Investment Options for the Frustrated Investor in a Bear Market

Although I called the 2008 bear market months ago now, and sold about half my holdings, I'm still wishing I had the fortitude to pull everything out completely, but that would be market timing, right? Most of the best investors in the world get it wrong, so what's the next best thing?

Diversification and Hedging...

Over the past couple months, I've diversified into commodities more heavily; initially with the gold bullion ETF GLD and more recently into the 2X leveraged ETF for gold, DGP. Unfortunately, I delved into platinum the only way I knew how with Stillwater mining (SWC) and realized an initial 15% runup to be followed by a precipitous crash. The only thing I can say is that where you can, avoid the operational risk of owning individual stocks like miners, oil drillers, etc., and buy ETFs where you can.

Regarding hedging, I had routinely held a few QQQQ puts at any given time and sold each time the market dropped another 5-8%. Adding a few hundred dollars here and there on the way down is nice, but hasn't quite done the trick considering the other high Beta holdings I've been seeing decline at 2x market rates.

To add some additional hedging power, there are some other powerful 2X inverse ETFs and funds out there. To bet against the Nasdaq, there's QID, the 2x inverse. Next, there's SKF, the 2X inverse of the Financials if you think there are more subprime surprises in store. Finally, it looks as though the hot air has deflated from the China bubble. As the markets continue to react to this reality, you may want to consider the 2X inverse of the Chinese market with FXP.

In order to realize a nice floor on some of your holdings, you may want to consider high yield stocks with steady dividends (outside of financials). Feel free to review my high yield self-directed IRA account holdings here:

http://everydayfinance.blogspot.com/2008/02/everyday-finance-high-yield-self.html

www.everydayfinance.blogspot.com

Me And My SEP

So I just set up an SEP-IRA for myself, partially because then I can contribute for last year, and knock a good chunk off the taxes I owe, and because I came across this wonderful bit of logic from Five Cent Nickel:

As I noted above, you can contribute to your SEP-IRA as either the employer, the employee, or both. In the case of the latter, it counts against your annual IRA contribution limit, so it reduces the amount that you can contribute to a traditional or Roth IRA. But in the case of the former, there’s no effect on your annual IRA contribution limit. Thus, it seems that you can use employer contributions to your SEP-IRA as a way of legally exceeding the IRS contribution limits.

Brilliant!

See, an SEP can't be set up as a Roth, but you can still deduct it from your taxes, and you can contribute up to 25% of what your business makes each year. So I can contribute my money to either the SEP or into my workplace accounts, and it doesn't make any difference. This is attractive because depositing into my workplace accounts can't exactly be done when I have a bit of spare cash - I have to fill out a form and hope they process it before my next paycheck. ALSO, I could roll it over into a Roth whenever I pleased, and I'm not limited to waiting until I leave this job. So I could have my 403b, my 457b, my Roth IRA, AND my SEP IRA.. drool. (I'm definitely in the savings-is-addictive club.)

Machinations

I'm feeling very pleased these days about my retirement contributions. With the new job came a healthy pay raise, and since my involuntary contributions as well as my workplace's contributions are done on percentage, they've gone up 30%, to $814 per month. I'm also putting in $500 per month myself, so I'm now getting nearly as much in retirement contributions as I am living on. This is astonishing to me.

I've got an automatic contribution of $200 per month to the Roth, and I'll max it out by the end of the year. And I'm now saving plenty of money. So I'm casting around for ways to get more money into my retirement accounts. I don't want to contribute so much every month that I have to rely on other money to live, but the 403(b) is the only other option after maxing out the IRA to get more money into a tax-sheltered account.

So here's my plan. I use about $1800 per month to pay all the bills, rent, groceries, contribute to the Roth, etc. So my plan right now is that once I have a comfortable amount saved up, I'm going to change my retirement contribution amount for that month from $500 to $2000 or $2500 - essentially my whole paycheck after about $470 in pretax required deductions - and live on my saved-up money for one month. Then I'll change it back the next month and save up my money again. Then when I get another $2000 or so saved up, I'll have another "no-income" month and put it in the 403(b).

This sounds pretty good to me but I'm also kind of chicken about not having the money coming in. But I think I can prep ahead of time and make sure the bills money is in the bills bank account, and the living money in the living expenses bank account, and I've got my ING debit card in case there is an emergency. So perhaps next month... :)

Tennessee's spring tax holiday underway

Many die-hard Tennessee shoppers are already at their local malls this morning, as the Volunteer State's special spring sales tax holiday began today.

The sales-tax price cuts on selected items began at 12:01 a.m. today, April 25, and ends Sunday, April 27, at 11:59 p.m. During this time, Tennesseans won't have to pay the an extra 9.25% levy, which is the combination of the 7% state and 2.25% local sales taxes, on certain items.

This one-time no-tax weekend is a companion to the state's regular shopping (or should we way, spending) event that is held the first weekend of each August.

As with that regular sales-tax-free fall weekend, during this spring weekend retailers will not be collecting state and local sales taxes on purchases of school supplies, art supplies and clothing priced $100 or
less per item and computers priced $1,500 or less.

You can get more details on exactly what is and isn't tax free at the Tennessee Department of Revenue special Web page.

