Afraid Of Investing In The Stock Market?

I've noticed a some bloggers are losing their confidence when it comes to investing in the stock market. Even people who strongly advocated buying and holding index funds are now pulling out of the market themselves. While they may feel better in the short term, it is likely their portfolios will significantly underperform in the long term.

Here's the data from Dalbar, an investment research firm. They found that market timers in mutual funds lost an average 3.29% per year, resulting in an average investor annual return of 3.51% during a time when the S&P index returned 12.98% annualized. A net difference of -16.49% is quite a big penalty for trying to time the market.

However, I understand fully that staying invested is an intellectual and psychological decision. In the past, emotion usually prevailed, causing me to sell instead of staying invested. Here are some ways I have tried to conquer the emotional element:

Allocated a portion I felt comfortable to risk. I confess that I have not been fully invested in the stock market. Historically, most of the accounts we control (taxable and tax exempt) have been in fixed income investments, with a maximum of 30% allocated to stocks. Thus, a minority portion of my savings would participate in the stock market. During the great tech bull market, my overall portfolio didn't grow exponentially like most of my peers. However during the tech crash of 2000 to 2002, I didn't lose as much money either, which made me feel good.

The other portion I was willing to risk was the company retirement account since 100% was invested in company stock (unnamed to maintain my anonymity:-) for most of my career. Fortunately for us, my company stock has returned about 16% annually for the past 20 years, outperforming the 9.5% return by the S&P 500 index during the same time.

Invested a small portion in quality companies with potential for exponential growth. When I first started investing, I tried to win big with with every stock pick. I would try to find out of favor stocks that I thought were under valued. More often than not, I was wrong would lose money. In the eighties, I did not to invest in "darling" stocks such as Dell and Microsoft. As it turned out, $1000 invested in Dell or Microsoft would return $386,250 and $246,700 respectively by May, 2007. So now I try to find "high potential" stocks in which to invest a small portion of my portfolio. I have chosen three stocks for this category, Google, Amazon and General Electric and made them part of my personal core stock holdings.

I won't sell these stocks unless there is a significant deterioration of the company fundamentals. For example, I have stayed invested these stocks despite the volatility of that past few months.

Hired a good professional wealth manager. As noted above, the returns from my company retirement plan were exceptional because I was required to stay 100% invested in our company stock. Therefore, about three years ago, I hired a professional manager for 1/3 of our personal accounts. He designed an investment strategy and has kept the funds 95% invested in the stock market during that time. My running joke with my manager is "Keep me invested when I bail out in my own accounts." Although I do pay a asset based fee, the returns have been comparable to the S&P 500 index and higher than my fixed income returns, after fees.

For reference, I found an advisor who is committed to wealth preservation and growth strategies, and part of an advisor team that had a track record of over 20 years. I didn't want someone who was successful primarily due to a narrow sector (e.g. energy, gold or tech) focus. My main expectation is that our advisor will keep us invested in a divesified portfolio so that our returns, at a minimum, match the S&P 500 index over the long term.

Although I haven't done the calculation, I expect that the returns outside of my company retirement account have been below those of the S&P 500 index. However, I am not disappointed since the level of risk was acceptable and returns were offset by the company retirement plan which beat the market.

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

Photo Credit: morgueFile.com, Jane M. Sawyer

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

Copyright © 2007 Achievement Catalyst, LLC

Collision and Comprehensive Car Insurance - When I Consider Dropping Them

Although I am a firm believer in having adequate insurance coverage, I also like to avoid being over insured. One of the insurances I periodically review is collision and comprehensive coverage for our cars.

Since we drive our cars for a long time, at some point they are no longer worth insuring. Liz Pulliam Weston wrote a good article about this in MSN.com titled Dump the insurance on your clunker. At some point, one should start considering stopping insurance for damage to car. Ms. Weston writes that point is when one's annual collision and comprehensive premium is equal to 10% of the car value less the deductible. For example, if one owns a $6000 car with a $500 deductible, one should consider dropping the collision and comprehensive insurance if the cost is more than $550 per year.

For me, 10% may be a little to low, since it will take 10 years of premiums to cover a totalled car in the first year. I personally like to use 20%, since that is a shorter time (5 years) to carry the risk. Also, I like to use an absolute car cost (e.g. $4000) I am willing to "self insure." When my car value drops below that amount, I will drop collision and comprehensive insurance. Finally, I consider our driving record. Luckily, we have only been involved in four car accidents in over forty years of combined driving, in which only one was at fault (by me.) Averaging only one accident every 10 years of driving lowers the probability of us to have an incident in five years.

At this time our, the collision and comprehensive premium for our cars is about 2% of the value of our cars after the deductible, primarily because of good driving records. Also, neither car is close to the threshold value at which I am willing to self insure. Therefore, it appears we will be carrying collision and comprehensive coverage for several more years.

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 or insurance advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

How Much is Enough Money?

If one doesn't know the answer, then one will never get there:-)

As More, more, more .... and then some more notes "we never seem to have enough money.... ever." In Silicon Valley, Millionaires Who Don’t Feel Rich by Gary Rivlin of The New York Times observes that people with a net worth of $2, $5, or even $10 million feel they don't have enough money, and need to keep working. People see others with $100 million in net worth and start thinking they need more.

To me, the question should be "How much is enough lifestyle?" Once the lifestyle question is answered , "How much is enough money?" will have a straightforward answer. For example, if someone wants to live in a $2 million house, drive a Mercedes 500 SL, attend private schools, and have a yacht, then $3 million net worth is probably not enough. On the other hand, a $250,000 house, 2003 Camry, public schools, and ski boat can probably do very well on $3 million net worth. To me, either lifestyle is acceptable. I am not one to judge the lifestyle another person chooses, if they can financially support it.

In our case, once we chose a lifestyle, it was easy to calculate the cost of supporting that lifestyle. We took that number and multiplied it by 20 to get a good initial estimate of a comfortable value of "enough money" on which to retire. Of course, as with any major personal finance decision, we had our professional advisor do an in-depth analysis to confirm the validity of our estimate.

