Wednesday, February 28, 2007

Successful Investing 101 - Value and Momentum Systems

During my investing lifetime, I have practiced two types of investing strategies - Value and Momentum. I would like to share my definitions of both and my experiences with each system


Value Investing

The classic value investing mantras are: "Buy low and sell high," and "Pay 50 cents for something worth a dollar." Warren Buffet, Benjamin Graham, Peter Lynch and John Neff are a few well-known investors that subscribe to this philosophy.

You may be asking, "Who in their right mind would sell something worth a dollar for $0.50?" The answer is they wouldn't, if they knew how to get it's full value. Here's an analogous situation. You are a collector of 1950's widgets. You are visiting your aunt and decide to attend a local estate auction. As it turns out there are two 1950's widgets being auctioned. However, neither the auctioneer nor the bidders know much about widgets, or 1950's widgets for that matter. As a result, you acquire the widgets for 1/3 to 1/2 of "market value."

Similar situations exist in the stock market. Except, it is never quite as obvious as the above examples. As it turned out, virtually the entire stock market in 1982 was a value play. However, very few people recognized that since interest rates were around 12-14% and the stock market had languished for about a decade.


Momentum Investing

The mantra of the momentum investor is "Buy high and sell higher." William O'Neill, founder of the Investor's Business Daily, is a major advocate of this approach. The system is built on the belief that a rising stock will continue to rise, for the reasons that have already caused it's price to increase. It could be due to fundamental, technical or other reasons.

The "risk" with this system is that one is often paying a premium for a stock. As we have seen with the recent real estate bubble, what goes up eventually will stop going up. Obviously the key to this system is to get in before the peak happens:-)

This week's precipitous drop in the indexes leads one to ask if the market is starting to move the value zone. I don't know. Personally, I have not been able to consistently make good returns on value investing. More often than not, my "value" stocks tend to go lower, making them not such a good value:-( A few times, I have made good picks and been rewarded. For example, I bought Dell in November of 1998 after it had declined and it increase six-fold in the next 18 months. However, I attributed that one more to luck than skill :-) At this point, I am going to wait for a clear bottom before buying.

In addition, it is often a difficult analysis for me on whether a stock is a value stock or on it's way to becoming a valueless stock. This issue happened to me with Southmark, and Richton International, now both bankrupt. The critical question today is whether Microsoft, Dell and Ford are value stocks or destined to eventually become extinct. Of course, I don't know the answer:-)

Over the past two years, I have had pretty good results with my variant of the Unemotional Growth System from the book, the Unemotional Investor by Robert Sheard. It is a momentum system that uses timely stocks from the Value Line Investment Survey and the Investor's Business Daily EPS ranking to select stocks to buy and to determine which stocks to sell. For my most recent picks, see Q1 2007 Stock Purchases.

Disclosure: I sold my positions in Avnet yesterday for about a 35% gain, even though there was no sell signal. I continue to hold Coach, Biogen, and Genlyte.

Update 3/4/07: I sold Coach, Biogen and Genlyte on 3/2/07. For more details, see Q1 2007 Stock Purchases Update - Closed All Positions.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Tuesday, February 27, 2007

When AMT Tax Is Triggered - Stop and Delay Deductions

After my first year of triggering the Alternative Minimum Tax (AMT), I realized that I would need to change my strategy for taking itemized deductions. Until that time, I had usually accelerated tax deductible payments such as property taxes into the earlier tax year. That way I could take a higher itemized deduction and get the tax benefit a year earlier. However, once I triggered the AMT tax, the strategy changed to delaying most deductions until the next tax year. The reason is that once the AMT tax is activated, additional deductions have ZERO impact on one's tax liability.

Briefly, here's how the ATM tax works. It basically allows for only two deductions, charitable contributions and mortgage interest. Other deductions are added back to one's income. For most people, this includes the standard or itemized deductions and exemptions. If one itemizes the following categories will not be used to reduce adjusted gross income when calculating one's AMT tax: medical expenses, local taxes, property taxes, second home mortgage and miscellaneous deductions.

The AMT calculates a minimum tax that is to be paid, irrelevant of the itemized deductions described above. So additional deductions will not reduce one's taxes and delaying the deduction to the following year may allow the deduction to count.

For more on Ideas You Can Use, check back every Tuesday for a new segment.

Photo Credit: morgueFile.com, Alex

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Monday, February 26, 2007

Is It Time To Buy Real Estate?



It seems like now is the time to buy real estate, both for personal housing and investment. Here's the case for buying:





  • Real estate prices are lower. There appear to be many good deals for buyers compared to a year or two ago, as pointed in the Wall Street Journal Article, Home Prices Keep Sliding;While Hesitant Buyers Sit Tight.


  • Foreclosures are high. Thus, there are opportunities to get low prices on some properties.


  • Interest rates are still fairly low in the 6-7% range.

Although I have owned investment real estate (but not currently), I do not plan to get into the real estate market at this time. Here are my reasons:



  • The risk of prices declining further continues to be high, as shown in this report by PMI Group. This report shares that the 10-60% chance of house prices in over half of the market in the study.


  • Most real estate investments involve debt and depreciaton in order to make them attractive. However, the debt can become a major negative when there are no rental income to offset the mortgage payment. At this time, I cannot afford to have a real estate investment create negative cash flow.


  • The last time I did the analysis, it seemed that most real estate rents would return about 5% on the total property value, about the return of a CD. However, being a landlord requires much more work than a CD :-) Also, a major portion of real estate returns depends on price appreciation. As noted above, the risk of price declines is still high in the short term.

In conclusion, if I were considering buying a home, I would be looking now for great deals. To date, I have never regretted buying a home, even during high appreciation times. The reason is that I have planned to live in the house for many years. At this time, we currently own aa home. As an investment, I think I will continue to pass on real estate.


For more on Strategies and Plans , check back every Monday for a new segment.

Photo Credit: morgueFile.com, Mary R. Vogt

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Sunday, February 25, 2007

2006 Tax Return Draft - The Good, The Bad and The Ugly

I completed the first draft of our 2006 tax return today. As with every tax season, I learn something new about our tax code. Here's the good, the bad and the ugly.


The Good

No tax on 2005 state tax refund. Since I triggered the AMT tax for 2005, it turns out my 2005 state tax refund is NOT taxable income. This is because I would have still triggered the AMT tax with state taxes reduced by the refund amount.

No AMT tax for 2006. I don't quite understand the reasons yet. But I am happy nevertheless. For those of you unfamiliar with the acronym AMT, it stands for Alternative Minimum Tax. For more details on the AMT, see my post An AMT Tax Benefit - Really.

The Telephone Excise Tax Credit. With three people in our family, we qualify for a $50 tax credit. I am going to take the standard credit. However, based on what I've been reading, if you have multiple cell phones, or made significant amounts of long distance calls, it may be worth doing a calculation based on your actual usage


The Bad

Not all 1099s have been received. I still am missing one 1099 and one K-1. It probably won't change my taxes much, but it keeps me from doing the final version.

