiness value from experiences rather than goods.

I thought it was also interesting that the article mentioned that anticipation increases happiness, and that by saving up for a purchase makes it more valuable. I generally agree with this premise. We live by the $100 and the $300 rule. Any purchase over $100 requires a 1 day wait for each $100, so a $500 purchase requires a 5 day wait, etc. Any purchase over $300 requires a family discussion and agreement.

I can attest to the fact that I very much enjoy our new living room furniture, which we saved up for and which we shopped for and researched over the course of a year. Would I have enjoyed the furniture if I had run out and bought it on credit, I'm sure I would have since there is something to be said for immediate gratification, but by waiting and saving up for it I do believe I increased my enjoyment for the following reasons. First, by saving up for the purchase I didn't incur any debt, there was no big bill to pay off for the next several months. Second, by waiting and researching I took the time to find the right furniture for the room. If I had rushed my purchase I likely would have ended up buying something that wasn't quite right and would have given up on my search to find the perfect fit (the room is odd shaped).

Wednesday, August 4, 2010

What is Your New Normal or New Abnormal?

Interesting article today from MSNBC on the "new abnormal" and "schizophrenic" American consumer.

  • Ralph walked away from his $329,000 condo and let it go to foreclosure and then went to DisneyLand and bought himself an iPad.

I guess Ralph is not worried about a judgment, not sure what the California law is, but here in Florida the statute of limitations on a deficiency judgment is twenty years. But, I guess if you are spending your extra cash rather than saving it the bank won't be able to collect on that judgment.

The article describes the new abnormal as follows:

The current circumstances might be better described as the new abnormal, in which no one knows anything. In June the Conference Board Consumer Confidence Index fell 9 points on the heels of an 11 percent drop in the S&P 500 the month before. New housing starts were as bad as they had been in eight months. Meanwhile, the unemployment rate still hovers near double digits. That's 14.6 million Americans out of work. Federal Reserve Chairman Ben Bernanke only added to the anxiety with a July 21 declaration that the economic outlook is "unusually uncertain."

So who are all those people at the mall? It's easy to forget that a 9.5 percent unemployment rate means that roughly 9 out of 10 Americans in the workforce are still employed. "Some consumers are probably liquidity-constrained," says Kenneth Rogoff, Harvard University professor and former chief economist at the International Monetary Fund. These are "the ones who are probably not the ones buying iPads. But 90 percent of Americans do have a job, and maybe 70 percent are confident about them. And maybe half of those have liquidity."

Perhaps it is good that those who "have liquidity" are spending it rather than saving for a rainy day. Spending helps to drive our economy and provide jobs. And I have to agree that when I'm out and about at shopping centers and restaurants, there seem to be quite a few people out shopping and dining these days. My husband and I often note "what recession" when we observe the very full parking garage at our local shopping centers (in the off-season too).

I thought it was particularly interesting that 51% of consumers had fallen behind on their annual savings plan due to impulse spending or spending beyond their means.

How about you, are you spending more these days? If yes, what types of purchases are driving your increased spending? Are you feeling more comfortable with the economy?

Tuesday, August 3, 2010

Motivation Follow Up

Following up on my earlier Motivation post, I received some interesting feedback.

Anonymous # 1 said...
I just read an article on WSJ about people putting money in to refi their mortgages to get lower interest rates and shorten the term since the alternative of investing in the stock market seems so uncertain. After reading that article, I started looking at refi options and 15 yr mortgages are at all time lows. I am in the process of refi'ing our mortgage from a 30yr at 4.875% which we just got last yr and thought was great, to a 15yr at 3.75%. For an extra 35% each month we'll pay our house off in half the time. This rate seems unbelievable to me, but we just locked it in and I'm really excited about having each mortage pmt mainly going to paying down principal compared to interest in the past.

3.75% is a great rate.

Like you, we refinanced last year and went from a 30 year @6% rate to a 25 year 4.7% rate. In the process we shaved a year off the term and we shaved a few extra thousand off the principal as we had to pay down the principal a bit to get down to a certain ratio vs. the appraised value (at this point I'm a little fuzzy on the details). If we could find a 3.7% mortgage rate we would absolutely consider refinancing again. We did a little research, but we need to do more as so far the rates we are finding here in South Florida are not at that level.

Anonymous #2 said...
I found an online mortgage extra payment calculation website and played with different extra payments. I discovered I can pay off my mortgage comfortably in 6 years and still have funds for other needs. So I started it last month. While the economy is slow and stock market bouncing around and savings accounts paying low rates it is probably a better use/return on my funds to pay down the mortgage. If
inflation kicks back up it may not make sense to pay the extra amounts. I am not sure it pays to refinance, you can use the cost of the refinance to jump start the pay-down and maybe come out ahead.

We have played this game too and spent an hour or more with a mortgage calculator to see how quickly we could pay off our mortgage by adding $100 a month (this is our current extra payment), $500 a month, $1000 a month, etc. We can afford to put more towards our mortgage, we just need to come up with the plan and execute it.

SJ said...
At 24, I am wondering if I am going to be forced to move out of my home state in order to afford a house. H and I have stable jobs with good pay (~80k) but the average price for homes in our area is more than 3 times our combined salary. Even with a 30% downpayment the mortage + taxes will be nearly $2k/month plus extra
expenses. Any advice for the young future homebuyers?

SJ, it sounds like you are way ahead of where I was at 24, so kudos to you.

In general, your housing costs, mortgage payment plus taxes and insurance, should not be more than 28% of your gross monthly income. So, if you and hubby are earning $80,000 a year, your monthly housing costs should be @$1860 or less. You don't mention if you have other debt, i.e. student loans, car loan, credit card debt, etc., but if you do, your total debt service per month should not exceed 36% of your gross monthly income or @$2400.

So, my general advice would be as follows. First, focus on killing any debt that you might have before you think about purchasing a house. Second, if you want to stay in your home state and you want to buy an average price home, you should probably focus on saving up more for a down payment to reduce your monthly costs to a manageable level. Third, you might want to consider moving to a state with lower housing costs, but you'll want to consider job security, family connections, costs of moving, etc. Fourth, focus on increasing your income.

I'd also suggest considering whether or not you need or want an average price home, could you be happy and content with a less than average price home? Good luck to you.

