Did I say flood insurance?

If I hadn't been convinced that getting flood insurance was a good idea already, I would be after yesterday's rains. It rained heavily for about an hour, and then later began to drizzle. Within maybe 20-30 minutes of the rain starting, water was running up over the sidewalks and ponds were forming in the yards. Cars were stalled out (or in some cases floating) on local streets, and the freeway was flooded. I'm thinking it might be good to add some water shoes to our emergency bin. And I wonder if car insurance covers damage due to flooding?

In this instance there was a sort of carnival atmosphere to things — people playing in the street, etc. but just that brief downpour caused quite a bit of damage for some people. Thanks to my husband for the pics.

Avoiding Life’s Worst Debt Traps

Building personal wealth is not hard if you understand math. All you have to do is take in more money than you spend. Yet, life isn't as simple as a math equation and there are various personal factors that can uproot even the best-laid plans. Cash, for instance, may be plentiful when we are single and working, and become scarcer when we are married with several children as dependents. Life also can have a way of throwing unexpected curves like layoffs, disease, divorce, and more. For those occasions, we have to turn to savings or loans to help us through the rough patches. So, how can we make the road a little smoother if we're not blessed with stunning good luck? Good financial planning can help you stay ahead of the game.

Financial Planning

The time to plan for your future is now. You may be in college, just graduated, or just divorced - it doesn't matter! There are certain milestones everyone wants to achieve and can plan ahead of time to finance. Things like a wedding, the birth of a child, or retirement are all events that can be planned ahead. Begin to learn how financial products work and how you can make your money grow. The earlier you start, the more it will grow through the power of interest. Find a financial counselor and get a financial check-up yearly.

You should review your insurance needs with them to see if you are covered enough in case of an accident, a health emergency, or the death of a spouse. Insurance is one area that many people fail to investigate until it is too late. Look ahead, and find out what insurance you should be carrying and make sure it covers you in case something unfortunate happens. This is the best way to help you smooth out the path ahead, when the future is murky and you don't know how good your luck might be.

House Flipping In The Real World-Part 5-Doing Time In Texas

Note: This has turned into another mini-series, this time on the risks and rewards of real estate investing. To start at the beginning scroll down.

Pretty soon I was out of the picture. Cynthia took over and Alice receded into the background with Hepatitis C problems and liver ailments I really didn't want to know about. I did learn that Alice had a pretty rough life with incest, alcoholism, and some drug abuse that undoubtedly contributed to the Hepatitis C and liver issues.

One doesn't meet ex-cons every day and my curiousity got the better of me, again. "Pretty tough in prison, I bet." "Oh, you kinda get used to it." "Which prison?" "Waco." (My son went to Baylor University in Waco and I didn't know Waco even had a prison. Guess the Chamber of Commerce doesn't go out of its way to spotlight the prison.) How long? Nine years. (Wow) Finally I couldn't stand it any longer, "What did you do?" "Forgery."

Forgery? Nine years for forgery? I think the takeaway here is don't do crimes in Texas unless you want to spend a lot of time indoors.

Plunging ahead. "And Alice?" "Attempted murder...but she got framed." That's what they all say, I thought. "Who did she attempt to murder?" I asked like an idiot, I really don't know when to just shut up. "Her sister's boyfriend. The guy was beating up Alice's sister and well you know..." At that point I did decide to drop it but thought about sending Alice over to see Freddy and then dropped that thought as well.

Cynthia didn't go into a lot more detail except to offer that she was a college graduate and that forgery is one of those kind of 'classy' crimes so she got to be a trustee in prison and did a lot of repair and agricultural stuff where she discovered her love of fixing things other than signatures. And boy, could she fix things. The patched holes fit right in, she put up three light fixtures, found a new(er) backdoor, and filled, sanded and replaced the woodwork where necessary. New paint was next.

In the garage I found the realtor's "For Sale" sign, spray painted it and scrawled my phone number on it with a Sharpie. Sue saw it and wondered if I had had a stroke. Placed it in the front yard and got a call from Marion.

Windfall retirement profits. Wrong!

Fellow tax blogger taxgirl recently got an interesting, and alarmed, e-mail about a proposed tax on windfall retirement earnings.

Don't panic. It's not true.

And while I usually wouldn't share tax info that is wrong, what with the way rumors travel, especially regarding politicians and their proposals during an election year, I wanted to preemptively get the word out to ease the minds of anyone else who might have had heard this.

Taxgirl did a great job of tracking down the mixed messages that led to this rumor. Apparently, this nasty falsehood has been around for a while, appearing in 2006 as a tax on stock market profits and most recently getting mixed up with the true, but not yet passed, proposal to tax the windfall profits of oil companies.

But, to quote taxgirl, this tax rumor, like too many others that thrive online, is crap. Check out her detective and debunking work here.

O where o where has my thousand dollars gone

So I upped my voluntary retirement contributions for February, and they were duly taken out of my paycheck. However, they didn't show up in my TIAA-CREF account. This is bad. They always arrive at the same time as my work's contribution and my involuntary contribution, but this time something seems to have gone amiss and I am missing $1000. I notified TIAA-CREF and they are looking into it, and I notified my HR department and did not get a response. Let's hope one of them finds something soon.. I'm a little disappointed that I missed the really low stock prices day - TIAA-CREF said that when they credit the money, it'll buy shares at whatever price is current that day, not the day it was supposed to credit. (Dangit.)

- Different Ways of Investing Money ??? What is the Best Choice for You?

There are virtually as many different ways of investing money as there are investors. That's great because it means that there is the perfect investment for just about everybody. One of the keys to investing success is to match the investment to the individual investor. There are so many ways of investing money that it would take a book to describe them all, and in fact many such books have been written.

Some of your general investing choices include real estate, individual equities (stocks), bonds (debt), equity funds, mixed funds (stocks and bonds), and your own business. Within those very broad classifications, there are numerous sub classifications. For example, there are many different types of mutual funds you can invest in, all with different characteristics designed to meet the needs of different investors. You can short sell stocks, buy and hold, or try and time the market (for most investors timing the market isn't too smart).