Still don't qualify for some great tax deductions or credits. I was hoping that new criteria for 2006 would allow us to qualify for all of the following: deductible IRAs, Roth IRAs, child tax credit, Roth IRA conversions, and retirement plan contribution credit.

Until I feel I am wealthy, I think I should qualify for these deductions and credits:-)


The Ugly

We need to pay more taxes, since we underpaid by about 15% Since coming back from an overseas assignment, I have been trying to get our withheld taxes to be +/- $200 of the amount owed. Last year we overpaid by 50% due to an adoption tax credit. This year we will need to add about 20% to what has already been withheld.

This year I have a reasonable excuse. About 11% of our income was due to capital gains for stock sales or dividend/interest, which do not have tax withholding.

Since more than last year's tax liability was withheld, we won't receive any penalties for underpayment. Needless to say, I will be filing my return on the last possible due date, April 17, 2007, to delay as long as possible the final tax payment, which I guess could be considered good:-)

For more on New Beginnings, check back every Sunday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Saturday, February 24, 2007

Carnival Round Up For The Week #2

Here are the Carnivals from this past week that I am reading :


The Carnival of Personal Finance #88 is hosted by Stock Market Beat.My Carnival choice is 5 Important Ways to Protect Yourself Against Job Loss by Debt Free. The guidance is a mix of diversification, having contingency plans, and having the right knowledge.
The Carnival of Debt Reduction #75: Diamond Jubilee Edition is hosted by Money, Matter and More Musings.My Carnival pick is Shift Your Thinking to Reduce Debt presented at Extreme Perspective. It's a real life story that shows investing in real estate can be a lesson about debt management. I agree. In the past, I had found myself trying to justify debt and negative cash flow for real estate because it was an "investment." The reality is that it is still DEBT. Fortunately, I was never able to convince myself and didn't buy the properties :-)
The Festival of Stocks is hosted by The Stock Geek.My Festival choice is Warren Buffet Buys More USG and More presented by Fat Pitch Financials, which highlights Mr. Buffet's recent buys and sells. If only I could know what Warren Buffet bought and sold before he did it:-)
The Carnival of Taxes #12 is hosted by Don't Mess with Taxes.My Carnival pick is Reduce taxes by fighting your property appraisal posted at Trying To Get It Right. The excellent coaching tip to getting a reduction are: Follow instructions, do your homework, and meet deadlines. I will keep these in mind for when I receive my next appraisal of my home for taxes.
The Carnival of 30s and 40s Personal Finances: The Wealth Accumulation State is hosted by Making Our Way.

My Carnival choice is Leaving Taxes to My Accountant presented by Ask Mr. Credit Card, which provides good reasons for using a tax professional.

I would love to outsource this annual task to an "expert." However, my personal experience with tax accountants has been less than stellar. While we were on an international assignment, my taxes were done by one of the major accounting firms for four years. In two of the years, I found errors which resulted in a higher refund. In another year, the accounting firm rechecked the filing and found an error (in data provided by my company) resulting in another significant refund. In only one of the years, there were no changes, perhaps indicating the return was done correctly.

Admittedly, while I am not a tax professional, I prefer to read my returns in detail before signing them. And it is concerning to me that I found errors in two out of the four returns done by a professional tax preparer.

On the other hand, I also admit that it is getting more difficult for me to keep up with all the new tax laws. So I continue to look for a tax professional that will meet our needs.



I hope you enjoy reading these Carnivals and finding tips you can use. I have moved my Carnival reviews from Tuesday (Ideas You Can Use segment) to Saturdays since several Carnivals that I read publish after Tuesday. In the Saturday review, I will be adding a bit more commentary to the review to fit into the Reflections and Musings theme.

Check back every Saturday for the next Reflections and Musings segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Friday, February 23, 2007

Company 401K Plan Evaluation

Recently there have been discussions by PF bloggers on the high fees and low quality of offerings by their company's 401K plan. Based on the issues, I decided to take a closer look at our company's retirement plan.

Based on the information I found, it appears we have been relatively well taken care of by our company's retirement plan and the adminstrator that was chosen. We have a small administrative fee (about $100) per year, depending on the size of retirement account. The plan has a limited, but excellent, choice of very good funds, with expenses of 0.03% for the S&P 500 index fund and between 0.30-1.5% for the specialized funds (international, bond, small cap, and blend). All the information (e.g. expenses, investments styles, quarterly results) on the funds is published on the adminstrator's website. While I do think the some elements can be improved, I don't see issues as egregious as ones (e.g. asset management fees of 0.5%) that have been shared by others.

The primary concern with our plan is that the company contribution of the retirement funds is invested entirely in our company's stock. And there are no diversification options until one is 50 years old. While our company stock has done well historically, the heavy weighting puts my retirement savings at risk if the stock price should drop.

For more on Reaping the Rewards , check back every Friday for a new segment.

Photo Credit: morgueFile.com, Mary R. Vogt

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Thursday, February 22, 2007

Having Children Has Made Us More Frugal

Thinking how a child has changed our lives, I believe we are even more frugal since having our daughter. To be clear, having children is more expensive. Clothes, diapers, toys and preschool all require higher expenditures, even with gifts from relatives providing some of the items.

So how do I know we've become more frugal? Simply because we are still spending about the same amount before and after having a child. Looking at our monthly expenditures, our living expenses (food, clothing, utilities, entertainment, etc) increased 0.5% after we had a child. However, preschool, activity classes, clothing and toys require us to spend 5% more per month. Thus, I conclude we must be more frugal after having a child.

While I have not looked at it in detail, I expect that most of the savings has come from what we used to spend on entertainment. We now do fewer high cost entertainment options and spend less on eating out.

For more on Crossing Generations , check back every Thursday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Wednesday, February 21, 2007

2006 IRA Contribution Deadline is April 17, 2007

Individual Retirement Accounts (IRAs) are one of the best wealth building tools available. In addition to earning income tax free, IRAs are one way to use “other people’s money” to save. I have made a contribution to my IRA every year that I have been eligible to do so.

The deadline for making one's 2006 IRA contribution is April 17, 2007. Normally, it would be April 16 since April 15 is a Sunday. However, recent legislation made April 16 a holiday in Washington D.C., giving all of us an extra day to file our taxes. For 2006, the maximum IRA contribution is $4000 per person with a $1000 catch-up contribution for people 50 or older.

Traditional IRA contributions are 100% deductible for Modified Adjusted Gross Incomes (MAGIs) up to $50,000 (single) and $75,000 (married filing jointly). Higher MAGIs may be able to deduct part of their IRA contribution. People with MAGIs over $60,000(single) and $85,000 (married filing jointly) cannot deduct traditional IRA contributions.

Roth IRA contributions are not deductible and the maximum contribution can be made for MAGIs up to $95,000 (single) and $150,000 (married filing jointly). Higher MAGIs may be able to make a contribution less than the maximum. People with MAGIs over $110,000 (single) and $160,000 (married filing jointly) cannot make Roth IRA contributions.