For more on Ideas You Can Use, check back every Tuesday 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

10/29/07 Stock Purchase Update - Only One Stock Remaining

In my 10/22/07 stock purchase update, I wrote about how my stock buy selections of Terex (TEX), Potash (POT), Shaw Communications (SJR) and Avnet (AVT) were performing. In that update, the portfolio was still benefiting from the Fed rate cut and was up $2,788 for a 15.9 % gain, for a new high. As of 10/26/07, the portfolio achieved a new high of $3,311 for a 18.9% gain. I had owned AVT for 5 months before selling it for a 5.1% gain and TEX for 4 months before selling it for a 3.9% gain. Last week SJR dropped off the buy list and I sold it for a 22.8% gain after owing it about five months. Here's the current status on the one remaining stock:

	My Wealth Builder 5/28/07 Buy List
Stock	Shares	Purchase Price	Current Price 10/26/07
Potash (POT)	50	$71.39	$116.67
Shaw Communications B (SJR)	100*	$21.755	sold @$26.85
Avnet (AVT)	200	$38.21	sold @ $40.15
Terex (TEX)	50	$82.56	sold @ $85.77

* 2 for 1 split on 8/3/07

Overall, I am still happy with the performance of these four stocks, given that the volatility in the market. Since the last update, POT was up $9.77, and SJR was slightly up when I sold it. I have owned these two stocks since June, 2007. POT has contributed significantly with a 63.4% gain in that time. SJR has contributed with a 22.8% when it was sold.

I continue to be impressed with my commitment to stay with the system recommendations, in spite of the market volatility. In the past, I would have closed out the entire position with this level of volatility. Given the performance of the portfolio, I am glad I held my positions instead of allowing myself to be whipsawed by the market each week.

The recent events (credit crunch, central bank interventions) originally had convinced me that the bull market is in its last stage, and I was considering closing out these positions during the next significant rally. However, the Fed rate cuts of 0.5% for the discount and Fed funds rate of September 18, 2007 lead me to believe the bull market will last about another year. Recently, I provided my 10/15/07 updated buy list from the modified Unemotional Investor Growth system.

At this point, I have not made any purchases from the new stock pick list, since the market rally has not been consistently strong. Last week's market activity continues to concerning, with narrow breadth and a high number of new lows. I am staying on the sidelines for new purchases until the market strength and breadth is better.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Retirement Saving Challenge - Four Month Status

Those who joined the Retirement Saving Challenge on July 1, 2007 have almost completed four months. On Halloween, Wednesday , October 31, 2007, one should have four months of saving, either at a rate to create 12 times income at age 65, or at a rate of 12% of salary. Here's what one's savings should be at this time:

	Four Month Amount by Age To Achieve Savings Equal To 12 Times Salary
Salary	20	30	40	50	60*	12% of Salary
$20,000	184	419	1,013	2,789	13,157	800
$30,000	273	629	1,519	4,184	19,736	1,200
$40,000	364	838	2,026	5,578	26,314	1,600
$50,000	455	1048	2,532	6,973	32,893	2,000
$60,000	545	1257	3,039	8,368	39,471	2,400
$70,000	636	1467	3,545	9,762	46,050	2,800
$80,000	727	1676	4,052	11,157	52,628	3.200
$90,000	818	1886	4,558	12,552	59,207	3,600
$100,000	909	2095	5,065	13,946	65,785	4,000
$110,000	1000	2304	5,571	15,340	72,364	4,400
$120,000	1091	2514	6,077	16,735	78,942	4,800
$130,000	1182	2724	6,584	18,130	85,521	5,200
$140,000	1273	2933	7,091	19,524	92,099	5,600

* Mathematically not possible. Shown only for reference

One can choose the lower of the 12 Times Number or the 12% Number. For example, if 20 and making $50,000 per year, one should have saved $455 by October 31, 2007. If more aggressive, one can choose to have saved $2,000.

Since this is an honor system challenge, there is no need to report one's results. I hope everyone is make progress towards their retirement savings target. The next update will be around November 25, 2007. Good luck until then.

Here are the related posts (in date order) for The Retirement Saving Challenge:

Retirement Saving Challenge

Set A Goal

Create Environments and Behaviors

Daily Savings Targets

Preparation - Timeless Personal Finance Recommendations

Finding Money To Save

The Power of Compounding

Get Started

One Month Update - July, 2007

Two Month Update - August, 2007

Three Month Update - September, 2007

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

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

Copyright © 2007 Achievement Catalyst, LLC

The Characteristics Of Personal Finance Blogs I Like

Personal finance blogs are a great way to find information, get insights, and be entertained. The blogs I read have certain characteristics that make them appealing to me. Here are the top five characteristics I like:

Knowledgeable about personal finance. I like blogs that show a good understanding of the financial, psychological or mathematical basis for personal finance principles. I especially enjoy those that create new models, do analysis based on sound financial theory, or question basis of principles shared by personal finance books.

Follow their own principles. I prefer blogs that typically "eat their own cooking." Good ideas are plentiful. My challenge in personal finance is good execution of good ideas. It's helpful for me to see how people were successful in using their own personal finance principles to achieve their goals.

Provide links to new or insightful personal finance articles. The landscape for personal finance success is always evolving. Tax code changes, career opportunities , and market dynamics all affect how I do in personal finance. I want to be aware of the changes and learn of options to address them.

Share successful personal finance experiences. Theory is great and execution of the theory is even better. I particularly like success stories about eliminating debt or significantly reducing debt, tips for getting good deals, saving strategies, and relevant stock or real estate investment opportunities.

Live by their disclaimer. Every personal finance blog I've read has a disclaimer that says, " I am not a professional. This blog is for entertainment purposes. Nothing should be construed as advice, " or something similar. I like blogs that abide by their disclaimer and avoid providing advice to commenters, e-mail requests, or asking their readers for possible answers.

I try to incorporate these same characteristics when writing articles and hope it makes My Wealth Builder an entertaining and useful read.

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 © 2007 Achievement Catalyst, LLC

Our Journey To Financial Freedom #4 - Lifestyle and Spending Choices

In early October, 2007, I announced that I had retired in my forties. So I now join my wife, who had stopped working earlier to be at home with our child. As promised, I am writing a Friday series on "How We Did It," of which this is segment #4. ( #1 is about our childhood , #2 is about education, and #3 is about working.) Our story is a boring one because we did it by working for established companies, spending less than we earn, and prudently investing our savings. There were no business start ups, lottery winnings, or inheritances involved. However, it worked for us. Read on if you still want to find out how.

