Monday, April 30, 2007

Back In The Stock Market

On Friday, April 20, 2007, the 153 point rise in the stock market convinced me that the short term market decline was over. A few readers are probably asking, "Duh, what took you so long to figure it out?" In the past, I would have decided much sooner. However, nowadays, I wait a bit longer for a firmer confirmation, since I believe this is a very choppy market. I still believe that a correction will occur this year, and will be watching out for any indication of a downturn.

Using a modified Unemotional Investor Growth stock picking system, the following stocks are on my buy list.


My Wealth Builder Buy List
StockPurchase DateNumber of SharesPrice
Cognizant Technology (CTSH)
Coach (COH)
Avnet (AVT) 4/20/07

200

$38.11
C. B. Richard Ellis (CBG)4/20/07

200

$36.39
Albemarle (ALB)


My purchases of Avnet (AVT) and C. B. Richard Ellis (CBG) have had mixed results. AVT is higher at $40.90 and CBG is lower at $33.85 at the market close today. The other three stocks are slightly down since April 20, which is causing some concern that the market is not yet on a confirmed uptrend. However, at this time, I will still be looking to add positions in the other three stocks this week.

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

Tagged by The Binary Dollar - My Personal Finance Obsessions.



I was tagged by Henry from The Binary Dollar to write about obsessions I might have.




Wiktionary defines obsession as a
  1. A compulsive or irrational preoccupation
  2. An unhealthy fixation

Based on this definition, I don't think I have any obsessions:-) However, in the spirit of the tag, I will share three personal finance topics on which I spend more time than most people thinking about and trying to understand.

Beating market returns with a simple system. While I understand the rationale of investing in market indices, I want to believe I can find a sustainable system that will beat the market returns long term. I've tried fundamental analysis, technical analysis, Value Line, newsletters, and some elements of CANSLIM.

Currently, I am using a modified version of the Unemotional Investor Growth stock picking system. I have had reasonable success with it over the past 18 months. However, I have only invested a small portion of my savings in the system.

Finding "sure" winners in real estate. Throughout my adult life, I have periodically investigated and invested in rental real estate properties. This is one of those investigation times again. Being a bit of a contrarian, I like the idea of buying when everyone is selling and selling when everybody is buying:-) Real estate is currently shifting from everyone buying, but not everyone is selling yet. I think some good opportunities are to be found over the next 18 months. Since I like to be conservative with real estate, my plan is to only invest if I find a great opportunity.

Intimately knowing tax return details to minimize my tax liabilities. Regular readers know that I still do my taxes by hand so that I intimately understand how I can minimize the tax I owe. I now have three additional reasons for diving into the tax return details. First, I am near the border of dreaded Alternative Minimum Tax (AMT). Doing my taxes by hand has helped me better know what can trigger the AMT. By managing my investment income and itemized deductions better, I will be able to avoid triggering the AMT in the future. Second, with the arrival of our daughter, I have been learning about the many tax deductions, exemptions and credits associated with a child. Finally, 2008 to 2010 has many special elements that will sunset in 2011, unless extended by Congress. Knowing the tax code details will help me take advantage of these elements.

I will now tag Golbguru at Money, Matter, and More Musings, Sun at The Sun's Financial Diary, and Silicon Valley Blogger at The Digerati Life.

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

Photo Credit: morgueFile.com, Matthew Hull

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

Copyright © 2007 Achievement Catalyst, LLC

CNBC Million Dollar Portfolio Challenge - IBN Network Update

As part of the Investors Blog Network (IBN) Festival #4, a portfolio was submitted to the CNBC.com Million Dollar Portfolio Challenge. Here is the status of the IBN Network Portfolio at the market close on Friday, April 27, 2007:



Status

Portfolio OpenedMarch 21, 2007
Stocks Purchased

Avnet (AVT)
Bruker BioSciences (BRKR)
Intuit (INTU)
Apple (AAPL)
Millicom International (MICC)
Gol Linhas Aereas Inteligentes (GOL)

Cash Position

16%

Portfolio Value

$1,133,000 (top 9% in ranking)

Gain to Date

13.3% (7.5 % from bonus bucks)


Since there are only two weeks left in the contest, it does not look like this portfolio will be in the top 10 finishers at the contest completion. However, the portfolio does show the IBN Network has made some good stock picks.

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

Photo Credit: CNBC.com

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

Copyright © 2007 Achievement Catalyst, LLC

CNBC Million Dollar Portfolio Challenge - Long Term Stragtegies Doing Well


Here is the latest status for the portfolio I entered in the CNBC.com Million Dollar Portfolio Challenge. Overall, my long term picks have done surprisingly well in this short term contest.

I entered a portfolio based on the modified Unemotional Investor portfolio which I described in My Stock Picks for Q1 2007. (Disclosure: I closed out this portfolio on March 2, 2007 as described in Q1 Stock Purchases Update - Closed All Positions and I repurchased Avnet (AVT) and C. B. Richard Ellis (CBG) on April 20, 2007.) In addition, I purchased Google (GOOG) and Golden Star Resources (GSS) which are stocks I like but were not identified by the system. Here are the status details as of the market close on Friday, April 27, 2007.


Status

Portfolio OpenedMarch 14, 2007
Stocks Purchased Avnet (AVT)
Coach (COH)
C. B. Richard Ellis (CBG)
Google (GOOG)
Golden Star Resources (GSS)
Cash Position

14.4%

Portfolio Value

$1,172,000 (top 6% in ranking)

Gain to Date

17.2% (9 % from bonus bucks)


I wish I was doing this well in my actual investment portfolio:-) The contest provides a "test" of the real world stock picks I have made, which makes me feel pretty good about the Unemotional Investor stock picking system.

Since there are only two weeks left in the contest, I will invest the remaining cash position in Avnet (AVT). At this point, it does not look like this portfolio will be in the top 10 finishers at the contest completion.

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

Photo Credit: CNBC.com

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

Copyright © 2007 Achievement Catalyst, LLC

Sunday, April 29, 2007

Our Brains Make Change Hard

"Consider how hard it is to change yourself and you'll understand what little chance you have in trying to change others." -- Jacob M. Braude

Personal change is very hard to do. There are many times I try to do things differently. However, it's always easier to revert back to old habits versus maintaining the new state. Based on reading I have been doing, we are genetically wired do what we know how to do.

We all have preferred talents on which we depend. This is the premise of a book Discover your Strengths by Marcus Buckingham. For whatever reason ( e.g. - parental training, childhood experiences, learning styles, etc.), one will choose to use preferred approaches and have tendencies to achieve certain outcomes. Knowing and focusing on one's talents can help enable effectiveness and help understand what can be done to create change.

The book also includes a questionnaire to help one identify the top five talents. I found the questionnaire results very insightful and very accurate. The results consistent with what I feel are my strengths and my development areas.




Pattern recognition is a major technique used by our brain. How do we know something is what it is? Why does practice and repetition improve our performance? One reason is that the brain uses a highly effective pattern recognition process to quickly analyze what one perceives. It's the reason that all of us recognize that a new animal is a dog even though we haven't see that specific breed of dog yet. Pattern recognition is applied to all aspects of our life, including personal finance. The brain looks for patterns we have already seen and it does not know the one's we have not seen.
A good book I have read on this topic is On Intelligence by Jeff Hawkins. The author does a very good layman's explanation of the concept.