For real estate investors, you can invest in REITs, buy single family properties and rent them out, rent multi family properties, flip properties, concentrate on foreclosures, develop and improve existing properties, or develop raw land. If you'd rather run your own business, there are literally more different business opportunities you can invest your money in than there is room to list them. You can start your own business from scratch, buy an existing business, buy a part of an existing business, or buy a franchise. The different types of businesses that are available to invest in is mind boggling.

There are several characteristics of investors you can look at to find just the right investment choice. One of the first to consider is the time horizon. How long will it be until you'll need access to the money? If you're investing for retirement and you're only 25 years old, you'll choose a totally different strategy than if you're 56 (the new 36) and rolling over an IRA. If you're 25, you can invest more aggressively than if you are closer to the time when you'll need the money because there is time to recover from volatility effects.

Typically more aggressive investments will deliver a higher rate of return, but they will bring with them commensurately more risk. If you're investing for far down the road, you'll have time to recover from those little ups and downs. Looking back over the last 20 years the tech sector has done very well indeed. However, there have been some serious bumps in the road.

For example, the Fidelity Select Software and Computer fund (FSCSX ) has returned an annualized 16.34% over the life of the fund. That's a highly respectable return, and you could do well if all your assets generate such a ROR. The problem is that the tech sector tends to flirt with volatility on occasion. If, in 1998 you were planning on retiring in 5 years, you may have looked at the stats for life of the fund return and think that plopping your money in FSCSX would have been a great idea. That would have been a fatal mistake with regards to your portfolio, however.

As you were crawling our from under the overpass, squinting in the noonday sun, and wondering what the hell happened to your money, you would have realized that just because an investment has great historical returns, it might not be the best investment for you. In this case virtually all equities in the tech sector were pulverized by the dot.com implosion. FSCSX lost almost 50% of it's value between the end of 1999 and the end of 2002.

More recently investors have experienced similar problems with regards to real estate and mortgage sector investments. The key when evaluating an investment vis-a-vis your time horizon is to look at the volatility. By definition volatility indicates a greater likelihood of wide swings in value, even if the overall rate of return during a specific time period is high. That means that you could be caught with your pants (or portfolio's value) down just when you need to begin withdrawals. By choosing investments with lower volatility when your time horizon is relatively short, you'll lower your risk of this happening.

The next thing to examine when evaluating different ways of investing money is your required rate of return. You can never predict an investment's future rate of return with 100% accuracy because you only have past history, industry trends and an evaluation of the local and world economies on which to base your decision. Lord knows any of these variables can be pretty difficult to predict with any certainty, let alone all of them combined.

You can, however, get within shouting distance of what you can expect to receive as a return on your investment by examining these factors and the past history of the prospective investment. In many cases there will be any number of industry analysts only too happy to offer their opinion. In some cases they'll be spot on, but it's often better to look at a general consensus on what performance can be expected in the future.

You will need to determine your required rate of return by determining how much you'll need to accomplish the goal of the particular investment. If you're investing for retirement, you'll need to determine how much annual income you'll require to keep you in the lifestyle to which you've become accustomed, and how long after retirement you plan on living (ah, but you know what they say about the best laid plans!). You can calculate how much of a retirement nest egg you'll need to supply that annual income figure for the requisite time period. Basically, your lump sum retirement account is calculated to pay out like an annuity. Typically a fixed rate of return is assumed for calculating purposes.

Once you know how large that lump sum must be and how long you have to amass that sum, you'll be able to calculate what rate of return you must generate to reach it, providing you known how much you'll be contributing each year. You can calculate your required rate of return using a formula, but it's generally easier to use an investment calculator.

The next thing you'll want to look at when evaluating a prospective investment is your risk tolerance. Many people have substantial tolerance for risk, others are extremely risk averse. Sometimes their risk tolerance for things financial is different that in other aspects of life. For example, you can love to bungie jump, ski and rock climb, but get pretty skittish when it comes to risking your hard earned cash. You'll want to balance your risk tolerance with the required rate of return to find a suitable investment.

Keep in mind that there is usually a positive relationship between risk and return. Higher risk investments compensate investors for taking greater risks with a higher expected rate of return. It's the expected part that can trip you up here.

Lastly, there are various intangibles that come into play. You may want to invest in things that interest you or in industries with which you have some familiarity. If you have a strong social commitment, you may want to pursue “socially responsible” investing. Other things will impact your investment choices as well, such as local or global economic factors that can make certain investments more attractive due to temporarily greater expected returns, shortened expected payout times or lowered risk.

An example of this is real estate investing in the current economy, particularly in foreclosed properties. Many regions have particularly large opportunities available here due to conditions in their regional economies. In these areas current economic climates, there are large numbers of foreclosed properties, leading to opportunities for investors who would like to invest their time and money here. You may want to retire unbelievably wealthy in a short amount of time. Well, your choices are understandably limited here, but foreclosure investing does offer you the ability to do so. Although the potential upside is large, you could also get yourself and your retirement nest egg into a spot of trouble this way. After all if it was that easy, everyone would be doing it. A few wrong moves and you could be the one getting foreclosed upon.

Another investment opportunity spawned by changing economic conditions is the growing number of new business that cater to those people wanting to save money on fuel costs, weather on motor vehicle fuel or heating oil. The very rapidly rising costs quickly created a market for products and services that wasn't really viable just a short time ago. The risk here is that your investment could be torpedoed if fuel costs drop in the future. Although analysts predict the costs of petroleum products to remain high for at least the next 18 months, possibly longer, analysts have been wrong before.

In order to evaluate different ways of investing money, you'll want to look at the following factors:

• Your investing time horizon

• Your required rate of return – Is the prospective investment expected to generate sufficient returns?

• An investment's risk as it relates to your personal risk tolerance

• Other personal factors that influence your comfort level with a personal investment.

