Wednesday, July 31, 2013

Simplified Investing

A Portfolio That's as Simple as One, Two, Three in The Wall Street Journal (subscription may be required) proposes that good investing may be as easy as buying three fund (or ETF) portfolio:  A total U.S. market index, an international market index and an (international or U.S.) bond index.  For those interested in additional diversification or alternative investments, a commodity ETN or real estate ETF can be use for a small percentage (~5%) of the portfolio.

There are several advantages to such an approach:  low fees, easy self management, low effort and great diversification.  I have been using a 4-6 ETF investment strategy since late May 2013.   So far, the strategy has worked well as I have been adding funds when the market corrects.

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 © 2013 Achievement Catalyst, LLC

Tuesday, July 30, 2013

Sharing in Class Action Payments

Recently, we received small checks for class action suits against American Express (for foreign exchange rates) and DeBeers (for price fixing).  In both cases, we agreed to be part of group that received compensation, in return for not filing our own lawsuit.

Since I had no interest in filing my own lawsuit, participating in the class action made sense for us, especially when the forms were easy to do.   So I filled out both forms, sent them in and waited for the checks to come.   Neither payment was very big, but it was still money that we otherwise would not have 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 © 2013 Achievement Catalyst, LLC

The Wealth Builder Carnival Still on Hold

Due to technical difficulties, The Wealth Builder Carnival continues to be on hold.

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

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

Copyright © 2013 Achievement Catalyst, LLC

Monday, July 29, 2013

Building Our Investment Core

Through one of my brokerage accounts, we are investing in a diversified managed account that uses an ETF investment strategy based on their global economic forecast model.  After being invested only two weeks, the account is up almost 4% :-)   Although I know the returns are due to my timing luck of investing during the recent correction, I do like the fact that the account does all the diversification, including over weighting select sectors, for me.

I will evaluate how this managed account performs versus other managed accounts and our own ETF investment strategy.   If it provides equal or better returns with less volatility, I will start adding more funds to this managed account when there is a market correction.

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 © 2013 Achievement Catalyst, LLC

Sunday, July 28, 2013

My New Retirement Job

Due to inheritance of property from my parents, we are now diversified into real estate. One property is commercial land, and the other property is a 33% share in a commercial rental. The real estate portion is about 15% of our total retirement and investment accounts. The proportion may be a little high, but is acceptable since acquiring the properties did not reduce existing financial assets,

At this point, I plan to keep both properties.    The land is in a the middle of a development zone that has slowed due to the recession.  While there is currently limited interest in the land, I expect the demand for development land in the area will return in 3-5 years.    The commercial rental is currently doing well and is expected to provide a regular income.

Both properties will require involvement from me, which is one reason I am no longer working part time wage jobs in retirement.  Working on these properties will be my new retirement job.  Maybe this work will become my perfect retirement job.

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

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

Copyright © 2013 Achievement Catalyst, LLC

Friday, July 26, 2013

Managing the RMD Tax Trap

RMD stands for "Required Minimum Distribution," which is the required amount an IRA owner must start withdrawing from a Traditional IRA after reaching age 70-1/2.   For IRA owners over 70-1/2, the RMD requires them to take income and pay taxes, when they would sometimes rather leave the money in the IRA. Several retirees over 70-1/2 have told me they were advised to spend IRA last, but wish they had spent IRA  money before 70-1/2 to reduce the tax hit from the RMD.

Although I am still many years from 70-1/2, I am already looking at way I can reduce our future RMDs.  First, we will try to convert as much to Roth IRAs as possible, since Roth IRAs have no RMD (or taxes on withdrawals).   Second, we will spend some of our IRA funds prior to 70-1/2 when we can get a favorable tax rate.  Third, I will use an NUA (Net Unrealized Appreciation) as a tax efficient way to reduce funds in my traditional IRA.

These three approaches should help reduce our future RMDs, but I expect we may still feel caught by the RMD tax trap.

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 © 2013 Achievement Catalyst, LLC

Thursday, July 25, 2013

First Times with Technology

I'm always amazed at how much earlier our daughter interacts effectively with technology versus when I did.  I remember when I saw her pause the DVD at five, even though no one taught her how to do it.  I almost never used the pause feature before our daughter did.

Here are some other examples of our daughter using technology at a much younger age than me.