The brain tends to automate many activities instead of thinking. Many of the activities the brain controls is reflex or automatic - e.g. heart beating, breathing, walking etc. We notice the automatic nature of our brain in our habits. I tend to drive the same way to work, almost on autopilot. I pronounce words the same each time. I have the basically the same wake up and go to bed routines.

Effectively, the tendencies of our brains mean we have a tremendous uphill battle to change the status quo in our brains and then effectively maintain that change. For me, it explains why only teaching personal finance techniques, without additional reinforcement or emotional help, won't succeed. The technique is only half the battle. The other half is overcoming the tendencies of the brain.

To illustrate, let me ask everyone to do a simple change. Try for a moment to write a sentence with your non-writing hand. Although, we all know how to use a pen, the shapes of the letters, and the desired outcome, most of us find it difficult to simply change hands when we write. Inevitably, all of us will switch back to our current writing hand.

What I Try To Do

I am the first to admit that I find adapting to change as challenging as the next person. While I don't have the definitive answer, here are some approaches I have to help myself change.

Recognize change will take extraordinary effort in most cases. If effective change was easy, we'd all be making the major changes needed. Be ready to do more thinking, looking for new patterns, and leveraging one's strengths in different ways. Also, try to focus on a limited number of changes at the same time.

Set a goal and plans to achieve that goal. A goal that is different than the current reality which causes one's brain to break from it's normal habits. The brain recognizes one must do something different to achieve the change. A goal and plans helps keep one focused on making the change. Here are our family's goals and plans.

Track progress. I find tracking specific measures versus our goal helps keep me on track by making the brain actively think about the plan and avoid reverting to old habits. I do this through our quarterly review of our Wealth Building Ratios. When I'm on track, I feel good that the plans are work. When I'm off track, I begin thinking about what adjustments are needed, if any.

For more on 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, April 28, 2007

Carnival Highlights For The Week #11

Here are some of the posts I like from Carnivals of the past week.

The Investors Blog Network (IBN) Festival #5 The Investors Blog Network (IBN) Festival #5 is organized by The BioHealth Investor.My Festival choice by Breaking the Shackles of the 9 to 5 on the Anatomy of a Stock Trade: Entry Techniques. This is a good post on the technical trading aspects on buying, managing risk and exiting a position in a stock.
The Festival of Frugality #71 is hosted by Money, Matter, and More Musings.My Festival pick is Frugal vs. Cheap posted at Money Walks. This post is an excellent discussion of the concepts with examples showing the difference.
The Cavalcade of Risk # 24 is at The Digerati Life.This is an excellent Carnival, with many great articles. I narrowed my Carnival selections to the following two.
The first is by Brazen Careerist tells us that You Don’t Need To Love Risk-Taking To Start Your Own Business. I like the key points in this post: Start with existing skills and assets, be flexible, find a partner (mentor), focus on what's important and have a positive attitude.
The second is by Personal Finance Advice which tells us about Understanding Disability Income Insurance. This post is an excellent detailed introduction to disability income insurance, which is more likely to be needed more than life insurance during one's working years.
The Carnival of Financial Planning #2 is hosted by The Skilled Investor Blog.My Carnival pick is Stocks Vs Real Estate, Winning Investment Strategies posted at The Digerati Life, which compares six areas of consideration when comparing the stocks to real estate. Her post convinced me that the real estate investment practice of personally buying and renting property to a tenant should be considered a small business instead of an "investment," since it may require frequent effort to have a positive return.

I hope you enjoy reading these Carnivals and finding ideas you can use.
Check back on Saturday for the next Reflections and Musings segment.

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

Copyright © 2007 Achievement Catalyst, LLC

Friday, April 27, 2007

A Capital Gains Tax Break For Retirees

I have found several interesting tax breaks for retirees. These tax breaks can help one maximize income during retirement if one can control taxable income. This post will share the tax break for capital gains and qualified dividends.

Get a Capital Gain Tax Rate of 0%

If taxable income is $63,700 or less for 2008 to 2010, one may be eligible for an capital gains and qualified dividend federal tax rate of ZERO percent. That's correct NO Taxes.

Currently, the long term capital gains and qualified dividend tax rate is 5% for taxpayers in the 5% or 10% tax brackets. Based to the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) and extended by the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA), the 5% rate drops to 0% from 2008 to 2010. In 2011, these rates will sunset and revert to the pre-2001 rates. For more details, please read the article in The CPA Journal.

Capital Gains Tax Minimization for 2008 to 2010

If one has long capital gains, consider selling all or part of those assets, with capital gains profits up to the upper limit of the 15% tax bracket. Then keep one's total taxable income under this upper limit, via standard or itemized deductions and exceptions. By doing this, one will pay ZERO federal taxes on income.

For reference, here are the 2007 maximum limits for the 15% tax bracket:

Taxpayer Status

Maximum for 15% Tax Bracket

Single

$31,850

Married Filing Jointly
or Qualifying Widow(er)

$63,700

Married Filing Separately

$31,850

Head of Household

$42,650


By the way, this works for anyone under the 15% tax bracket maximum income limits. One does not need to be a retiree:-)

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, April 26, 2007

The Value Of My Parent's First House


Speaking of Estimating the Price of My Home, I decided to see what my parent's first home is worth today. Using Zillow.com, I discovered the estimated value of the house is now $486,000, for which they paid $28,000 about 40 years ago. It's a modest home, about 1400 square feet, but in a Washington, D.C. suburb.

This 17.4 fold increase amazed me. Over the 40 years, this was a 7.4% annual return. And based on today's tax laws, the gain would be tax free up to $500,000. This would be been one of my parent's higher returning investments, were they still living there today.

On the other hand, I don't think they would have been able to monetize their gain. Their current house, although much larger and newer, is worth about $450,000. So most of the gain from their first house would be tied up in the equity of their current house. This is the issue with counting home equity towards one's retirement. The gains may still be tied up in the house during one's retirement.

Hopefully, we will see similar gains on our house. At the same rate of increase, my first house of $75,000 will be worth $1,300,000 at 40 years. Based on a staged retirement strategy, I believe we will be able to monetize our home. In the first stage of retirement, we will continue to live in our home. In our second phase of retirement after 85, we will either sell our home or do a reverse mortgage.

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

Photo Credit: morgueFile.com, Daniel T. Yara

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

Copyright © 2007 Achievement Catalyst, LLC

Wednesday, April 25, 2007

Start Thinking About 2007 IRA Contribution

Now that your 2006 tax return is filed, you can start thinking about your 2007 tax return :-)While the deadline is April 15, 2008, it’s not too soon to start setting aside money for your 2007 IRA contributions. As I wrote in a previous post, IRAs are one way to use “other people’s money” to save.

For 2007 the IRA contribution limits are the same as for 2006. The maximum IRA contribution is $4000 per person with a $1000 catch-up contribution for people 50 or older. The income limits to qualify for IRA deductibility and Roth IRAs have been increased.