For more details on IRAs, see IRS Publication 590.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial or saving advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Tuesday, February 20, 2007

An AMT Tax Benefit - Really

Although I grumble a lot about the AMT tax, I know of one benefit, although small, to paying it. For me, the 2005 state tax refund I received in 2006 will not be considered taxable income when I file my 2006 return. This is because the reduction in state income tax would not have reduced the AMT tax I paid for 2005. Hence, the tax refund is not considered taxable income in 2006:-)

As background, the AMT (Alternative Minimum Tax) was created to ensure that "wealthy" taxpayers pay a minimum tax. The AMT does this by excluding certain tax preference items when calculating the AMT tax. The following are some of the tax preference items that affect many tax payers: exemptions, medical deductions, state and local income taxes, property taxes, certain tax exempt interest, miscellaneous itemized deductions, various credits, and long-term capital gains. The tax was intended to only affect "wealthy" taxpayers. However, since it was not indexed to inflation, each year more middle class tax payers are affected.

For more details on the AMT tax see the Guide to Alternative Minimum Tax (AMT) from Fairmark.

I first had to pay the AMT tax on my 2004 tax return. Previously, I had accelerated paying my property taxes in order to take the tax deduction earlier. However, due to the AMT tax, accelerating payment of the property taxes did not reduce my taxes. In fact, the only deductions that aren't affected by AMT are home mortgage interest and charitable deductions. Read about the experiences of another tax payer at Finance Buff who posted Tax Deduction Denied.

And now back to the 2005 state tax refund ....

Since returning from an overseas assignment and having our first child, I haven't been able to estimate our taxes correctly, resulting in an overpayment of state taxes for 2005 and a significant state tax refund in 2006. However, since a lower payment of state taxes (equal to the 2005 payment minus the refund) still would have triggered the AMT tax, my 2005 tax refund is not taxable income. Bonus!

The official method to check whether a refund is taxable or not is to recalculate the previous tax return with the itemized state taxes reduced by the refund amount. If there is no change in the AMT tax, then no tax is owed on the refund.

So this year, while I am grumbling again about triggering the AMT tax, the silver lining will be that my 2005 state tax refund is not considered taxable income for 2006.

For more on Ideas You Can Use , check back every Tuesday for a new segment.

Photo Credit: morgueFile.com, Clara Natoli

This is not financial or tax advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Monday, February 19, 2007

Stages Of A Career

Job Goals for Every Age by CareerBuilder.com shares a philosophy of how to think about one's career at different ages.

Here are the CareerBuilder.com stages and my commentary.

Twenties: Establish a Positive Work Record

I agree that one should building a good reputation and a network of supporters and references. It is also a time to learn the difference between good work and exceptional work. Strive to do exceptional work at all times.

Thirties: Focus on being a leader

Yes and I would add to differentiate oneself from one's peers through one's business results. It is important to begin setting strategic direction and then delivering outstanding results from the strategy. Senior management will identify future leaders from this age group.

Forties: Re-examine your definition of success

I would re-title this as Forties: The glory years. The forties are typically when people are in leadership positions and these may the highest earning years. From a personal finance perspective, it may also the time when people have the most discretionary income and can achieve the most wealth accumulation.

Fifties: Envision your future

I would add a subtitle to this - Fifties: Envision the future and prepare for transition. The fifties will bring job responsibility changes, family changes, and possibly retirement. Life and work can be much different that previous decades. I ask myself, "What will I do when I retire?"

Sixties: Reap what you have sown

I would title this - Sixties: Reaping the rewards and reinventing yourself. If one has planned well, this phase is where one can enjoy the rewards of an outstanding career and choose what to do, whether it be to continue or be something new. Personally, I hope to get to this stage before my sixties :-)

Personally, I think of my life (and career) in three stages which overlap - Learning, Working, and Enrichment/Leisure. Learning covers from birth to the thirties. Working covers from the twenties to sixties. Enrichment/Leisure covers from the forties on. I'll write more about the three stages in a future post.

For more on Strategies and Plans , check back every Monday for a new segment.

Photo Credit: morgueFile.com, Virginia Coccaro

This is not financial or career advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Sunday, February 18, 2007

Eliminating Mortgage Debt - New Thinking

Last week, my retirement spending analysis showed virtually no reduction in daily expenses during retirement. This was a bit surprising since the rule of thumb is one can live on 80% of one's current income when retired. After thinking more about this, I realized the issue was our home mortgage.

Currently, our mortgage payment (principal and interest only) equals 19% of our after-tax income. If we can eliminate our mortgage debt by or within a few years of retirement, our income needs will be reduced by about 20%. Eliminating our mortgage debt will significantly improve our ability to retire.

We currently have a 30-year fixed mortgage at 5.375%.

Our current plan is to pay the mortgage off in about 15 years by making additional principal payments. One way is to increase the monthly payment by about 50% as described in Paying Off A Home Mortgage Earlier. We have chosen another way of making one annual lump sum payment equal to about 4% of the original mortgage principal. Either way will pay off the mortgage in about 12 more years.

However, I also want to cover the possibility of retiring earlier than 12 years from now. If I get the opportunity to retire in my 40s :-), I might not have paid off the mortgage. Here is how I plan to eliminate the mortgage in less than 12 years, if needed.

  1. Continue with our current mortgage payoff plan. At this time, I will not pay any more additional funds against the mortgage. Doing so would sacrifice the savings we are putting against our retirement. I would rather keep the money in liquid assets versus illiquid assets such as our house.


  2. Assign a part of current and future savings to a 50% or greater lump sum mortgage payoff. This money would be used to payoff part of the mortgage, if needed. Otherwise, the fund will remain part of our emergency or retirement funds.


  3. Identify other potential sources of funds to pay off the remaining balance in lump sum. If I can retire earlier than planned, it will likely be because of a windfall. Windfalls would include the following: excess returns from investments/stock options, or severance pay. Any of these windfalls could be used to payoff the remaining mortgage balance.

In the past, I would have been uncomfortable putting so much money into an illiquid asset such as a house during retirement. However, Retirement Planning - A Staged Approach has convinced me that the value of one's house can be effectively used for retirement income.

For more New Beginnings, check back every Sunday for the next segment.

Photo Credit: morgueFile.com, Michael S. Richter


This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Saturday, February 17, 2007

Why Aren't We All Wealthy (Yet) ?


There have been some discussions in the blogosphere on whether Personal Finance bloggers are really knowledgeable or not. After all if we are so smart, why aren't we all wealthy? I think that is a very good question. I submit that many bloggers are knowledgeable. Here are four reasons that I think we are not all wealthy yet:

More Time Needed - Time is one of the major factors in creating wealth. Saving and investing over a long period of time always works. Some people just haven't had the time they need for their plans to work. They are in the 20s and 30s. However, if they continue with their plans they will become wealthy. Many of the PF bloggers I read are in this category. I wish them good fortune on their personal finance journey to success. Remember, for most of us, wealth building is a marathon, not a sprint.