Age of Experience
Technology ActivityDaughter
Me
Fly in Airplane
1
20
Use Computer
3
19
Own Computer
8
25
Download Music
8
n/a

I'm sure the trend will continue as she gets older.  She will definitely own a cell phone before me, since I still refuse to get one.

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

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

Copyright © 2013 Achievement Catalyst, LLC

Wednesday, July 24, 2013

Wills and Living Trusts Update Done

Earlier this year, we decided it was time to update our wills and trusts, since it had been over 13 years since we wrote them.  This month we completed the update.

The process was much easier to do this time for a couple reasons.  First, we were already familiar with the elements and knew the changes we wanted.  Second, we were able did all the discussion and revisions over e-mail, so no travel time was involved.

As it turns out, the main change was updating our successor trustees, successor executors and success attorneys in fact.  However, that required changing almost every document that we had previously written.  In addition, the content of some of the documents (e.g. health care power of attorney, living will, etc.) have changed slightly in content.

In the future, we will review every 5-10 years or when a life changing event (new beneficiaries, death of successors, or major financial change) happens.

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 © 2013 Achievement Catalyst, LLC

Tuesday, July 23, 2013

The Wealth Builder Carnival is On Hold

Due to technical difficulties, The Wealth Builder Carnival will not be published this week.

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 © 2013 Achievement Catalyst, LLC

Monday, July 22, 2013

Becoming a Great Employee

"Commit to a challenging outcome and then deliver." ~ former boss on doing well at work.

I always remembered this advice for my own career.  I also learned that good employees will stay employed and get average to slightly above average salaries. However, great employees will have superior salaries and often be considered for promotion..

In my experience, good employees typically do excellent work, but don't necessarily take responsibility for the outcome.  Great employees also do excellent work, and also take full responsibility to deliver the business outcome that's needed.  Often, great employees will even set the direction for both the outcome and the work to be done.

For me, once I learned to differentiate between the performance of a good and great employee, I was able to focus on the elements of being a great employee.

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 © 2012 Achievement Catalyst, LLC

Sunday, July 21, 2013

Success During A Weak Recovery

Between 2009 to 2012, one of the companies for which I did part time work increased revenue over 50% and doubled its workforce.    I thought that was pretty impressive, especially since flat was considered the new up during that time frame.  However, success didn't happen by accident.  The company management took specific steps to grow the business and the actions worked.

Here's what the company did based on my observations:
  • Set stretching growth goals.  The previous management was satisfied with maintaining current revenue and profits.   The new management set a goal of becoming one of the top franchisees for revenue and profits.
  • Re-evaluated product mix.   The previous management focused on high margin product offerings and had significantly overweighted the business towards these offerings.   The new management decided to achieve a  move typical mix of offerings and decided to increase the lower margin, but still very profitable, offerings.   He specifically marketed the lower margin offerings very actively and significantly increased the number of customers.
  • Hired new staff.    The old staff was very qualified to run the old business, but necessarily the new business.  The new management hired new staff that supported the new goals and target customer.  
  • Measured progress.  Using the franchise metrics, the new management showed significant progress from the very beginning.  Within a year, the franchise has moved from a top 50 franchise to a top 5 franchise.

  • Terrific business results which created more jobs, which shows that businesses can do extremely well even during a tough economy.

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

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

    Copyright © 2011 Achievement Catalyst, LLC

    Saturday, July 20, 2013

    Disappearance of Financial Blogs

    I have been blogging for almost 7 years.  Many of the financial bloggers that started about the same time are no longer blogging.  There are about 15 blogs that I track on the right sidebar blogroll.  I lose 1-2 bloggers a year as evidenced by recent posts being a year or more.  If I search, I can probably find about 50 blogger that I knew about 7 years ago.   Here's what I assume may have caused the end of their blogs:

  • Lack of time.  For most, blogging is not their day job.   Bloggers usually have full time jobs, families and other commitments.   Also, life changes can significant reduce the priority for blogging.
  • Lack of compensation.  Some were interested in making money blogging. Some expected lots and some expected a little.  In most cases, it was less than expected.
  • Lack of content.   It's tough to find interesting financial topics to post every day.  It's hard to find new topics, new perspectives or new ideas. 
  • In my case, I have experience all three reasons to stop.  However, I have continued blogging because it's a nice daily routine.   I enjoying writing a short piece about my latest financial (and sometimes non-financial) thinking.  Right now, I don't see stopping anytime soon, but that could change as it has for many other bloggers. 