• Your reason for investing – Is it a hobby, do you want regular income from the investment, or are you investing for retirement?
  

These factors will help determine if the different ways of investing your money will deliveer your desired result.

Need Job Fulfillment? Read this--

I love Ben Stein. Really like the first part of this, not too crazy about the middle part and back on track for the last part. Go, Ben, go.

Arm Yourself for Job Fulfillment and Retirement Bliss

by Ben Stein

Now for some decidedly non-PC thoughts.

I hear a lot of bragging from my pals about how their daughter got into Brown or their son is being courted by Goldman Sachs or their grandchild just got into a fancy prep school.

Worth Bragging About

What I never hear is bragging from parents who say, "My son just got into the Army Special Forces and is risking his life to keep your son and you alive." I never hear parents saying that their kids got into the 82nd Airborne and are now fighting in Afghanistan to give people there a decent life and keep Al-Qaeda tied down so they don't come here to attack us.

Now, you may say, "All well and good, and it's great that these military families are so modest. But what does this have to do with me?"

It has everything to do with you, my friend.

Why It Matters

First, the military people on the ground -- and those in the ground in Section 60 of Arlington National Cemetery -- are the ones who keep your family alive. They're the ones who comprise the wall around America so that we can play and make money for our retirement and enjoy our children. They, whether in training or in traction, are the ones who keep America humming and keep the noblest dream of freedom alive in our hearts.

Again, you may say, "I agree and honor them, but what does this have to do with a column about money, careers, and finance?" Again, everything.

Day after day I get letters from readers who complain about their jobs and their lives. They have dead-end careers. They have bosses who disrespect them. They have colleagues who are strangers. I know that world. I've been in it.

Real Job Satisfaction

But I also get letters aplenty from men and women in the military. They love their jobs. They do exciting work. Dangerous, of course, but exciting. They have immense responsibilities. They get challenged on a scale they would never have dreamed conceivable. They bring more out of themselves than they knew they had.

Yes, they don't get paid as much as they should. But their pay isn't terrible, and they get extraordinary benefits. More than that, they wake up each morning feeling that they matter. They never have to worry if they're making a difference in the world, because they know there would be no civilized world without them. Their colleagues on the battlefield not only treat them with respect, they would give up their lives for them. They have each other's backs in the real sense of the phrase. (Please, someone at a Wall Street firm, tell me if your colleagues feel the same way about you.)

In short, dear reader, you might want to consider a career in the military. The world needs you, and it just might make you feel like you're doing something very worthwhile with your life.

Light at the End of the Tunnel

Second, I want you to think about retirement in a serious, truthful way. This will tell you that while you're going to be fairly vigorous and sprightly for the first part of your golden years, you possibly won't be for all of them. You'll get a bit weak, often more than a bit confused, and generally not totally "there" for your duties and responsibilities.

This is one of the many reasons I love and recommend variable annuities, which you then convert into a lifetime annuity. Once you've set the annuity on autopilot and start adding to it (always with an eye on fees), it compounds month after month free from tax.

True, when you start withdrawing from it, you have to pay income tax on the amount of gains in the account. But for most Americans, that rate is now extremely low. And you get that check from the insurance company or financial house as regularly as clockwork. It mounts up and up during your contributing years, and then you get the money through the mail.

You don't have to study the market. You don't have to worry about ups and downs. The money just comes in every month or every quarter and you live on it. And it's guaranteed to be there until you die, or for some specified number of years thereafter.

Old age, especially the part of old age that involves loss of powers, is frightening enough for anyone. Old age that involves fear of financial insecurity is truly horrifying. Annuities are a safe, easily accessible, low-cost (if you keep an eye on fees) way out of that desolate valley. Keep them in mind, even if others mock them. They work.

Hardly Working

Finally, I have a correspondent who endlessly asks me if I know ways to get rich that don't involve much work so she won't miss her pedicures. She also wants to work only with nice people who are also smart.

I hate to break this to her and to everyone in her situation, but there's no such job. Making money takes hard work. The people who do it well make it look easy, but it isn't. It's hard work. Get used to it. And the people you work with aren't always nice, either.

There's no royal road to quick wealth. Hard work and disciplined, sensible savings will get you there. Not pedicures.

I love my apartment. I really do.

After a deluge of rain this spring, my windows are still leaking. I tried to tell the HOA about this 2 years ago when we had a crappy representative from the property management firm. However, they’re only taking action on it now.

So now that I’m done the bathroom, I’m going to have to move out and redo the entire back wall. And if I do that, I’ll rip out the carpet and put in hardwood flooring. And when there’s money once more, I’ll have to redo the kitchen.

But since my HOA is somewhat incompetent, I will wait to do all of this until the window leakage problem is fixed. Since that’s probably not for a few months, I’ve got time to save.

Blah blah blah.

At least the flooring is something I can do myself on the weekend with a few friends.

Phew.. a lot can happen in a week

It's been a bit busy. I started my new job last Wednesday and things are going pretty good. There was actually some back and forth about how much I was going to get paid.. I talked to Top Doc on the phone who just said, come in and talk to the office manager. So I showed up Wednesday morning and he had a very fuzzy recollection of me - apparently he had gotten about 15 seconds with Top Doc who just said, she's coming. So they had not had a conversation about my salary. He says he'll talk to her, and then for the next few days, I can never find him, plus I keep shuttling between two of the offices. Finally on Thursday evening before I leave, I sent him an email listing what I wanted to talk about (salary plus a couple other things) and said if I couldn't get a hold of him I would call him. I finally got him on the phone about 2PM on Friday and he said that they'd set me at $40k. Which is fine, I told them $40-45k in the interview, and while it is a little less than I used to make, I probably would have accepted less, but it does seem like bad form to cheap out on someone who's already BEEN there three days.