In my first job, many of college graduate new hires, did social activities together. It was clear to me that I had chose a different lifestyle than many of them. My apartment was 1/3 to 1/2 less expensive than their apartments. I drove a 13 year old family car, while many of them purchased new cars. I rarely used my credit card in contrast to some friends that charged their limit and paid the minimum. Looking back, I wasn't perfect, but I did manage to do some things right.

Here's What I Did Well

Acted below my wage. In the early years, I usually had money left over each month, which I put into a savings account. I only recall one month when I spent my entire paycheck before the end of the month, my first month of working. I managed to spend all my money three days before my next paycheck. However, I was able to make it until the next pay day. I never did that again. Here are some of the elements that contributed to living below my means:

1. Rented and furnished a basic apartment close to work. To me, an apartment was only a place to sleep and I didn't want to spend much time commuting. My first apartment was a mile from work and its only amenity was a pool. No clubhouse, sauna or exercise facility. It was about 2/3 to 1/2 the cost of luxury apartments in the area. I furnished it some college items and hand-me-down furniture from my family and lived there a couple years before moving to a rented house with a friend.
2. Bought only what I needed. My only major household purchases were a microwave and a personal computer, both of which were relatively new in the 1980s. Even back then, I didn't have cable TV, gym memberships, or buy other things that I wouldn't use.
3. Didn't buy the next car for two years. While it wasn't pretty, the 13 year old family car was reliable and got me where I needed to be. Not having a car payment was extremely helpful for managing my early finances.
4. Inexpensive entertainment. Local recreational leagues were my main form of entertainment. I found them to be good exercise, great socializing and, of course, fun. The major expense was the weekly social event after the game, at a local bar.
5. Avoided debt for everyday expenses. Initially, I operated on a cash basis to manage my finances, which prevented me from over spending. The only debt I had was my student loan. Initially, I didn't have a credit card. When I started using a credit card, the bill was paid off immediately.

Here Are Things I would Do Differently Today

During my first three years of working, I didn't have the savings to pay cash for a car or put down a 20% down payment for the house I wanted. So in both these areas, I probably took on a little too much debt, and monthly payments to acquire them. While my choices were stretching, I was able to survive since I was frugal in other areas of my life.

1. Bought a new car after two years. I admit it. I had the new car itch. I bought my first car with a 4-year loan. Fortunately, I didn't buy a BMW, which I had been considering. Although I could easily afford the payment, it did significant reduce my savings and made it difficult to qualify for a home loan in the future.
   
   Today, I would buy a more basic new car than I bought. Alternatively, I would buy loaded used car. I have purchased cars both ways and have been very satisfied.
2. Stretched to buy a house. In the eighties, people were still benefiting from increasing value of homes. I bought the most I could afford, even though the bank thought I couldn't qualify. I ended up partnering with my parents, at 50% ownership to buy the house. I covered 100% of the mortgage, although 1/2 was considered "rent" payments to my parents.
   
   Fortunately, this stretch worked to my advantage. I had bought a house in a desirable and highly appreciating neighborhood. It ended up almost tripling in value when we sold it 16 years later, for a annualized 6.2% after tax return. In addition, interest rates were dropping during the eighties, enabling me to refinance from a 30-year to 15-year mortgage for the same monthly payment. Finally, after 16 years, my monthly mortgage cost was exactly the same, while my salary had almost tripled.
   
   If I did this over again, I would purchase a two family house, or duplex, and rent out the other part to a good friend. Doing so would have covered a major part of the mortgage and expenses. Also, the house would have been a real estate investment, with the income, tax and capital gains benefits associated with it.

Admittedly, I didn't have as luxurious a lifestyle as my peers with similar income during my twenties. Also, during my twenties, my savings didn't seem to grow very much for all the effort I expended. However, I have no regrets. In retrospect, I would not have been happier if I had a lifestyle like my peers, just poorer and more stretched. Also, living below my means really paid off in my thirties and early forties, when my income increased significantly faster than our lifestyle expenses.

Next segment: Setting Goals and Tracking Progress

Here's the series:

1. Our Childhood Preparation
2. The Value Of Higher Education
3. Making The Most Of My Job
4. Lifestyle and Spending Choices
5. Setting Goals, Developing Plans and Tracking Process
6. Staying The Course
7. How Luck Played A Role
8. My Personal Finance Mind Tricks
9. The Professionals We Used
10. When Preparation Met Opportunity

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

Photo Credit: morgueFile.com, Kenn Kiser

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

Copyright © 2007 Achievement Catalyst, LLC

Being at Home With our Daughter - A Great Choice for Us

Recently, I have noticed some discussions in the Personal Finance Blogosphere on the choice of two incomes versus having a single income, with one spouse staying out home, typically with the children. Several bloggers have posted articles about this, for example at Brip Brap and at The Digerati Life. While the option may not work for everyone, our preference has been for a single income family, allowing one stay-at-home parent.

Our family made the single income choice eight years ago, about five years after we were married. We did it primarily because I was taking an international assignment and we expected the transition would be smoother if one person focused on the household. When we returned, we continued to be a single income family because we were adopting our daughter. Here are some of my insights from the experience:

1. Splitting up responsibilities worked well. One spouse earning income and one spouse managing the household worked well for us. Earning income or managing the household are both full time jobs. We did much better focusing on one than trying to manage both part time. With focus, we eventually ended with more total income and a better managed household.



2. Timing the change with a significant overall compensation increase helped. Since the international assignment was a promotion and included cost of living adjustments, the financial impact of my spouse not working was minimized. Over time, the salary at the new level grew significantly faster than the combination of previous salaries, resulting in a higher total income for the family.



3. My spouse considers managing the household and caring for our daughter as her "job." She puts in the same effort, focus and diligence as she did for her former paying job, including striving for excellence. My wife's work is definitely worth the estimated value of a stay-at-home mom at $138,095 annually.



4. Our daughter has benefited from having a stay-at-home parent. We believe that our daughter has a better quality of life, is happier and learns more from her parents because one of us stays home. To note, we still do have her go to part time pre-school for socialization and educational reasons.

Finally, I also didn't want to miss our daughter growing up and I retired in my forties in October, 2007. As a result, we will now depend primarily on investments for income. Since managing investment income takes far less time than earning a salary income, we will also be revising the household and child care responsibilities to reflect this change. More about the new split of responsibilities in a future post.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Is Frugal Living The New Trend?