IRA owner participates in a company sponsored retirement program

Regular IRA contributions are 100% deductible for modified adjusted gross incomes (MAGI) up to $52,000 (single) and $83,000 (married filing jointly). People with MAGI over $62,000(single) and $103,000 (married filing jointly) cannot deduct regular IRA contributions. Roth IRA contributions are not deductible and the maximum contribution can be made for MAGI up to $99,000 (single) and $156,000 (married filing jointly). People with MAGI over $114,000 (single) and $166,000 (married filing jointly) cannot make Roth IRA contributions.

IRA owner does not participate in company sponsored retirement program

No income limits for deductibility of IRA for both single and married filing jointly. If the spouse participates in a company sponsored retirement plan, then the IRA owner can deduct 100% of the contribution up to $156,000 MAGI. No deduction is allowed after $166,000 MAGI.

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, April 24, 2007

Car Insurance - I Declined on Uninsured/Underinsured Coverage

First let me put all the usual disclosures at the beginning. I am not an insurance person, attorney or a personal finance advisor. This post represents my personal interpretation. Please consult a professional before taking any action.

While I believe insurance is important, one of my wealth building strategies is to avoid getting unnecessary insurance. I currently DO NOT have uninsured/underinsured motorist coverage, because I do not believe it is necessary for me. Here is how I came to the conclusion:

What Uninsured/Underinsured Motorist Insurance Covers

It covers the collision, medical and liability costs of an insured driver or underinsured driver. For example, if an uninsured driver hits your car, the damage to your car and any medical expenses would be covered by this insurance.

Why I Don't Buy The Coverage

I already have good medical insurance.
I currently have $1,000,000 of medical insurance through work. The bodily injury insurance of uninsured/underinsured motorist insurance would be duplicating this coverage.

I own a low value car. Our state requires minimum insurance coverage which would probably covered the totaled value of our cars. If the person is uninsured, then my own collision insurance would cover the damage. In both cases, uninsured/underinsured motorist insurance would be duplicating collision coverage.

I think I should only insure myself. I prefer not to pay additional for someone else's insurance liabilities. I recognize that it may cost me more should I be hit by an uninsured/underinsured driver. However, I am willing accept that risk versus paying $30 to $50 every six months for the insurance.

When I first decided to decline underinsured/uninsured coverage, my insurance company required me to sign a waiver, caused me to be momentarily concerned about dropping a "necessary" coverage. However, I still proceeded and dropped the coverage. Since dropping this insurance, we have been saving about $200 per year and have had only two minor accidents where the insurance of the car at fault completely covered the repairs.

Of course, insurance is a personal decision. If you have low medical insurance limits or you own a very expensive car, it may be worth carrying uninsured/underinsured motorist insurance as a additional insurance.

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

Photo Credit: morgueFile.com, Kenn Kiser

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

Copyright © 2007 Achievement Catalyst, LLC

Monday, April 23, 2007

2007 Wealth Building Plans - Q1 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.

Here's how I have done versus my plans for Q1 2007. I have crossed out the items that have been completed. The red items are late. Blue items were completed ahead of time. Green items were added after the initial plan was developed.


<><><><> <><><><> <><><><>
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. January



  • Executor work - complete getting basis for 2005 and 2006 returns.



  • Open up UTMA account for daughter.

  • March



  • Final draft of 2006 tax return.



  • Review Company retirement plan results.



  • Calculate Q1 Wealth Ratios.




  • Although not the investment results I wanted, I am satisfied with the completion of action items for March, 2007:-) During March, I decided to file an extension for my 2006 tax return since I owe taxes and wanted some more time to confirm the number. Of course, with an extension, I must still pay the expected taxes, which I did. In the review of my company retirement plan, I decided to increase my money market holdings slightly and continue to increase it as the company stock rises. I will be doing this to offset the risk of having most of my retirement account in company stock. (For reference, I have limited investment options at this time.) Finally, my analysis of Wealth Ratios for Q1 2007 showed virtually ZERO growth in my investments. This has caused me to rethink my retirement income strategy.

    My only outstanding task item in Q1 2007 is the executor work that I wanted to complete in January. Given the lighter task load in February and March, I thought I would complete the executor work in that month. The work is not difficult, but requires a lot of effort since new accounts need to be opened for each DRIP. Each new account requires the same information, but on their own documentation. This work continues to confirm my personal decision to avoid using DRIPs.

    Alas, not perfect, but pretty good progress. I will update progress on the remaining plans quarterly, since I had front loaded many of the activities into the first quarter.

    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, April 22, 2007

    Retirement Income Strategy - New Thinking

    Having had regular salary income for all my working life, the likelihood of depending entirely on irregular income streams in retirement is causing me rethink how we will manage our finances.

    Current Situation While Working

    Since graduating for college, I have always had a job with steady and increasing base compensation. I always knew what my monthly paycheck would be and on about an annual basis, the amount would increase. Planning for living expenses, future large purchases, and emergency funds has been relatively straightforward. For us, planning has been taking a percentage of the monthly paycheck and putting it towards to right category.

    Future Situation In Retirement

    My sources of income in retirement will be: 1) Company profit sharing retirement account; 2) Personal savings and investments; 3) Deferred compensation (stock options); and 4) Social Security. With the exception of Social Security, the amount available from these sources will be entirely dependent on investment gains. If I retire in my forties, I won't have the benefit of Social Security payments until 62 or older.

    Income Strategy

    As I learned in my Wealth Builder Ratio Updates for 2007 Q1, even though the stock market has a good long term return, investment income may not be predictable in the short term. I have started to work with my financial advisor, to better understand the options. I'm sure that self-employed business owners are used to this situation, but having variable yearly income is a new concept to me.

    Although the strategy is still not fully developed, here is how I am thinking about about it based on insights from my financial advisor:

    Regularly guarantee one to two years of income. Each year, I will transfer retirement funds and create one to two years of income in short term money instruments (3 month to 1 year CDs or Treasury Bills) prior to needing the money. This will guarantee a certain yearly income is available no matter what the stock market situation is and give me peace of mind. Of course, I will give up some market gains by doing this.

    Use a risk allocation to diversify my retirement portfolio. My retirement investments need to be better diversified by risk to offer short term income protection and potential gains exceeding market returns. As described above, a part of the diversification is to have the income needed for the next one to two years in low risk and certain (perhaps lower) returns investments. Thus, any declines in the market will not affect my short term income. However, I will still benefit from the higher longer term returns of being invested in a stock market portfolio and other higher risk investments, such as as real estate or a small business.

    Risk allocation is different than asset allocation. Asset allocation reduces market risk by investing in different relatively non-correlated investments, e.g. stocks, bonds, real estate and gold, and thus minimizes the negative (and positive) impact of one sector should it deviate from the norm. Risk allocation puts investment funds into different categories of - very low risk, market risk and high risk. Very low risk would include one's house and income needs. Market risk is a diversified stock market portfolio. High risk might be a single stock, real estate or a small business.

    Transition to a risk diversified portfolio before retiring. In the early 2000's, I personally knew several people whose retirement plans were negatively impacted because their company's stock fell 50% just before their retirement. While their financial advisor had recommended reallocating part to lower risk cash in the year before retirement, the future retirees didn't want to lose out on any gain by the stock's 30-40% gains the previous few years. Instead the stock fell precipitously in the bear market, causing great disruption to their plans.