In addition to purchases made at Tennessee stores, state tax officials say that this weekend's sales tax holiday also
applies to qualified items sold via mail, telephone, e-mail
or the Internet. You simply have to place the order and pay for the items, and the
seller has to accept your order for immediate shipment, during the holiday. It doesn't matter when the item is actually delivered to your Tennessee home.

Popular, but poor, tax policy: "Each of the 2007 sales tax holidays provided almost $10 million in tax
savings to Tennessee families," said Revenue Commissioner Reagan Farr in announcing this April tax holiday. "I hope that everyone will take advantage of this yearâ??s special three
day weekend of tax savings."

Economists, however, say that sales tax holidays are not good tax policy.

"The purpose of sound tax policy is to raise necessary revenue for programs while minimizing distortions in the economy, and interfering as little as possible with the choices of free individuals in the marketplace," write Tax Foundation experts Jonathan Williams, Curtis S. Dubay and Johanna Mausolf. "Unfortunately, sales tax holidays fail this test of sound policy."

Businesses, too, pay a price. While retailers might get a few more sales from shoppers making special trips, they also have more administrative costs. Most, however, simply grin and bear it and hope that their bookkeeping frustrations will be offset by additional sales.

That's bound to happen, since shoppers love the getting a perceived deal, especially at the expense of the tax collector. And politicians love anything that makes potential voters happy.

So expect to see tax holidays, both special events like the one this weekend in Tennessee, as well as the dozen or so scheduled every fall, to stick around for a while.

And as those back-to-school sales tax holiday dates get closer, we'll post the dates here at Don't Mess With Taxes.

Pathetic on so many levels

This azcentral article about homeowners who mail in their keys instead of making payments described a situation that's just pathetic on so many levels. It said:

“Joan Shaffer is turning in the keys of the north Phoenix Tatum Ranch home she bought with her daughter in late 2005. They put nothing down on the home, took out a loan that let them pay less than they owed each month and now their loan is $200,000 more than the house is worth.”

Hindsight is always 20/20, but still, the tiniest bit of foresight should have prevented one major mistake. It should be crystal clear that if you pay less than you owe each month, you're going to owe more and more with each passing day. That's just basic math.

But the next part is what really struck me as pathetic:

“We paid $585,000. It was the peak of the market, but no one told us,” said Shaffer, a real-estate agent from Colorado. “We would probably have to spend the next 20 years trying to get right on the mortgage. That's crazy.”

Wait. She's a real estate agent?

Presumably a real estate agent might have some experience with, oh, I don't know...Real estate? Market values? The housing industry? Comps? Buying and selling homes?

But she's upset that “no one told” her that it was the peak of the market?

I guess that there's a person out there whose job it is to accurately predict the future and actively go out of their way to prevent hapless real estate agents from doing stupid things with real estate. And boy did that person screw up!

Give me a break.

Sure, we all make mistakes. It's how you handle things after the mistakes that matters.

How Much Is Enough To Retire? Finally Some Reasonable Answers

When I see something I like, I steal it. Or at least borrow it. The financial world is full of worthless calculators. Here is something by Jon Clements of the Wall Street Journal that makes sense.

It's halftime. What's the score?

Today, I turn 45. (Don't feel bad; only my mother ever remembers.) By my reckoning, that puts me halfway through my working career and hence halfway to retirement.

How big a nest egg should a 45-year-old have? Here's a look at who faces a midlife financial crisis -- and who might be able to retire early.

Taking stock. Start with the accompanying table, which shows what percentage of pre-tax income you need to sock away over the next two decades, depending on how much you currently have saved.

Suppose you have a $240,000 portfolio, equal to three times your $80,000 annual income. To retire in comfort, you ought to save a manageable 12% of income every year for the next 20 years, calculates Charles Farrell, a financial adviser with Denver's Northstar Investment Advisors.

That savings rate -- which would include any employer contribution to your 401(k) -- will give you a retirement stash equal to 12 times income at age 65, or $960,000 in today's dollars. If you then use a 5% initial annual withdrawal rate, your savings will kick off $48,000, or 60% of your old salary. Add in Social Security and you might be hauling in a respectable 80% of pre-retirement income.

All this assumes you can clock an after-inflation investment return of five percentage points a year during the next two decades. To hit that target, keep a healthy sum in stocks and a tight lid on investment costs. (If you don't have precisely 20 years to retirement and want a sense of whether you're on track, try the retirement planner at www.dinkytown.com.)

Quitting early. What if you have savings of four or even five times income? As you can see from the table, amassing enough for retirement should be a breeze. In fact, if you have savings of five times income today and you never saved another dime, you would hit 12 times income at age 63.

But if you have already amassed a hefty nest egg at 45, you're probably a diligent saver, and you might look to retire early. Let's say you salt away 20% a year.

At that rate, if your portfolio today is equal to four times income, you will hit 12 times income at age 59, Mr. Farrell calculates. Similarly, if you currently have five times income saved, you should be set by age 56.

True, that means retiring before you're eligible for Social Security. But if you are a diligent saver used to living on a small portion of your income, that shouldn't be a big sacrifice.

Catching up. On the other hand, maybe you haven't been so thrifty. As the table indicates, the annual savings rate required to amass 12 times income by age 65 is 20% if you currently have two times income saved -- and a whopping 27% if your nest egg today is merely equal to your annual income.

Can't do it? Instead, you could scale back your retirement goals, delay retirement or both. Suppose you have savings equal to twice your income. If you sock away 12% of income per year, you could retire at age 69 with 12 times income.