Something that is definitely a bonus though is that instead of working at the main clinic, which is out in the suburbs and is about 20 minutes of highway to reach, I'll be assigned to the downtown office, which is literally about five minutes from my house. So that's pretty awesome. Unfortunately it'll be longer after we move, but definitely not bad at all - about 12 minutes, none highway. If I REALLY wanted to, I could take a bus, with only a few blocks' walk to get to the stops at each end. But that's $41 a month for the bus pass, and I don't know how much the garage pass is going to be, but unlikely to be that much, and 12 minutes drive in each direction is pretty good on gas too. I'm also excited to be downtown because it's actually in a hospital, which means there are a lot of resources (like a cafeteria, a lot more bathrooms, gift shop, etc, as well as being able to schedule tests for my patients onsite.) Downtown also has a lot of lunch restaurants and some street vendors, so I could go out and get all kinds of good stuff.

(for those who used to read regularly, yes, I do now own a car. It is a 2002 Chevy Cavalier with about 9823498 dents, which is why it was about $2700. But it hasn't required much in the way of maintenance and I'll probably drive it into the ground. Driving is WEIRD but fun.)

One really awesome bonus though is that they FEED YOU LUNCH on Mondays and Tuesdays, and sometimes Fridays. Today I actually got two lunches, because I was in the suburban office in the morning when they were passing round the menu. Apparently the drug reps pick a restaurant and we all get to choose what we want off the menu. Most people got an appetizer or dessert in addition to a meal. So I picked out coconut shrimp (which they ended up not having) and chicken parmesan with pasta. Then at about 10:30 I got a call saying that there was someone to see down at the downtown office. I am meeting with the most experienced coordinator down there frequently for training. So by then the order was already in, and I went downtown before lunch arrived. And what do you know but they had Panera boxed lunches. Five kinds of awesome. So I got Panera for lunch, and my chicken parmesan was there when I got back to the suburban office. Hooray for free lunch! I am totally going to milk that. I don't think they do the menu ordering at the office I'll be at, but free food is still awesome.

In house news, we did our inspection on Tuesday, and there are of course a few problems. The ones we were most concerned with were the wiring and the hot water heater. The house is about 100 years old, so the wiring is pretty old, but it looks like someone rewired the downstairs but not the upstairs. The upstairs is not grounded at all, and there is knob and tube wiring in the attic that is under a foot of insulation. How this was explained to me as bad is that knob and tube has nice big copper cables, which can be good because they are much thicker than wires used today, and usually enclosed in a wall with air all around them to let heat escape. So being under a foot of insulation means the heat can't escape and this is a fire safety issue. So that's bad. The other big issue is that the hot water heater's air outlet is not drafting properly. The house has two chimneys and the air is supposed to go up one of them, and it's not. This might be because the chimney is full of leaves and crap, or it might be that the chimney has collapsed internally. Who knows. Not our problem. It's a safety risk. So we asked on our request to remedy that they replace and ground the upstairs wiring, and that they fix the hot water heater so it's drafting properly and the basement doesn't fill up with carbon monoxide. That's bad. We're waiting to hear back from them probably tomorrow about what they're going to do.

We also went in early this morning and Boyfriend signed lock papers. We are locked in at 6.25% paying half a point of discount (probably covered under what the seller is paying) and given the way the markets look now, that's probably the best we'd be likely to get, even given what our mortgage person was up to. When we first met she had said 6.25% with no points, but this is acceptable given that we are putting so little down.

In completely unrelated news, I've also been spending money on clothes. This is kind of new for me, and I forgot how much I actually really enjoy having nice clothes and looking like an adult. At my last job I kind of fell into wearing the same pants every day with different solid colored t-shirts and long sleeved t-shirts, and I felt like I was starting to look my age. (this is not something you want when you are as young as I am in the professional world where people have to trust you are providing accurate, potentially life-altering decision-making information.) So I spent some time at the outlets on Tuesday and spent about $250 on clothes, and for this got six dresses, a couple tops, and some assorted other items. Went to a different store a couple days ago and spent $75 on four dresses. Kind of getting into dresses now, to some extent. But like the commercials say, feeling like a grown-up at your new job: priceless. I'm going to try to weed out some of my older, less attractive clothes and slowly turn over my wardrobe. At this point, if I can't wear it to work, there hardly seems a point in buying it since I already have plenty of t-shirts and shorts, and you can wear black pants any day. I do need to buy some black closed toed shoes that I can wear barefoot, since I a) hate pantyhose b) bought a bunch of knee length skirts and dresses and c) you can't wear open toed shoes in a hospital. So that might end up costing more than my outfit on any given day, but hey, no one said looking like a grown-up was cheap.

Start planning for your final expenses now

I know this post topic is kind of morbid, but this issue is very important. Recently, Mr. Dimes and his family had to bury his grandmother, who died suddenly but not unexpectedly right around Christmas. She had a modest funeral and burial, and her final expenses clocked in around $8,000. My mother-in-law fronted the money and will eventually be reimbursed when the estate has been settled, as the grandmother did have some real estate and other assets which could be sold to cover the expenses. Not everyone is so lucky, though.
I recently had a client whose mother died unexpectedly who was requesting over $16,000 in funeral assistance. Her mother owned no property, had no life insurance, and had done nothing to prepare for her final expenses in advance. While the client has siblings, neither individually nor collectively can they afford the costs of the burial. Their mother desired to be buried in the family plot in an area where real estate is very pricey and the burial costs are over half the cost of the funeral. I had to help a grieving client find an alternative to the burial she wanted in order to have something she could afford. This was not a particularly fun experience. Please, for the love of your survivors, do not do this to them. Plan for your final expenses now and let your family members know where they can find any information about plots, policies, final wishes, etc. Deaths are difficult enough without creating financial stress and trauma for a grieving family.

Here are a few ways to ease the financial burden on your survivors:

• Consider prepayment of funeral expenses: If you know where you want to be placed upon your death, consider buying a plot in advance, and make sure your survivors know where it is. You can also prepay for the funeral, casket, and other mortuary services rather than requiring your relatives to front the expenses at the time of your death.
• Have a life insurance policy specifically for funeral expenses: Both my client's mother and my husband's grandmother had small ($10K-$25K) whole life insurance policies to pay for their funeral expenses, but for one reason or another had let them lapse and when they died, there was no money. If, however, you make sure that you (or someone else) is paying on them and don't let the policies lapse, they can be sufficient to cover burial and funeral costs.
  