Monday, August 2, 2010

Hidden Fees

This past weekend, I had to take my car in for repairs, specifically the air conditioning has been acting up. I took my car to the dealership service shop rather than our local mechanic, because I needed the car fixed on Saturday as I was traveling for work on Monday (can't really be driving around in South Florida in a car with no a/c in August).

The dealership called and told me that the repair, a new a/c compressor, would run $800. Ugh! Well, I have no idea how much this part plus the labor should cost, nor does my husband (although he has more car knowledge since he has an antique car that he is always tinkering with). So, we called our neighbor, who is a mechanic, and he was kind enough to assist us with the research. He gave us part information, key questions to ask (so the dealer would know we really had talked to a mechanic) and a hard quote of $600 which included replacing a companion part.** Mr. Sam calls the dealer back and talked them down to $700 with the companion part included (which was not part of the original quote), plus we also had a couple of belts replaced and the oil changed. Before Mr. Sam hung up with the dealer he reviewed the hard quote with the representative, wrote it down and confirmed that the only addition to the hard quote would be sales tax.

I'm sure you can figure out where this is going. When we reviewed the invoice the numbers didn't quite add up. Mr. Sam and I sat down with the invoice, reviewed his notes, calculated the tax and there was a $30 extra charge on the bill that did not jive. I can't remember exactly what it said, but it was something like "garage fee." Dealer rep informs us that they charge everyone a "garage fee" although he couldn't explain what we got for that fee. In the end, recognizing that the "garage fee" was not part of the agree hard quote he took it off the bill.

Bottom line, don't be afraid to negotiate the costs with a service provider and watch out for hidden fees. Think about how many people had their cars serviced at this shop during the course of a week, think about how many of them were charged a $30 "garage fee", how many of them paid that fee without blinking and that the fee is simply pure profit for the dealer.

**We would have had our neighbor make this repair, he normally takes care of our cars, but he doesn't work on the weekends and I was traveling on Monday so the repair had to be completed before Monday.

Sunday, August 1, 2010

August 1 Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $17,986 (55%) (goal is $33,000)
(2) - $10,000 (100%) (goal is $10,000)(Completed)
(3) - $700 (58%) (goal is $1200)
(4) - $2457 (70%) ($8819 in our baby fund, goal is $10,000)
(5) - $869 (12%) ($27,063 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $35,012 (61%)

Two goals completed, working on baby fund next (as it is easiest goal to close out) and we are slightly ahead of schedule on our 2010 goals.

Unexpected Bargains

Yesterday, Mr. Sam and I were out and about taking care of some errands. In particular, we needed vacuum cleaner bags for our Kenmore vac. So we put together a Sears list, said vac bags, light bulbs, etc. and headed to our local Sears.

Mr. Sam is traveling for work this week and we have our summer vacation scheduled in a couple of weeks so he ended up poking around the men's clothing department. Well, Sears was having an end of the summer sale and there were tons of shorts, t-shirts, casual shirts on sale for 60% off. Mr. Sam ended up picking up a several pairs of heavy, good-quality cargo shorts for $10 each along with super-sale shirts as well. We went home, washed everything, cleaned out his closet and tossed a bunch of stuff that had paint (home improvement projects) and grease (antique car projects) stains. We also donated items that he no longer wears or don't fit properly anymore.

I never think of shopping for clothes at Sears, but I was so pleased with the results that I have encouraged Mr. Sam to go back today and pick out a few more pairs of shorts. We are in South Florida so shorts are a necessity.

Wednesday, July 28, 2010


We have been thinking more and more about putting more effort into paying down the mortgage on our primary home.

First if we pay off our mortgage we will have killed our biggest and last remaining personal debt (mortgages on our investment properties are business debt). Second, if we pay off our mortgage we will have flexibility regarding hazard and wind storm insurance which are extra expensive here in South Florida. Third, paying off our mortgage gives us a known return vs. an unknown return in our investments which with the market being so sporadic has certain advantages.

I am not planning to abandon our current 2010 spending and savings plan, but just thinking more about how we can put extra money, beyond our savings plan, towards our mortgage principal. I am also thinking more about our 2011 savings plan and other options for paying down our mortgage at a faster rate (extra payments, bi-weekly payments, mortgage debt snowball). I have also been looking at accelerator loans after hearing about them recently on NPR, but I really am not a fan of taking on a loan to pay off a loan.

How about you, have you paid off your mortgage at a faster rate? If so, how have you accomplished this task?

Thursday, July 15, 2010

Two Down

Two down, four to go.

As of today, we have maxed out our IRAs for 2010. So, we have completed two of our six 2010 savings goals.

Our remaining goals, max out our 401k (51%), our baby savings (47%) and our mortgage prepayment (58%) are all on track to be completed by year end.

So lots of good news, the only goal that is lagging is our emergency fund. Our goal is to have $32,000 by year end and so far we have only accomplished 10% of that savings goal. Accordingly, this will be the next goal I will focus on since the other three are on track, via automatic payroll or automatic savings to be completed by the end of the year.

How are you doing with your 2010 goals?

Wednesday, July 14, 2010

July Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $15,486 (47%) (goal is $33,000)
(2) - $9500 (95%) (goal is $10,000)
(3) - $700 (58%) (goal is $1200)
(4) - $1500 (43%) ($7861 in our baby fund, goal is $10,000)
(5) - $665 (10%) ($26,665 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $30,990 (53%)

Just about where we should be for July. Almost done with Mr. Sam's IRA funding.

Wednesday, June 9, 2010

Another Idea

Here is another idea for prioritizing which debt to pay off first: pay the most hated debt first.

Step # 2

Picking up with step # 2 of our debt plan.

After we gathered up all of our bills and figured out the total amount we owed, the next step for us was to document our debt. We created an Excel chart, but any kind of chart or document will do, that included the following information:
  • Name of creditor (i.e. Citibank)

  • Amount of debt

  • Interest rate (including any details regarding short term interest rate deals, i.e. 0% expiring on X date)

  • Minimum payment

  • Monthly payment due date
Then we determined the method of debt repayment. You've got a few choices here, you can go with paying highest interest rate debt first (which will likely save you money in the long run) or go with the debt snowball method (pay off the smallest debts first). After some debate, we went with the snowball method. Pick which ever method you think is going to work for you.

Read about Step 1 here.