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

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

    Copyright © 2013 Achievement Catalyst, LLC

    Friday, July 19, 2013

    Our Options for Stable Retirement Income Streams

    While I don't have a pension, I appreciate the stability offered by pension income.  So I've been evaluating options that help create stable retirement income.   Here are some of the options that are possibilities for us.
    • Dividends and interest.  When interest rates were 5%, CDs and bonds were a good source of stable income.  Now that interest rates are low, dividend paying stocks can also provide a stable source of income, although with more principal risk.
    • Rental property.  This option can offer a good steady stream of income.  However, it is usually effort and resource intensive.   Either the work (rental, repair, tax returns) needs to be done by the owner or a management company needs to be hire to do the work.   Vacancies can significantly increase costs or reduce income.
    • Annuity.  Insurance companies can provide a stable source of income in return for a lump sum payment or period contributions.
    • Social Security.  This government  program provide month payments to beneficiaries.  Now that I'm 55, Social Security benefits are likely not going to change for me before I reach 62 which is the first year I can file for benefits.
    I will start working with my financial advisor to utilize these options and create stable retirement income payments.

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

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

    Copyright © 2013 Achievement Catalyst, LLC

    Thursday, July 18, 2013

    An ROI Analysis of College Costs

    Only 150 of 3500 U.S. Colleges Are Worth the Investment: Former Secretary of Education reports that most colleges and degrees don't provide an adequate return on investment (ROI) on the costs.   Mr. Bennett writes that certain colleges and certain degrees offer better returns for those considering higher education.

    This article doesn't surprise me.   I have long been an advocate of the purpose of college being to get a higher paying job.  Unfortunately, a college degree has become a check mark, rather than a stepping stone.

    Of course, we want our daughter  to attend college and we are saving for the tuition.  However, we will make sure that she understands the purpose is to get an education that qualifies her for a higher paying job.

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

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

    Copyright © 2013 Achievement Catalyst, LLC

    Wednesday, July 17, 2013

    When To Use Good Financial Decisions

    "Every day that you eat." ~ my answer

    A good financial decision should be a habit that is used every day.  To me, if it is a good financial decision, I shouldn't make an exception and not use it.  Here are some of the financial practices that I try to follow every day.

  • Live below our means.   While working we lived at least 20% below what we were earning, and saved the difference.  Even in retirement, we continue to try to live below our means.  We don't want lifestyle inflation to end our early retirement.

  • Pay ourselves first.  When we were working, we always made sure there was some amount to put into our savings account.  The most important payment each month was to ourselves.

  • Avoid debt.  We try to save and pay for everything with cash.  Everything includes furniture, vacations and cars. 


  • For us, the above list has been a set of good financial decisions.  Using these every day has been a good approach for us and helped us avoid falling into less optimal financial habits.

    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 © 2013 Achievement Catalyst, LLC

    Monday, July 15, 2013

    How I Stay on My Diet

    Since I was diagnosed with blockages in my heart arteries, I've put myself on a restrictive diet: first the Ornish diet and now the Esseltyn diet.   Initially, I was eating no animal products except for non-fat dairy and egg whites, no nuts and seeds, no avocados or olives, and no added fats or oils.  I have since excluded all dairy and egg whites.  

    People usually surprised that the diet is voluntary; I've decided to do it based on the literature that I've read. Second, they are surprised that I plan to stay on the diet.  Third, they are surprised that I don't cheat, which I have typically done with diets in the past.

    Here's what helps me stick with my diet:
  • Readily available health food.  Grocery stores now carry products that meet my diet requirement so that not everything needs to be made from scratch.   For example, there are whole grain breads made without oils, soy milk with no added oils, oil free salsa, etc.
  • Internet.  There are numerous recipes for my diet available by searching online.
  • Support.  My family and friends are supportive of my diet.   They help me find tasty food options that meet my diet restrictions.
  • Time.  Since I'm retired, I can invest more time and effort into cooking healthy food.

  • I know that the diet would have been much more difficult to maintain 20 years ago, and even 10 years ago.  With all the resources and capabilities available today, I think I will be able to stay on this diet.