• Consider less expensive methods of body disposal: Burials are getting to be insanely expensive, and so are funeral plots. Cremation, on the other hand, is a more frugal alternative to standard burial, and is less harmful to the environment. Some people don't like the idea of cremation for religious or other reasons, but it definitely costs less. It also has the added benefit of allowing for portability of remains; for example, if you want to be buried a great distance away from where you died, ashes are much easier to transport than an intact corpse.
  
• Have a specific set of assets designated for funeral expenses: This would definitely require either a will or a joint account with a person most likely to survive you, but it could solve the problem of a family member having to front expenses and then wait for reimbursement. If you create an account specifically for funeral expenses, then a family member or the executor of your estate should be able to access those funds in order to pay for your funeral. If you're going to do this, you might as well make your wishes known as well as what should be done with any money that remains, in order to keep your relatives from donating your body to science and then flying off to Cancun with your funeral money.
  

While not fun, death is an inevitable (and expensive) part of life, and you can help your family tremendously by making provisions for what to do when it happens.

House, Senate panels back a 3.9% pay raise for 2009

The House and Senate budget panels are backing a 3.9% increase in military base pay for 2009, while the President is backing a 3.5% increase for next year. The goal of these increases is to provide for a cost of living adjustment as well as make military pay commensurate with civilian pay for similar jobs. While the increase sounds nice, it hasn't been signed into law yet, because the Congressional Budget is far from being finalized, and if you recall how the process went this past year, don't count on seeing it until February. Hopefully though, a lame-duck Congress and a lame-duck President can get their work accomplished quickly and prevent unnecessary inconvenience to military families.

Of course, we all realize that with the increasing costs of fuel, food, energy, and housing this 3.9% increase will really be a small pay cut, but that's a topic for another day.

We're Back--It's Time To Think

Ok, back at it. House is going ok, son getting married, daughter loves her job, son going off to be an air liaison officer with the army (not real thrilled with that but he does what he wants) so grabbed a few minutes and back on the air.

First thought--to succeed you got to think in this world. Most people don't. A French, yes French, philosopher said "Those who feel, think life is a tragedy. Those who think, feel that life is a comedy." Or something like that. To be successful you have to think and think hard. One guy that does is Forbes columnist Ken Fisher. If you can't afford Forbes you can find him and his staff at MarketMinder.com.

Here is one column that requires you to think, not feel. I'm probably breaking some copyright law but, hey--

Veto Power

10/4/2007

Story Notes:

• The third year of a US president’s term is usually very positive for stocks



• So far, 2007 has been a classic presidential third year with no major legislation passing into law



• With the 2008 election race revving up, congress is likely to accomplish even less in the next sixteen months

The third year of a US president’s term is simply stellar for stocks historically. Doesn’t matter who the president is, or what his agenda was—it’s great for just about all of ‘em. A president’s third year has historically been good for stocks because his party has typically lost seats in the midterm elections, leaving the country closer to legislative lock-up. A Congress split down the middle (or close to it) specializes in posturing and pontificating. But that’s about it. Stocks love when there’s little to note legislatively, preferring the status quo to government intervention in free enterprise.

MarketMinder has highlighted this theme over the last twelve months. See these past commentaries for more:

• A Presidential Popularity Contest, 7/25/2007



• A Political Punch, 5/31/2007



• Hot Fuzz, 5/17/2007

MarketMinder is agnostic to political affiliation. Donkeys or elephants, it makes little difference to us. Why? In the Beltway everyone’s a politician first and foremost. This means politicians on both sides of the aisle are out to preserve and consolidate power and get reelected. That’s always job one. Seeing politics in this way allows investors to view the landscape in a clear, unbiased way and make accurate decisions about the potential market and economic consequences of new legislation.

Thus far, this presidential third year has been archetypal. Politicians were front and center across media outlets—ubiquitously promising to take action on issues like trade with China, new taxes on private equity firms, healthcare reforms, and so on. But for all the talk, they’ve got nothing to show for it! A promise broken is the modus operandi of politicos, and we think that’s a great thing.

The Democrats are too busy drafting resolutions denouncing a radio entertainer for practicing his right to free speech to pay much attention to other issues. And let’s not forget the GOP, recently spending valuable time in Congressional session spearheading a resolution condemning a newspaper ad. Strong work guys!

The only material legislation that’s passed through both Congressional chambers recently is a $35 billion increase in healthcare coverage (for folks mostly already covered by more efficient and better private insurance). 35 billion bucks is small change for a $13 trillion US economy, so it was nothing to get excited about in the first place. But the bill was DOA—Bush vetoed it as soon as it hit his desk.

With 2007 heading toward closure and the 2008 election machine revving up, the likelihood of any big new legislation in the next 16 months is extremely unlikely. The president’s third year is the sweetest, but the fourth is historically almost as good. That’s just another positive feature to today’s stupendously benign equity environment.

Let the politicians keep expending their hot air on advertising censures and inane grandstanding—stocks will appreciate it.

Think about it. Bill

Tuesday, July 1, 2008

The Difference

Last night, a group of friends old and new gathered to celebrate the passage of time, the ritual of the 30th birthday, for two of our best party boys at the mysterious Debonair Social Club on the city's West side.

The bar, billed a "boutique video club" by a local review site, featured a curious mix of clientele, decor and wait staff. Among mash up of goth-ish goers, heavily tattooed leather fans, 80's material girls and quasi-punk lovers, my casual crowd was totally out of place. The bouncers seemed more focused on keeping people out than getting people in, and the bartenders were ridiculously rude, but for the most part, we didn't mind. Intrigued by the people watching and the strange interplay of Nirvana, Annie Lennox and Fall-Out Boy on the speakers, we spent most of the night debating whether the place was an all-out gay bar, a bar for the more dramatic theater crowd or simply an oasis for the eccentric. The videos and images on the high walls offered more than a little fodder for conversation.