Tuesday, June 8, 2010

June Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $11,832 (36%) (goal is $33,000)
(2) - $8500 (85%) (goal is $10,000)
(3) - $500 (42%) (goal is $1200)
(4) - $1500 (43%) ($7861 in our baby fund, goal is $10,000)
(5) - $-800 (-11%) ($25,839 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $24,532 (43%)

Added more to Mr. Sam's IRA with the market down again this week.

Thursday, June 3, 2010

Debt-Free Vacation

I just returned from my annual girls Memorial Day trip/vacation and want to share a bit about how to plan a debt-free vacation.

(1) I have an automated transfer into a vacation/travel fund in the amount of $50.00 per pay-period or $100 a month. Obviously, this is not enough money to fund a full vacation, but it is generally enough to pay for a flight. While we don't normally use credit cards, I do use them when I book a flight, a hotel and a rental car. So I book a flight and pay for it using my credit card, but I normally have more than enough to pay for the flight in our ING travel/vacation account.
(2) I book the hotel, again I use my credit card, but I also find out if there is a charge to the card or whether or not I can pay for the hotel upon check out. I add the cost of the hotel to my travel spending plan.
(3) I think about what I'll be doing on my travels: spa, tour and entry fees, shows, etc. And I sketch out a spending plan for expenses I'm pretty sure I'm going to incur (these are planned expenses).
(4) I also think about daily expenses: dining, shopping and misc. expenses like tips, cab and bus fares. I normally plan for a $100 a day in food, dining, cocktails, shopping and misc. for just me ($200 a day when I travel with Mr. Sam). These are what I call unplanned expenses.
(5) I add up the flight, hotel, planned and unplanned expenses for my total. I deduct the amount already in the travel fund and come up with my unfunded travel/vacation amount. Then I take my unfunded amount and fund it by setting up an auto transfer to my travel fund for the weeks between when I plan my travel and when I leave. Since I normally plan travel at least a few months in advance this works pretty well for me.
(6) Finally, at the end of my travel I either leave the expenses like hotel and rental car on my credit card and immediately pay from my travel fund or I pay for the hotel and rental car upon check out/return using my Visa debit card. During my travel, depending on where I am, access to bank ATMs, safety issues, I use a combination of cash and Visa debit.

While I use a spending plan for my vacation/travel (what some would call a budget), I don't normally skimp when I travel, I like to stay at very nice hotels (and did so on this last trip), and I normally partake of fine wine and great dining, etc. But, I plan out those expenses and allocate funds before I depart. End result, a stress free and basically pre-paid vacation.

Friday, May 28, 2010

Net Worth Obession Question Part 2

I found you on the NYTimes article. Ready for more fame? So I am doing what you do, but I have trouble getting my husband on board. He has student debt, but he earns more and has a stressful job, so he feels like he can treat himself to lunches out, cabs home, etc. To some degree if you work 120 hours a week you really cannot bring lunch, but some of it is just disregarding my goals. Did you go through anything similar? I read all the financial books and motivational materials, and just don't know how to get him on board.

This is a great question. I find this topic fascinating.

In my marriage, I am the spender and Mr. Sam is the frugal one (although he was not much of a saver and most of the debt that we had was "his" debt). I also earn more than Mr. Sam, so my situation is a little different than the situation presented by the above question.

After we got married, I decided that we should live a debt free life and I talked to Mr. Sam about my ideas here and there. I didn't force it on him all at once. I tried to get him to read the Total Money Makeover, but he is not much of a reader and only read a couple of chapters. He was all for paying off all our non-mortgage debt, but he thought I was crazy and he couldn't see how it was possible. Mr. Sam wasn't really on board until I presented him with a written plan that demonstrated that it was possible to pay off our debt in a year (a very focused, somewhat painful year). Thereafter, I went about setting up systems that enabled us to reach our goal (which I will write about soon, Steps 3 and 4).

So, you know your husband, how does he learn and process information, can you present a fully fleshed out plan to him in a form that will get him excited.

Regarding the eating out and cabs, we went with an allowance system (Steps 3 and 4) which each gave us a set amount of money to spend on discretionary items. Perhaps you could consider such a system and he would still have a certain amount to spend on these convenience items.

I don't think the fact that he earns more means that he gets to spend more. If you are married the money that comes into the household, in most States, is a marital asset. I'm sure there are folks that will disagree with me on this point but that is my opinion.

Thursday, May 27, 2010

May Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $11,132 (34%) (goal is $33,000)
(2) - $7500 (75%) (goal is $10,000)
(3) - $500 (42%) (goal is $1200)
(4) - $1350 (39%)($7711 in our baby fund, goal is $10,000)
(5) - $-1000 (-14%)($25,639 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $22,482 (39%)

With the extra push the last two weeks to add to Mr. Sam's IRA, we have gotten our overall numbers back on track. At present, we are now just slightly below our target for today's date.

We may look to add some more stock to Mr. Sam's IRA today or early next week depending on the market and if we can pull together some more funds.

Friday, May 21, 2010

Buy Low

We bought about $2500 in stocks today, within Mr. Sam's 2010 IRA, since the market is so down.

Wednesday, May 19, 2010

Net Worth Obession Question Part 1

Michele said...

i read the preview article and was wondering - how do you calculate your net worth if you are underwater in your mortgage? do you put your house as an asset at what you paid or what it is worth on i am not worried about losing it (yet) since i am employed and have an emergency fund.

I guess it depends on whether you think the value is accurate or not. You can track your net worth however you like and you know the back up for your numbers. As I explained to Ron Lieber, much of our net worth is illusory. We won't know the value of our real estate or stock investments until we sell them.

So this is what we do. The net worth numbers for our primary home and real estate investments are the values assigned by the local property appraiser.

Anonymous said...

I find your $100/month extra mortgage payment hard to understand. With a large mortgage and significant dollars going to other categories, I would have expected the extra mortgage payment to be either zero (especially with your low interest rate) or hundreds each month. Can you share how you settled on an average of $100/month extra payment?

Yeah, I hear you. We would really like to pay off the mortgage on our primary home. But right now our goal is to prioritize our non real estate investments because we are over invested in real estate. So, we decided to add prepaying our mortgage to our 2010 goals, while the amount of $100 is somewhat symbolic it keeps this goal on our radar screen.

Tuesday, May 18, 2010

Thoughts on the NYT Net Worth Obession

So, now that the NYT article "Net Worth Obsession" article has come and gone, I'm going to answer some of the questions and comments that were posed by NYT readers that clicked over to my NetWorthIQ page and this here blog. But first, I wanted to take some time to mull over the comments to the NYT article which fall into about four different categories.

