Wednesday, May 18, 2011

2011 Goals - Mid-May Update

(1) Max out 401k(s) - $12,491 (38%)(goal is $33,000)
(2) Max out IRA(s) - $10,000 (100%)(goal is $10,000, this goal is completed)
(3) Add to e/r fund - $3,600 (36%)(goal is $10,000)
(4) Pay down mortgage - $1660 (33%)(goal is $5,000)
(5) House projects - $0 (goal is $5,000)

Total - $27,751 (44%)

Invest Now or Invest Later?

A Reader in New York had a question regarding whether it is better to fully fund an investment, i.e. our IRAs, early in the year or spread out the investments over the course of the year to take advantage of dollar-cost averaging. Great question.

First, although we have fully funded our IRAs for 2011 we have not actually invested all that money. We use our IRAs for individual stock investments. We pick out stocks that we like based on our investment goals and then we try to buy same on down days via a limit order. We plan to hold these investments for at least 3-5 years or until they double in value. 

Second, for our 401k contributions we contribute over the course of the full year. We do so for budgeting purposes.

Third, regarding dollar cost averaging. Our savings goals are really a savings snow-ball.  I stay motivated with savings by working towards the goals and crossing them off as soon as possible.  If I could fully fund our 401ks earlier in the year, I would do so. 

I'm not an investment expert, but my goal is to get my/our money invested as quick as possible. Get that money working sooner rather than later.  Here is an expert's opinion and explanation that sums up my feelings about this issue.

What say you?  Are you pro dollar-cost averaging and if so, why?

Tuesday, May 17, 2011

2011 Savings Goal No. 2 is Completed

We have now completed funding of our 2011 IRAs. 

Monday, May 16, 2011

Managing Major Purchases in a Marriage

I'm married to a wonderful guy who while he pays very little attention to his spending is not a big spender.  But, recently, this month, Mr. Sam has come to me (pursuant to our $300 rule*) with a desire to spend about $5,000 on a purchase that makes no sense to me.

Without disclosing the purchase, it is for something that will really only benefit him, has a danger factor, and I think is unnecessary, but will make him happy (or he thinks will make him happy).  Think something along the lines of flying lessons when I hate flying.

First of all, we discussed the money factor.  I suggested that we save up for the purchase, make it a savings goal, and he would be able to execute the transaction in 2012.  Alternatively, we could switch our $5000 house project fund, which is a 2011 savings goal, to a savings fund for him and he would be able to execute the transaction at the end of 2011.  But, he wants to move forward with the transaction now.  We do have the money, we have money in our emergency fund and we have money in our other short term/mid term savings that we could tap.

Second, happiness.  I fully support Mr. Sam in just about anything that he thinks will bring him happiness.  This transaction is important to him, something he has wanted to do for many years, etc.

Third, we discussed the fairness factor.  I direct the spending of the bulk of our household monies.  In the past few years, I've purchased new furniture, a nused car for me, etc.  In fact you could go back to our wedding and look at all the funds (granted this was before it was our money) I spent on our special day when he would have rather saved that money.  While one could argue that these purchases and expenditures  benefited both of us, and they do and did, they benefited me more because I cared much more about them.

Fourth, the danger factor.  There is an element of danger to this purchase that I'm not comfortable with.  In fact, in discussing the purchase I suggested spending more money to increase safety.  I also encouraged him to do more research, etc. 

Finally, decision time.  Ultimately we decided as a married couple to move forward with the purchase.  We are taking $4000 out of our emergency fund to front the cost.  However, this week, I'm receiving a bonus at work which will allow us to refund the emergency fund.  Said another way, we are using my bonus money to pay for this expense. 

* The $300 rule = we have to discuss and agree regarding any purchase over $300.

Friday, May 6, 2011

2011 Goals - May Update

(1) Max out 401k(s) - $11,054 (33%)(goal is $33,000)
(2) Max out IRA(s) - $9,000 (90%)(goal is $10,000, my IRA is now maxed out for 2011)
(3) Add to e/r fund - $3,600 (36%)(goal is $10,000)
(4) Pay down mortgage - $1660 (33%)(goal is $5,000)
(5) House projects - $0 (goal is $5,000)
Total - $25,314 (40%)

We are a little bit ahead on our savings for 2011.

Thursday, May 5, 2011

Better Chance You'll Get Struck by Lightning

Do you play the lottery?  I do not, and generally describe the lottery as voluntary taxes for people with poor math skills.  What I mean by that statement is you are giving money to the state and your chances of winning are very poor.  Indeed, often times you have a better chance, especially in Florida, of getting struck by lightning than winning the lottery.*

So imagine my surprise, when Mr. Sam told me he bought a Florida Firecracker Millionare Raffle ticket this past week.  He said he kept hearing about the raffle on the radio and decided to buy a ticket.  The odds for this game are better than the regular Lotto, because they are selling a limited (750,000) tickets.  Anyways we were talking about what to do with the money if he wins the big prize and I was surprised that he said pay off the house.

What would you do if you won the lottery?  Or are you like me, you don't play and you'd invest that $10 instead of buying a ticket?

* Over the course of a lifetime, 80 years, the odds that you will be struck by lightening is 1 in 5000.  Your odds in Florida are even higher in that Florida is the lightening capital of the country. 

Wednesday, May 4, 2011

Forcasting Tool

Mr. Sam came across a tool at which provides information from a number of  analysts (varies from stock to stock) as to the forecasted stock price information over a 12 month period.  Seems like a handy tool, but whether it is helpful will require some analysis of our own. 

For example, I own 275 shares of Citigroup (symbol:  C), this forcasting tool tells me that over the next 12 months the high forecast on price is $6.50, the median $5.63, and the low $4.00.  So, I'm going to watch Citigroup over the next few months and compare to this tool. 

Monday, May 2, 2011

The Expensive Side of Delay

Confession time, I recently got a speeding ticket.  At the same time I received the speeding ticket, I received a ticket for not having proof of insurance or registration with me. 

I challenged the speeding ticket.  I might save money by challenging the ticket since an attorney friend is handling it for me at no charge.  But, in challenging the speeding ticket I completely ignored (forgot) the insurance ticket.

I could have resolved the insurance ticket by presenting proof of insruance with 30 days at the DMV and paying $10.  Instead, I forgot I needed to do anything about the ticket and ended up missing the 30 day window which meant I had to pay the full amount of the ticket $116.  But, it gets worse.  I paid the $116 but ended up having a late fee of $23 which I didn't know about or pay so my license was administratively suspended.  So I paid the $23 late fee, but I still had to pay $60 to get my license reinstated.  And, I wasted an hour of my life at the court house and then another hour at the DMV.

$199 to the State of Florida vs. the $10 I should have paid.  Ugh!