Today, in thinking about a bar whose image is up for grabs, I began noticing how within my own social scene, people's images, personas and passions have changed over the last 10 years.

The fun-loving, free-sprited lifestyle of our early 20's - yet so filled with drama, tension and angst - seems to have given way to a more focused kind of existence. As some friends said good-bye early to be home with their babies, others laughed about recent stints living abroad in Europe and Brazil while others discussed career goals and other aspirations. Of course, this conversation was often punctuated by the occasional sing-along to Billy Idol and eventually became more vodka-driven than not, but still, this morning I can't help but think about the change that's occurred.

If our early 20's are all about defining our identity, determining our priorities and filtering out what we don't want in our lives, then our late 20's - for some of us, at least - are about internalizing those priorities and goals and setting in motion a path to get there.

I'm not sure how long this "setting in motion" phase lasts. But I would define it as the point in between once you finally identify what you want out of life until you actually are able to achieve it. Crap. Scratch that out. Because that sounds an awful lot like life itself.

OMG, the enormity of what I wrote just hit me...

When did we become adults?

That's the difference, isn't it. Individually, we're at different stages, but collectively, we're all officially adults now. I'm at once proud and sad.

Is that what our 20's are really about? You pay the student loans back, you learn to succeed in the nine-to-five (Ok, 8 a.m.-to-8 p.m.) world, you buy the furniture and the wall art, you adopt pets, you learn to manage your finances and live well within your means.

And somewhere in there, adulthood happens. Who knew?

Saturday, June 28, 2008

Balancing Frugality and Camaraderie - What’s Your Advice?

I received the following email last week:

I was hoping you could throw this one out to the group of readers:

I'm a relatively frugal recent college grad, working hard to save as much as I can. I left my job at Bear Stearns in April and started a new position at a small but stable financial services firm last Wednesday. The analysts on my team frequently go out to lunch, and have been inviting me each time. I went with the group on my first day, and we all paid for our own meals. I viewed that expense as part of team building rather than as the cost of a meal which I would have otherwise brown-bagged, but I am not interested in spending money on lunch more than once a week or so, and when I do spend that money I'm not terribly interested in eating with work colleagues (my wife works nearby and when she's not around I enjoy relaxing alone with a book and my food). What to do?

Thank you!

-Jay

My opinion:

I think you have to ask yourself what you have to gain by eating with your colleagues. If you're the new kid on the block, it may be a good idea to forge some relationships with your new colleagues. If the only way to do that is by eating lunch with them, then perhaps you should consider doing so once or twice a week. I definitely don't think it is necessary to eat out with them every day.

Another way to build friendship with colleagues would be to go out to lunch with one or two of them at a time. People are more likely to talk if they're not in a large group.

The main thing is to be careful that you don't become the office loner.

Now it's time for AFM readers to weigh in. What's your advice for Jay? How do you balance frugality with camaraderie?

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Friday, June 27, 2008

Living Well without Spending a Lot of Money

Having a moderate income does not mean that you have to live like a pauper.? If you want to live well, then the key is living within your means.? That means not stretching the family budget to upgrade to a larger home that you can barely afford, or trading up for a new car every few years.? A few small sacrifices here and there on your more big ticket items can mean a lot more money to spend (and save) in other places.??

If you find yourself tempted to “upgrade” homes, consider why you are looking.? If you simply do not have enough room for everyone, then think twice about how your home is currently arranged.? Does everyone have to have their own room?? Do you really need a room dedicated to being an office or an exercise room?? If you can combine spaces to make things work in a smaller home, then you can spend the money that would have gone to a larger mortgage payment on other things that will bring you much more immediate and hopefully lasting joy.??

The same goes for upgrading your car.? You may want to drive the newest model, but it obviously doesn’t keep you happy for long, or you wouldn’t feel the urge to upgrade.? Instead, pick a model that you love and stick with it.? Bonus points for picking a model that is moderately priced and that will save you money on gas in the long run, too.?

Spending quality time and living well does not have to involve spending a lot of money.? If you find yourself going out to dinner or to the movies often, then think about why you are going out and see if you can change your attitude to change your behavior.? You may find that taking a walk to the local park or spending time on your bike is not only healthier, but less expensive and just as enjoyable as spending money.? If you don’t cook your own meals because you don’t know how, then consider taking a cooking class - which you can consider an investment in yourself for the future.??

When you love to spend money, you should also never underestimate the power of the coupon.? If you have to shop, then save as much money as possible doing it by applying coupons and even using cash back rewards cards.? You should always make sure to pay your cards off in full when you get the bill to ensure that your interest does not negate the cash back.? Enjoy your spending, but do it wisely.??

It is easy to live well if you are living within your means.? “Keeping up with the Joneses” is a practice that is guaranteed to get you into financial trouble very quickly, but if you learn to enjoy the things that you can afford to have and to do, you will find that your life is already incredibly rich.?

Travel Tips

Someone pointed out a budget travel article to me sometime last year, but I didn’t care much for it, so I’m not going to link it here. But it got me to thinking about my last backpacking trip to Europe. This post is an old draft from October 2007. I’m just now getting around to finishing it up for you.

Now, first of all, somehow I scammed a friend into paying for my plane ticket from San Francisco to Paris about 10 years ago. It was a situation where her folks weren’t going to let her go without a companion so the money had to come from somewhere and by golly, this is how it was going to get done. It was her decision to do this, never my suggestion. She made the offer and I merely accepted.

I saved nearly all year for it since my friend called me sometime her final year of college and said she wanted to backpack in Europe for a month. Fine with me. I was living with roommates/family that were willing to let me pay a month’s rent late. I diligently paid down my credit cards, paid my student loans on time, and banked about $800 cash before I left.

To plan the trip we did several things.