First category - people who track their net worth are confusing their self worth with the amount within their bank accounts.

Your teaser states, "We all wonder how much money other people really have."No, we do not ALL wonder about that. I could not care less. Further, I never ever confuse a person's monetary assets with their "worth."

Um, not really. My self worth is tied up with my relationships, my contributions to the community, my career efforts and accomplishments, how I treat and interact with people in my every day life, etc., etc. But career accomplishments and my education level DO impact my ability to earn money which impacts our net worth.

Second category - people who track their net worth have skewed priorities.

This is a spoof, right? Would it be cruel of me to suggest that a diagnosis of metastatic cancer or some similar tragedy might be a useful corrective to what I regard as a somewhat misplaced set of priorities in the lives of the featured individuals?

Ouch, please don't wish cancer on me folks. I admit to being focused on our finances and admit that I spend more time thinking, tracking, researching, planning, etc. than most of my peers. And one of my top priorities is to have enough money in the bank to (1) cover an emergency, (2) pay for goods and experiences without resorting to debt, (3) provide for our retirement. But the idea that "money" is my top priority is wrong, my top priority is to live a good, fulfilling life with the man I love.

Third category - people who track their net worth in a public forum are showing off.

Tacky. Poor taste.

The main reason I don't post my net worth or blog under my full name is because I do have concerns that people might think that I am bragging about our net worth numbers or passing judgment on others. I've been tracking my individual net worth since shortly after I graduated from college and I posted it on NetWorthIQ mostly for my self. I compare myself to myself, or ourselves to ourselves (our net worth is now a joint number) and my goal is to see progress.

Fourth and final - tracking one's net worth is a valuable tool.

People who don't track their personal finances closely make the mistake of thinking that those who do, are obsessed with money. I'm not obsessed with money, but over the years I've developed ways of tracking my income, spending, debts, and assets, which allow me to know where I am financially, with very little effort on a month-to-month basis. (about 2 hours per month on finances and paying bills, etc) For me, it's the freedom of knowing how much I can spend extra for a vacation, or a gift to a family member. It's the freedom of knowing how much I will need to adjust my budget in order to save for the downpayment on a new car.

Ding, ding, ding. For me, tracking our personal finance habits and keeping track of our net worth helps me stay engaged and therefore I think about the purchases, where our money is going and how we can try to save more.

Wednesday, May 12, 2010

Net Worth Obession

The New York Times Magazine Preview on net worth obsession has been posted/published. My 5 seconds of fame appears on page 2.

I enjoyed reading the preview article and learning how others use the Net Worth IQ site to motivate, shame, cajole themselves towards better financial health. As always, the comments from the public are as interesting as the article. My comment, with typos and all, is below.

As someone who talked to Ron but declined to give my name, I find tracking my net worth a valuable tool. I don't generally compare myself (ourself since my net worth iq number is joint) to others, but instead compare myself to myself. On-line tracking tools are, for me, an outgrowth of Quicken which I also use. I find that tracking, lots of tracking, requires me to stay engaged with my finances, think about each dollar I spend and work to save more.In our 30s we have retired all debt, we have no credit card debt, no student loan debt, no car debt, etc., except our mortgage and the mortgages on our investment properties (which are rented and paying for themselves). We save a good chunk of money each month, both in our retirement accounts and in other savings vehicles. And we still live a good life that includes eating out, vacations, and shoes for me.

For me tracking and measuring my assets and debts on a monthly basis keeps me on track. Having to review a balance sheet each month, like a business person does or should, focuses on the fact that are household is a small business and we have to take care of ourselves.

I'm looking forward to reading the full magazine article this weekend.

Friday, May 7, 2010

May 7th Numbers.

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $8274 (25%) (goal is $33,000)
(2) - $5000 (50%) (goal is $10,000)
(3) - $500 (42%) (goal is $1200)
(4) - $1200 (34%)($7561 in our baby fund, goal is $10,000)
(5) - $-1200 (-17%)($25,439 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $16,744 (29%)

Completed funding my 2010 IRA and bought some bargain stocks yesterday. Otherwise, we are behind on our goals but trying to catch up.

Tuesday, May 4, 2010

Step # 1 - Face the Music

I have been keeping a calender, where any day I spend money I put it there. I add it up daily then weekly then the month.This way I can see what really needs/can be cut out. I already bring lunch, don't eat out or have cable, drink soda or do much entertainment. I cut gift cost to $15 from $25, so keep the ideas coming. I would love to attack like you have :-)

This comment from a recent post got me thinking that I ought to run through the steps, in detail, we took to pay off our unsecured debt. As regular readers know, Mr. Sam and I paid off all our unsecured debt, which totaled $55,500, in twelve and a half months back in 2007.

So here goes. Step # 1 on this journey to freedom from debt was to "face the music" and figure out how much debt we had. This sounds like an easy step, but it probably was the second most difficult step in our debt plan.

Background, Mr. Sam and I were married in late 2006. While we were living together and our finances were some what intermingled he was responsible for his debt and I was responsible for mine. We had a joint account for shared expenses and we each contributed to our joint account based on how much we each earned. I contributed more to our joint expenses, because I earned more. I was responsible for paying all our joint expenses and my own expenses. Mr. Sam was on his own.

So when we decided to tackle our debt as a 2007 New Year's Resolution, in order to do so we had to gather up the actual paperwork and sit down and chart it out. As of January 1, 2007, we had six debts, I had one credit card debt, Mr. Sam had three credit card debts, one other debt, and one student loan. The student loan debt was about $27,000 and about half our total debt.

Thursday, April 29, 2010

Go Big or Go Small?

Another interesting article from The New York Times discussing the pros and cons of making little budget adjustment (i.e. the latte factor) or deeper cuts to one's finances like selling the house or car.

I have written about this topic before and I can go both ways on this issue. First, it is easier to make smaller budget adjustments, things like reducing eating out (bring your lunch each day), scaling back on one's cable, Internet, or cell phone package, etc. Second, those small savings are nothing to sneeze at. If you can capture $5-$10 a day in savings, you could end up with $300 a month to direct to either paying down debt or savings as long as you are diligent and consistent.