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

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

    Copyright © 2013 Achievement Catalyst, LLC

    Sunday, July 14, 2013

    The Wealth Builder Carnival #135

    Welcome to the one hundred thirty-fifth edition of The Wealth Builder Carnival. The purpose of this carnival is to collect articles from the blogosphere on building, preserving and keeping enough wealth for a comfortable retirement. For reference, I have tried to keep the carnival content tightly focused on wealth building and did not include submissions that were off topic. For reading convenience, the posts are listed with a brief summary or comment by the submitter and organized into seven categories: Earning, Insuring and Protecting, Investing, Living Frugally, Retiring, Saving and Taxes.

    And now on to the Carnival.


    Earning


    Super Saver presents Friends, Family and Business posted at My Wealth Builder, saying, "Although my company encouraged marketing to friends and family, I refused to use this sales strategy."


    Investing


    Dividends4Life presents 4 Dividend Stocks Building Shareholder Returns posted at Dividend Growth Stocks, saying, "Numerous research projects have shown, a conservative dividend growth based investment strategy has consistently outperformed the market over time. My goal as a dividend growth stocks investor is to build a steadily increasing income and not necessarily to outperform the market via capital gains. But given the choice, I certainty don't mind having both..."

    Bill Smith presents AIG Earnings Of This Quarter posted at FastSwings, saying, "AIG earnings have improved by a staggering 50% over the past twelve months and a respectable five percent in the past month alone."

    John Schmoll presents What Makes a Company Worth Investing In posted at Frugal Rules, saying, "There are many things that you can look at if you’re interested in investing in stocks. By following some of the basics you can start to build a stock portfolio that will serve you well and help set you up for long term needs like retirement."


    Living Frugally


    Jeff Moore presents 25 Blogs with the Best Tips for Shopping Back to School Deals posted at Babysitting Jobs, saying, "You can often save by shopping completely out of season. Oftentimes, shopping doesn’t even involve leaving your home, as online discounts are plentiful and recycling what you already have is an option, too."

    David presents Are Brooks Brothers Shirts Worth it? posted at Financial Nerd, saying, "Describing Analysis that factored into purchasing Brooks Brothers shirts."

    Dakota1301 presents What Does Thrifty Mean? posted at NiftyThrifter, saying, "Hi, I wrote this blog so that people can get an idea of what frugality and thrifty are. Hope you enjoy!"


    Retiring


    Jacob @ My Personal Finance Journey presents Extreme Retirement Saving - Is it For You? posted at My Personal Finance Journey, saying, "This post explores what is "extreme retirement saving" and whether or not the strategy is right for you."


    Taxes


    Daniel presents My Letter To The IRS Disputing Their Insufficient Funds Charge posted at Sweating The Big Stuff, saying, "The IRS took $210 out of my refund. Here is my response requesting them to review and reconsider."


    That concludes this edition. Submit your blog article to the next edition of The Wealth Builder Carnival using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

    Technorati tags: , .

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

    This is not financial, earning, insuring, investing, living, retiring, saving, tax, or wealth building advice. Please consult a professional advisor.

    Copyright © 2013 Achievement Catalyst, LLC

    Ended My Cardiac Rehab Program

    After five months of a formal cardiac rehab program, I graduated since I have achieved my exercise goals.  The program consisted of 3 one hour sessions per week.  I generally attended two per week and exercised on my own during the other days.  Near the end, I was attending one session a week or every two weeks.

    The cardiac rehab program went well because my blockages were discovered and corrected before I showed any symptoms.   So I could exercise strenuously from the beginning.

    Now, I'm on my own to do exercise.  I'm trying to get in 30 minutes a day, at least 6 days week.   The best part is that I can now do it anytime and I don't need to drive 45 minutes to the facility

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

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

    Copyright © 2013 Achievement Catalyst, LLC

    Saturday, July 13, 2013

    No New Projects is Working

    After figuring out that my do-it-yourself  project backlog was creating clutter, I decided to refrain from starting any new discretionary projects.  This would allow me to reduce clutter by completing the many projects for which I have already acquired the materials.

    Since starting my "No New Projects" strategy, I've completed five projects from my backlog over two weekends, which has freed up some storage space.  Based on the success, I will continue eliminating one backlog project every week, until I get down to a less than five project backlog.

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

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

    Copyright © 2013 Achievement Catalyst, LLC

    Friday, July 12, 2013

    All Time Personal High Still Not Creating Confidence

    Yesterday, our investments and savings accounts reached an all time high.  Two factors were the main contributors. First, my company stock has finally exceeded its 2007 high earlier this year, adding about 20% to our account.  Second, an inheritance from my parents added about 20% to our investment assets.  Stock market gains also contributed to a lesser degree, since we have mostly been in cash.