Alternatively, you could call it quits with 10 times income at age 66. Again, imagine you earn $80,000 a year. If you retire with 10 times income, or $800,000, and use a 5% withdrawal rate, you will have $40,000 a year from your portfolio, equal to 50% of your old salary.

Meanwhile, if you have a nest egg of just one times income and you can't see cranking up your savings rate to 20% or more, you will likely have to curtail your spending fairly sharply in retirement, unless you work well past 65. For instance, to retire with 10 times income, you would need to salt away 12% of your pretax income every year until age 71.

One warning: All of the above presumes your income rises at the inflation rate between now and retirement. What if your income rises much faster? Ironically, that could make it tougher to retire.

"Let's say you get a big raise at age 50," Mr. Farrell says. "It's probably not feasible to replicate that lifestyle in retirement. The majority of that money should probably be committed to additional savings." If you do that, your nest egg will grow faster, and you won't have to throttle back your spending quite so much when you retire.

Copyrighted, Dow Jones & Company

2008 Basic Allowance for Housing Rates Forthcoming

It's that time of year again! No, not the holiday season, but the month or so where military personnel and their families are anxiously tapping their toes waiting for the release of the next year's housing allowance figures. According to the Pentagon site, the 2008 BAH figures will be available in "mid-December." Historical data suggests this will probably be December 14 or December 17.
I suspect in many areas of the country, BAH rates will either level off or drop. There seems to have been a huge increase in BAH rates nationwide in 2005, and in many areas that appears to have been too much, such that rates have either flattened or fallen in the past two years. The trend will probably continue.
BAH rates are determined by an annual survey of properties in a given military housing area, and by determining the median housing costs (rent, utilities, and renters insurance) for servicemembers based on the type of housing they *should* have based on their paygrade and family size. Basically that means more modest housing for junior enlisted and more substantial housing for senior enlisted and officers, as well as more substantial housing for servicemembers with dependents. A single E3 has more modest housing needs than an E7 with a wife and three children.
What happens if you live in an area where the BAH rates will drop from 2007 to 2008? You will be covered by "rate protection." Rate protection means you will receive the higher of the BAH you are entitled to on January 1, 2008, or the BAH you were entitled to on December 31, 2007. In other words, if you see that your BAH is expected to drop $200 per month between 2007 and 2008, provided you don't lose BAH eligibility for some reason, you will keep seeing the 2007 rate. However, if you move into the area from another duty station, you will receive the new (and lower) BAH rate. If the BAH annual survey has done its job properly, though, you shouldn't be paying too much out of pocket for housing expenses.

House Flipping In The Real World--Part 3-Fast Freddy

(This blog is turning into another mini-series, this one on the joys(?) and perils of real estate investing. I repeat, that anyone can make money at real estate BUT it is not painless and not easy. To go to the beginning, scroll down.)

Went to the closing, signed a bunch of forms, and wrote very large checks to the realtor and for last years taxes. But told myself I had followed the rules--fixed the house, interviewed realtors, put the house on the market, found a qualified(?) buyer, and paid a bunch of money at closing. And was helping a young couple get a start in life. As a friend put it, let no good deed go unpunished.

But I was feeling pretty good about myself and sat back and waited for that first payment...and waited. One problem surfaced immediately--Freddy and Celia didn't have a phone, or at least not one they told me about. Called the realtor. He would try Freddy's dad. Gave me the number as well and the number for Celia's parents. Called both and got Spanish only speakers or so they said. (Phone tricks are something I've dealt with for years. I was in international finance and we had a controller in Brazil that often got phone problems when asked difficult questions. It was only after we had become friends that he admitted to crumbling typing paper next to the phone when things got too hot for him. Try it, it sounds exactly like a cell phone breaking up.) Celia finally called and said could I come by and they would have the money for the first payment. Didn't like it but ok.

This happened a couple of times and finally said, no more nice guy, mail the money order. Worked a couple of times, then more phone calls, then nothing, then a summons from the city to clean up the backyard. Called the city, said I didn't own the property but, just out of curiousity, what was in the backyard? A junkyard, the city said. Oh, great.

Then payments on schedule for a couple of months and then nothing. I started to dread the first of the month--would they or wouldn't they? Called the realtor and he called around and found out that Freddy was having cash flow problems because Freddy was in jail. Wonderful. Seems Freddy was having a mid-life crisis early, brought down by the burden of the wive and two kids. Fooling around with some buddies he got busted for something and discovered it's hard to paint houses when you are locked up.

By now about a year has gone by and I'm getting a little curious about whether they had paid property taxes. Stupid me, of course not. And they were in arrears and incurring late charges of about $100 a month. Note: The city is not a friendly creditor, don't get late on your tax payments.

I hit the ceiling and then cooled off and then did the smart thing--I abdicated. Called a lawyer I knew casually, how much to foreclose? $400 plus fees of around $100. Go for it. He said the process would take about three months. What? That's the way it goes. Ok, get cutting.

And I thought of Bill Smithburg. Smithburg was chairman and CEO of the Quaker Oats Company when I worked there early in my career. Bill was a hero for having the 'vision' to buy Gatorade and turn it into a powerhouse. A few years later he was vilified and canned for buying a tea company that I can't even remember the name of right now.