1. We joined Hostelling International. That got us discounts across Europe at youth hostels. We used their pre-booking service to reserve rooms. This was absolutely essential in places like Paris, which are extremely popular during the summer months.

2. My friend had an ISIC card. It’s an international student ID card and helped her get cheaper admission to many museums. I was no longer a student, but I would let her pay for us and often the ticket taker would assume I had one too. When they didn’t, that was fine, I paid full price.

3. We did Eurail passes. To get the Youth price, you must be under 26. I think I was 24 at the time. I’m too old now so I might as well get the Adult 2nd class ticket these days. But yes, you can save quite a lot. We went from Paris to Madrid, to Barcelona, to Geneva, to Brussels, to Paris, to Munich to Geneva, back to Paris. Eurostar/Chunnel tickets were separate and I went to Brussels alone since I couldn’t afford the Chunnel. My friend left me alone to pick up another friend in London who couldn’t afford a full two weeks with us.

4. We ate really cheaply. We got breakfast at our hostel every morning without fail. We then bought fruit, snacks, bread, cheese and meat for lunch everyday. We only dined at restaurants at night. Since we weren’t big drinkers, we got vin du pays and shared it at the youth hostel, which is mighty entertaining. Take a pocketknife, bandanna, and canteen/water bottle. You will find them essential on your travels when it comes to dining.

5. We traveled light. I used a backpack that carried about 4,000 cu inches. It wasn’t very much, but that meant I kept my possessions to a minimum and my souvenir buying down. The only things I have from that trip are pictures and a pair of hiking boots because my regular sneakers just weren’t cutting the mustard. I spent a lot on them, and while they were worth it. I should have tried to buy better boots at home on sale. But I had no idea that running shoes were actually terrible for this sort of trip. Chalk this up to serious inexperience about hiking and traveling. Sneakers were ok in the past, but definitely not for this kind of trip.

6. Do your research to maximize your adventure! I got the Rick Steve’s Guide to Museums. I read it and was very specific about which museums I wanted to visit and gave them a priority. I studied art history and my friend has less of an interest in it, so she let me dictate a little of what to see. We had a really good time because Rick’s books are very informative, right down to a walking path through the museum that will take you efficiently past the major highlights. I kid you not. He will be specific about which staircase to take.

On a different trip to Italy, I used The Blue Guide to Rome. That was an extremely wonderful book. Don’t get too hung up on Let’s Go and Lonely Planet. If you are interested in a special location or topic, get the book and do the research since it will enhance your visit. Say if you are going on a wine trip in France, get a book that will teach you about the terroirs so you can figure out if you want to go to Burgundy or Bordeaux.

Rick Steves wrote a really great overview about guidebooks. Having used many of the guidebooks he’s listed. He is spot on with his descriptions of the books. Use this to help you decide between guidebooks. And I completely agree, get the latest copy you can. Absolutely borrow an old one from a friend, but when you are ready to go, get the latest copy for yourself, within 12 months of publication. Guidebooks are periodicals, and just like a magazine their information has time-value.

7. We didn’t have a crazy nightlife. Sure I went out on La Rambla in Barcelona and ended up dancing close to all night. I hit a bar or two with some Catalans I met in a Belgian youth hostel when I was by myself. But I didn’t pack a fancy outfit to wear clubbing and skipped all that entirely on this trip. Hanging out with the kids in the youth hostel was much more fun and conducive for conversation than a noisy club.

8. Work the network. Now that I’m older and have some extremely well-traveled friends, I can leverage those connections into couch surfing for a night or two in far flung locations. I haven’t taken advantage of it, but I have put people in touch with each other and had good reports about the outcome. Be prepared though to take a gift or some sort of thank you for the host.

I stayed with my pen pal’s parents when I stayed in Switzerland. I hadn’t written my pen pal a letter in 5 years. But out of curiosity, I called his parents’ house from Geneva out of the phone book and took a trip out to see them finally. It was really nice. I hope he gets to visit me in DC one day. I ended up sending a present later for his mother when I found out she likes to collect a special type of figurine.

9. Think about working on your trip. I haven’t done this, but I know someone who worked on his grandmother’s potato farm in Finland for part of the summer, prolonging his stay in Europe by a few weeks. I also had a friend who picked cantaloupes in Israel because he wanted to save money and travel longer on a trip around the world. Basically he was a migrant farmer, you know, the kind we try to keep out of the US. You do what you can if you want to keep traveling and since he was with a friend, he said it wasn’t too bad. Obviously, this route isn’t for everyone. But there are more formal work experiences you can arrange as well.

Ok, that’s about it. I hope it gives you some ideas for your next trip.

Wednesday, June 25, 2008

Money in the Bank - What are your Best Options for Gaining Interest with your Money

Congratulations on making savings a priority!? Now that you have some money in the bank, it is time to figure out what kind of account will yield you the best benefits.? Do not leave your money sitting in checking where it does not accrue interest; this practice does nothing for you, and will not help you grow you money.? In fact, leaving your money in a checking account may actually tempt you to spend more than you intend, so watch out for your funds!

A basic savings account is a better option than your savings account, yielding you a small interest payment each month with little or no minimum balance required in the account.? If you need your money to be highly mobile and available at all times, then this is the perfect account for you, particularly if you tend to maintain a low balance at this point.?

If you have managed to save a few thousand dollars, on the other hand, a money market account might be the best thing for you.? This account has a much higher interest rate than a traditional savings account, but also has a much higher minimum balance, often of several thousand dollars.? If you feel comfortable having a few thousand dollars dedicated to the account at a time, then this might be the perfect option for you.? If you can’t afford not to have instant access to that money, however, you might want to stick to a more traditional savings account.?

If you really don’t mind having your money tied up for a long time, though, you can spend your money on a CD, which stands for Certificate of Deposit.? A CD is a special kind of account, which usually has an even higher rate of return than a money market account, but which ties the full balance up completely.? When you put your money into a CD, you commit the money for a certain amount of time.? You cannot deposit or withdraw to or from that account, and the money that you earn on it is often applied less frequently, sometimes annually.? This kind of account yields higher interest payments, but usually have a large penalty if you withdraw your money before the term is up.? If you can afford to have your money set aside for long periods of time, then a CD might be a good option for long term savings.?