    At this point, I still don't feel the same euphoria that I had in 2007.   While my company stock is up, I don't have confidence it can maintain the current price, much less advance.  The property I inherited from my parents is a one time event and is also more likely to decline than advance in price.   So I don't consider most of our gains in 2013 to be reproducible or sustainable.

    So I continue to be financial cautious for the rest of 2013.   As the market advances, I will use the opportunity to take some profits.  Then I will wait for the next market decline to put funds back into equities.

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

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

    Copyright © 2013 Achievement Catalyst, LLC

    Thursday, July 11, 2013

    What I've Learned from My Inheritance

    We are down to the final elements of distributing my parents' estate. I always get a personal education when doing a new task. As an executor and trustee, I've learneda lot about what to do for our own estate planning. Here are a couple of my key insights.
  • Real property.  Real property can't be easily divided like stocks or cash.  It can either be owned jointly, sold and distribute the proceeds, or given to one heir but reducing his share in another area.  Joint distribution may result in owners that have different objectives that are in conflict.  Selling may be result in a sale at a lower price, since the goal is to complete the transaction quickly.  Assign the real property to one heir will require an appraisal that assigns fair value. 
  • Number of executors/trustees.  Having co-executors allow splitting up the work and provides more perspective dividing the property.  However, co-executors can create more transaction time and effort when there is not agreement.
  • Based on my experience, my spouse and I are updating out trusts to have one successor trustee to manage the finances for our minor children.  In addition, we will consider options that help eliminate or make the transfer of real property easier and faster.

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

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

    Copyright © 2013 Achievement Catalyst, LLC

    Wednesday, July 10, 2013

    Friends, Family and Business

    One of my retirement jobs was a client based financial services job.   In our training, we were encouraged to call on friends and family to build our client base.   I didn't follow this protocol and in fact, purposely avoided offering my services to friends and family.  I did this for the following reasons:

    1. Keep business and personal relationships separate.  When I was working, I maintained only business relationships with co-workers.   I learned this principle from one of my early bosses and reapplied it.   This principle ensured that I only had to consider one relationship for any interactions and avoided having one relationship influence a decision in the other relationship.
    2. Privacy.  I don't want to know the specific financial situations of my friends and family, e.g. how much they make, amount of charitable contributions, taxes paid, etc.  These types of  information would not likely be shared in the normal course of a personal relationship.
    3. Financial dependency.    I don't want to depend on friends and family for wage or commission income, especially if it could negatively impact the personal relationship. 
    I've been pretty good at separating personal and business relationships.  The one exception is that I offered to do some of my mother-in-law's financial services when my father-in-law passed away.  However, 2013 is the last year since I won't be doing the financial service job in 2014.

    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 © 2013 Achievement Catalyst, LLC

    Tuesday, July 09, 2013

    The Wealth Builder Carnival #134

    Welcome to the one hundred thirty-fourth edition of The Wealth Builder Carnival. The purpose of this carnival is to collect articles from the blogosphere on building, preserving and keeping enough wealth for a comfortable retirement. For reference, I have tried to keep the carnival content tightly focused on wealth building and did not include submissions that were off topic. For reading convenience, the posts are listed with a brief summary or comment by the submitter and organized into seven categories: Earning, Insuring and Protecting, Investing, Living Frugally, Retiring, Saving and Taxes.

    And now on to the Carnival.


    Earning


    Bryan presents Highest Paying Jobs in America posted at Gajizmo, saying, "A potentially high salary can be a very compelling reason to take up a specific degree or career path. Although your education usually affects your pay, not all high paying jobs require a formal education. Nonetheless, our research shows that education strongly correlates with the highest paying jobs in America. Here is a list of top paying careers, job requirements and descriptions, average salary figures, and the number employed in the field."

    Jon Rhodes presents Experts Reveal How They Make Money Online posted at Affiliate Help!, saying, "Several successful Internet entrepreneurs share how they make money online."


    Insuring and Protecting


    R.J. Weiss presents 11 Ways To Prevent Your Identity From Being Stolen posted at Insurance Protection Blog, saying, "11 Simple ways to protect your identity, to protect your credit"

    Gary presents Different Types of Life Insurance posted at MyLifeInsuranceQuotes123.com, saying, "Every financial planner and advisers touts the importance of having life insurance, and this isn't just because it is their business, but the real life benefits are tangible and essential. With so many policies available, how do you which type of life insurance is best for you? Here is a detailed explanation of dozens of types of life insurance policies, from term to whole to universal coverage."