I remember Bill for sending out a memo to finance saying, roughly, don't bring me small projects or acquisitions. Bill figured out that you spend the same amount of time on a little project as a big project, sometimes more. I finally figured out that Freddy and Celia were a small problem that was taking up way too much management time and effort so I flipped it to the lawyer and said, call me when this mess is over.

Sound cruel? Perhaps. But I would soon find out that Freddy was really a nasty little person.

Making a killing on travel containers

As Mr. Dimes and I are going out of town in a few days, I went to Target and purchased our airplane toiletries. We're only going to be away for about a week so there's not much point in bringing a full-sized shampoo, conditioner, body/face washes, lotion, contact lens solution, and toothpaste. Target has a little aisle full of "trial and travel-sized" toiletries, which is convenient, most of which are priced right at $.97 apiece. Doesn't seem like too much, does it?
Well, as luck would have it I also needed to buy a regular bottle of conditioner and a family size tube of toothpaste, both of which were considerably larger than one ounce, and each of which cost about $3.00. For my money, the bigger bottles provided a much greater value. I spent around $12 on our toiletry needs for a single week in travel-sized containers in order to be compliant with FAA requirements.
A lot of people advocate buying once and reusing your containers, which is not a bad idea when they are something that can actually be reused. Toothpaste tubes, for example, aren't refillable, and even though our current tube has less than three ounces in it, because it was originally a six-ounce tube, it would be confiscated by TSA officials. Same thing with contact lens bottles and lotion tubes.
It seems to be a necessary evil of modern travel that you either have to drop a small fortune on toiletries or pack them in your checked luggage, adding heft and increasing the risk of an in-flight bottle explosion. I'm sure the manufacturers of these small containers and their contents love these new regulations, as they are able to sell more product. But I am unimpressed.

What the CEO envisions… vs. the reality of what may actually be happening

Back in December when I reviewed??Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time, I did not live in a community dotted with a Starbucks at every block, so I have never been to a Starbucks. ?I was able to read the book and see the vision Howard Schultz, the CEO, had of the company. ?I saw how he wanted the Starbucks image to exist. I wrote my review of his business techniques in the book?here.

Now my commute to work passes three Starbucks Cafes, so I decided to check the place out. ?My brain carried the image Schultz painted in his book. ?The experiences have been totally different. ?Yes the employees were great and the coffee was delicious–but it was the other things that were off. ?He said they give real cups unless customers ask for to-go cups. ?The baristas told me it's actually the opposite. ?They don't even have enough?porcelain?cups to?accommodate?the seats in their shop. ?Schultz said his business was green; the places I visited had no recycling for the disposable cups. ?The differences between what Shultz said was standard and what I saw were shocking. ?But it just goes to show:

A CEO can't always be in touch with what is really happening in his company. ?It's like a king–does he really know everything his subjects are up to? ?There are so many people and so many cups of coffee.

I feel lucky that I read the book before I walked in the coffee shop. ?Of course, it means I was disappointed when I walked in while the average person is won over by the experience. ?Oh well. ?No wonder this book is on clearance at Amazon now.

?

?

Positive net worth!

I updated my NetWorthIQ page a day or two ago and it looks like I finally have a positive net worth! Click here to see my NetWorthIQ profile.

OK, so it's only $367 above zero, but it's a start! (Although I am currently only including my retirement contributions, not the actual value of the account, so if I used actual value it'd be about $2000 more.)

I have some pretty audacious savings goals for this year. I'm already trying to max out my retirement savings and I want to get up to a $10,000 emergency fund (right now at $4000 and change) as well as save up the money to pay off my 0% balance transfer when it comes due in December (I'll need about $4600, have about $2700 right now) so I've still got some work to do. I have some other goals to meet if I can do those, but those are the first priority.

I'm really not worried about paying off my student loan though - it's fixed at 3.9% and I'm getting 4.5% at ING, so it makes more sense to save right now than pay down the debt.

Fun With Real Filings

There is absolutely no doubt that, to the extent such exists, the best reading in public filings with the SEC are in a few areas. Letters to management attached to SC 13Ds filings are always amusing, particularly when penned by a scribe with the dark sense of humor or acerbic with of Loeb or Chapman. Occasionally you might even find an S-1 that has potential. But for the real gold, sometimes you have to go to good old SC 14A, particularly in the face of a good, solid proxy fight. It is also hard not to be entertained by Rule 424 filings for things like sovereign bond issues. Consider these headings under "Recent Political Development" for a bond issue by the Republic of the Philippines:

Election Protest of Legarda

Arrests in Connection with Coup Attempts

Impeachment Complaints Filed Against President Arroyo

Communists and Affiliated Groups

Abu Sayyaf and Moro Islamic Liberation Front

Government Expropriation of Ninoy Aquino International Airport Terminal 3

Proposed Amendments to the Constitution

I mean really, when have any of Apple's filings been so entertaining?

March 2008 Goals Update

Goal #1

Specific - Contribute to my 401k plan

Slow and steady definitely wins the race here. The regular contributions are doing well and it adds to my overall retirement accounts growing or staying relatively flat even though the bulk of my holdings are down nearly 9% for Q1 2008.

Grade: Pass!