Lack Discipline/Commitment - Many people understand what needs to be done. However, only some are willing to , able to or committed to do it. For example, an activity that is guaranteed to work is to save 10% of one's income. It is guaranteed to work, whether one makes $10,000 or $100,000 per year. Saving only $1 per day can create over $500,000 in 50 years at a 10% return (average yearly return of the stock market since 1926). Imagine what saving 10% of one's income can do.

However, there are many reasons people give for not being able to save 10% of one's income. The reasons include:
  • Would require too much sacrifice.

  • Can't afford 10% after all "necessary" expenses.

  • Too much debt.

  • Don't make enough money.

  • We really "need" to drive a new car or live in a more expensive house.

  • Can't get a higher paying job.
  • Yes and ..... I submit it's a choice. Decide yes, and one will likely become wealthy. Give in to the "reasons", and one may never become wealthy.

    Need a Better Strategy - Having a good plan to build wealth is important. Good plans have a higher probability of success than poor plans. As example of a good plan is to pay oneself first. In my opinion, a poor plan is one a former colleague used - increase one's standard of living by maxing out credit cards, and then make the minimum payment forever. The majority of plans and tactics shared are good ones. However, it is important to know that some plans won't work.

    Here is my own personal wealth building strategy which I believe is a good one:-).

    Had a Disastrous Event - Even the best plans can be derailed by outside influences. Job loss and health issues can be major negative impacts to wealth building. Even a temporary job loss or temporary illness can significantly reduce one's wealth. I know some people have had this happen to them. Getting back on track is generally a difficult and long task.

    We have been fortunate so far and have avoided any disastrous events. While I can't prevent a disastrous event, I make contingency plans in case such an event happens. My contingency plans include an emergency fund of a year's income and comprehensive insurance coverage.


    That's my personal assessment of why we're not all wealthy yet. In my opinion, many of the "more time" group will likely succeed and become wealthy someday. Most of other three groups will try valiantly ... and will likely fail:-(

    For more on Reflections and Musings , check back every Saturday for a new segment.

    Photo Credit: morgueFile.com, Jane M. Sawyer


    This is not financial or wealth buildingadvice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Carnival Round Up For The Week

    Here are the Carnivals from this past week that I am reading :

    The Carnival of Personal Finance #87 is hosted by 2 Million - My Journey To Financial Freedom.My Carnival choice is from Money $mart Life with Why We Should Save As Much Money As We Can since you don't know what the future will bring. I agree, the consequences of over saving are much better than the consequences from under saving.
    The Festival of Frugality #61 is hosted by Hustler $$$ Blog.My Festival pick is How to stop nickel and diming yourself into the poorhouse! by Kirby on Finance, which proposes a systematic way to eliminate $2-$3 "splurges." This is another good way to "buy only what one needs."
    The Carnival of Family Life is hosted by Colloquium.My Carnival choice is Kids And Money posted at No Credit Needed Blog, which describes the system used to teach their daughter about managing money. This system is similar to many others about which I have read. I will use a version of this when our daughter is old enough.
    The Cavalcade of Risk #19 - Valentine's Day Edition is hosted by My Wealth Builder.My Cavalcade pick is Tontines - A Way Out of a Pension Jam at Pension Risk Matters, which reports on a 350 year old risk management tool that can provide guaranteed income for retirees. Tontines appear to address the issue of potentially over saving or under saving for retirement. I like the idea and will study it further for my own retirement use.


    I hope you enjoy reading these Carnivals and finding tips you can use. I have moved my Carnival reviews from Tuesday (Ideas You Can Use segment) to Saturdays since several Carnivals that I read publish after Tuesday. In the Saturday review, I will be adding a bit more commentary to the review to fit into the Reflections and Musings theme.

    Check back every Saturday for the next Reflections and Musings segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Friday, February 16, 2007

    Will Expenses Be Reduced For Retirement?

    Last week's post on fixing things myself and saving money got me thinking about how our expenses might change during retirement. Here is my analysis of money saved and extra money spent during retirement.


    Money Saved - Weekly

  • Laundering of shirts - $11
  • Dry Cleaning - $10
  • Gasoline for drive to work - $16
  • Lunch - $0 since I already bring my lunch to work.
  • Auto insurance - $0.50 (less mileage means slightly lower insurance rates)
  • Disability insurance - $15
  • Life insurance - $5
  • Spending Increase - Weekly

  • Health Insurance - $90 since I will need to pay for retiree health coverage
  • It appears the answer is No. My current estimate is that I will need to spend more money in retirement, due primarily to health insurance coverage. I didn't expect to have more expenses in retirement. I will look into this further to makes sure I didn't miss any items.

    For more on Reaping the Rewards , check back every Friday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Thursday, February 15, 2007

    UTMA Opened - Allowance Funded

    Yesterday, I opened the UTMA (Uniform Transfer to Minors Act) account for our daughter with TD Ameritrade. I also funded it with $10,000 to qualify for a free IPod Nano.

    As I posted earlier, this UTMA is a tax advantaged way that I am using fund her allowances until she is 18. In addition, my spouse will get a free IPod Nano she can use.

    For one day, I am a personal finance hero:-) My daughter gets $10,000 and guaranteed allowances until she is 18. My wife gets an additional Valentine's Day gift of a IPod Nano. I get a tax break and a free promotion for what I needed to do anyway. It doesn't get any better than that.

    For more on Crossing Generations, check back every Thursday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Wednesday, February 14, 2007

    Cavalcade of Risk #19 - Valentine's Day Edition


    Welcome to the Cavalcade of Risk #19 - Valentine's Day Edition. I am honored that I was offered the opportunity to host this excellent Carnival. My thanks to Hank Stern for contacting me and taking the risk on me to be more actively involved:-)

    Starting with Valentine's Day, I submit that it is a risky day, especially for the young. In my youthful days, I recall that the day was often the test of the status of a developing relationship. In a such a relationship, one doesn't quite know if the feelings are mutual or not. Thus, Valentine's Day offers the risk of over delivering, under delivering or hopefully meeting expectations. Sometimes, Valentine's Day activities were the difference between a ROYAL flush or a royal FLUSH :-)

    On to the Carnival ......

    As background, all the submissions were excellent. However, I included only posts that had some element of risk in the content. In addition, I limited the Carnival to one submission per blog. For blogs with multiple submissions, I selected the one I liked best. Enjoy!

    Multiple Hits by Cupid - Is The Risk Over Managed?


    Ben presents How To Lower Your Homeowners Insurance Premiums Without Even Trying posted at Money Smart Life. Here are the words every policy holder loves to hear, "We recently changed the way we price homeowners insurance to ensure your premium reflects the risk your policy presents to us. As a result, your policy premium has decreased."

    David Williams presents What you don't know can't hurt you posted at Health Business Blog. As a doctor friend said, “If someone thinks they’re completely healthy it just means they haven’t had a full workup.” What I think he meant is that if you go looking with the latest tools and diagnostics you’ll find something, even if it’s not really there.