    Investing


    Dividends4Life presents 5 Stocks Raising The Dividend Growth Bar posted at Dividend Growth Stocks, saying, "A stock with a high yield doesn’t mean much if the dividend is cut or eliminated, and the stock price declines significantly. Sometimes it is desirable to accept higher risk for a higher yield. Other times we may be accepting higher risk and are not being adequately compensated for the additional risk. One measure of dividend sustainability is..."

    John Schmoll presents Finding Strength in Our Lack of Investment Control posted at Frugal Rules, saying, "Investing in the stock market can be rife with emotion as stocks go up and down. While there is a lot we can’t control, there is much we can. By focusing on what we can control you can set yourself up for effective investing and start you down the road of investing for long term needs like retirement."


    Living Frugally


    Jason Hull presents Sacred Cows Make Great Burgers posted at Hull Financial Planning, saying, "My amazing, mouth-watering, make the family beg for more hamburger recipe. Oh, and I also debunk a whole lot of personal finance myths."


    Retiring


    Super Saver presents Retirement Income: Pension versus Investments posted at Hull My Wealth Builder, saying, "I've always chosen investment retirement income. I am now reconsidering that choice."


    That concludes this edition. Submit your blog article to the next edition of The Wealth Builder Carnival using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

    Technorati tags: , .

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

    This is not financial, earning, insuring, investing, living, retiring, saving, tax, or wealth building advice. Please consult a professional advisor.

    Copyright © 2013 Achievement Catalyst, LLC

    Monday, July 08, 2013

    Pausing for the Next Correction

    Since late May, I have been trickling funds into my ETF investment strategy. I also put funds into a diversified selection of biotechs and a few bank stocks.  Finally, I added some funds into a managed account. 

    I expected the correction to be shallow and short, so I started putting funds back into stocks early in the decline.  At this point, I'm not sure whether the correction is completed, or if the market is pausing before resuming its decline.    In either case, I will take a short break from putting more funds back into stocks.  I will buy again when the market starts declining again, whether it is a continuation of this correction or staring a new one.

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


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

    Copyright © 2013 Achievement Catalyst, LLC

    Sunday, July 07, 2013

    Our Highest Investment Level Since 2009

    With the trickling in of funds to equity investments over the past two months, our retirement and savings accounts are at the highest level of equity investments since late 2008, when we had about 8 times my pre-retirement salary fully invested.    The level went as low as 3 times my pre-retirement salary in mid 2011.   Now, the level is up to 5 times my pre-retirement salary.

    Currently, we are about 25% invested in equities versus about 50% in late 2008.  Since I am still willing to increase our equity investments, we are still trickling funds into the market.  I'm still not ready to be 50% invested, but adding another 5% or about 1 times my pre-retirement salary would be reasonable.

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

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

    Copyright © 2013 Achievement Catalyst, LLC

    Saturday, July 06, 2013

    Outrageous Cost for Replacment Parts

    Based on my do-it-yourself repairs, I knew that replacement parts were expensive.    For example, it's not uncommon for a part to cost 1/10 of an entire appliance, and that's before labor.   However, today I learned of the worst cost yet, where the replacement part cost over two times the cost of just buying a new item.  I thought I had misheard the price and asked four times to make sure.  To my dismay, I had heard the correct price.

    Basically, I was buying the charger for a small portable electric appliance since that was the only element missing.  The entire appliance cost $40, including the charger.  The cost of only the charger from the manufacturer?   $82.  That's right, over two times the cost of buying a new appliance. 

    I told them that was crazy and that I would check with a local electronics store for a replacement.  After a little research, I found options for $15 - $20, which was reasonable.   However, since I was convinced that I had recently seen the charger, I decided to search the house in areas I had been working.  After about an hour, I found the charger, even though it wasn't near where the appliance was stored.

    I definitely saved $15 and time searching and I saved as much as $40 to buy the entire appliance.   I didn't save $82 because there was no way I was paying two time more just to buy the charger. 