The Latte Era Grinds Down by Daniel Gross in the October 22, 2007 edition of Newsweek shares a new phenomenon of buying smaller and less expensive that is spreading across America. It's now cool to try to live within one's means. The article shares stories of people making their own lattes, using scooters for transportation, going for right-sized homes, eating out less and, potentially, eliminating cosmetic treatments.

This is great. To me, frugal living has been looked down upon for the past two to three decades. It was much cooler to live the high life, even if it required debt. After all, the eighties, nineties and the aughts were all about living at the edge and pushing the envelope. Million dollar mansions, $60,000 cars, and $8 lattes showed that one had "made it." If one created an expensive lifestyle on debt, so much the better for "beating the system."

For many, frugal living is an excellent way to become wealthly. Now more people are espousing spending less than one earns, Ways to Be Frugal While Building Wealth and Buying Only What One Needs. I'll know that frugal living is a major trend when mainstream media begins interviewing frugal bloggers more than bloggers who are in debt :-)

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

Links To Carnivals from October 21 -23, 2007

Here are links to select Carnivals from October 21 -23, 2007:

Investors Blog Network (IBN) Festival - October 21, 2007

The Personal Development Carnival - October 21, 2007

The 123rd Carnival of Personal Finance (Boo Edition)

Festival of Stocks - October 22, 2007

Carnival of Family Life Fall Festival

Festival of Frugality #97

Carnival of Money Stories #31

Please give these hosts some recognition for their great effort and check out their Carnivals.

This is not financial, investment, or personal development advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

If I Won't Use It Frequently, I Don't Buy It

When I was growing up, we had a great living room, but the kids weren't allowed to use it regularly. My parents had saved years for the furniture. Therefore, it was treated as special and reserved for guests or celebrations. In my early adulthood, I followed the same principle. As I became older, I have changed my attitude from "having a special item" to "use it as much as possible."

Two experiences were the catalyst for this personal change. The first was from a seminar taught by Mike Vance, who coined the phrase, "Think out of the box." Mike shared a personal experience where his children asked, "Why do guests always drink from the crystal glasses and the family drink from plastic glasses?" After thinking about it, Mike responded that it didn't make sense. Subsequently, Mike starting letting his family use the crystal everyday, and "guests wondered why we served them with plastic glasses."

The second catalyst was from our time in Japan. In a visit to a temple, we found out that the monks regularly served guests with tea cups that were hundreds of years old, literally antiques. To the monks, the cups were everyday utensils. They used the cups until they broke and then replaced them. It didn't matter to them that the cups were antiques to everybody else. I thought the monks had a excellent attitude towards possessions.

During my early adulthood, I also learned a the following about material belongings:

Most stuff get worse with age. With the exception of wine, most things tend to get worse with age, especially when exposed to the outdoors. Cars and homes tend to get worse versus better. I remember saving my first car to restore when I had time and money. I thought not using it would preserve it. However, each succeeding year it got worse until the engine even quit working.

Many items require additional involvement. Whether one uses something or not, it requires maintenance, insurance and space for storage. I know people who have built or rented extra space to keep occasional use items, such as boats, jet skis, or campers. Personally, I'd rather rent these items when I need them versus owning and storing them most of the time.

Many things go out of style or become obsolete. Clothes, furniture, and electronics are among items that either go out of style or become obsolete. Therefore, buying these items before needing them doesn't make sense to me.

So now my attitude to enjoy what I own and to use it often. If I can't do both, then I don't buy it.

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

Photo Credit: morgueFile.com, Rich DuBose

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

Copyright © 2007 Achievement Catalyst, LLC

Estimating the Value of a Car or House

Sometimes, I need to know the value of a car or a house. Here are some useful sites for getting the data.

Used Cars

Edmunds - Used Cars

Kelley Blue Book - Used Cars

Nada Guides - Used Cars

New Cars

Edmunds - New Cars

Kelley Blue Book - New Cars

Nada Guides - New Cars

Houses

Real Estate ABC

Zillow

Besides the comparing prices when buying or selling, I like to use these price estimators for following tasks:

Net Worth Assessment - These calculators will provide the necessary estimates so that one can do a more accurate assessment of personal net worth. I tend to overestimate the value of some possessions. These calculators provide an unbiased estimated I can use.

Insurance Coverage Decisions - Since insurance companies won't pay over the market value of a damaged item, it's good to understand the value of the insured property. For example, for me it's not worth paying $300 collision insurance per year for a car that only has a $2000 market value. Especially, if I haven't had an at-fault accident in the past 10 years. Also, it prevents me from over insuring my house. If the insurance company won't pay more the rebuilding costs, it doesn't pay to insure for more than that value.

Tax Assessments - Property taxes are based on the market value of one's home. Unfortunately with declining real estate prices, a home may now be worth less than the original price. If that is true, often one can get the market value of a home reduced for tax assessment purposes. The answers will help determine if it is worth contesting the current market value assessment of a home.

Finally, I have shown several market value estimators without endorsing any one. The estimators will give similar, but not exactly the same, value numbers. I find this useful since estimating is not an exact science and a range is likely better than a single number. For estimating my purchases, net worth and insurance purposes, I tend to use the low end of the range. For sales of my property, I like to initially consider the higher end of the range:-)

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

10/22/07 Stock Purchase Update - Declined With Market Weakness

In my 10/15/07 stock purchase update, I wrote about how my stock buy selections of Terex (TEX), Potash (POT), Shaw Communications (SJR) and Avnet (AVT) were performing. In that update, the portfolio was still benefiting from the Fed rate cut and was up $3,078 for a 17.6 % gain, for a new high. As of 10/19/07, the portfolio was down slightly to $2,788 for a 15.9% gain. I had owned AVT for 5 months before selling it for a 5.1% gain and TEX for 4 months before selling it for a 3.9% gain. Here's the current status on the positions in the two remaining stocks:

	My Wealth Builder 5/28/07 Buy List
Stock	Shares	Purchase Price	Current Price 10/19/07
Potash (POT)	50	$71.39	$106.90
Shaw Communications B (SJR)	100*	$21.755	$26.40
Avnet (AVT)	200	$38.21	sold @ $40.15
Terex (TEX)	50	$82.56	sold @ $85.77

* 2 for 1 split on 8/3/07

Overall, I am still happy with the performance of these four stocks, given that the volatility in the market. Since the last update, POT was down $6.00, and SJR was flat. I have owned these two stocks since June, 2007. POT has contributed significantly with a 49.7% gain in that time. SJR has contributed at 21.4%.

