Our Journey To Financial Freedom #9 - The Professionals We Used

In early October, 2007, I announced that I had retired in my forties. As promised, I am writing a Friday series on "How We Did It," of which this is segment #9. ( #1 is about our childhood , #2 is about education, #3 is about working, #4 is about lifestyle , #5 is about goals, #6 is about staying on track, #7 is about the role of luck and #8 is about my personal finance mind tricks.) This segment about the times we chose to use professional help.

Most of my life I have been a do-it-yourself type of person. My dad was a great do-it-yourselfer and I inherited his ability. Why hire an electrician when I can follow instructions to rewire a light switch? Correct a leaking faucet or toilet? I can be a plumber for a day. Of course, I know my limits. For the big jobs, I call in the pros, e.g. roofing, cutting down a large tree, painting the exterior of a 2 story house.

I also applied this approach to managing my personal finances. On my own, I learned about buying real estate (mainly my home), investing in the stock market (equities and options), buying fixed income securities (CDs, and municipal bonds), and managing IRAs. I still do my own taxes, by hand:-), and routinely do mortgage payoff or compound interest calculations on Excel spreadsheets. Finally, both my spouse and I are pretty good at paying ourselves first, putting money in emergency funds and paying our bills (including credit cards) on time. However, for the big, complex or way out of my league jobs, I hired a pro. Here are some key areas where we used professionals.

Trust and wills. Just before moving to Japan for an international assignment, the company's tax consultants asked us if we had a will. Since we didn't have children at the time, our answer was, "no." He then advised us that while we were in Japan, our estate would handled under their laws, if we had no will. However, if the decedents had a will or trust, Japan would recognize the documents.

Needless to say, with only a short time to moving, we hired a local firm to do the legal work for living trusts, wills, durable powers of attorney, and living wills. For us, it was well worth , given the limited time to do it. A colleague once told me he saved money by buying the living trust forms at an office supply store and doing it himself. I guess if I were single, I would take the risk. However, with a family and the responsibility to ensure the estate is protected for them, I think it's worth the cost of having an attorney make sure it is correct.

Validating amount needed and managing funds for retirement. While we were overseas in Japan, I realized that it would be a good idea to hire a professional wealth manager when when returned. It became obvious to me that I didn't have the time to completely keep up with the latest developments nor did I have time to effectively manage a large investment portfolio.

When we returned, I began to investigate financial advisors. Fortunately, I liked one of the first ones I identified. Their investment approach of prudently growing wealth was in line with my personal preference, and their approach had avoided a large part of the tech decline in 2000-2002. Also, I knew people that had been with them for many years and were satisfied.

Thus, we moved a portion of our savings to a managed investment account. Over the past two and half years, I have had numerous discussions with my financial advisor on investment strategies, retirement readiness and market environments. Importantly, he had access to sophisticated tools (e.g. Monte Carlo simulations) to provide a great estimate of retirement funds sustainability, which gave me high confidence we could retire in our forties. And most importantly, he has given me confidence to stay invested in the stock market even during times of high volatility.

However, in both cases, I did not completely delegate responsibility to the professionals. For the trusts and wills, we already had a working knowledge about estate planning, the benefit of revocable living trusts and how we wanted to distribute our estates. For financial planning, I had already developed financial goals and investment strategies from which we could further refine with our financial advisor. In addition, I am very involved when new investment strategies are being considered.

As we get older, I expect that we will need additional professionals (e.g. a CPA and family attorney) and will be working to identify good candidates in the next few years.

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, Andrew

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

Copyright © 2007 Achievement Catalyst, LLC

Potential Tax Credits For Having Children

Since our daughter is only three years old, I'm still learning all the tax credits that are potentially available to taxpayers with children. Here are some of the ones that I have identified so far. I've included the updated numbers I found for the 2007 tax year for Married Filing Joint (MFJ) status.

	Credits for 2007 Tax year*
Type	Maximum Benefit	MFJ Phaseout Begins at	MFJ 100% Phaseout at
Child Care Credit	$1,050 per child $2,100 maximum	$15,000**	43% phaseout at $43,000**
Adoption Credit	$11,390	$170,820	$210,820
Child Tax Credit	$1000 per child	$110,000	$110,000 + $20,000 for each child
Additional Child Tax Credit	up to $1000 per child	n/a	earned income below $11,751
Hope Education Credit	$1650 per child	$94,000	$114,000
Lifetime Learning Credit	$2000 per family	$94,000	$114,000
Earned Income Credit	$2853 - one child $4716 - 2 or more	$14,180**	$35,241 for one child $39,783 for 2 or more

*While the sources are believed to be good, My Wealth Builder cannot guarantee the accuracy, timeliness or completeness of the information in the table.