    Continue to build wealth in retirement. Since significant wealth building is achieved through concentration, I would continue to maintain a smaller percentage of my portfolio in higher risk and potentially higher return investments. These would include single stocks, stock options, partnerships, and real estate other than my house. I am encouraged by this element since my previous retirement investment strategy was not adequately allowing for continued wealth building.

    Overall, I think this is a much better strategy than one of wealth preservation, which I had been using. I will be refining my income and investment strategies for retirement over the next couple months and will post updates as I develop them.

    For more on 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, April 21, 2007

    Carnival Highlights For The Week #10

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

    The Carnival of Personal Finance #96 is organized by All Financial Matters.My Carnival choice is Maxing Out Retirement = Saving Too Much? by Personal Finance Advice, which numerically addresses the question of whether someone saved (and sacrificed) "too much" in a specific example. His conclusion estimated the person was saving about 15% of a $100,000+ salary, and was able to do so and "still have fun."
    The concept of over saving and over sacrificing is one of the hot topics in the Personal Finance Blogosphere. My personal bias is that a better future always requires some sacrifice - e.g. getting higher education for a better paying job, foregoing some things for a comfortable retirement. As long as I can eat well, have good shelter and be safe, I don't actually need too much more :-)
    The inaugural edition of the Carnival of Financial Planning is hosted by The Skilled Investor.My Carnival pick is 15 Financial Lessons from the Demise of Anna Nicole Smith (Yes, I’m Serious) presented at Credit Card Lowdown, which shares 15 estate planning tips learned from her situation.
    While some of the tips may have more relevance for Ms. Smith's situation (e.g. - don't do drugs), the following were ones that were relevant to me:
    2. Hire a good lawyer.
    3. Draw up a proper will.
    4. Include contingencies in your will or trust.
    5. Don't procrastinate.
    6. Beware of estranged relatives.
    12. Appoint guardians for minor children.
    13. Set up trusts.
    The Carnival of Education #115 is at Dy/Dan.My Carnival selection is by What It's Like On The Inside, who wonders How Did We Survive To Adulthood? without car seats, safety belts, bicycle helmets, rubberized playground mats, and hand sanitizers during our childhood.
    While I would never not use a car seat, safety belt, or a bike helmet for our daughter, I can't help but wondering if we are creating a "less careful" adult population in the future. The same principle can probably be applied to children who are "protected" from making financial choices while growing up.


    I hope you enjoy reading these Carnivals and finding ideas you can use.

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

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

    Copyright © 2007 Achievement Catalyst, LLC

    Friday, April 20, 2007

    Retirement In My Forties - What Would I Do?


    Last month, I wrote an article on how I could retire in my forties. Earlier I wrote an article Retire From Your Job, Not Life. Here are some initial thoughts of what I would do and not do if I retired in my forties.

    Things I Will Do

    More time with family. While working, I have spent most of my time with the "outer circle" of contacts and less time with the "inner circle" closest to me, my family and close friends. I admit that I have worked 12 to 16 hour days, including weekends, for long stretches. I have traveled for extended periods, up to a month. I have worked at home. I have worked on vacations.

    I have already taken back the weekends for family activities. It has been great and I look forward to doing more in retirement.

    More time with my daughter. I will be there as she grows up. I am enjoying the time now immensely since she still is enthusiastic to have Daddy around her. I know someday I will be uncool and asked to be unseen:-) Until then, I will enjoy being with her as she grows up.

    Do whatever I like. Stay up late, sleep in, stay in my pajamas and read. Invest in stocks, post more to my blog, and check out yard sales. Play recreational sports. Eat healthy, exercise and smell the roses. And, of course, more planned activities with my wife and daughter.

    Get paid for what I love to do. A common career recommendation is to do what one loves. For me, doing what I loved never seemed to pay very much or enough :-) However, in retirement, the amount won't matter as much if I love to do it. And when I stop loving it (either the work, environment, or company) , I can quit and go to the next paying activity I love to do.


    Things I Will Not Do

    Volunteer work. To me, volunteer work is still WORK but for no wages. When I was younger, I did volunteer work to gain additional experience for my career. I have already done a significant amount of volunteer work in my younger days. I've led, as president, various organizations: a community social group; my alumni association; and a non-profit charity. I've also run for public office. I have little interest to do additional volunteering in retirement :-)

    Consulting. Based on what I have observed, there would be too little control of my life, which I would want back in retirement. It seems that great consultants have less control rather than more control of their lives. I would rightfully be serving the needs and desires of clients, whatever they may be. Otherwise, I would not be doing a great job.

    Part time work related to my current career. A previous boss once said, "If I wanted to continue to do what I am doing today, I would not have retired." I agree with that perspective.

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

    Photo Credit: morgueFile.com, Scott M. Liddell

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

    Copyright © 2007 Achievement Catalyst, LLC

    Thursday, April 19, 2007

    Being A Big Kid - Frugal Entertainment


    One of my not so big secrets is that I still love to play like a kid. As entertainment costs for movies, sports events, and theatre continue to skyrocket, being a big kid is an inexpensive way to have fun. I enjoy playing video games, building models, participating in sports and playing with toys. Before we had our daughter, I didn't have a good excuse to do these activities. I would have to admit that I was doing it for myself:-)

    Now that we have our daughter, I get to play as much as I want, with our little girl being the apparent reason. Here are all the things I get to do now, without any guilt:

    Imagine. It's great to pretend one is an astronaut, fireman, artist or a bear. We build robots from lego blocks, do puppet shows, bring stuffed animals to life. Imagination can be great entertainment.
    Draw and sing. My drawing is atrocious and I sing horribly. However, to my daughter, each drawing I do is a masterpiece. Our driveway is filled with chalk drawing requests. We learned very early on that singing calms our daughter at night. So I sing a lot at nights.
    Play video games. I am the original video game addict. That's why I don't own any. Although my daughter doesn't play, my nephew does, using his Play Station. The last time I beat him in a video game, he was 5. Now he routinely beats me, and he probably could win even with his eyes closed :-)
    Have fun doing silly things. We chase each other around the house. We yell and scream, blow bubbles, throw snowballs and fly kites. I am excited at the overcoming the simplest challenges. We have fun feeding our fish. I crawl around the house like a bear. We laugh, we laugh and we laugh more.
    Learn like a child. Going to children's museums is one of my more serious children's activities. As an engineer, I love to see science in action. A great place to observe how science works is at a Children's museum. Scientific principles are brought to life in a way that is enlightening and entertaining.

    The zoo is another great place for learning, especially about the animals, their habitats and the environment. For me, I get to relearn all the great animal knowledge that I had forgotten.
    Not only is playing like a kid fun, it also can be very inexpensive. With the exception of the museums and the zoo, there are no major costs that are associated with the above activities. For the museum and zoo, we get yearly family memberships which pay out after the second visit.

    For more on Crossing Generations , check back every Thursday for a new segment.
    Photo Credit: morgueFile.com, Phaedra

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

    Copyright © 2007 Achievement Catalyst, LLC

    Wednesday, April 18, 2007

    Planning For 2007 Tax Returns - Tax Tables

    The best time to plan and prepare for taxes is before the tax year is completed. Since the IRS publishes the next year's tax rate the previous fall, the 2007 tax brackets, as well as amounts for standard deductions, personal exemptions and other tax areas, are already available. These tables can help you develop tax strategies and estimate your tax bill for 2007.