I continue to be impressed with my commitment to stay invested in these stocks, in spite of the market volatility. In the past, I would have closed out the entire position with this level of volatility. Given the performance of the portfolio, I am glad I held my positions instead of allowing myself to be whipsawed by the market each week.

The recent events (credit crunch, central bank interventions) originally had convinced me that the bull market is in its last stage, and I was considering closing out these positions during the next significant rally. However, the Fed rate cuts of 0.5% for the discount and Fed funds rate of September 18, 2007 lead me to believe the bull market will last about another year. Last Monday, I provided my 10/15/07 updated buy list from the modified Unemotional Investor Growth system.

At this point, I have not made any purchases from the new stock pick list, since the market rally has not been cosistently strong. Last week's market drop is also concerning. I am staying on the sidelines until there is a stronger buy signal.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Expecting Sticker Shock

Today, I will be attending my first NFL football game during this decade. The last football game I attended was in the 90s. Even back then, it was expensive. Since then, the team has a new stadium, is paying at least 2-3 times higher salaries, and acquired some top talent in draft picks. I expect that it will be pretty costly to see the game in person.

Various sources show the cost for a family of four attending a NFL football game is now around $340, adjusted to 2007 dollars. Quite expensive by any standard. However, since I only attend a game once a decade, I'm not going to complain. It would ruin the fun of going to the game. After all, this is from our entertainment funds. :-)

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

Photo Credit: morgueFile.com, Jeltovski

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

Copyright © 2007 Achievement Catalyst, LLC

Five Stages of Retirement

The Five Stages of Retirement by Michael Katz in the Street.com shares a joint study by AgeWave, Ameriprise Financial and Harris Interactive on the five emotional stages of retirement. A key point of the study is that emotional preparation is as important as financial preparation. Here is a table from the article showing the five stages:

The Five Stages of Retirement
Stage	Timeframe	Emotions, concerns and aspirations
Imagination	Six to 15 Years Prior to Retirement	• Growing enthusiasm and excitement as retirement gets closer. • 74% expect to enjoy retirement a great deal.
Anticipation	Zero to Five Years Prior to Retirement	• Excited and hopeful until worry and doubt set in one to two years prior to retirement. • 77% expect to enjoy retirement a great deal.
Liberation	First Day to First Year of Retirement	• Excited and relieved from work stress. • 78% enjoying retirement a great deal.
Reorientation	Two to 15 Years Into Retirement	• For some, retirement is more challenging than they thought. May feel depressed and bored. • Others reinvent themselves and undergo a transformation into a fulfilling new life.
Reconciliation	16+ Into Retirement	• Relatively content and less depressed and worried, but sad as they begin to confront end-of-life issues. • 75% enjoying retirement a great deal.
Source: AgeWave, Ameripise Financial and Harris Interactive.

For me, I am enjoying the Liberation phase since I retired less than a month ago. However, since I retired in my forties, I also feel motivated to starting the next phase of Reorientation, to define the "meaningful purpose" in this third phase of life. I can't see 43.5 hours in front of the TV like the average retiree. I've already started taking classes on exploring my options (e.g. my dream job) and am excited about what the future may be.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Links To Carnivals from October 17 -20, 2007

Here are links to select Carnivals from October 17-20, 2007:

Carnival of Everything Finance

Carnival of Financial Planning - October 18th Edition

Carnival of Personal Finance Money Tips - October 20, 2007

Give these hosts some recognition for their hard work and visit their Carnivals.

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

Copyright © 2007 Achievement Catalyst, LLC

Our Journey To Financial Freedom #3 - Making The Most Of My Job

In early October, 2007, I announced that I had retired in my forties. So I now join my wife, who had stopped working earlier to be at home with our child. As promised, I am writing a series on "How We Did It," of which this is segment #3. ( #1 is about our childhood and #2 is about education.) Our story is a boring one because we did it by working for established companies, spending less than we earn, and prudently investing our savings. There were no business start ups, lottery winnings, or inheritances involved. However, it worked for us. Read on if you still want to find out how.

For us, our jobs were the majority of our income sources - for living expenses, savings and retirement benefits. In hindsight, there were some things I did very well and there were other areas which I should have done better. I hope my story will provide some insights that others can use.

What I Did Well Initially

I accepted a job with high pay and high potential. Having majored in Chemical Engineering, I decided to start working in that field. The starting salaries were among the highest and I was looking forward to using my education. I had several job offers from oil, chemical and other industries hiring Chemical Engineers. The positions all had potential for higher level management positions, which is the career track I eventually chose.

Although I now recommend taking the job with the highest offer, I didn't at the time. In fact, I accepted the lowest paying offer(10% lower) because it had the type of work I most wanted to do.

Worked in a low cost of living area. While it was not the driving reason, the location of my first job was in a low cost of living area. Thus, my salary enabled me to have a comparable standard of living to accepting a higher offer.

What I Did Well Later (But Should Have Done Earlier)

After over a decade of an average career, I knew I wasn't achieving my potential. There were a number of peers advancing faster than me. While I had advanced one level, some had advanced two levels, and one had advanced three levels. I finally realized that doing good work wasn't enough to achieve the level of success I wanted. Exceptional work was needed to be compensated above average. Here were the three components of exceptional work that applied in my career:

Consistently influence the direction of a project to be bigger for the company. The operative words here are "consistently" and "bigger for the company." The company rewards results that benefit the company and reward people that do it consistently. Bigger often means delivering greater market share, lower product costs, higher quality or faster than before. It can also mean overcoming adversity (e.g. higher oil prices) better than competition.

It means doing detailed homework, being aligned with the corporate mission, and getting support of others who aren't in the direct organization. Sometimes it means figuring out and doing something that hasn't been done before. Often it means taking personal risk. It always means working harder than just completing what one is expected to do.