Obviously, if your mortgage or car payment is killing your budget that is a much larger problem than the $10 a day you spend on lunch out of the office. But it is difficult and painful to walk away from a home, sell a car at a loss, etc. You have issues like credit rating, contracts, legal implications to deal with. I agree with the premise of the article that it is better to avoid getting yourself into a too expensive mortgage or car in the first place.

We really went the third route, we paid off $55,000 in debt in just over a year by making big adjustments to our day to day spending. We got on a very strict spending plan and directed all money not going to overhead (expenses with a bill, i.e. mortgage, taxes, utilities, etc.) to debt.

Saturday, April 24, 2010

Response to Comments - Part 2

So what did Ron Lieber want to talk to you about? Please make sure you link the article if he writes about you!

I did speak with New York Times financial columnist last week. He is working on a piece for the N.Y. Times weekly magazine to be published in mid-May.

He was interested in speaking with me because I am one of the most "active" users of Which means that I have data for every month going back to 2003. I actually have been tracking my net worth going back to just after college so I have more data than I could input on He was interested in why I (our net worth is tracked as a couple but it really is me and not my husband who does all the tracking) keep close track of our net worth, what other tools I use (Quicken, Excel spread sheet, this blog, GRS, etc.) and whether it is healthy, not health, helpful, etc.

Mr. Lieber seemed especially interested in whether I was using all my tracking tools so that I could compare myself to others, whether it was a competition.

For me the tracking, especially the net worth tracking, is a tool to help me compare me to me (or us to us). I recognize that the net worth numbers are somewhat illusory (you can't really know what your house, real estate investments, or stock investments are worth until you sell them) and I don't get too worked up about them. My net worth tracking is more big picture and my goal is to keep that chart going up (Ron pointed out that our chart doesn't track the market chart or the other user charts). Using Quicken and the other tools helps us to stay on track from month to month.

I'll keep you updated if any of my quotes make the article and will link it whether I'm quoted or not.

Friday, April 23, 2010

Response to Comments

I would love to know the details of your audit. Do you do your own taxes? Did you have professional representation at the audit? Did your accountant handle the audit? Just wondering...

I plan to write a full recap of the audit process, what we learned, what we will do different when we finally close out this chapter. However since the audit has not yet been closed I'm holding off.

But I can answer the three questions raised in the above comment:
(1) No we do not prepare our own taxes.
(2) Yes we had our accountant represent us at the audit.
(3) We prepared for the audit with direction from our accountant and signed a power of attorney so he represented us at the audit. We also attended.

As I've posted before, we were audited for two reasons. The first reason I was able to resolve with the IRS by just sending them some additional paperwork. The second reason required an in-person examination and resulted in payment of back taxes. The second issue was caused by our accountant in that he made a mistake thinking that we were eligible for an exemption when we were not.

Tuesday, April 13, 2010


What is the opposite of forward progress, backwards regression.

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $7100 (22%) (goal is $33,000)
(2) - $3200 (32%) (goal is $10,000)
(3) - $300 (25%) (goal is $1200)
(4) - $750 (21%)($7135 in our baby fund, goal is $10,000)
(5) - $-1800 (-26%)($24,412 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)

Total - $12,550 (22%)

We have written the check to the IRS and the check to the CPA, hence we moved $6,000 out of our emergency fund. We'll have to work hard to replenish our emergency fund and regain ground on our 2010 savings goals.

What Do You Do?

What do you do when someone on the street asks you for money? 99.9% of the time, I say no thank you and keep walking. I don't believe its helpful to hand out cash to the homeless our down and out, I'd rather give those funds to charities who help the homeless. Note - I use to work in social services.

This morning, it was dark and very early (before 6:00 a.m.), and I stopped at Dunkin Donuts for some coffee.* I was still half asleep when a middle aged man in a work uniform asked me if I could spare 75 cents so he could catch the bus. My initial reaction was to be startled since it was dark, I was sleepy and I was thinking about my work day and all that I needed to accomplish. My second reaction was to say no thank you which is what I normally do, but I ended up giving him a dollar (most of the time I carry no cash so the fact I had a dollar was a surprise) and told/asked him to "be kind to the next person." He followed me into DD and asked the clerk for change and when I left he was sitting at the bus stop.

Did I make the right choice? I really have no idea. I've never seen this person before so this is not a regular scam at my DD (if it is a scam) and he really did present as a blue collar worker trying to get to his job.

What would you do?

*Buying coffee on a daily basis is a dumb financial move but when it is super early (before 6:00a.m.) and I'm heading to work I treat myself.

Monday, April 12, 2010

Fidelity Research Tool

My local Fidelity representative called me recently regarding the status of an old 401K. He calls once in a while to inquire as to whether I want to roll it over to an IRA (I don't at this time) and instead of just hanging up after that inquiry, he asked how else he could help us. I responded, "help us make more money."

So we chatted about what we were doing and he pointed us to some interesting research tools that I was not aware of. If you have an account with Fidelity, there are expert strategies that are regularly updated (find them under research and then under stocks). So if you are a bargain hunter, like I am, there is a "Bottom Fishing" expert strategy which lists the best rated stock bargains along with the back up research. The is a "Running with the Bulls," "Bears in the Woods" and several other less colorfully named strategies. Anyways, it looks like a great research resource and I expect we will be trying out some of the research strategies in our IRAs (where we do our individual stock investing).

Tuesday, March 30, 2010

Retirement Numbers

Started the April 1, 2010 NetWorthIQ update today and happily realized that our total retirement savings, 401K and IRA monies, totals more than $350,000.

At present our retirement savings is at $354,943. Our 401K accounts have recovered much of the losses from 2008, although we have not yet recouped full losses.

Audit Update

Audit process is just about over. Generally good news, liability reduced from @$20,000 to @$4,000.

I plan to provide the gory details soon.

Sunday, March 21, 2010


Caught a replay of Dave Ramsey on the ride home last night (I'm working all weekend, major project due Monday).

I was totally inspired by Debra and John a couple in their mid-40s (Debra is 45) who paid off all of their debt, including their home on 100 acres, in six years. They are debt free at 45!! Debra explained that they paid off $230,000 in debt on a yearly income of $100,000 a year. At the same time they paid for their son to also go to college and graduate school so he doesn't have any debt either.