** 2006 tax year number.

I was surprised to find so many possible credits (and large credit amounts) for taxpayers with children. The ones we'll be able to use in the near term are the child tax credit and the adoption tax credit. Hopefully, the education credits (Hope and Lifetime Learning) will still be available when our daughter attends college.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Comparing Wealth Building to Running a Marathon

In my life, I've noticed I do well with activities where I learn the key principles, practice the skills, and have diligence in making the effort. Having run a marathon, I noticed some similarities between preparing and running the race and building wealth for retirement.

1. Good preparation is important. Training for a marathon involved months of training, lots of distance running and good discipline. I would not have been able to complete the run without doing the training. A side benefit was that it was good for my physical health.
   
   For wealth building, I have found having good personal finance habits and good discipline are important to being successful. Learning to pay oneself first and to buy only what one needs are excellent training for wealth building.



2. Have a plan and refine it as needed. Running at a sustainable pace was important. The finish line is a very far away from the start. It's important to know one's skills and NOT waste energy. I planned and ran the marathon with a college roommate. We decided to run at a 8' 45" per mile pace even though both of us had run 3 to 5 mile races at 7' to 7' 30" per mile. While much slower than our capabilities, we felt this pace would enable us to finish.
   
   For wealth building, I found having a sustainable plan, which we modified as needed, was very helpful.



3. Don't worry about other participants. Keeping focused on our own plan, pace and progress was very important. At the start, there were thousands of runners in the pack. Hundreds of runners passed us in the first five miles. However we passed hundreds of runners in the subsequent 21 miles as they burned out from starting too fast.
   
   In wealth building, others may appear to have more (e.g. luxury cars, expensive clothes, and more gadgets) at the start. However, it is good to avoid comparisons and stick to one's plan.



4. Push to completion when the finish line is close. When I only had 1-2 miles left in marathon, I knew I would have enough energy to finish is good shape. Similarly, as our retirement savings got closer to our target, we seem to be able do a little more to get to the finish.

In my only marathon, I finished the race in 4 hours and 9 minutes, much after the winning time of 2 hours and 12 minutes. On the wealth building side, we have managed to completely retire while in our forties. In both cases, being able to finish made the preparation and effort well worth it.

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 November 26, 2007

Here are links to select Carnivals from November 26, 2007:

Carnival of Family Life

Carnival of Personal Finance #128

64th Festival of Stocks

Please give the hosts some recognition for their effort and check out the Carnivals from this week.

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

Copyright © 2007 Achievement Catalyst, LLC

Some Good Frugal Living Philosophies

MSN.com has a Women in Red column by MP Dunleavey and a recent article 6 Saving Secrets From "Frugal Fanny" caught my attention. One of the Women in Red members, Anna, shares how she is supporting her husband and daughter on a single income of $65,000 in Washington, D.C. Impressively, 74% if her income is spent on committed living expenses, leaving 26% of unexpected expenses and savings. I also thought she had some good strategies, which have worked well for her. Here were the six money philosophies in the article, with my comments:

1. Money should be for living, not spending. I agree that money should be treated as a tool for living needs, instead of for spending on "wants." Good use of money can enable one to create sustainable lifestyle. As with any tool, I believe one needs to learn how to use it properly.



2. Never go into to debt, if you don't have to. Fully agree. For our family, I would modify this to "Never go into debt except for a home, a student loan that is less that 50% of one's salary from a first job, and maybe a first car."



3. Don't deprive yourself. I like her approach of indulging, but not every time. I think it is very important to make choices on where to spend money and what to give up. My strategy is to be happy with buying only what I need.



4. Steer clear of spending traps. I agree avoiding places that create temptation is a good way to avoid unnecessary spending. If I don't see it, I can't buy it :-)



5. Beware of bulk buying. For me, I include this point in the category of only buying what I need. I don't see a problem with buying a package of 30 rolls of toilet paper at Costco. We'll always need toilet paper. However, I do see the overspending issue with buying 6 box bundle of crackers, when I only need one.



6. Avoid comparisons. I think this is one of the best strategies. To me, it's important for our family to have the things we need and not what others need and want. For example, I admire home theaters, luxury automobiles, iPhones, and other wonderful things that my colleagues, neighbors and friends own. I am happy that they enjoy the items, am genuinely interested in the items, and am complementary about the items. However, in most cases, I don't translate admiration into a need to own it.

Finally, I think an excellent point of the article is that while Anna has good strategies, she is not perfect. However, as MP Dunleavey notes, "she doesn't let minor failings stand in the way of making steady progress on bigger issues -- a quality we should all aspire to."

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

11/26/07 Stock Purchase Update - Riding a Roller Coaster

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. Second, I avoid the stocks that have a high percentage of shorted shares Third, I then look at the businesses of the remaining stocks. The result is a list of three to five stock selections which I attempt to buy when market conditions appear favorable for the selections.