Commit to delivering an exceptional goal. Who wants a coach that commits to coming in third place? I want a coach who will commit to and do the work to win a Super Bowl. The same expectation is true in my company. People who commit to exceptional results get noticed. It's tough to get to and hold on to the top spot in the market place. It's hard to go from losing money to making money in one year. It's nearly impossible to increase market share by 10% in two years. Commiting to and doing what's needed to get achieve these exceptional goals will get rewarded.

Deliver the goal. Of course, we all know that saying and actually making it happen can be two different things. So the final step is actually delivering what one committed to doing. Exceeding one's commitment is even better. Then repeat over and over in different projects and different environments (e.g. favorable or unfavorable markets).

My Example

I still remember the day my department manager called me into her office and said, "Our General Manager has asked that we staff this project again. We've decided to do it and think you would be the best candidate. Let us know if you are interested." Even though it was not a glamorous assignment, I immediately agreed. The project started before my transfer and I decided to start working on it since I would inherit it. It became clear early on that the initial focus area had much less than a 50% chance of succeeding. At one point, the chance of success appeared less than 10%.

In my younger days, I would have used the infomation to explain to my manager why we weren't able to succeed. However, I now realized that exceptional meant telling my manager that we didn't yet have the solution, but we were committed to succeed and figuring out how to deliver the needed business result. Using extraordinary effort, I studied the historical records, enlisted experts outside my organization, and collaborated with another function to identify strategies to increase our chances of success. After choosing two options, we worked both of them to create the solutions, which were good but not guaranteed successes. While the solutions were not perfect, we had done sufficient homework to be better than our competition, and delivered a successful outcome, that everyone wanted but few had expected.

Over the next two years, the work we did made several projects into top priority areas for our General Manager. In addition, I used the opportunity to influence the creation of a global network of experts to better manage how we did the work.

After three years of similar results, I was promoted to a section manager. After three more years, I was promoted again to a department level manager. There were significant compensation increases with each promotion.

Since we consciously increased our standard of living at a much slower rate than my salary increases, we were able to put significantly more towards savings. This has enabled us to put away enough savings to be able to retire in our forties. In fact, the about 80% of our savings occurred after these promotions.

On the other hand, the ultimate path I chose required more effort, more stress and more personal sacrifice than my first decade with company. I know there are some that would think retiring early would not be worth the "pain." For me, in hindsight, I have no regrets. Although it would have been reasonable to take the opposite path and never advanced further than one level, the trade off is that I would have had to work much longer before retiring, in my late fifties at the earliest.

Next segment: Lifestyle and Spending Choices

Here's the series:

1. Our Childhood Preparation
2. The Value Of Higher Education
3. Making The Most Of My Job
4. Lifestyle and Spending Choices
5. Setting Goals, Developing Plans and Tracking Process
6. Staying The Course
7. How Luck Played A Role
8. My Personal Finance Mind Tricks
9. The Professionals We Used
10. When Preparation Met Opportunity

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

Photo Credit: morgueFile.com, Iván Melenchón

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

Copyright © 2007 Achievement Catalyst, LLC

Roth or Traditional IRA For Our Children?

Is it better for my daughter to use a Roth, where withdrawals are tax free, or a Traditional IRA, where contributions are tax deductible, for retirement savings? The answer is, "It depends" on whether one's retirement tax rate is higher, lower or equal to one's tax rate during time one is contributing. Below is a table showing the recommended choice.

	IRA Choice For Higher Return
Tax Rate in Retirement	Roth IRA	Traditional IRA
Equal	X	-
Higher	X	-
Lower	-	X

In a previous post on choosing between a Roth or Traditional IRA , I showed that a Roth had a better return when the tax rate was the same after retirement. In The Best Retirement Deal by Walter Updegrave, he agrees with the equal tax rate analysis and shows the results for both lower and higher tax rates after retirement. His conclusion is that one cannot predict future tax rates and therefore, should put some retirement funds in a Roth IRA.

Being somewhat pessimistic, I expect that my daughter's tax rate will likely be higher after retirement than in her working years. Therefore, I would recommend putting savings in a Roth IRA if she qualifies. If she doesn't qualify for a Roth IRA, I would still have her put money into a non-deductible IRA.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Our Three-Year Old Makes Her First Purchase

Since our three year old daughter accompanies her mom on grocery store trips, she understands the basic process of making a purchase - choose the products, get in line, and pay the cashier. Also, she recognizes money, although she doesn't always correctly identify the name/amount of the coin or bill. Recently, I thought it would be good to let her make a purchase transaction.

At a local farm harvest festival, we always stop at the pumpkin patch to choose our Halloween pumpkin. This year, I let our daughter choose one. She chose a small one, about the size of a lemon and took it to the cashier. The price was 25 cents and I gave her a dollar bill. She put the pumpkin on the table, gave the cashier the dollar, and received 75 cents in change, which we allowed her to keep. She was very proud of herself and exclaimed to her mom, " I got a pumpkin."

We ended up losing the pumpkin during the festival. Fortunately for us, she doesn't get upset about losing things, even if lost items are her stuffed animals. So when we left, she asked to buy another pumpkin. After choosing an orange gourd, she took the item to the cashier. This time it was 50 cents. I helped her count the money from her pocket and she was the proud owner of of another "pumpkin."

While I'm sure she didn' t completely understand all the transactions, our daughter was excited about making the purchase. She still remembers that she paid "two quarters" for the orange gourd and that she has one quarter left from the original dollar. Pretty good understanding and a good start on personal finances for a three-year old:-)

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

Photo Credit: morgueFile.com, Gracey Stinson

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

Copyright © 2007 Achievement Catalyst, LLC

Money Moves For Your Fifties

8 money moves you must make at 50 by Liz Pulliam Weston of MSN.com shares eight areas to consider at fifty when planning for retirement. I group the recommendations into five main areas:

1. Think about the dream job. Retirement if a great time to do what has been a passion, interest or dream. However, Liz warns that one should put significant retirement funds at risk to achieve the dream.



2. Make retirement a top priority. Continue to put money in retirement savings and begin to understand future costs, such as health coverage. This includes reducing financial support for adult children, if necessary



3. Get to zero debt. It is good to target for zero debt by retirement. Having no debt will significantly reduce one's monthly fixed expenses.



4. Have adequate insurance. I consider insurance a necessity to protect our wealth against the risk of financial disaster. I have health, liability, property and long term care. While working, I also carried life and disability and I no longer carry these two since retiring in my forties.