Impressive! $230,000 over six years is $38,500 a year, which is also 38% of their gross income. I always want to know more about these folks that call into Ramsey's show, like are they also saving for retirement, or do they have an emergency fund, etc. In this instance, Debra at least told us that they were also paying for college/grad. school during this time. I would assume that education costs would run at least $10,000 a year (if not more).

When I got home, I told Mr. Sam and he said "sure, we could put more towards paying off our home, if we cut out more discretionary spending."

While I like to think we live on a pretty lean budget, we could do better (Mr. Sam mentioned something about shoes and how many I seem to own).

Anyways, something to think about.

Saturday, March 20, 2010

To Be Or Not To Be Debt Free?

The New York Times has a good overview of when to prepay on a mortgage and when not to.

Basically if you've got a good mortgage rate, like we do at 4.78% fixed, the NYT advises that you should not be throwing extra cash at your mortgage if: (1) you have other higher interest debt (i.e. credit cards); (2) you are not investing enough in your 401k to get the employer match*; (3) you don't already have a good size emergency fund saved up.

I agree, generally good advice, our only debt is mortgage debt (although we've got more than one mortgage with our investment properties), we are maxing out our 401ks and we have a $30,000 emergency fund. So we have got the green light, according to this advice, to pay extra on our mortgage.

The NYT article also runs through the tax benefits of a mortgage (although I'm not in fan of debt for tax benefits), better returns elsewhere (i.e. investments) and the general need most people have for liquidity these days.

I'm always a little skeptical of not paying off debt to get a better return in the market, but I would assume that an individual who is disciplined enough to pay down a mortgage is also disciplined enough to invest or save that money rather than spending it. I also agree that msot people these days are in need of greater liquidity due to the general economic uncertainty facing many.

*I always find it interesting that almost all personal finance articles, advice, blogs, etc. assume that all employers provide a 401k match. I've never worked for a company that provides a match. I also don't agree that one should only invest in a 401k if one receives a match, invest in a 401k so you can take care of yourself in retirement.

Monday, March 15, 2010

Updated March 15th Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $6900 (21%) (goal is $33,000)
(2) - $3200 (32%) (goal is $10,000)
(3) - $300 (25%) (goal is $1200)
(4) - $600 (17%)($7122 in our baby fund, goal is $10,000)
(5) - $5000 (71%)($30,163 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $19,000 (33%)

We put $4000 of Mr. Sam's bonus into our emergency fund and we will keep it there until we hear from the IRS. Some, or all, of that $4000 may eventually be transferred into our IRA accounts. Another $1000 went into Mr. Sam's 401k. He is going to use $500 for something fun. The rest went to taxes, with-holdings, and a little extra into our regular checking account.

Sunday, March 14, 2010

Historic Homes

Historic home question:

I think you mentioned in the past that your rental properties are historic... what are the challenges and benefits to owning historic versus non-historic properties, and what caused you to choose historic? (Example of a potential challenge: An experienced real estate investor depicted on a television program was preparing to remodel the historic home he had just purchased, only to find out that the project required approval by a local gov't agency... and ultimately his original plans were modified to accommodate their requests.)

Our primary home, rental #2, and rental #3 are all historic homes, built in the 20s and 30s. My prior home was also historic.

We ended up with two historic rental homes mostly by chance. Our home is historic and we live in a historic area (mixed, there is some 50s, 70s and newer construction too). When we were shopping for rental homes we wanted homes close to us (easier to manage, easier to work on) and we wanted the best bang for our buck. Historic homes that have not been dramatically upgraded are generally cheaper than similar size newer construction homes. We can cover the mortgage if the rental home is empty without too much pain and we don't have to charge as much for rent (very helpful in this economy).

But there are also negatives. First, insurance for a historic home is more expensive (big issue here in Florida). Second, historic homes can be more difficult to maintain, repair, etc. Third, when it comes to selling, I think historic homes generally sell for more (better profit) but appeal to a more limited segment of the population. And finally, yes, the historic preservation board can limit dramatic changes to the property (since we don't plan to add an addition or second floor, etc., this is not a big issue for us).

Saturday, March 13, 2010

Ides of March

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $6900 (21%) (goal is $33,000)
(2) - $2200 (22%) (goal is $10,000)
(3) - $300 (25%) (goal is $1200)
(4) - $600 (17%)($7122 in our baby fund, goal is $10,000)
(5) - $1000 (14%)($26,163 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $14,000 (24%)

Increase in progress due to Mr. Sam's bonus, 401k deductions applied to bonus so he is well ahead on his contributions for the year. We are about $2,900 ahead on our 2010 savings goals.

Friday, March 12, 2010

By Any Other Name

A little psychological trick, I title our emergency fund account, which we keep at ING, as "Vacation Home Fund." By doing so, I am less likely to transfer money out that account because each time I look at our ING accounts I think about our long term goal of building a vacation home.

Wednesday, March 10, 2010

Time to Buy Citi?

Fortune says it might be time to buy Citi stock.

Other smart money has recently been speculating on the stock. Hedge fund legend George Soros bought nearly 100 million shares in the fourth quarter of 2009; John Paulson of Paulson & Co. added more than 200 million shares; and Daniel Loeb's Third Point bought shares worth $83 million.

But Berkowitz says investors can't ignore the Treasury's move to allow Citi to repay its Troubled Asset Relief Program (TARP) funds. "The only way the government was going to allow repayment was if they thought the bank was recapitalized," he says.

We bought some Citi stock a few weeks ago, in our IRA, when it was trading in the high $2 range. We'll see if it pays off.

More Good News!

More good news. I am receiving a 14% increase in my compensation which should be reflected in my March 31 pay check.

Half of that increase is compensation that was cut back in July (everyone in my company took a pay cut). I got back some of that compensation in January 2010 and at the end of March will receive the rest (of course, I lost 6 months of receiving that money, but I'm happy to have it back 9 months later).

The other half of that increase is pay increase that should have kicked in as of January (i.e. step increase).

The last little bit of good news, is that the company is re-instituting the bonus plan, so there is a bonus opportunity at the end of 2010 (there were no bonuses in 2009). Although, I'm not going to hold my breath that anyone, including me, will actually receive bonuses.

Expect that any and all extra compensation will go towards our 2010 savings goals.

Tuesday, March 9, 2010

Retirement Calculator

Interesting article on the Money Magazine site regarding the fact that 43% of American workers have less than $10,000 in retirement savings. I'm hoping that the bulk of those folks are very young and have time to save.