    If interested in specific details, you can get more information from the IRS website.

    2007 tax rates and brackets
    These tables can help you estimate your tax bill
    For single taxpayers
    If taxable income is over --But not over-- The tax is:
    $0$7,82510% of the amount over $0
    $7,825$31,850$782.50 plus 15% of the amount over $7,825
    $31,850$77,100$4,386.25 plus 25% of the amount over $31,850
    $77,100$160,850$15,698.75 plus 28% of the amount over $77,100
    $160,850$349,700$39,148.75 plus 33% of the amount over $160,850
    $349,700no limit$101,469.25 plus 35% of the amount over $349,700
    For married couples filing jointly*
    If taxable income is over--But not over--The tax is:
    $0$15,65010% of the amount over $0
    $15,650$63,700$1,565 plus 15% of the amount over $15,650
    $63,700$128,500$8,772.50 plus 25% of the amount over $63,700
    $128,500$195,850$24,972.50 plus 28% of the amount over $128,500
    $195,850$349,700$43,830.50 plus 33% of the amount over $195,850
    $349,700no limit$94,601 plus 35% of the amount over $349,700
    * Or qualifying widow(er )
    For married couples filing separately
    If taxable income is over-- But not over-- The tax is:
    $0$7,82510% of the amount over $0
    $7,825$31,850$782.50 plus 15% of the amount over $7,825
    $31,850$64,250$4,386.25 plus 25% of the amount over $31,850
    $64,250$97,925$12,486.25 plus 28% of the amount over $64,250
    $97,925$174,850$21,915.25 plus 33% of the amount over $97,925
    $174,850no limit$47,300.50 plus 35% of the amount over $174,850
    For heads of households
    If taxable income is over But not over The tax is:
    $0$11,20010% of the amount over $0
    $11,200$42,650$1,120 plus 15% of the amount over $11,200
    $42,650$110,100$5,837.50 plus 25% of the amount over $42,650
    $110,100$178,350$22,700 plus 28% of the amount over $110,100
    $178,350$349,700$41,810 plus 33% of the amount over $178,350
    $349,700no limit$98,355.50 plus 35% of the amount over $349,700

    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, April 17, 2007

    Would I Do The Expat Assignment Again?


    Knowing what I know now, the answer is absolutely yes. Overall, it was a great experience professionally and personally. Here are the reasons:

    The location. My assignment was in Japan. On the surface, this location seems like one of the less desirable ones since it is so far away. As it turns out, I think it is one of the best. Colleagues who had done assignments in Europe and Latin America, also thought Japan was their top choice. While an expensive country, Japan was very accommodating to foreigners and it was a very safe country. We enjoyed the Japanese culture.

    The work experience. I had responsibility for the product development organization the region. In the U.S., my company is a big gorilla in the business. In Japan, we were a chimp, at best. Operating as a chimp is much different than operating as a gorilla, especially when the competitor companies are the gorillas. :-)

    It was a promotion. The assignment accelerated my promotion by at least 3 years. In fact, I may never have been offered a promotion without the assignment, given restructuring and downsizing that subsequently occurred.

    The compensation was good. My base compensation increased because it was a promotion. In addition, the new level had short term bonuses and long term deferred bonuses. And as discussed in a previous post, the adjustments for being an expat were generous, in most cases.

    It was a great experience for our family. Living outside of the U.S. taught us a lot about our culture and other country's culture. I have now greater respect for cultures, businesses, and challenges outside the U.S. Our family also grew stronger as we faced our challenges of living abroad.

    To note, I have seen an opposite effect on some families (about 10%), where the issues become more exaggerated by living overseas. This is a caution area if one is considering an expat assignment - current issues may become worse.

    Of course, each person needs to assess their own person situation before accepting an expat assignment. There are many more factors than the one's I highlighted above. However, these were the top five reasons for why the experience was a good one for us.


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

    Photo Credit: morgueFile.com, Daniel T. Yara
    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Update on Promotion Rewards

    Previously I wrote about getting freebies for activities I was already planning to do - i.e. double dipping. Here is an update on the status of the rewards for participating.


    Update on Freebies
    Promotion Sponsor
    Reward
    Submitted
    Status
    TD AmeritradeIPod Nano for opening and funding a new account with $10,000February 14, 2007Received a silver 2GB IPod Nano on April 13, 2007.
    Mazda$25 Visa Gift Card for test driving any Mazda.March 9, 2007No information. No test drive was done since a Mazda RX-8 wasn't available.
    Chevy$25 Best Buy Gift Card for for test driving a Chevy HHR.March 31, 2007No information. I enjoyed driving a loaded HHR, which is a new SUV crossover design. MSRP was about $23,000.
    Ford$50 Target Gift Card for for test driving a Ford Edge.April 16, 2007No information. I enjoyed driving an upper tier Edge, which is a new SUV crossover design. MSRP as about $32,000.

    Since these were activities I was already planning to do, the promotion is a nice additional bonus. However, now that I qualified for each promotion, I am tracking them until the bonuses are received :-)

    For more on 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, April 16, 2007

    2006 Tax Return Extension Filed


    Originally, my goal was to file my 2006 tax return by April 17, 2007. However, I have decided to file for an automatic extension to August 15, 2007 using form 4868. While the extension delays filing, one must still pay any underpayment of taxes due by the original due date. Thus, I sent in an additional 20% payment for my taxes.

    Here are my reasons for filing an extension:
    1. Missing Schedule K-1 for an investment. We had invested in a local sports bar LLC based on the success of the principal in a current business. In 2005, the business broke even and was expected to be profitable in 2006. Unfortunately, the principal had a heart attack and passed away. This has resulted in some of the paperwork being delayed since the principal handled all the business documentation.
    2. Absence of AMT tax. After two consecutive years of paying an AMT tax, we did not owe an AMT tax this year. While I am happy not to pay the tax, I still do not understand why I don't owe the AMT tax this year. Frankly, that bothers me and I am concerned that there is a small probability that an error is the cause. After working on the AMT part yesterday, I think I have found the answer and confirmed my original estimate is correct. However, I decided it would be a good idea to recheck my numbers again.
    3. Make sure I get the tax breaks for which I am qualified. Since I owe taxes this year, I wanted to be extra sure I didn't miss any tax breaks (charitable contributions, tax credits, or loss carry overs) that can help reduce my taxes. While finding all tax breaks is important every year, it feels more critical this year, since I owe so much. :-)

    As usual when owing taxes, I sent in the extension certified to have proof that the additional taxes were paid on time.
    For more on Strategies and Plans , check back every Monday for a new segment.
    Photo Credit: Internal Revenue Service

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

    Copyright © 2007 Achievement Catalyst, LLC

    Sunday, April 15, 2007

    New (Free) IPod Nano Arrived

    While not new to the owners of 100 million IPods already sold, the IPod Nano is "new to me." In February, 2007, I opened a new UTMA account for our daughter with TD Ameritrade, funded it with $10,000 and qualified for a free 2GB IPod Nano. On Friday, the IPod Nano arrived and my wife is the proud owner of our new electronics.