5. Stay healthy. On average, healthier people are wealthier. Several studies have shown a positive correlation between state of health and amount of wealth. The University of Michigan published a study about this relationship in 1996. Yahoo! recently published an article on a new study by the British Medical Journal that reconfirmed the findings.

Overall, I agree these are important areas on which to focus. Putting effort against these areas in my thirties and forties helped us to achieve early retirement in our forties early retirement in our forties.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Sometimes What Seems Easy Is Really Hard To Do

I've recently taken up a new exercise, yoga. Although, I am still in my forties, I thought it would be a good idea to start an exercise program that had less pounding of the joints. I thought the transition to yoga would be smooth. After all, I had played competively in high school and college sports (football, track, tennis and rugby), and had run a marathon and played rugby after college. To me, yoga seemed to be a very passive form of exercise, with a variety of stretching and holding positions. I expected yoga to be very easy, because of my sports experience.

However, I soon found yoga was a fairly demanding form of exercise for the following reasons:

1. Yoga uses muscles that I don't usually use in other forms of sports.


2. Yoga uses muscles in different ways that in other forms of sports.

As a result, I found myself unable to keep up with other participants, who were much older or appeared less athletic than me. Surprisingly, yoga is also a strenuous workout for my muscles. As a result, it is a bit frustrating learning yoga, since it is different than my other sports and I am not particularly good at it. However, I am going to keep doing yoga, because I believe it will be of great benefit as I get older.

The Personal Finance Lesson

To me, the successful practice of personal finance is a lot like my experience with yoga. Good personal finance principles are simple and timeless.

1. Spend less than one earns. Live below one's means. Buy only what one needs.



2. Save, invest and benefit from the magic of compounding.



3. Use debt sparingly and for items that may appreciate (e.g. home and education) and not for everyday expenses.



4. Go to college and major in a degree that leads to a profession.



5. If it sounds too good to be true, then it is.

Millions of articles have been written about the benefits of following these principles. These are are proven principles that, if followed, will lead one to be wealthy. It looks like it should be easy to do.

However, for many people, it is hard to follow these principles. I admit, it was hard for me at first also, because the principles were contrary to my desire of early gratification. However, the longer I stuck with it, the more these principles became a habit and easier to do. My reward is that I was able to retire in my forties. I hope I have an equally successful transition experience with yoga:-)

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

Photo Credit: morgueFile.com, Sanday Pindiyath

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

Copyright © 2007 Achievement Catalyst, LLC

Links To Carnivals from October 15 -16, 2007

Here are links to select Carnivals from October 15 -16, 2007:

Festival of Under 30 Finances - Starting a Business Edition

The Personal Development Carnival

Carnival of Personal Finance #122

Festival of Stocks - October 15th

Carnival of Twentysomething Finances

Carnival of Money Stories

Festival of Frugality #96 - The FIRE Edition

Give the hosts some recognition for their hard work by visiting their Carnivals.

This is not financial, investment or personal development advice.

Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Becoming Wealthy Is Contagious

Socially contagious, that is. Hanging with the money crowd by Jean Chatzky at Money Magazine discusses the phenomenon of social networks developing norms, both good and bad, for the group. Earlier this summer, a study published in The New England Journal of Medicine showed a person's chances of becoming obese increase significantly if a friend, sibling or spouse becomes obese. "We find that a person's chances of becoming obese increase by 57% if they have a friend who becomes obese, 40% if they have a sibling who becomes obese, and 37% if a spouse becomes obese," say researchers Nicholas Christakis, MD, PhD, and James Fowler, PhD.

Ms. Chatzky points out that the social norms phenomenon for obesity may also have relevance to money management. For example, financial advisor Pam York Klainer has long recommended to her clients to "find people who have the money behaviors you want to learn and start hanging out with them." The good habits are likely to rub off due to the social network pressure. If your current networks aren't working, Ms. Chatzky suggests using the web to access a network or to create a new network on your own.

To me, her best recommendation is to teach one's kids. I fully agree as I wrote in My Parental Responsibility - Be a Great Role Model. My daughter learns often by copying what her parents do. If I can model good personal finance behaviors, I can give her a head start for her future.

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

Stock Buy List Update - 10/15/07

I base my stock picking system on the Unemotional Investor Growth system from the book The Unemotional Investor by Robert Sheard, with the following modifications. First, I look at the top 20 stocks. In addition, I have found that avoiding the stocks that have a high percentage of shorted shares and investing when the Value Line weekly Rank 1 turnover is low are good additions to his Unemotional Growth criteria.

My last update of the buy list using this system was on 5/28/07. Interestingly, the last few weeks have had a low turnover (2-4 on average) of Rank 1 stocks. This phenomenon, based on my experience with the system, indicates a bullish trend for the market. Here are the seven buys identified by the system.

	My Wealth Builder Buy List
Stock	Purchase Date	Shares	Purchase Price
Potash (POT)	6/7/07	50	$71.59
Research in Motion (RIMM)	wait	TBD	TBD
Southern Copper(PCU)	wait	TBD	TBD
CNH Global NV (CNH)	try week of 10/15	50	TBD
Garmin (GRMN)	wait	TBD	TBD
GameStop (GME)	wait	TBD	TBD
BHP Billiton (BHP)	try week of 10/15	50	TBD

Four of the picks, POT, PCU, CNH and BHP, are in industries that I believe will benefit from the strong economy and business investments - infrastructure and materials. The other three, RIMM, GRMN and GME are currently doing well in their business and I am concerned about whether they can maintain their competitive advantage with only a single product or service to offer customers. Here is a brief description for each company, quoted from the Yahoo! Finance profiles.

Potash Corporation of Saskatchewan, Inc. (POT) engages in the production and sale of fertilizers, and related industrial and feed products. The company manufactures and sells solid and liquid phosphate fertilizers; animal feed supplements; and industrial acid, which is used in food products and industrial processes.

This is a carryover from the 5/28/07 buy list. It was returned 58% since early June, 2007

Research in Motion (RIMM) engages in the design, manufacture, and marketing of wireless solutions for the mobile communications market worldwide. Most notably, they are the manufacturer of the Blackberry.

RIMM is dependent on a single product and therefore, I will do more research before deciding to purchase this stock.