While reading the article I ran my numbers through the retirement calculator and was told that I needed to be saving @$25,000 a year. [I'm not sold on the rules they use but I gave it a go.]. Right now, I'm doing my best to max out my 401k at $16,500 and my IRA at $5,000. So, at present, I am short $3,500 for retirement savings although we are saving other monies for other goals so perhaps we could divert more of our savings to retirement.

On the other hand, Mr. Sam only needs to save @$11,300 according to the calculator so he is saving $10,000 more per year than he "needs" to. Maybe he'll be kind enough to lend me some cash when we are 65.

Monday, March 8, 2010

Good News

More good news, Mr. Sam received a 3% raise at work and a $10,000 bonus.

Most likely, we will add the bonus money to our emergency fund until we get a final determination from the IRS. If we get a positive result from the IRS audit, most likely, we will use the bonus money to finish funding our 2010 IRAs.

Thursday, March 4, 2010

Biggest Loser

Over on NetWorth IQ, our $200,000 loss in November 2009 put us top loser, by amount, in December 2009.

Wednesday, March 3, 2010

Updated 2/28 Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000 (Completed
Total - $57,700

(1) - $4554 (14%)
(2) - $2200 (22%)
(3) - $200 (17%)
(4) - $450 (13%)($6972 in our baby fund, goal is $10,000)
(5) - $800 (11%)($25,963 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $11,204 (19%)

About 1 week ahead on our savings schedule.

Sunday, February 28, 2010

Rental Update

Rental #1 - tenants are behaving themselves, paying rent on time, don't hear from them at all except rent checks.

Rental #2 - Mr. Sam spent February turning this property, did some upgrades, replaced the carpet, updated the landscaping. Place looks good and it is rented as of March 1, 12 month lease.

Rental #3 - will be occupied by a family member (from the cold and snowy north) for the next two months. We won't be collecting any rent for the next two months but that is okay and worth it to us to be able to host our family for a long visit.

Friday, February 26, 2010

February 28th Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $3954 (12%)
(2) - $1200 (12%)
(3) - $200 (17%)
(4) - $450 (13%)($6972 in our baby fund, goal is $10,000)
(5) - $800 (11%)($25,963 in our emergency fund, goal is $32,000)
(6) - $3000 (100%) (Completed)
Total - $9604 (17%)

Slightly ahead of schedule on savings. Since we completed our house goal, we have increased baby fund savings from $100 per pay period to $150 ($300 per month).

Thursday, February 25, 2010


Following up on yesterday's post, the check to our local utility agency cleared and posted to the checking account for our investment property. Check shows it was deposited 2/18 (it was due 2/19). Not sure why it took so long to post and not sure why my current bill shows a non-payment.

Wednesday, February 24, 2010

Fourth Strike

Following up on yesterday's post, last night I received a bill from our local utility agency which noted that we had failed to pay last month's bill.

I know this one is wrong, because this is a bill for which I must write a physicial check and for which I drop off at the Town Hall drop box. But, looking at our checking account for this property, the check has not cleared so who knows what happened to it. I assume its floating around some where in the Town Hall.

Tuesday, February 23, 2010

Three Strikes

Three times in the last two months I have failed to pay a bill. I'm not sure what is going on with my bill paying system except that I've narrowed down the problem to - me.

Each month, I create a monthly spending plan which is based both on our yearly spending plan and the prior month's spending plan. Not much changes from month to month except the normal fluctuation up and down of our bills and the occasional appearance of a quarterly, semi-annual or annual bill. Then comes the first and/or the fifteenth of the month and I pay our bills, I cross them off the spending plan, I enter them in our check registrar, I deduct the amounts from our various accounts and I actually pay our bills, most of them, via on-line bill pay.

Looking back on the last two missed bills, I see that I crossed the bills off on our spending plan, I entered them in our check registrar, I deducted these monies from our total, etc. But, what was missing was the actual bill pay. I can't recall whether I missed the on-line step in total or whether I entered the bills into the on-line system but failed to hit that last button.

So, I've got to rethink my system and add in a final double checking step to make sure that the on-line payments are reflected in my pending payments at the end of the process.

What is your system, does it work for you, have you ever had this type of failure?

Monday, February 22, 2010

A Little Bit of Good News

Received a letter from the auto insurance company, sounds like the insurance company won at mediation (the two insurance companies mediated the liability for the car accident since there were no witnesses and we both said we were not at fault). I received a check reimbursing me for my deductible ($500). Happy about that.

I will be calling the insurance company to find out more, I am hoping, and assuming, that they recovered all expenses ($11,000) related to the repair of my car which would mean that I wouldn't receive a black mark on my insurance history.

Thursday, February 18, 2010

Uncle Sam is a Mean, Mean Man

Our IRS audit did not go well. I will provide more details soon. We have provided more information to the IRS with the hopes that the additional information will sway them to reconsider their decision. If not, we will appeal.

Monday, February 15, 2010

2/15/10 Numbers

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000
Total - $57,700

(1) - $2636 (8%)
(2) - $1000 (10%)
(3) - $200 (17%)
(4) - $300 (9%)
(5) - $600 (9%)
(6) - $3000 (100%) [Completed]
Total - $7736 (13%)

So far, we are on target with our 2010 goals. New couch was ordered.

Tuesday, January 26, 2010

Audit Agony - Part 2

We spent another 8 hours on Saturday preparing our records for the upcoming audit. We also met with our CPA yesterday, happily he was pleased with our preparation and we probably only have another 1/2 of prep time left. Overall, we've probably spent 30 hours responding to the first request for documents and preparing for our audit appointment and responding to the second request for documents.

Audit is scheduled in two weeks.

We have vowed to keep our records better organized going forward and I am working on organizing our 2009 records in preparation for filing 2009 tax return. We won't turn our attention to 2009 taxes until we get the audit behind us.

Wednesday, January 20, 2010

One Done, Five To Go

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund - $3500
(5) Add to emergency fund - $7000
(6) House/Furniture fund - $3000 [Completed!]

Total - $57,700

(1) - $600 (1%)
(2) - $500 (5%)
(3) - $100 (8%)
(4) - $100 (2%)
(5) - $200 (2%)
(6) - $3000 (100%)

Total - $4,500 (7%)

Three weeks into the new year and we've got one goal completed. Clearly, I am desperate for a new couch. We are 1% ahead on our savings goal. Whoo-hoo!