    Regular readers know that I am not a big fan of buying the latest electronics. For example, I still do not own a cell phone, use cable or have a wide screen TV. However, the IPod Nano was provided as a free gift for opening a UTMA account, which I was already planning to do. So technically, I didn't really buy something I didn't need :-)

    For reference, the promotion did cause me a little more effort than normal for opening a TD Ameritrade account. The UTMA was not a standard account and I went to a branch office to make sure I did the application correctly. In addition, due to a backlog from the overwhelming response to the offer, my account wasn't actually created until after the deadline, which required me to make two phone calls to confirm I had qualified for the promotion. To TD Ameritrade's credit, they handled the situation very well. Although, my application as processed didn't include the IPod Nano promotion, the customer service representatives quickly corrected the mistake.

    Today, I unpacked the IPod and began to use it. Having owned an Apple MacIntosh previously, I expected the IPod to be a plug and play into my HP Windows XP computer. So I ignored the limited instructions and plugged it in. Unfortunately, the current version of iTunes on my computer didn't recognize the IPod. After a half hour of frustration, which included a failed download of iTunes 7, I decided to finally read the instructions, which recommended first going to the Apple.com website to get started. Upon doing this, I was able to get the new IPod Nano to function correctly.

    Other than the inauspicious start up, I have been impressed with the product. The product is very intuitive. I was able to figure out most of the functions (e.g. touch dial), without reading the instructions, and learned about more functions after reading them :-) It also has several functions, which I wouldn't expect -e.g. a clock. I have been able to download several albums and edit play lists using iTunes 7. Finally, the sound quality is excellent.

    I can also see how the IPod may become an additional drain on the pocket book. This weekend, we noticed an abundance of IPod accessories (car adapters, portable speakers, clock radio docks) with costs in the $100 to $200 dollar range, some of which we think would be nice to have. However, we resisted buying them at this time:-)

    At this time, I don't think we'll give into IPod mania; however, I will let all know if that changes. In addition, I'll let everyone know my impression of the IPod after using it a bit more in the next month.

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

    Photo Credit: Apple.com

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

    Copyright © 2007 Achievement Catalyst, LLC

    Saturday, April 14, 2007

    Carnival Highlights For The Week #9

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

    The Investors Blog Network (IBN) Festival #4 is organized by My Wealth Builder.

    My Carnival choice is Save Time with the Stock Market Search Engine by Investors Trip. The Stock Market Search Engine (SMSE) was created because of frustration with links unrelated to the stock in Google Search. The SMSE solves this problem because the search index lists only websites that are related to the stock market.

    In addition, the portfolio by the Investors Blog Network for the CNBC.com Million Dollar Portfolio Challenge is shared. As of April 13, 2007, the portfolio is worth $1,058,000 and is in the top 21% of contestants. The current leader has $2,860,000.

    The Tax Carnival #16 is hosted by Don't Mess With Taxes.

    My Carnival pick is 7 Tips On Claiming Your Tax Deductions for Business and Charitable Contributions at The Digerati Life. For those of you still doing tax returns (like me), here are a few additional tips on deductions, especially if there is a business involved.

    The article reminded me that business owners get a number of deductions that employees do not. The tax breaks can help a lot when running a business.

    The Festival of Frugality #69 is at The Digerati Life.

    My Carnival selection is Right Turns And Other Simple Tips To Save Money And Environment by Money, Matter and More Musings, which highlights 51 saving tips from Time Magazine.

    An excellent tip is making right turns to go to and get back from one's destination. It can save a lot of time and gasoline over the long term. I'll be trying this tip on my errands this weekend.



    I hope you enjoy reading these Carnivals and finding ideas you can use.

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

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

    Copyright © 2007 Achievement Catalyst, LLC

    Friday, April 13, 2007

    Deferred Income Can Significantly Help Retiring Early

    The first consideration of retiring in my forties is the financial aspect. My target has been to achieve retirement savings equal to 20 times my gross salary. At this savings ratio, I am confident that we can have enjoy a net income of that is 80% of my current net income.

    However, one factor that I had not serioiusly included before was the impact of deferred compensation. Mine is in the form stock options, which have a 10 year term to expiration. If I should leave the company, I would need to cash out the options prior to leaving. If I would retire, I am able to keep the stock options until expirations. Keeping the options until expiration can make a significant difference.

    I asked my financial advisor to evaluate a savings ratio of 16 times my gross salary and include my stock options, with retirement income of 88% of my current net. The monte carlo analysis shows a 90% probability of having sufficient funds to retire. This analysis conservatively included continuing to fund our daughters education for a private university 16 years from now. While 90% probability is the minimum confidence level I would accept, I am encouraged retiring in my forties is a financial possibility.

    I am not too surprised that including my stock options will help my retirement situation. I remember stories of retired individuals who were able to live on just their deferred compensation income for a decade after retiring. For me, having deferred compensation may be a key enabler to retiring in my forties. Of course, there is always a downside risk that the stock options will expire worthless, if the company does not do well.

    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, April 12, 2007

    College Admissions - What I Consider the "Right Stuff"


    As an alumnus, I have interviewed local high school students applying for admission to Princeton University. During those interviews, I did an evaluation of the student which was then submitted in a recommendation to the University. Essentially, I was making a decision as to whether the applicant had the "right stuff."

    Each interviewer has their own criteria for the "right stuff." Here are my top three:

    Intellectual Capability - I look for intrinsic mental capability. SAT scores and grade point average are a beginning, but not the final factors. I also consider intellectual curiosity and depth of understanding. I typically ask about a paper they wrote, a scientific experiment they did, or volunteer work. Does the candidate accept the standard explanations or do they wonder about other causes? Can the applicant explain why he took a specific path or choice? What did the student learn from volunteer work. Based on the discussion, I get a better understanding of their overall mental capability.

    Leadership - To me, all applicants should have extracurricular activities as a minimum. I look for leadership participation to differentiate the students. For sports, did the applicant demonstrate outstanding performance in the form of a tournament win or league championship? For student council, did the candidate have responsibility for a major program. For other school activities, did the applicant only participate or take a leadership role in planning for the organization.

    Diligence - The third area I evaluate is the student's commitment to doing hard work and overcoming adversity. For me, this is the area that most differentiates applicants. What did they do when results turned out different than expected? Did they have a financial, physical or skill challenges that needed extraordinary effort to change? Did they need to influence others to enable getting something done?

    In my 10 years of interviewing, I found these three criteria have often helped me identify the most qualified applicants. Of note, I am amazed how much the quality of applicants increases each year. I often wonder if I would still be admitted if I applied today:-)

    Disclaimer: Other than being a graduate, I am not affiliated with Princeton University. This article represents my own views and not the views of the University.

    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, April 11, 2007

    The Difference Between Risk and Fear

    Most of the time common stocks are subject to irrational and excessive price fluctuations in both directions as the consequence of the ingrained tendency of most people to speculate or gamble...to give way to hope, fear and greed. Benjamin Graham

    In personal finance it is important to know the difference risk and fear. Understanding risk allows one to take prudent chances to build wealth. Allowing fear (or lack of fear) to take over can prevent one from taking reasonable risks (or cause one to take unreasonable risks).

    Let me illustrate the difference between fear and risk with a few examples.

    Definition of Risk

    Suppose we are playing a game based on a coin flip. Heads you win, tails you lose. The prize is one dollar. You are required to play 10 times. How much should one pay to play the game to maintain "zero" risk? The answer is 50 cents. Over the long term, one would break even since the probability is 50/50.