    Cupid Misses the Mark - Is The Risk Under Managed?


    Bob Sargent presents Poor Timing? posted at Specialty Insurance Blog. The Governor of Florida and the Legislature have passed legislation solving, they hope, Florida’s property insurance challenges, but after a mild hurricane season and increasing competition in the insurance market are they buying at the peak?

    Egon presents Busting the Top 6 Life Insurance Myths posted at InsuranceHelpHub.com. Term life insurance has many advantages. But understanding term life insurance and its benefits means sifting through the myths surrounding it; and there are many myths about life insurance. These life insurance myths and misconceptions can result in too little coverage causing financial hardship for families suffering the loss of a loved one.

    Leon Gettler presents Bigger risks ahead, says regulator posted at Sox First. The global economy is doing fine but industries are now confronting huge risks and issues. Britain's regulator, the Financial Services Authority, is warning businesses that the impact of a shock to the financial system is much greater now than two or three years ago.

    Cupid Hits The Bull's Eye - A Good Level of Risk Management


    David E. presents Accidents Happen – Be Prepared and Then Move On posted at Worldwide Success. Dealing with accidents is not much different than dealing with any other risks. Risk management is an important discipline in managing a project, a business, an investment, and your personal finances. Being successful requires managing risks well. Be prepared so that when an accident happens you can minimize its impact.

    Bob Vineyard, CLU presents Cancer Insurance posted at InsureBlog. A vaccine to prevent cancer in young woman? Who could hate that? Believe it or not, it's a risk assessment issue, and InsureBlog's Bob Vineyard shares why it's an insurance one, as well. (Be sure to catch the lively debate in the comments section, too!)

    Silicon Valley Blogger presents A First Look At Asset Allocation posted at The Digerati Life. The choice one makes for investment allocations can signficantly increase or decrease one's risk. Proper asset allocation allows one to choose a desired risk profile ranging from conservative to agressive.

    Spencer Hill presents Why Long Term Care Insurance? posted at Hill's Personal Finance. Funding a potential long term illness or disability without depleting your savings and investments can be done in many ways. Its best to start planning for this event around age 50 or about 20 years before long term care might be needed. After your plan is in place it is best to review it every 5 years or when significant changes in the law take place.

    Marc Mayerson presents Insurers' Duty to Defend their Insureds Against Intentional Torts posted at Insurance Scrawl. This post shares both sides of whether litigation insurance applies, to suits against the insured alleging an – or only – intentional tort.

    Joe Kristan presents IN THIS CORNER, THE VILLANOVA MAULER posted at Roth & Company, P.C.. Joe responds to questions from the tax professor Jim Maule about President Bush's health care ideas. The answers are a mix of accounting, risk management, and cost effectiveness.

    Michael Cannon presents Paduda Cuts (Closer) to the Heart of the Matter… posted at Cato at Liberty. Sick people don’t need insurance. Insurance doesn’t make sick people healthy. They need medical care. They may even need subsidies. So why not try to provide them those things, rather than wreck the markets for both health insurance and health care?

    Julie Ferguson presents Working and surviving in extreme cold posted at Workers Comp Insider. Here are various resources and tips for minimizing the health and life-threatening risk that extreme temperatures pose for people who have outdoor work responsibilities.

    More Risky Propositions


    TC presents Simple Living - best buys for DIYs posted at InvestmentsLoans.net which shares how to minimize the risk of paying too much for items in an auction.

    Bill Losapio presents HOLY BULLION! BIG News in the Gold Market posted at LWilliamLosapio.com, which discusses the risk of price manipulation if one invests in gold.

    Fedor presents Understanding Currency Trading Dynamics posted at forexblog. One shouldn't take the risk of being in the business of currency trading if one expects to lose money as a beginner.

    Andrea Dickson presents Womanhood microscopic and other hot stock tips posted at WiseBread Financial. Penny stocks almost always lose money for the investor. We should keep friends and family from believing they can beat the odds.

    Rita Schwab presents US Malpractice Law - Understanding the System posted at MSSPNexus Blog. It is a brief summary of how the US medical malpractice litigation system works.

    Jeffrey Strain presents The Best Place To Hide Money: Conversation With A Burglar posted at Personal Finance Advice. Burglars will always find some of one's valuables. Here's how one can minimize the loss and damage.


    And From Around The Blogsphere


    Here is a selection of additional articles posted during February.

    Dr Susan M. Mangiero reports on a 350 year old risk management tool that can provide guaranteed income for retirees in Tontines - A Way Out of a Pension Jam at Pension Risk Matters. Tontines appear to address the issue of potentially over saving or under saving for retirement. I like the idea and will study it further for my own retirement use.

    David Dobbs, host of Smooth Pebbles, writes that taking regular midday naps is associated with reduced risk of death from heart disease in Naptime! Read this and have a coronary ... or take a nap. It's your decision.

    We've all read about assessing risk, and managing risk, but what about the psychology of risk? Vaughan at MindHacks looks into risk, obsessive-compulsive disorder (OCD) and security in The Psychology of Risk and Security.

    My submission is Lessons From The Poker Table posted at My Wealth Builder which reapplies strategies to manage risk in gambling to personal finance.

    In closing the of Cavalcade of Risk #19 - Valentine's Day Edition, I leave you with one final thought: Don't risk the fallout from forgetting to acknowledge Valentine's Day with your special someone :-)

    Photo Credit: morgueFile.com, Nicolas Raymond

    This is not financial or risk management advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Tuesday, February 13, 2007

    Investors Blog Network - Introduction to Members

    Having recently joined the Investors Blog Network (IBN), I would like to share more about the seventeen members with readers of My Wealth Builder. For each member, I have provided a the blog name, a self-description (if available) of the blog, and a recent stock or stock market related post.

    I hope this introduction helps you become more familiar with the members of the Investors Blog Network (IBN). For your convenience, I have listed the IBN members in the Investors Blog Network Blogroll in the right sidebar.

    BioHealth Investor

    Description: Blog and journal for the latest events in the biotech and healthcare industry.Investments - News - Commentary.

    Here's my pick from the last week -IBD Top Ranked Medical Stocks - 2/12/07. Hmm... I may take another look at Immucor, which was almost a buy in my stock picking system.

    Dividend Money

    Description: Retirement planning using dividend stocks.

    My choice from last week is The Best Dividend Stock List, which shares some top dividend paying stocks.

    Gannon On Investing

    Description: Value investing blog and value investing podcast influenced by Benjamin Graham, Joel Greenblatt, and Warren Buffett's value investing model. Built upon the value investor insights of intrinsic value, margin of safety, competitive advantage, and protection of principal.

    My post pick is On Old Posts and A New Year which summarizes his favorite posts and stock picks from 2006.

    Generation X Finance

    Description: Helping a unique generation achieve financial independence.

    My post pick is Weekly Mutual Fund Review - Oakmark Equity & Income Fund, which provides his analysis of the Oakmark Equity & Income Fund.