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


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

    Copyright © 2013 Achievement Catalyst, LLC

    Friday, July 05, 2013

    Retirement Income: Pension versus Investments

    With a choice between pension retirement income and investment retirement income, I've always chosen investment retirement income.  After reviewing our investment retirement income for the past 6 years, I am relooking at the options again. 

    Here are the pros and cons as I consider at the options.

    Pension
    • Pros - Guaranteed, stable, inflation adjusted.
    • Cons -  No control, upside capped
    Investment
    • Pros - Controlled by retiree, big upside possibility
    • Cons - Volatility, big downside possibility, requires management effort
    Overall, I don't think there is one right answer for everyone since it depends on personal risk tolerance, interest,  and available time.  For us, I think an blend of pension type retirement income and investment retirement income will be a good approach.  Since neither my spouse nor I have a pension, we will need to consider other options to create stable retirement income streams.

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

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

    Copyright © 2013 Achievement Catalyst, LLC

    Wednesday, July 03, 2013

    Retirement Income Volatility

    As part of my Q2 2013 review, I decided to look at the annual Income ratios, which are shown in the table below:

    Wealth Ratio
    YearIncomeSavings
    Target
    0.8 
    20
    2007
    3.41
    23
    2008
    -5.47
    16.7
    2009
    -1.38
    15.3
    2010
    1.29
    16.6
    2011
    0.5
    17.1
    2012
    2.02
    19.1

    Average income ratio: 0.06      Standard deviation: 3.1      Total income: 0.37

    For reference, annual income is simply the difference between the year end amounts in our retirement and saving accounts.  So an average income ratio of 0.0 is the minimum which means that my income covered my expenses exactly.  However, I was targeting to grow our savings by a 0.8 ratio every year. 

    The most striking number in the analysis is the standard  deviation, which means that 68% of the annual income will be between -3.05 and 3.16.   So I could easily be down 3 times my pre-retirement income or up 3 times my pre-retirement income with equal probability.  That is way too much volatility.

    So I've decided that trying to live entirely on investment income is not the strategy for us going forward.  I would like to get to about 70% of our income being stable and depend on the other 30% from investment income.  In other words, 70% of our income would be from low volatility sources and and 30% from the investments.

    Low volatility sources that I will investigate include: Social Security, real estate, and annuities.  



    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 © 2013 Achievement Catalyst, LLC

    Tuesday, July 02, 2013

    The Wealth Builder Carnival #133

    Welcome to the one hundred thirty-third edition of The Wealth Builder Carnival. The purpose of this carnival is to collect articles from the blogosphere on building, preserving and keeping enough wealth for a comfortable retirement. For reference, I have tried to keep the carnival content tightly focused on wealth building and did not include submissions that were off topic. For reading convenience, the posts are listed with a brief summary or comment by the submitter and organized into seven categories: Earning, Insuring and Protecting, Investing, Living Frugally, Retiring, Saving and Taxes.

    And now on to the Carnival.


    Earning


    Bryan presents Jobs That Require No Experience posted at Gajizmo, saying, "Similar to the chicken and the egg paradox of which came first, getting a job without experience can be difficult, but you need to get a job in order to earn experience. This can be especially frustrating for new graduates or the recently unemployed looking to make a career change. Here are the best jobs that require no experience."


    Insuring and Protecting


    John Schmoll presents Ways to Save Money on Health Care if You are Uninsured or Underinsured posted at Frugal Rules, saying, "Health care costs are no doubt out of hand. However, with some diligent planning and wise decision making you can get many of your health care needs taken care of and save money in the process."


    Investing


    Dividends4Life presents 5 Dividend Stocks Working Even When I’m Not posted at Dividend Growth Stocks, saying, "This past week I have been vacationing hundreds of miles from my home. As with most vacations, I have not done much work this week. However, a quick check of my brokerage account shows that my Dividend Growth Stocks have been very busy this week. It is nice to know my income portfolio never takes a day off. What’s even better is the portfolio is frequently getting a raise through higher cash dividend payments."

    Jason Hull presents The Stock Market is Irrational. Does This Mean You Can Take Advantage of It? posted at Hull Financial Planning, saying, "Lots of finance professionals like to cite the Efficient Market Hypothesis (EMH) as a catch-all explanation for why the markets move the way they do. The problem is that our irrational behaviors also drive the stock market. Therefore, there are inefficiencies in the market, but can *you*, the individual investor, take advantage of those inefficiencies?"