    Why? First, this example is not a bet - i.e. where one gets their wager back with their winnings. In this example, one pays to play, which is forever spent, and the winnings are the only return. Thus, when one pays 50 cents and wins, the net winnings are 50 cents. Second, the statistical expected value in this game in 50 cents, because a coin flip has a 50% probability of a head or tail and the payout is one dollar.

    For me, risk is an estimate of the payout probability versus the cost to play.

    Low risk. Long term payout greater than cost. There may be short term losses. In this example, it would be paying less than 50 cents to play.

    Risk neutral. Long term payout equal to cost - i.e. no gain or loss. This is paying 50 cents to play.

    High risk. Long term payout less than cost. In the short term, one may win. This is paying over 50 cents to play.


    Definition of Fear

    So what is fear? Using the same situation as above, here are some questions to answer that will help define fear:

    If the prize was $1, would you pay 25 cents to play?
    If the prize was $100, would you pay $25 to play?
    If the prize was $1,000, would you pay $250 to play?
    If the prize was $10,000, would you pay $$2,500 to play?
    If the prize was $100,000, would you pay $25,000 to play?

    Statistically, the answer should be yes. These all have returns greater than risk and one should take all these "investments." One is guaranteed to win in the long term since the payout probability is better than the cost of playing.

    However, most people stop playing at one of the higher values. Why? Because the fear of losing the higher cost to play becomes a bigger factor at higher prize values. It may be acceptable to lose $25, but not $25,000. And while the prize payout is in one's favor, each play is not a guaranteed win. So the fear of losing once, twice or more begins to be the determining factor.

    Risk and Fear with Respect to Investing
    The confusion between risk and fear can become evident when people are investing. Fear or the lack of fear often causes one to make the wrong investment decision.

    For example, since 1926 the stock market has averaged 10% returns. From a risk perspective, one should be invested in the stock market. Very few alternative investments have a comparable return. The long term results favor the person invested in the market. However, I know people who will not invest in stocks either due to the 2002 bear market results, or thinking the stock market is akin to gambling. Because the perceived short term losses are high, fear is causing these people not to take a good risk opportunity.

    On the other hand, penny stocks are attractive to many investors. From a risk perspective, penny stocks are high risk versus the possible return, i.e. unlikely to return a gain. However, many people still invest in penny stocks because they only "invest what they are willing to lose." Here, the lack of fear causes people to invest in these poor risk options.

    My Situation
    I wanted to tell my readers that I base my investment decisions on risk:-) However, in thinking about my own situation, I may be letting fear affect my investment decisions. I am over weighted in CDs and Bonds, which are "risk neutral." I am under invested in the overall stock market, which has good returns and is low risk in the long term. I am also over weighted in investing in my company's stock, which has a possibility of high gains but with higher risk.

    Fortunately for me, my company stock has had higher returns than the stock market index over the long term. However, based on this analysis, I should invest more in the stock market index and less in CDs and bonds. In addition, I should start reducing the holdings in my company's stock. I will begin making these asset allocation adjustments in the next few months.

    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, April 10, 2007

    Estimating The Value Of My House

    Although I do not consider my home an investment, I still like to know it's approximate value. In the past, I would need to do one of the following:



  • Contact a real estate agent for an appraisal.


  • Use sales records to do a comparables analysis.


  • Both approaches involved more effort than I wanted to invest. Also, many "free" Internet appraisal services often involved contact with a real estate agent, which I did not want to do.
    About a year ago, a new service named Zillow.com debuted. Completely free, Zillow.com provides an estimated of value of a home based on comparable sales, house features, and other factors, such the status of the economy. It's easy to use. One only needs to enter the address of the property and Zillow.com returns the estimated value.

    Zillow.com has been a useful application for tracking the value changes of my own home and homes in our neighborhood. However, sometimes Zillow doesn't have the correct descriptive information (e.g. number of bedrooms) about my house, which causes me to wonder about the accuracy of the estimate.

    While I would not use Zillow.com to get a definitive price, it seems to give a reasonable range of values for properties in our area. Over the past year, it has provided an estimate range of +/- 15% for my own house, which is good enough for the purpose of estimating net worth. If I needed an estimated value for estate, tax or selling purposes, I would use a more rigorous appraisal option.

    For more on 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, April 09, 2007

    Investors Blog Network (IBN) Festival # 4 - The Million Dollar Portfolio Edition


    Welcome to the Investors Blog Network (IBN) Festival #4 - The Million Dollar Portfolio Edition. As background, the Investors Blog Network is a consortium of 27 bloggers, many who are primarily focused on stock investing. Several personal finance bloggers with interest in stock investments, such as me, are also part of the IBN Feedburner Network.

    For this edition, I have asked that submissions be about a specific stock to be purchased in the CNBC.com Million Dollar Portfolio Challenge. For reference, the investment strategy to win the contest is different than a long term investment strategy. However, virtually all the submissions were stocks the submitter would put in their own portfolio. This is a testament to the Investors Blog Network and each submitter's unwavering investment philosophy.

    Here are the stock picks submitted in the order received:

    Avnet (AVT) - My Wealth Builder submits Avnet, which distributes electronic components, enterprise network and computer products, software, and embedded subsystems. This stock is one of my top buys using a modified Unemotional Growth system, based on the book the Unemotional Investor, by Robert Sheard. The stock is up over 35% since January 22, 2006, when I purchased it for $26.11 a share. I sold the stock in early March for a 36% gain, but plan to buy it again once the market resumes an upward trend.

    Bruker BioSciences (BRKR) - Biohealth Investor submits Bruker BioSciences: Earnings Growing, Insiders Buying. On February 22nd, the company announced an increase of 80% in net income per diluted share for 2006 over the prior year, and expects earnings growth of 40% for 2007. This is the type of growth that drives small caps to mid-cap status.

    Intuit (INTU) - Stock Market Beat offers INTU: We've Got Intuition. The price of Intuit is highly seasonal. It usually gets cheaper during tax season and rises afterwards, possibly presenting an opportunity to buy shares with one's refund in April.

    Apple (AAPL) - FIRE Finance presents Gamble on CNBC Million Dollar Challenge , which shares his single stock pick for the contest. One reason FIRE likes Apple is that it has a quite an impressive product line. Several products are in the pipeline which leverage already existing technologies and products.

    Millicom International (MICC) - Trade Radar presents Millicom International (MICC) - more growth on the way. MICC offers prepaid cell phone service in emerging markets. With respect to telecom, these markets are growing at faster rates than the developed countries of Europe and the US and Millicom is benefiting handsomely. With a beta over 5, they always have the potential for a good pop.

    Gol Linhas Aereas Inteligentes (GOL) - One Guy's Investments presents Bear Stearns Downgrades, Time to Buy (GOL). At a trading PE of about 18 and a very large and growing market to address, he is convinced that the shares are a very reasonable buy here -- the analysts might be wrong on the estimates that give this a forward PE of about 10, but in the long run this is one of the stocks in his portfolio that he is most convinced has a bright future.