Goal #2

Specific - Reduce my credit card debt

Measurable - By 50% or $9,137 (rounded up to $10K)

Achievable - Monthly payments of $762

I am making payments, but if you click through on my Networth IQ graph, you’ll see that I’m basically back to where I started. I am holding $18K in credit card debt and I have 9 months now to chop that in half. I really thought I would be making a lot more progress on this goal in March since my medical FSA reimbursement came through. However, I had some unexpected car repairs this month for ~$550 which I put on my credit card. In April I am going to cash out a CD that is expiring and putting it towards this goal.

Grade: Fail because at Q1 checkpoint, I should be 25% complete on this goal. Tsk tsk.

Goal #3

Specific - Reduce my credit card debt on my highest balance card ~$10K

Measurable - By 50%

Achievable - ~$450 a month

Last month I gave myself a Pass rating for this goal because I am consistently making payments of $500 a month on this card, and my finance charges on its balance are about $60 a month. I think I still get a pass rating since I successfully made those payments all quarter. However, I am going to make a $800 payment in April to ensure I hit this target by year end.

Grade: Pass

Even though I got a pass on two out of three goals, I still don’t think I’m doing so great at the end of the first quarter of 2008. I think I have figured out why my big payments aren’t making a big dent.

A long time ago, I used my HELOC for a balance transfer on some of my credit card debt. That was July 2007. Since then, I haven’t really increased my payments to my HELOC to pay it down faster. However, I still classify that debt as credit card debt since that’s what it really is. I just wanted a lower interest rate on it.

What does this really mean? It means that I think I’m going to have to bump up my HELOC payments every month or else hold a bare bones amount in cash and throw every spare dime to my credit cards. I’m not really sure. I think I could easily increase my HELOC payment by $200 each month without much pain but I am uneasy holding my cash balances close to zero. I’ll have to think about it some more.

Avoiding common tax-filing mistakes

Today is a tax-season milestone. There's just one week left until your 1040 is due.

Yep, you've put off filing for 14 weeks. While you've been enjoying all this time tax-free, a major problem with delaying filing until the last minute is that when you do finally get around to filling out the paperwork, you might be in such a hurry that you make a costly mistake.

To help you avoid that, here are 10 common tax errors to be on the lookout for:

• 
  Entering the wrong account in connection with direct deposit of your refund.



• Claiming the wrong hybrid credit.



• Not counting all your charitable contributions.



• Missing out on the PMI deduction.



• Overlooking ; unearned income.



• Making math miscalculations. ;



• Misentering or forgetting Social Security numbers.



• Ignoring IRS mailing material.



• Forgetting signatures.



• Missing the filing deadline.

Details on each of these errors can be found in this story I wrote for Bankrate.

Some other bloggers also offer their takes on common tax mistakes:

• Millionaire Money Habits lists five filing mess-ups. ; ;
  



• SamaraK looks at some errors the IRS says it always sees. ; ;
  



• ETL Technical Expertise has five more mistakes that show up on a lot of returns.

So even though time is short, slow down a bit so that you don't end up making one of these mistakes and costing yourself in the process.

You ask: How do you do it????

In response to my last post, I received the following question:
"How are you putting away $1,000 per month?"

The answer? I work really f'ing hard at it (f-bomb for emphasis). Here's how.

1) Low rent. The single most important factor. My rent is only 12 percent of my monthly income after taxes. This is no accident. I could easily be paying twice or three times that. When I chose not to live in the "trendy" city neighborhoods in my early 20's, a lot of colleagues and friends thought I might as well fall off the planet. But I could not, would not justify paying a rent that was at at the time roughly 50 percent of my monthly income.

My apartment, in its own sleepy, funky suburbia, isn't the most glamorous. It wasn't the nicest one we saw. It doesn't even really have a kitchen, the appliances are old and I have a Barbie-pink bathroom (really). But it does boast an AMAZING location, just one block away from the Metra and the el, and is walking distance to our downtown (restaurants, bars, shopping, gym, banking, etc.). It has two huge bedrooms, two bathrooms and free parking. So what if my "chandelier" is bright turquoise with fake candles and a plastic chain? Or if my carpets are ugly?

I knew when we started renting here that we had a savings goal in mind. I knew the place was small and the layout was cramped. But for the money, it was just what I needed at the time. No more. No less. The trick for me was understanding that I can't have everything I want all the time, at least not right away. And lucky for me, my rent hasn't been raised in four years.

(Sorry New Yorkers, this lesson probably doesn't apply to you :(

2) Staying power. I've been working at the same job for seven years. And I put everything into it. The first couple years were really tough; I made hardly anything. But after five years with the same company, I started to make some nice headway with my salary. I've said before that while it's popular to spend your 20's extending your education, "finding yourself" or floating from job to job, there's a lot of opportunity to be had by staying loyal to one place. It's an old-school idea, but some of the most successful folks I know under 30 have been working at the same company for a number of years.

3) Cap your spending. I don't buy anything, really. I've had the same TV for 10 years and the same computer for five years. I have the same god-awful table and chairs that I had in college, and I bought all the rest of my furniture at discount stores. I got my bed at Sam's Club in 1999 and most of my current apartment decorations came from Ikea. I'm very careful about my discretionary income. Although my monthly income has steadily risen, my lifestyle has not. I don't go to fancy restaurants, and I limit my spending at bars and clubs. Instead of raising my monthly expenses, I just keep raising the amount that goes in my savings and my 401k. That way, I never notice that my lifestyle lags far behind my income.