In order to reach our goal of saving $57,500 in 2010, we have got to save $1100 a week. $1100 a week seems like a lot of money, it is a lot of money, but half of that is $630/week in 401k money. 401k money is less painful because the bulk of it is pre-income tax (we do put some of our 401k monies into a Roth 401ks [after-tax]). 401k money is also less painful because we never see that money, we never take possession or control of it, rather it is deducted from our pay-check before we get paid so the temptation to spend it is reduced.

Our prepayment on our mortgage is set up for auto-payment so I can pretty much forget that one and know that it will be completed. The emergency fund auto-transfer is set up as $200 per paycheck for a total of $4800 for the year. The baby fund auto-transfer is set up as $100 per paycheck for a total of $2400 for the year. In order to meet these two goals we will need to increase the auto-transfer or throw extra* money at these two goals during the year.

We do not have an auto-transfer for the IRA, normally I fund our IRAs by throwing extra money at the IRA as early in the year as possible. We also normally use the bulk of our tax refund to fund our IRAs.

*Salary - 401k contributions - auto-transfer savings - recurring bills - allowance = "extra money."

Tuesday, January 19, 2010

Audit Agony

We spent many hours this weekend working on getting ready for our IRS audit.

Thursday, January 14, 2010

2010 Savings Goals

I have set up our auto payment for the extra $100 in principal prepayment for our mortgage. I have scheduled the auto payment for the second half of the month which is when we also do our auto savings for our home and real estate investment escrow accounts.

Wednesday, January 13, 2010

Final 2009 Numbers

(1) Max out 401ks - $33,000
(2) Max out 2009 IRAs - $10,000
(3) House project and furniture - $6,000
(4) Add to baby fund - $5,000
(5) Add to emergency fund - $10,000
Total - $64,000

(1) $32,689 (99%)
(2) $10,000 (100%)
(3) $2,323 (47%)
(4) $1,515 (30%) ($6,515 in our ING baby account)
(5) $3,141 (29%) ($25,022 in our ING e/r account)
Total - $50,168 (78%)

Final 2009 numbers, the good news: maxed out our IRAs, I maxed out my 401K, Mr. Sam just about maxed out his 401K, $25,000 in our emergency fund, $50,000 total saved.

Tuesday, January 12, 2010

How Much is Too Much - Emergency Fund

As Mr. Sam and I work on our 2010 spending plan and fine tune our 2010 savings goal, the issue of the emergency fund has come up (again).

We have $25,000 in our emergency fund which is kept in both our ING savings account and an ING CD ladder. We also have about $13,000 in other targeted savings and sinking funds (i.e. escrow accounts for each property we own, our baby fund, our house/furniture fund, our travel/vacation fund, our holiday fund, etc.) at ING for a total of about $38,000 in cash savings.

This weekend we were discussing our savings goal for 2010 and Mr. Sam originally objected to adding more to our emergency fund, as he sees it we have almost $40,000 in cash and we should be putting more money into the market. $40,000 in cash does seem like a lot, but first off we can't count the $13,000 since that money is (1) already allocated to certain expenses or (2) already allocated to certain goals. And $25,000 in emergency savings, in mind, is not nearly enough when you factor in the real estate investment we own and that we are responsible for the mortgage, taxes and insurance regardless of whether or not the properties are all rented up.

Now, it is true, that luckily we have never been in a position that all of our rentals were vacant at the same time, but the idea of an emergency fund is to be prepared for the unexpected. Once, I had explained all of this to Mr. Sam he agreed that we need to continue to add to the emergency fund.

Monday, January 11, 2010

Card vs. Card vs. Card

I have been following along with this New York Times series on the costs and rewards of using debit and credit.

The latest installment has been whether it is ethical to use credit cards with rewards programs when those rewards are subsidized by other consumers, generally less well off, who don't use credit or can't use credit (because they are not eligible). You can figure out how much your card cost by going to true cost of credit.

We don't use credit cards, but we do use our debit cards with signature (which is more expensive for the retailer) for just about all our day to day purchases.

Retailers, over the years, have figured out that people who use plastic spend more money and buy more stuff, so more and more retailers accept credit cards. It also costs a pretty penny for retailers to process cash, i.e. theft, counting, banking, etc. so the idea that cash costs less for retailers may not be true.

But I think the question that the NYT poses, should poorer consumers subsidize richer consumers rewards is a very interesting one. Problem could be solved if more retailers offered a cash discount to those who use cash.

Tuesday, January 5, 2010

Tentative 2010 Goals

(1) Max out 401ks - $33,000
(2) Max out IRAs - $10,000
(3) Prepay mortgage - $1200
(4) Add to baby fund (carry over from 2009) - $3500
(5) Add to emergency fund (carry over from 2009) - $7000
(6) House/Furniture fund (carry over from 2009) - $3000

Total $57,700

We are setting the bar a little lower this year, since we fell short last year and since I'm still working with a 7% pay cut in 2010. We have yet to finish our 2010 spending plan so our savings goals may be adjusted after we complete same.

Monday, January 4, 2010

Glass Half Full?

Good news to start of 2010.

The 10% pay cut that my company imposed on all employees back in July 2009, has been reduced, at least for me, to a 7% pay cut as of January 15th pay check. I can't really call this a pay raise since I'm just getting back 3% of my salary, but I'll take it and add it back into the salary column as we work on our 2010 spending plan.

Friday, January 1, 2010

New Year, New You, New Plan

Happy New Year!!

Since it is that time of year, let's talk New Year's resolutions. Do you make them? Do you keep them?

I'm more of a goal gal, goals are easier for me to track, and easier to restart if I fall off the wagon. So, we are working on our financial goals which I will post soon. I also want to keep better records and keep my records better organized - since our IRS audit is coming up soon, this one is top of the list. We also want to have a 2010 baby and so we'll continue to add to our baby fund and we'll also work on health/fitness and probably visit some doctors early this year.

Being debt free is a super awesome goal. We resolved to get debt free in late December 2006 and started working our plan on January 1, 2007, we were debt free as of January 15, 2008. And we've been debt free, except for our mortgage (and our investment property mortgages and small business expenses we like to put on our 0% Home Depot credit card), ever since. It is wonderful not to have credit card bills, car payments, student loan payments, etc. and not having to service debt frees up money for savings and investments.

What are your plans for 2010?