    Investor Trip

    Description: Financial talk for global investors on investing, stocks, mutual funds, ETFs, import-export, and alternative investment ideas.

    My choice post is Is the Chinese Market Overvalued?,which predicts a forthcoming correction for the Chinese stock market.

    Money, Matter, and More Musings

    Description: Musings Of A Graduate Student on Money Making, Money Management, Personal Finance, Debt, Credit Cards, Interest Rates, Everything Else That Is Money Related, And Some More.

    Golbguru's post Investing for Dummies: The Dart Board Model Portfolio is a humorous article about an often discussed "stock picking" method:-)

    My Wealth Builder

    Description: Wealth, Riches, Prosperity, and Affluence. Knowing what wealth is (and isn't), getting wealth, and keeping enough wealth for a comfortable retirement.

    My pick from last week is Q1 Stock Purchases - Reflections, which shares my stock buys and performance for this quarter.

    One Guy's Investments

    Description: The story of Travis Johnson's investment portfolio, with analysis and thoughts on the stocks and funds he has considered, bought and sold.

    My post pick is Is Akamai Going to Buy ALL of its Competitors? (AKAM) which discusses a stock I was considering at one time.

    Online Stock TradingMy pick is Homebuilders Go Plop and FIG Newton Goes Pop which shares last weeks market highlights, particulary the first IPO of a hedge fund, Fortress Investment Group, LLC (FIG).
    SciTech Investor

    Description: Blog and journal covering the business and financial aspects of science and technology: Stocks - News - Commentary.

    The post Wal-Mart, Amazon Movie Download Ventures Will Kill Netflix questions whether Netflix will survive with competition from these formidable companies.

    The Bull TraderHere is there list of stocks with bullish trends in Stock Watch Lists.
    The Digerati Life

    Description: Blogging About Money, Personal Finance, Geeks and Cyberspace… Here In Silicon Valley

    My post post pick is Filthy WMT = Poor WMT Stock Performance? which links the decline in store cleanliness with stock performance. This post was highlighted on The Street.com.

    The Money Po$t

    Description: Examining all aspects of the financial world.

    My pick from the blog is Free Investing Classes which shares that Morningstar.com is offering 172 online investing classes for free.

    The Money Tortoise

    Description: A Slow, Steady, and Successful Approach to Personal Finance

    My blog pick is SPIVA-Quarterly Report Care on Passive Vs. Active Investing which confirms once again that few actively managed funds outperform a market index fund.

    Trade Radar

    Description: Ping The Market! Stock Market Signals and Analysis.

    My post pick is Weekly Market Update - Uncertainty Turning to Bearishness?, which says it all.

    Volume Spike Investor

    Description: Investing in stocks based on short term spikes in volume.

    Here is a recent recommendation in Pain Therapeutics Jumps Almost 8% on Higher Volume.

    Word On The Street

    Description: Chartering the financial seas.

    My post pick is Publicly Traded GoFish.com: The Next YouTube


    As always, please do your own due diligence or consult with your own financial advisor before making any investments.


    For more Ideas You Can Use , check back every Tuesday for a new segment.


    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Monday, February 12, 2007

    Watch Out - Revised 1099s May Cause Amended Tax Returns

    In the Wall Street Journal article The Risk of Filing Taxes Early, the growing issue of revised 1099 forms is reviewed. 1099 forms are used by banks and brokerages to report one's income to the IRS. In the past three years, the occurrence of revised 1099 forms have been increasing. I have received revised 1099s for the past two years.

    This year may even be worse since the IRS is now requiring institutions to report tax exempt interest which is subject to AMT taxes. This has caused some institutions to request an extension of up to 30 days for sending out 1099s.

    In some cases, the revised 1099 won't have any impact or provide a small additional refund. In these cases, one can choose not to file an amended return. However, in other cases, taxes will be owed, requiring the filing of an amended tax return.

    Now, I already dislike the task of filing my tax return one time. I surely don't want to file a return twice. Since I received revised 1099s (and W-2s) the past couple years, my plan is to wait until April, 2007 to file my tax return. By then, all 1099 and W-2 revisions will need to be complete and correct.

    For more Strategies and Plans , check back every Monday for a new segment.

    Photo Credit: morgueFile.com, Stuart Whitmore

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Sunday, February 11, 2007

    New Carnival - The Carnival of 30's and 40's Personal Finances

    The inaugural edition of 30's and 40's Personal Finances: Wealth Accumulation Carnival is posted at Making Our Way. This Carnival focuses on family, career and investment financial planning for people in their 30s and 40s. To me, this Carnival will begin to serve a segment, the 40s, that is currently under represented by the blogging community.

    My Carnival pick is Everything You Need to Know About Financial Success in Less than 100 Words posted at Worldwide Success by David E. The post uses Scott Adam's (author of Dilbert) idea that a guide on savings and wealth building can be put on one page, which Scott did in 126 words.

    If you are in your 30s or 40s, this Carnival may have a number of tips one can use. I hope you enjoy reading the articles as much as I did.

    For more New Beginnings, check back every Sunday for the next segment.
    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Saturday, February 10, 2007

    Q1 2007 Stock Purchases - Reflections

    Since buying some of my stock picks on 1/22/07, one of the purchases, Avnet (AVT), has had a significant run up. Although Avnet came close, it didn't meet my criteria for selling. While I would like to take a profit, I will continue to own Avnet. My other purchases have performed as expected, some up and some down. Genlyte is no longer a pick in my system and I will sell it once it is over my purchase price.

    Here's how my Q1 2007 purchases are performing:


    Stock

    Ticker

    Shares

    Price
    1/22/07

    Price
    2/9/07

    Gain
    Loss

    Percentage
    Gain/Loss

    AvnetAVT200$26.115$34.46$1,669

    32.0%

    CoachCOH50$44.01$46.86$142.50

    6.5%

    Biogen IdecBIIB50$51.14$49.50$82

    3.2%

    GenlyteGLYT50$76.5$73.47

    $151.50

    4.0%



    The overall gain is $1,578 and 11.4% for a total investment of $13,805.50, excluding commissions. While the market was a bit choppy this past week, I am still bullish as I think corporate earnings will continue to be strong this quarter. At this time, I plan to continue to own Avnet, Coach and Biogen. I will sell Genlyte on any rally that puts it above the purchase price.

    Also, I am no longer trying to buy CB Richard Ellis (CBG), even though it meets my buy criteria. The additional interest rate uncertainties from this week make a commercial real estate service company less desirable for me.

    For more Reflections and Musings , check back every Saturday for a new segment.
    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Friday, February 09, 2007

    Fixing Things Myself (and Saving Money)

    There must have been gremlins in our house and cars the past week. After 3.5 years of relative infrequent repair needs, we had several issues occur at once. For the past few years, I have been paying someone to fix issues like these. This past month, I've been wondering how much less I would spend in retirement since I would have time to fix things myself.