Southern Copper (PCU) produces copper, molybdenum, zinc, and silver. It engages in mining, milling, and flotation of copper ore to produce copper concentrates and molybdenum concentrates; the smelting of copper concentrates to produce anode and blister copper; and the refining of blister/anode copper to produce copper cathodes.

PCU already has a $36B market capitalization and a worker strike may impact it. I am not actively looking to purchase it and will do more research.

CNH Global N.V. (CNH) engages in the manufacture and distribution of agricultural and construction equipment worldwide. The company operates in three segments: Agricultural Equipment, Construction Equipment, and Financial Services.

I think infrastructure rebuilding will continue to be a winning investing theme and will try to purchase 50 shares of this stock.

Garmin (GRMN) engages in the design, manufacture, and marketing of navigation, communications, and information devices that are enabled by global positioning system (GPS) technology worldwide. It operates in four segments: Automotive/Mobile, Outdoor/Fitness, Marine, and Aviation.

It's a great product but I think GRMN has not demonstrated it can sustain its competitive advantage. I will do more research before purchasing this stock.

GameStop (GME) operates as a retailer of video game products and personal computer (PC) entertainment software. It sells new and used video game hardware and software, and related accessories and other merchandise.

I believe GME has benefited from the introduction of new video consoles (e.g. Wii) and new games (e.g. Halo 3). At this point, I won't be purchasing this stock.

BHP Billiton Limited (BHP) engages in mining, drilling, and processing mineral resources. It operates through seven segments: Petroleum, Aluminium, Base Metals, Carbon Steel Materials, Diamonds and Specialty Products, Energy Coal, and Stainless Steel Materials.

This is an Australian company that is supplying materials for China. I will purchase 50 shares.

While all of the seven stocks are excellent picks, I tend to focus on the ones that have some sustainable projected growth. For example, I did not buy the housing stocks in early 2005, even though several were identified as picks by the system. Therefore, at this time, I will be looking to buy BHP and CNH.

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

10/15/07 Stock Purchase Update - New High

In my 10/8/07 stock purchase update, I wrote about how my stock buy selections of Terex (TEX), Potash (POT), Shaw Communications (SJR) and Avnet (AVT) were performing. In that update, the portfolio had benefited from the Fed rate cut and was up $2,611 for a 14.9 % gain, just slight below the new portfolio high of $2,745. As of 10/12/07, the portfolio was up to a new high of $3,078 for a 17.6% gain. I owned AVT for 5 months before selling it for a 5.1% gain and TEX for 4 months before selling it for a 3.9% gain. Here's the current status on the positions in the two remaining stocks:

	My Wealth Builder 5/28/07 Buy List
Stock	Shares	Purchase Price	Current Price 10/12/07
Potash (POT)	50	$71.39	$112.90
Shaw Communications B (SJR)	100*	$21.755	$26.30
Avnet (AVT)	200	$38.21	sold @ $40.15
Terex (TEX)	50	$82.56	sold @ $85.77

* 2 for 1 split on 8/3/07

Overall, I am still happy with the performance of these four stocks, given that the overall market had a significant drop in August. Since the last update, POT was up $9.24, and SJR was flat. I have owned these two stocks since June, 2007. POT has contributed significantly with a 58.1% gain in that time. SJR has contributed with a 20.9%.

I continue to be impressed with my commitment to stay invested in these stocks, in spite of the market volatility. In the past, I would have closed out the entire position with this level of volatility. Given the performance of the portfolio, I am glad I held my positions instead of allowing myself to be whipsawed by the market each week.

The recent events (credit crunch, central bank interventions) originally had convinced me that the bull market is in its last stage, and I was considering closing out these positions during the next significant rally. However, the Fed rate cuts of 0.5% for the discount and Fed funds rate of September 18, 2007 lead me to believe the bull market will last about another year. So I have updated my stock picks from the modified Unemotional Investor Growth system, which I will publish later today.

At this point, I have not made any purchases from the new stock pick list, since the market rally has not been very strong yet. However, last week the market rally became stronger and I will consider making some buys this week..

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

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

Copyright © 2007 Achievement Catalyst, LLC

Tax Return For 2006 and Preparation For My 2007 Tax Return

It's time to fess up and admit I am a procrastinator when it comes to filing my tax returns. I just completed my 2006 tax return, in time for the extended due date of October 15, 2006 (tomorrow:-). To note, an extension does not include extending the time for payments that are due. Taxes owed were still due on April 17, 2007 this year. Thus, I had done a initial estimate of my tax returns in March and, unfortunately, sent in the additional taxes I owed. However, getting an extension usually allows me to make sure I have all my records and to make sure I didn't miss something. Here's what I learned this year:

1. No return needs to be filed for my daughter's UTMA accounts. My in-laws and we have set up custodial accounts for our daughter. Having heard about the "kiddie tax," I thought that I would need to include her income in our tax return, using form 8814 or form 8615, or, even worse, file a tax return for her. However, I learned as long as her unearned income is below $850 and she has no earned income, no return need to be filed.



2. No self employment tax needs to be paid on income below $400. According to Schedule SE, no filing needs to be done for self employment income under $400. While this was not a concern for 2006, it will be good information to know for the 2007 tax year.



3. Sometimes tax rates are reduced. When I calculated our estimated 2006 state tax, I assumed the same tax rates as 2005. According to the estimate, we owed money, which I sent in. However, the tax rates were reduced for 2006, and now we are getting a refund. Although this is probably the last time rates will decrease, I will check our state tax rate for estimates in the future.

Now I have confessed to my misdeeds, I will be taking steps to be better on filing my taxes for 2007. Here's what I am doing:

1. Taking the H&R Block Basic Tax course. Now that I am retired in my forties, I have time for extracurricular activities like this one. If I pass the final exam with 80% or better, I will qualify to be a seasonal tax preparer for 2007 taxes. At the very least, I will be better prepared to do my 2007 taxes:-)



2. Do my initial 2007 tax estimate in December 2007. Since I retired in October, 2007, my W-2 income will be finalized in at the end of October, 2007. While I will have some additional interest and capital gains income, it will be small compared to me income. I should be ready to final in January, 2008:-)

We'll see if these interventions will make a difference for the 2007 tax return:-)

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

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

Copyright © 2007 Achievement Catalyst, LLC