4) Go without. I don't have a car, and I don't drive. I walk or take the train and the bus everywhere. I'm trying to learn how to drive now, so I'll probably eventually need to purchase some insurance. But B and I have one car between us, and right now we only drive it about once per week. I hitch rides and sometimes chip in for gas. I hitch rides a LOT with people who do drive. But other times, I'm stuck waiting in the snow, the rain, the wind, the cold ... it's just no big deal to me because I don't really know anything else.

Another BIG without... I don't have any kids yet. This isn't something everyone can control, or would want to, for that matter. And it's definitely something that's difficult for me to explain to others sometimes, while other times it's difficult for myself to deal with. It just hasn't happened yet. But I can guarantee you that if I had kids I wouldn't be saving as much, if anything at all.

5) Live for experiences. (Picture at right is me and B ocean kayaking in Monterey Bay on vacation in 2006)...

When I do splurge, I've learned that I'm much more satisfied spending on experiences than I am on things. So I'll drop a lot on a vacation (a budget vacation, of course, that uses free miles and credit card points) that allows me to spend time planning and prepping throughout the year ... and that lives on in my mind forever when it's over. Some people like to spend on big entertainment systems or name brand clothes or house decorations or whatever. I don't. For me, it's much more about the memories in my mind than the art on my wall. Make sense?

So that's really it. Those are my big secrets. Who knows if they're right or wrong, and who knows if they'll help you at all. I'm just a girl trying to save some money and having a good time doing it.

Debt Consolidation: Easing the Burden

There's no doubt that while having a certain amount of debt is normal and a way of life for most of us who live in North America, some of us have gone over the line where we can pay back what we owe in monthly payments. Before any further discussion of this unfortunate situation can take place, it’s necessary to note the facing a debt burden is something that can happen to anyone. It’s not just the people who don’t know how to manage their money that can get into trouble, but those unfortunate ones among us that are faced with the loss of a job, a family illness, or a host of other unexpected circumstances that find themselves falling behind.

Types of Debt

It matters what kind of debt you have, and as you might have guessed, there are several different kinds although most of the debt that the average person finds themselves facing is what’s called unsecured debt. This includes the one that most of us struggle with in one way or the other—credit card debt. As well there are those unpaid student loans that have a way of gathering interest like a stone rolling down a hill gathers moss, and tax debts as well as medical or legal bills that have gone unpaid.

It happens more and more that people find themselves unable to see over the mountain of debt that they’ve created for themselves. Most of them are good people who would love nothing better than to find a way out and there’s help out there. Debt relief agencies like?Delray Credit Counseling?are experts at studying people’s individual debt circumstances and then helping them find a way out.??

What to Do About It

?The best option is to speak to a professional that can help. A certified debt counselor is the right choice. Professionals like those at http://www.delraycc.com are the people that can listen to your situation and help you find a plan to get you back on track. To start, all you need to do is apply to a local debt consolidation program—they are either usually private or non profit agencies that will supply a free quote on the time and interest that will be required. It’s really quite simple and once a plan is in place, you stand to save a substantial amount of interest on the payments and shorten the time it will take to pay the money back. The debt consolidation company that you select works with your creditors to design a repayment method that will both satisfy them and start you back on the road to financial freedom.

There’s a good reason that this is the best option and it’s simple. By consolidating you debt, you avoid having to claim bankruptcy. While bankruptcy does erase many of your debts, it does not take away some of the ones that can swell to large proportions like child support payments and student loans. As well, once you’ve filed either the Chapter 7 or Chapter 13 versions of bankruptcy, you credit rating is affected for up to ten years and you will find it considerably more difficult to get a personal loan, a mortgage or even a job.???

How often do you replace pillows?

Our bedpillows hadn't been washed in some time, so I cleaned them on Friday. After taking them out of the dryer, I was amazed to see what awful shape they were in. The shells were clean and pretty, but the filling was all wadded up and sideways (and I'd even dried them with tennis balls, like everyone recommends). A lot of punching and jumping on them has made them look a lot prettier but they're far from new, and when I fold them in half they don't spring back to their original shape. So should they be tossed or not? I'm sure a pillow salesman would tell me to replace them every two years or something, but what is the lifespan of a pillow?
I'm probably going to replace them in the summer, after they've gotten four years of use. Seems like a reasonable timeframe.

Name That Instrument

We know our readers are among the sharpest. (Notice I didn't define my sample universe). We also know you are up for a challenge after a long, hard trading day. So this little contest should only be vaguely difficult. Name the financial instrument depicted in the attached chart.

Winner will get dinner with the famous DealBreaker writer...

Fried Tofu Cubes

So frozen tofu turned out to be way better than I thought. It’s pretty darned versatile. We’ve thrown it into curry for an entree, boiled in soup, and now I’ve tried frying them.

There’s a fried tofu appetizer at Bangkok 54, one of DC’s best Thai restaurants, that I love. I haven’t figured out the dipping sauce yet, but the main thing is that I have a more than acceptable alternative.

Since I usually freeze whatever is leftover from making dinner out of a 14oz block of tofu, it’s usually a log about 1.5 inches square and about 3-4 inches long. I freeze it, and then thaw in boiled water for 20 minutes as I was instructed by my tofu cookbook. Once that’s done, I drain it really well. It’s kind of spongy, so I end up squeezing it just a little bit over the sink to drain it even further. After that, I cut it into half inch slices and spread them on a paper towel to dry.