    First, I noticed my turn signal was clicking faster than normal, meaning that one of external lights was burned out. A quick look at my tail light showed it wasn't going to be simple change. Access to the bulb would require taking off the tail light cover. Not having work on cars for over 10 years and not on this truck, I wasn't looking forward to all the preparation work - buying the part, finding an manual, and removing the light fixture.

    However, I decided to dive into fixing it right away. On the way back to the office, I stopped at a local auto parts store. Using their computer, they identified the correct light bulb for my truck. Since I didn't have a manual for my truck, I looked on the Internet and found the complete manual in a PDF file. After reading the instructions, I took off the tail light and installed the bulb. It took about 15 minutes after I gathered my tools. I called the auto repair shop the next day and learned I had saved $22.50 for the service charge plus parts.

    A few mornings later I noticed there was only lukewarm water in our shower. Since our water heater is about 20 years old, my first thought was that it had burned out. When I checked the water heater, I noticed the pilot light wasn't lit. Since the instructions to light the pilot were written on the water heater, I decided to first try lighting it myself. (I had lit the pilot in my previous 90 year old house many times.) As it turned out, the pilot light was lit on the first try. This saved a $69 service call plus an estimated $20 repair charge.

    Then our sliding glass door wouldn't close when the temperature dropped to one degree overnight. We had called a repair service that was going to charge $30 to fix it that afternoon. However, when the sun rose, it warmed up the door and we were able to get it to close. (OK, it's a bit of a stretch to claim I fixed this, but we did save $30:-)

    Total saved was $141.50, not including tax. Not bad for one week of handling my own repair work, which I sometimes enjoy doing since I am an engineer. I can see easily doing more of my own repairs in my early years of retirement, which would somewhat reduce my living expenses.

    For more on Reaping the Rewards , check back every Friday for a new segment.

    Photo Credit: morgueFile.com, Kenn Kiser

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Thursday, February 08, 2007

    Investing 529 Plan Contributions


    I've been happy with the returns on the college savings in our 529 plan. So I am following the same investment strategy with the 2007 contribution I made in January. Here's how I've invested the 529 contributions since 2005:



    25% Vanguard Aggressive Growth Index Portfolio
    25% Vanguard 500 Index
    25% Vanguard Extended Market Index
    25% Vanguard Developed Markets International Stock Index

    As of January 31, 2007, the one year return of these funds was 14.56%, 14.24%, 10.52% and 20.11% respectively. I continue to divide our college savings equally among these funds instead of putting the majority in the highest returning fund. I believe all of these are good funds and will have good returns over the long term. Therefore, I don't try to choose the best fund for the year and just put an equal portion in each fund.

    For more on Crossing Generations , check back every Thursday for a new segment.

    Photo Credit: morgueFile.com, Michael Connors

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Wednesday, February 07, 2007

    Don't Get Talked Into Bad Deals

    When dealing with people on financial matters, it's good to be reasonably knowledgeable about the topic. From my experience, being even somewhat knowledgeable can help one avoid bad deals. In my opinion, scammers and con-artists go after targets that don't appear to know much about personal finance. So if one is not knowledgeable, how does one avoid getting talked into bad deals? Here are some ways I use:

    When someone is pressuring. I tell them I need some time to review it with my spouse, parent, or third party advisor. I ask for a contact number where I can get back to them. This allows me to consider the options at my own pace.

    When it sounds too good to be true. Ask for documents or a prospectus "to review with your attorney or CPA." In some cases I get the documents, many cases you will not. If I get documents and am truly interested, I find an attorney or CPA to review them. If it is a good deal, the cost will be covered. If it's a bad deal, finding out it is will be worth the cost.

    When the deadline is right now. I thank them for the opportunity and tell them no. It likely is a bad deal. I remember attending a seminar for a timeshare. We were offered a great early bird deal of $11,000 if we signed right away. We said no and the salesperson offered a better deal at $8,000. When we said no again, he lowered it to the final price of $6,000 and we said no again.

    Being perceived as knowledgeable is good. While there is a very small chance one may miss the deal of a life time, more often than not, one will have just avoided a bad deal.

    For more on The Practice of Personal Finance, check back on Wednesday for a new segment.

    Photo Credit: morgueFile.com, Mary R. Vogt

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Tuesday, February 06, 2007

    Full Feeds Enabled Again

    I want to thank readers of the My Wealth Builder feed for their patience during the past two weeks. Due to a new blog copying the full feed content of several personal finance blogs, including My Wealth Builder, I had changed to partial feeds. I realize from comments I have received that this change has caused some inconvenience. My apologies.

    To protect my copyrighted content, I sent a courteous note to the new blog and requested that they remove the copied content and only post summary feeds, i.e. only about 75 words of the post. The blog owners sent a courteous reply, agreed to my request and removed all full post copies of My Wealth Builder. As a result, My Wealth Builder feeds have been changed back to full feeds.

    Based on this experience, for future situations like this one, I will first contact the blog owner before taking other actions (such as converting to partial feeds.)

    Again, thank you for your patience in this matter.

    For more on Ideas You Can Use , check back every Tuesday for a new segment.

    Photo Credit: morgueFile.com, Mary R. Vogt

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    My Carnival Reading for the Week of 2/4/07

    Here are the Carnivals that I will be reading this week:

    The Carnival of Personal Finance #86 is hosted by The Simple Dollar.My Carnival choice is Retirement Savings Contributions Credit presented by A Penny Saved, which shares how one may qualify for a tax credit of up to 50% (maximum $1000 per person) for retirement contributions. Married couples with an adjusted gross income (AGI) less than $50,000 and singles with an AGI less than $25,000 may qualify.
    The inaugural edition of Carnival of 30's and 40's Personal Finances presented by Making Our Way.This new Carnival is scheduled to post on February 7, 2007.


    I hope you enjoy reading these Carnivals and finding tips you can use. Check back every Tuesday for the Ideas You Can Use segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Monday, February 05, 2007

    2007 Wealth Building Plans - January Review

    “He who fails to plan, plans to fail.” - Proverb quote

    As a reminder, I have three financial goals for 2007:

    1. Keep investment income to salary ratio >0.8.
    2. Increase savings to salary ratio by 1.5.
    3. Decrease debt to salary ratio by 0.1.

    Below is my plan for the Q1 2007, broken down by month. I have crossed out the items that have been completed. The red items are late. Blue items were completed ahead of time.

    January
  • Send payment to pay down 4% of mortgage principal.
  • Make maximum 2007 IRA contribution.
  • Make maximum 529 plan contribution for college.
  • Meet with Financial Advisor to review investments status.
  • Consolidate tax records by end of month for April 15th filing. Get preliminary estimate of capital gains from stock investments.
  • Adjust automatic savings deposits to be 20% of salary.
  • Review stock selection model and invest in picks.
  • Allocate a portion of 401K to international funds.
  • Executor work - complete transfer of assets to trust.
  • February
  • Do first draft of 2006 tax return.
  • Make full year contribution to Church via appreciated stock.
  • Executor work - complete getting basis for 2005 and 2006 returns.
  • March
  • Final draft of 2006 tax return.
  • Review Company retirement plan results.
  • Calculate Q1 Wealth Ratios.