Sunday, June 22, 2008

Getting online discounts and coupon codes

Whenever you buy anything online, it’s always a good idea to do a quick search for coupons or discount codes. You can often easily find 10% off, 20% off, and free shipping. Many times the values are even higher than that.

With many purchases or just large ones, these discounts can add up quickly. Whenever you are checking out and see a box for a promo code, it's always prudent to take a quick look for some codes before submitting the form.

You can find some great discounts with Adobe coupons. (Although university students can get very cheap education packages from their campus bookstores) If you need to get a copy of Photoshop, Dreamweaver, Illustrator, Acrobat, or any of Adobe's other products, then you should check it out

You can get discounts with Kohls coupons or Macys coupons. This could save you a chunk of change, versus shopping at their department stores. And if you wanted, you could even go take a look at the items in the brick and mortar stores beforehand.

Hopefully you will be able to find some great bargains and codes that will save you money today and down the road.

This post has been sponsored by ‘Coupons for Everyone’.

Friday, June 20, 2008

Developing my legitimacy bit by bit

It pleases me to report that I have passed the first of two exams necessary for me to attain the certification of Accredited Financial Counselor, a designation awarded by the Association for Financial Counseling and Planning Education. Once I have completed a second exam (probably sometime in the spring), finished several hundred hours of practicum experience, subscribed to the Code of Ethics and paid the membership fee, I will be a blogger with a legitimate, real-life accreditation, and not merely an "internet professional"! How many other personal finance bloggers can say the same?

It was quite a test. Nothing at all compared to the CPA exams or the CFP nightmare, but it definitely required a lot of preparation to fully understand all concepts covered.

If you are eligible and interested, this program is a great opportunity for military spouses and survivors to get free education and certification in an important field. The certification would cost about $900 out of pocket otherwise. Applications are accepted in the spring sometime, usually in March. For more information on the program, click here.

Thursday, June 19, 2008

Getting To A Million Bucks

Most people don't get rich because they refuse to start small. Why bother? Just win the lottery. I can't believe people buy lottery tickets but they do. And the ones I see doing so don't look very smart. And they aren't.

The way to get there is simple, well, kind of. Save two times your annual salary and let the power of compound interest take over. Einstein said that compound interest was the eighth wonder of the world and most people think Einstein was, well, an Einstein.

Jonathan Clements gives the details in the following---

How to Save $1 Million for Retirement

The Wall Street Journal Online
By Jonathan Clements


If you're a newly minted college graduate, the $1 million-plus needed for retirement might seem impossibly large.

Feeling discouraged? Try lowering your sights, aiming instead to accumulate savings equal to two times your annual income.

Once you hit that milestone, the financial wind will be at your back -- and reaching your retirement-savings goal should be a breeze.

Breaking through. Suppose you expect eventually to earn $80,000 a year. Looking ahead to retirement, you reckon that -- in addition to Social Security -- you will want maybe $45,000 a year from your portfolio, adjusted for inflation.

To generate that $45,000, you will need a $1 million nest egg, calculated in today's dollars. This assumes that, in retirement, you use a 4.5% annual portfolio-withdrawal rate.

Investment Growth

"People wonder how they will ever accumulate enough money," says Charles Farrell, a financial adviser with Denver's Northstar Investment Advisors. "But what many investors fail to understand is that, once they reach a certain level of assets, most of the savings should come from investment growth."

Mr. Farrell figures the breakthrough occurs at around two times income. Let's say your salary has hit that $80,000, you have amassed $160,000 in savings, you are socking away 12% of your pretax income each month and your investments earn 6% a year.

Over the next 12 months, your $160,000 portfolio would balloon to $179,518, or $19,518 more. Your monthly savings would account for $9,600 of that growth. But the other $9,918 would come from investment gains. In other words, you've got to the crossover point, where the biggest driver of your portfolio's growth is now investment earnings, not the actual dollars you're socking away.

You should, however, keep salting away money. That sacrifice will be handsomely rewarded, as things really start to snowball. Using the assumptions above, your portfolio would soar from $160,000 to more than $418,000 a decade later. True, part of this gain would be lost to inflation. But inflation should also drive up your salary, allowing you to squirrel away more money.

Get Started Now

Getting started. That still leaves the initial task of accumulating two times income.

"It can take people 12 to 15 years," Mr. Farrell says. "The earlier you can start, the better. But if you're close to two times pay by your early 40s, you're probably in pretty good shape."

As you strive to amass that sum, your top priority should be funding your employer's 401(k) plan. In addition to the initial tax deduction and continuing tax deferral, you will likely receive a matching employer contribution, which will help speed your portfolio's progress.

If you can, save outside your employer's plan, by funding a Roth individual retirement account. That won't get you an initial tax deduction, but you will enjoy tax-free growth. A Roth also offers a heap of flexibility. At any time, you can withdraw your contributions -- but not the account's investment earnings -- without any sort of tax hit. That means your Roth could double as an emergency reserve or as your house down-payment fund.

Investment Ideas

Which investments should you buy? Check out broadly diversified no-load funds like AARP Aggressive and Schwab Target 2040, both of which require a $100 initial investment. Until you reach Schwab's $1,000 brokerage-account minimum, you will need to add $100 every month through an automatic investment plan, where money is pulled out of your bank account and invested directly in the fund.

Also consider Fidelity Freedom 2050 and T. Rowe Price Retirement 2050. The regular minimum at both funds is $2,500. T. Rowe Price will trim that minimum to $1,000 if you open an IRA and waive the minimum entirely if you sign up for a $50-a-month automatic-investment plan. Similarly, at Fidelity Freedom 2050, you can sidestep the minimum if you agree to invest $200 a month through Fidelity's SimpleStart IRA program.