I then mix up a tablespoon or two of flour, add garlic powder, curry powder and cayenne pepper. I put in enough to make the flour brown like light brown sugar, but not enough pepper to burn my tongue. I suppose you could dump everything into a bag and shake up the tofu cubes to coat. Shake off the excess and let them dry out a little bit. Then deep fry them. I pour in just enough canola oil into a pan till it’s about a half inch deep. Then fry the cubes. I flip them when they turn brown on one side and drain on paper towels. I like them to be really crispy on the outside, but still squishy in the middle.

I also tried this without flour and then drying the tofu cubes for a few hours. They come out MUCH crispier that way. Feel free to experiment and leave your results here. The main issue is driving the seasoning into the tofu for lots of flavor. I’ve also been using Goya Adobo seasoning as well, but the curry and cayenne flavors come out the most.

For a dipping sauce we’re experimenting with soy-sesame for a more Korean style sauce. We’re also investigating fish sauce for a Thai style sauce, and a sweet and sour type sauce too.

I like them really hot, fresh out of the pan, but they are pretty good room temperature too. It’s a pretty quick appetizer.

H&R Block gets more social

While social media sites are dominated by individual users, an increasing number of businesses are adopting the applications. One of the companies making significant inroads as a way to reach and engage customers is H&R Block.

Yep, the tax preparation giant, whose franchise shops are best known for filling out millions of 1040s nationwide and, in recent years, dealing with the backlash against refund anticipation loans, now has incorporated blogging, YouTube, MySpace, FaceBook and Second Life as ways to reach taxpayers. Heck, the company even Twitters.

Spearheading the convergence of social media and taxes for Block is Paula W. Drum, the firm's vice president of marketing for digital tax solutions. Shel Israel, author, technology adviser and social media guru, recently spoke with Drum about her role and efforts to reposition the Kansas City, Mo.-based company as an overall tax expert by using, in part, innovative social media programs.

You can read Israel's conversation with Drum at Social Media for Taxing Situations.

In this case at least, Block's efforts are succeeding. I found Israel's item on H&R Block not from the usual suspects touting tax info, but from another, nontax person's Twittering about the interview.

Ka-Ching

Damien Hirst, the little artist lover boy of several notable hedge fund managers, has churned out yet another masterpiece of ridiculousness. This time it’s a line of psychedelic jeans for Levis, inspired by work of Andy Warhol. Unlike Hirst’s pickled tiger shark, which Steve Cohen bought for $8 million, and a diamond encrusted skull, sold to an unnamed investment group who requested anonymity because this is the sort of purchase that gets you a reputation for being insane, the pants go for the extremely reasonable price of $80,000 a pop. As we’ve mentioned in the past, a great way to ingratiate yourself with the boss is to suck up to him or her by pretending to have the same interests no matter how out there they may be (hence, my sudden interest in Dungeons and Dragons role play). So while the historically exorbitant cost of buying a dead fish and housing it in formaldehyde may have kept you, lowly SAC analyst, from getting in with the Big Guy in the past, you now have no excuse not to show up to work wearing the same outfit as the BG, and remarking on the “coincidence,” thereby taking your daily interactions from non-existent to awkward. I smell a raise.

Damien Hirst Is Really Into Jeans [Gawker]

The 6 Financial Mistakes Couples Make

I just read an article over at ‘Smart Money‘ about how couples often make similar mistakes in regards to their finances. It brings up many good points and issues.

“Most of us don't know how to talk about money,” says Mary Claire Allvine, a certified financial planner (CFP) and co-author of “The Family CFO: The Couple's Business Plan for Love and Money.”

“People tend to be emotional and reactive about money, not strategic,” she says.

When emotions run high, people tend to make fiscal mistakes. Allvine's solution: Approach family finances as if you were running a business. “If you put a business metaphor into the picture, you'd be surprised how much more methodical people are.”

In this article she talks about 6 common pitfalls that could arise if issues are not properly resolved.

1. Merging finances


2. Controlling debt


3. Spending habits


4. Investing Wisely


5. Money Secrets


6. Emergency Planning

Give the article a read, I think that you will find it full of good ideas and perspective for you.

A better plan

The more I thought about the plan I came up with yesterday the more stressed I got that it might not work out (like if they don't process the paperwork to return my contributions to a normal level in time!)

So what I am going to do instead with the extra savings is to max out the Roth now, and change my monthly contribution to $1000 from $500. That way I won't feel much of a pinch since I won't be contributing the $200 per month (which sadly since I am now in such a high tax bracket, I would only get post-tax about $300 from the extra $500).

Also I figured out that I would only be able to do the whole-month thing twice before I hit the cap on my 403(b) contributions. What a dilemna to have, eh? ;)

So if all goes as planned, I will contribute the following amounts to my 403(b) during the year 2007:

$3990 - involuntary contributions
$500 - already made, voluntary
+ $11000 - will make, voluntary
----------------------------------
$15490 - juuuust squeaking under the maximum voluntary contributions

Also: $5784 - employer contributions
$4000 - Roth IRA

Total: $25274, maxing out both the IRA and the 403(b).

I am extremely pleased with myself. =) Maybe I will hit my retirement goal before 30!