  • Overall, I am satisfied with the completion of action items for January, 2007. Our college, retirement IRA and mortgage debt reduction contributions are completed for the year. For our tax filing work, I have most of the 1099's, with couple brokerage accounts of still outstanding. I have made my stock picks for this quarter.

    My only outstanding task item is the executor work that I wanted to complete in January. I have pulled together all the necessary documentation and still need to send the completed forms to the multiple DRIP accounts. Given the lighter task load in February, I will complete the executor work in that month.

    For more on Strategies and Plans , check back every Monday for a new segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Sunday, February 04, 2007

    Great Discounts On Amazon.com

    I recently found out that one can search Amazon.com categories by the percentage of desired discount for the items. With Valentine's Day almost upon us, I decided to try searching the Jewelry & Watches, Camera & Photos and Musical Instruments categories for gift ideas. The results are shown in the table below.

    Discount Percentage

    Category

    10-30%

    30-70%

    70-90%

    Jewelry & WatchesSave on a some jewelry and a large selection of watches.Save More on jewelry and watches.Bigger Savings on a wide variety of earrings, bracelets, necklaces and watches.
    Camera & PhotoSave on a wide variety of cameras and accessories.Save More on cameras and accessoriesBigger Savings on primarily accessories and a few cameras
    Musical InstrumentsSave on a variety head phones , some turntables and a few keyboardsSave More on head phones and accessories such as blank DVDsBigger Savings on accessories such blank DVDs and wire connections


    Overall, the discount pages offered quick access to deals in Amazon.com categories. The Jewelry & Watches category offered a great variety and selection in the 70-90% discount range. I thought the Camera and Musical categories had a better selection at the 10-30% discount range.

    Disclosure: As an Amazon.com affiliate, My Wealth Builder will receive a referral fee for purchases of items via the above discount links.

    For more Ideas You Can Use, check back on Tuesdays for latest segment.

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Request for Submissions - Cavalcade of Risk #19

    A new beginning for me. I will be hosting my first Carnival, the Cavalcade of Risk #19, on February 14, 2007. The Cavalcade of Risk is a Money & Finance Carnival that was started on June 7, 2006 to cover the topic of risk management related to the insurance business. The Carnival has expanded to include any articles on the topic of risk - insurance risk, investment risk, market risk, medical risk, and even personal risk.

    The submission deadline is Monday, February 12. You can submit your article using the Blog Carnival Submission Form.

    For more New Beginnings, check back every Sunday for a new segment.

    Photo Credit: morgueFile.com, Darren Hester

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Saturday, February 03, 2007

    Lessons From The Poker Table

    On weekends in college, I regularly played poker. I did it mostly for the social aspects, but I also won about $20 each weekend. The lessons I learned in poker were very applicable to my career and life. Here are some of the lessons I applied to personal finance:

    You must play the hand you are dealt. Every game requires each player to use the hand that they receive. No one ever says, "if I only had 4 aces, I'd be a winner." You try to win the money with the cards that you have.

    Personal finance application - No matter how much I was earning, I always payed myself first and put money into savings.

    Knowing when to fold is an important skill. Anytime during the game, one can choose to quit playing a hand. Cutting one's losses early and letting the winners run is a important skill. A bad hand rarely becomes a good hand. A good hand can become a better hand.

    Personal finance application - On my losing stock picks, I try to get out before the losses become big. Honestly, I am still not as good as I would like to be in this area.

    Bluffing works well when used occasionally. Many times I won because I had the best hand. Sometimes I won because people thought I had the best hand, and the best hand folded. In poker, sometimes it's not the cards you have that matter, it's the cards players think you have that count.

    On the other hand, bluffing only works when used appropriately. If one always bluffs, the other players will know that one doesn't have a good hand.

    Personal finance application - When negotiating a price, be ready to walk away from the purchase.

    The overall winner will have won in many different games. While luck plays a role, skill is the most important factor impacting the game. The best player will understand the strategies, be able to bluff and know when to fold for the different games.

    Personal finance application - I am building my wealth using a portfolio of investments - stocks, bonds, CDs, and real estate.

    Always look for the "fish" in the game. If you can't find him, you're it. A fish as a bad or weak poker player. There is usually a fish in every game and he will lose his money to the other players. If one isn't good at identifying the fish at the table, then one is probably playing out of one's league.

    Personal finance application - Being able to separate good financial ideas (e.g. pay oneself first) from bad financial ideas (e.g. only trust gold) is very helpful.

    For more Reflections and Musings, check back every Saturday for a new segment.

    Photo Credit: morgueFile.com, Ronnie Bergeron

    This is not financial or poker advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Friday, February 02, 2007

    Retirement Planning - A Staged Approach

    Recently Jonathan Clements, a Wall Street Journal columnist, proposed a staged approach to retirement spending in How to Survive Retirement -- Even if You're Short on Savings. Usually, I agree with the simple logical solutions to personal finance issues that Mr. Clements presents. However, this time, an analysis with numbers shows that the solution may not be feasible to address the issue of being short on savings.

    However, the staged approach does seem to provide an effective way to use one's home as savings for retirement.

    Low Savings Example

    Mr. Clements writes that a solution to low savings is to live retirement in two phases. In the first phase of 65 to 85, one should spend 3-4% of one's retirement savings. 15% should be set aside and invested in stocks and TIPS. In the second phase of over 85, one would spend the investments for the 15% invested and money from the sale or reverse mortgage of one's house. Conceptually this sounds like a good idea.

    However, when one puts in the numbers, the staged solution doesn't appear to work. Using his example of a 55-64 year old average savings of $90,000, 4% or $3,600 per year does not provide sufficient income on which to live. The person would still be primarily depending on Social Security and their pension.

    A Good Approach to Use One's House for Retirement Savings

    While it doesn't solve the issue of low savings, a staged retirement approach does offer an opportunity for one to use the equity of one's home as retirement income. In the past, I have not been a fan of using my home as retirement savings. The concept of staged retirement has caused me to change my mind.

    Take the example of 35 year old Em S. Grad in the Vanguard Retirement Calculator post. To cover 30 years for retirement after 65, Em needed $6,708,059 in retirement savings. If we apply the staged retirement model, Em would need $4,534,151 in retirement savings to cover the first stage through 85, or 20 years. To cover from the second stage of 85 to 95, Em should have a house (or other sellable assets) valued at $2,164,908 (the difference between $6,708,059 and $4,534,151) when he retires at 65. Em can then sell the house and other assets at 85 to fund the second stage of his retirement.

    What I like about the staged model is that I can enjoy a significant portion of my "retirement savings" before I retire. In this case, it is in the form of my house and other assets. Thus, I will not have forgone enjoyment of all my wealth while saving for retirement.

    Thank you, Mr. Clements, for another great idea.

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    This is not financial or retirement advice. Please consult a professional advisor.

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