    Living Frugally


    Khaleef @ Fat Guy Skinny Wallet presents We Paid Off A Credit Card This Month…But Does It Count? posted at Fat Guy Skinny Wallet, saying, "We Paid Off Our Credit Card, but of course there’s a twist. Find out how we did it, and what happened to take away from our celebration."

    Theresa Torres presents How to Save Money While Traveling posted at CreditDonkey.com Tips, saying, "By following these tips on your vacation, you can save a little extra money that you can use on your next travel."

    Khaleef @ KNS Financial presents A Budget Account: The Key To Protecting Your Emergency Fund posted at Faithful With A Few, saying, "A budget account can mean the difference between a secure financial household and one that is in chaos. Find out what it is and how you can start one!"


    Retiring


    Bryce Fowler presents What’s Your Number? posted at Save and Conquer, saying, "Many people have no idea of how much money they will need to have saved when they retire in order to maintain their current lifestyle. It is not difficult to define your retirement number, but you must answer a few questions and make a few assumptions."


    Taxes


    Super Saver presents A Tax on the 30% posted at My Wealth Builder, saying, "The Affordable Healthcare act will be a tax on the young and healthy that do not currently have health insurance."


    That concludes this edition. Submit your blog article to the next edition of The Wealth Builder Carnival using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

    Technorati tags: , .

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

    This is not financial, earning, insuring, investing, living, retiring, saving, tax, or wealth building advice. Please consult a professional advisor.

    Copyright © 2013 Achievement Catalyst, LLC

    Monday, July 01, 2013

    Wealth Builder Ratios - Q2 2013 Update

    Here is our Q2 2013 Wealth Builder Ratios update. During the second quarter of 2012, the Dow, Nasdaq and S&P500 indices were up 2.3%, 4.2% and 2.4% respectively. My company stock was down 0.9%.  Our investment portfolio increased in value 13.4% due almost entirely to the value of property inherited from my parents during this Q2. Without the inheritance, our portfolio would have been down 1.8%

    For more details on the relevance of these ratios, please see this How Much Is Needed To Be Wealthy - The NUMBER. 

    Ratio and Target
    Q1 2013
    Q2 2013



    Comments
    Investment
    Income to Salary
    Target=0.8
    2007=3.41
    2008=-5.47
    2009=-1.38
    2010=1.29
    2011=0.5
    2012= 2.02
    2.164.73This gain was due primary to receiving and inheritance distribution of property.  Without the inheritance the ratio would be slightly down at 1.82

    I plan to sell some additional shares of company stock in my retirement plan, keeping only the low basis shares in my company retirement for a future NUA execution.  At this point, I have sold 90% of the stock options with an early 2014 expiration date.
    Savings to Salary
    Target >20
    2007=23 2008=16.7 2009=15.3
    2010=16.6
    2011=17.1
    2012=19.1
    21.223.8Again all of the gain was due to the property inherited.  The value would be slightly down at 20.9 without the inheritance.

    During Q2, I continued to trickle funds back into the stock market.   I plan to continue trickling in funds into stocks and ETFs during Q3 2013.
    Debt to Salary
    Target=0
    2007=1.51 2008=1.46 2009=0
    2010=0
    2011=0
    2012=0

    0

    0
    We said bye-bye to our mortgage on May 20, 2009. Eliminating a mortgage payment has reduced our expenses by 24%.

    My financial goals for 2013 are:

    1. Continue to maintain an Investment Income to Salary ratio > 0.8. (on track)

    2. Maintain a Savings to Salary ratio of 20. (on track)

    3. Maintain Debt to Salary Ratio at 0. (met final goal of 0)

    (For reference, Salary refers to gross salary just prior to early retirement in October, 2007.)

    Both #1 and #2 were directly correlated with how well our stock, bond, and CD investments returns. With the flat performance of my company stock and the high proportion of cash, our portfolio was down slightly.

    Although I am pleased with our portfolio results, I am not confident the gains are sustainable. Our short term expenses (next 3-5 years) are invested in CDs, bonds and money markets. I continue to be concerned about volatility of our investment portfolio, and there equal downside and upside potential going forward due to EU sovereign debt crisis and the US debt ceiling crisis.  So I continue to slowly add funds to the stock market, and hold my company stock and stock options

    I continue to have the same financial goals for 2013. At this point, I am slightly optimistic about the economy and the stock market.

    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 © 2013 Achievement Catalyst, LLC