    Apple (AAPL) - The Digerati Life presents Did You Own Apple Before The iPhone Announcement? Although she missed the price gain with the announcement of the iPhone, Silicon Valley Blogger doesn't plan to miss any gains by Apple during this contest:-)

    Lumera (LMRA) - Online Stock Trading offers Swing Trade LMRA - Lumera Corp, which submits a stock that had a significant run up since October, 2006, and then pulled back about 50%. One of the main trading patterns he uses has been put into play this month, and he is buying the stock. (Although this is a great pick, it doesn't meeting the $500 million dollar market capitalization required. I will get an alternate pick from Online Stock Trading later this week.)

    In addition, these three members of the IBN Network did not participate with a stock pick and offered advice about choosing stocks. Again, in the order received:

    The Skilled Investor presents Searching for superior investment fund managers is a waste of your money and time. He offers that investing in market indices via low cost ETFs (exchange traded funds) is the best option for non-professional investors.

    Stock Gumshoe presents Stock Gumshoe -- New and Improved, which is a new blog associated with One Guy's Investments. It's purpose is track the performance of all the "teaser" companies he sleuths out here as the Stock Gumshoe. Now one can see how well all the authors that tout stocks in newsletters are really doing.

    Investors Trip submits Save Time with the Stock Market Search Engine that he has developed because of frustration with links unrelated to a stock in Google Search. The Stock Market Search Engine solves this problem because the search index lists websites only that are related to the stock market. A great tool to use and investigate stocks one is considering, including those for the CNBC.com Million Dollar Portfolio Challenge.

    IBN Network Portfolio Status

    Here is the status of the IBN Network Million Dollar Portfolio:



    Status
    Portfolio OpenedMarch 21, 2007
    Stocks Purchased Avnet (AVT)
    Bruker BioSciences (BRKR)
    Intuit (INTU)
    Apple (AAPL)
    Millicom International (MICC)
    Gol Linhas Aereas Inteligentes (GOL)
    Cash PositionAbout 30% with 2 stocks to be purchased
    Portfolio Value$1,048,000 (top 29% in ranking)
    Gain to Date4.8% (3.6 % from bonus bucks)


    If the IBN Network Portfolio should win a weekly prize or the Million Dollar grand prize, the winnings will be split among those that submitted picks and the portfolio success will be reported in My Wealth Builder:-)

    Photo Credit: CNBC.com

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

    Copyright © 2007 Achievement Catalyst, LLC

    Sunday, April 08, 2007

    Dine Out Ads - New Idea


    This idea started as April Fool's article, which I posted last week. However, I think it may have merit. Bloggers are always looking for ways to get good advertising for their blogs. The common methods are contextual advertising, text link advertising, and affiliate advertising. While these are great advertising opportunities for bloggers, I think it may be time for another business model.

    My idea is a new advertising model based on paying with food. Here's how it will work:
    1. Restaurants will register as advertisers.
    2. Bloggers will post affiliate links that provide exclusive specials and coupons for the restaurants.
    3. Customers click on the links and print out coupons.
    4. When the coupon is used, the blogger will get a credit, good towards food at that restaurant. When there are sufficient credits, a gift certificate to the restaurant is mailed to the blogger.

    The name of this new program will be the Dine Out Ads. Here are the reason I think this may work:
    1. Bloggers will be promoting the restaurants in their area which they frequent. The compensation will be in the form of a gift certificate for the restaurant. A blogger would not likely promote a restaurant they did not like.
    2. Bloggers can click on their own ads and use the coupons. Novice bloggers often click their own ads before they realize it is prohibited in some other advertising programs. This program would legitimatize clicking on one's own ads since restaurants would still benefit if the blogger used the coupon.
    3. Restaurants only pay for clicks that result in paying customers. Since the payment for the ad is made only after the coupon is used, the restaurant knows the advertising cost for each customer converted.

    Since this is still an idea in development, I'll let readers know if Applebee's, Chili's, Ruby Tuesday's, or other casual national chain restaurants contact me:-)

    Photo Credit: Applebee's Inc.
    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    Saturday, April 07, 2007

    Carnival Highlights For The Week #8

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

    The Carnival of Personal Finance #94 is organized by No Credit Needed.My Carnival choice is 10 Tips on Life and Disability Insurance: How And Why We're Getting More by Silicon Valley Blogger, which shares their current family situation (spouse starting own business and children) and how that affects their insurance thinking.
    I would also include determining how Disability and Survivor Income Insurance from Social Security can be used to cover part of one's insurance needs. After all, we've all paid for it already and should consider it available (until Social Security goes broke.)
    The Tax Carnival #15 is hosted by Don't Mess With Taxes.My Carnival pick is by Tax Information which offers some help with Costly Tax Mistakes and What You Can Do about Them. This is a good list.
    Here's what I'm doing to avoid making mistakes. Since I owe taxes, I will pay that amount and file for an extension. That will enable me to ensure that don't miss any items to claim.
    The Carnival of Debt Reduction #81 is at Money Walks.My Carnival selection is by Debt Free 4 Ever, which states it’s 70% Attitude and 30% Hard Work to get rid of debt.
    I like the point of the article. Getting rid of debt starts with personal commitment and needs hard work. However, getting rid of debt also requires having good (financial) knowledge, which the lack of sometimes cause a debt problem. Here's my build on the title: Getting Rid of Debt is 70% Attitude, 70% Knowledge, and 70% Hard Work. Perhaps, a topic for a future post :-)
    The Festival of Stocks #30 is hosted by Investor Trip.My Festival pick is Dell's accounting problems:the tip of the iceberg posted at Sox First, which opines that Dell is a victim of the "winner's curse" which caused them to miss learning that their business model is now obsolete.
    I agree. It is hard for a company to transform themselves periodically from what made them successful to what will keep them successful. That's the reason very few companies exist more than a few decades.
    The Carnival of Personal Development is presented by Alex Shalman.com.My Carnival choice is What They Don't Teach You In School posted at The Optimized Life. How to fail, continual learning, leadership, finance, and personal vision were identified self education areas that are important to personal success.
    I agree that schools are not designed nor responsible to teach these concepts. That's still a responsibility that I have as a parent. Another skill I would add to this list is "critical thinking."
    The 68th Festival of Frugality is hosted by Mapgirl's Fiscal Challenge.My Festival pick is Free 12-month supply of contact lens cases & coupons posted at Wise Bread - Living large on a small budget, which shares a Bausch & Lomb promotion for a free year's supply for contact lens cases.
    Another necessity I can get for free:-) I generally use a contact lens case for several months to a full year. Bausch & Lomb is trying to change my paradigm and will be sending me 12 cases as one year's supply. Since it's free, I'm willing to let them convince me:-)
    The Festival of Under 30 Finances #20 is hosted by One Big Mortar Board.My Festival pick is Starting Early: The Young Adult’s Guide To Personal Finance posted at Debt Consolidation News, which lists 65 elements in their guide.
    Many of the elements I ascribe to being a good student of finance, which I think is an important skill. Here are ones that have worked best for me: #2 - Pay yourself first, #50 - Choose a job-oriented degree and #61 - Plan for your retirement. One I didn't see and would add is: Only use debt for a home, college tuition, and perhaps one's first car.


    I hope you enjoy reading these Carnivals and finding ideas you can use.

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

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

    Copyright © 2007 Achievement Catalyst, LLC