Calling all Personal Finance Bloggers...Want a Job?

I was approached with an interesting opportunity that doesn't quite work for me from a location/pay standpoint, but I think it might be of interest to fellow bloggers and readers of Everyday Finance. I was asked to pass it on to which I gladly obliged. Attached is the information, feel free to contact the Mint directly:


The role is full-time, based in Mountain View, CA, and pay in the mid to high "five figures". Successful candidate will have personal experience writing on personal finance topics and must submit samples to be considered. They’d do some writing themselves, as well as managing a handful of other writers (including xxx, who you’ve traded emails with) on specific PF topics. They’d drive the blog design and it’s SEO/Acquisition goals, as well.
Many thanks and best wishes for continued success,
Donna

Donna Wells
Chief Marketing Officer
Mint Software, Inc.
280 Hope Street Mountain View CA 94041
O: 650-469-1302
C: 650-996-7676
www.mint.com

www.everydayfinance.blogspot.com

Michigan Primaries – The State That Doesn’t Count

Well the primary elections are in town today.? Time to get out and vote.

For the republicans it’s business as usual.? You vote for the best guy they should put up for president.? But what about the democrats?

Well.? I guess they don’t want to recognize Michigan.? The only major candidate to put her name on the Ballot was Hillary Clinton.? So here are your democratic choices:

A.?Hillary Clinton

B.?Undecided

C.?Other: Write Name Here:_____________________

Here’s the funny thing.? If you choose C your vote doesn’t count.? What?? You read that right.? They give you a choice that invalidates your vote.?

Printing costs must be up because they’ve got a few names on there of guys who’ve already dropped out, so you can’t pick them either.

But the Obhama and Edwards supporters are still out in full force:

“Choose undecided,” they say.? “That way Michigan delegates can vote for someone else instead of Hillary down the road”.? Ok.? Let me get that straight now.? Vote for the guys that didn’t even want to be on Micigan’s ballot?

But what issues are important for Michiganders in this election? That’s an easy one:? JOBS.

1 in 13 people doesn’t have a job here.? So it should be an easy sale for the candidates that do actually want to get some votes out of old Michigan.

I’m a republican.? I haven’t made up my mind for their best guy yet.? But I’ll do some research today and go cast my vote later this afternoon.

It should be an exciting election year ahead.

High Yield Muni Funds with Steady Payouts - A Tax-Free 6% Plus

Given that the flavor of the month will soon be municipal bonds and associated instruments, I wanted to get ahead of the curve and post a few options for investors who want to partake in a potentially safer way to achieve high yields than banking on a quarterly dividend that may be reduced at any time or a wildly fluctuating share price. There are some especially nice instruments (closed-end funds) that save you the time and effort of individually purchasing the bonds yourself.

What makes municipal bond closed-end funds attractive?

• The most important aspect in my opinion is the risk-adjusted return at this point. Several prominent investors are citing this time as the most attractive time to be purchasing munis in recent history given the spread over treasuries. One might ask why the high premium per lower than commensurate risk? It's the lack of liquidity in the market. These bonds are highly unlikely to default, they're diverse and the yields are likely to decline in the future once liquidity returns to the market.
• CDs, money markets and savings yields are all dropping to pathetic levels. Treasuries are now yielding negative when accounting for inflation.
• The ones I cite here pay dividends monthly, and have done so on a consistent basis for years.
• The owner pays no federal tax on the dividend payments. Roughly, holding a 6% closed end muni fund is equivalent to holding an 8% high yield stock, but without the same risk and the added benefit of non-correlated returns on the underlying asset value.

I've listed a couple states here to chose from:

BlackRock New Jersey Municipal Bond Trust (BLJ) - yielding 6.04% and has been paying the same, steady yield for over 5 years.

BlackRock California Municipal Income Trust (BFZ) - yielding 6.10% and again, has been paying the same, steady yield for over 5 years.

PIMCO Municipal Income Fund (PMF) - yielding 6.34% and again, has been paying the same, steady yield for over 5 years.

What are the risks?

• For one, states have been paying their employees to live off the public largess for years and there may come a time when full pensions after 20 years of work is no longer a sustainable model. Conversely, states do not hesitate to raise taxes either; PA and NJ have recently passed sales tax increases and the municipality I live in randomly started a 1% local income tax.

• The share price could continue to decline and if you're looking to sell, you may do so at a loss. I would envision buying these instruments and holding for years as opposed to trading.

• Do your own research, of course and perhaps buy more than 1 of these in multiple states if you're investing a significant sum.

If you're interested in higher yielding stocks in diverse industries from commodities to international investment, feel free to visit my recent post on my self-directed IRA holdings.

www.everydayfinance.blogspot.com

Death Of A Salesman

Why go to the work of thinking up stuff when you can steal it? Did I say steal it? Sorry, borrow it.

The job of salesman (salesperson?) has always fascinated me because I'm not very good at it. Wish I was because it is a job you can take anywhere. I was in international finance and the smart money said you had to live in New York, London, or at worst, Chicago to make a living. I proved that wrong but the career category is not very portable.

Sales is. If you're good you can live anywhere. The guy building the million dollar house next to ours is a salesman for IBM working out of his house. And he builds houses in his spare time. What a life.

So think about it but read this by Ben Stein first.

Ten Ways to Blow a Sale

by Ben Stein

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