The latest update of my buy list using this system was on 10/15/07. The previous update of my buy list was on 5/28/07. One stock, Potash (POT), was selected in both lists. Thus, I am tracking the results of the 10/15/07 updated buy list, with Potash being purchased earlier. To be transparent, I will track the results with and without Potash, since it has gained significantly from its initial purchase in June, 2007.

	My Wealth Builder 10/15/07 Buy List
Stock [purchase date]	Shares	Purchase Price	Current Price 11/23/07
Potash (POT) [6/7/07]	50	$71.59	$108.08
Southern Copper(PCU) [11/13/07]	40	$108.24	$104.20
CNH Global NV (CNH) [11/13/07]	50	$55.22	$53.32
BHP Billiton (BHP)	tbd	tbd	tbd

While my buy list was created on 10/15/07, I waited until November before making any new purchases. Waiting a month has been fortuitous, since prices of my selections have dropped below their 10/15/07 price. At this point, the total portfolio is up $1577.90 for a 14.8% return, down from last week's high of $2073.90 for a 19.5% return. The new purchases of PCU and CNH are down $256.60 for a -3.6% return.

The market activity continues to be concerning, with either narrow breadth or a high number of new lows. However, the Fed interest rate cuts lead me to believe the bull market will last about another year, although it may be choppy. Currently, I am only making limited purchases until the market develops a more clear direction.

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 - Five Month Status

Those who joined the Retirement Saving Challenge on July 1, 2007 have almost completed five months. On Friday, November 30, 2007, one should have five 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:

	Five Month Amount by Age To Achieve Savings Equal To 12 Times Salary
Salary	20	30	40	50	60*	12% of Salary
$20,000	226	521	1,260	3,470	16,366	1,000
$30,000	339	782	1,890	5,204	24,549	1,500
$40,000	452	1,043	2,520	6,939	32,732	2,000
$50,000	565	1,303	3,150	8,674	40,915	2,500
$60,000	678	1,563	3,780	10,409	49,099	3,000
$70,000	792	1,824	4,410	12,143	57,282	3,500
$80,000	905	2,085	5,040	13,878	65,465	4.000
$90,000	1,018	2,346	5,670	15,613	73,647	4,500
$100,000	1,131	2,606	6,300	17,348	81,831	5,000
$110,000	1,244	2,867	6,930	19,082	90,014	5,500
$120,000	1,357	3,128	7,560	20,817	98,197	6,000
$130,000	1,470	3,388	8,190	22,552	106,380	6,500
$140,000	1,583	3,649	8,820	24,286	114,563	7,000

* 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 $565 by November 30, 2007. If more aggressive, one can choose to have saved $2,500.

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 December 29, 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

Four Month Update - October, 2007

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

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

Copyright © 2007 Achievement Catalyst, LLC

Is A Recession Coming?

The answer is yes. The unknowns are when and for how long:-) The current housing bust, credit crunch, and collateralized debt crisis are factors pointing towards recession. In addition, consumer spending is declining. Offsetting factors including continued strong business results, a strong global economy and Fed Monetary policy. I believe Ben Bernanke and the Fed now realize the need for further rate cuts, which they will do in the next few months. Overall, I think the the offsetting factors will delay but not prevent a recession. My hope is that the delay will be at least 18 months and soften the eventual recession, leading to a quick recovery.

Here's an interesting article dated August 31, 2007, by Jim Kingsland at Seeking Alpha titled, "Are We Headed Towards a Recession?" It notes,"A text book definition describes a recession as two consecutive quarters of falling GDP. The National Bureau of Economic Research, also known as NBER, goes a few steps further: 'A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.' " In addition, the article shares viewpoints by several economists on both sides of the question. Mr. Kingsland concludes that a recession is not far away.

Based on a recession scenario being likely in the next 1-2 years, I will be more cautious about putting new funds in the stock market, and consciously maintain at least 35% of the portfolio in cash, bonds and CDs. In addition, I will start identifying stocks for potential short positions, should an extended market decline occur.

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

Photo Credit: morgueFile.com, Clara Natoli

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

Copyright © 2007 Achievement Catalyst, LLC

Our Journey To Financial Freedom #8 - My Personal Finance Mind Tricks

In early October, 2007, I announced that I had retired in my forties. As promised, I am writing a Friday series on "How We Did It," of which this is segment #8. ( #1 is about our childhood , #2 is about education, #3 is about working, #4 is about lifestyle , #5 is about goals, #6 is about staying on track, and #7 is about the role of luck.) This segment is about how I motivated myself by creating new paradigms, which made it easier to be fiscally tough. Here are some of the "mind tricks" I developed and used:

Admiring instead of owning. Somewhere in the journey, I realized that admiring something did not mean I needed to own it. An analogous situation is artwork in a museum. I very much enjoy seeing paintings by the masters, but I wouldn't want to own those paintings, even if I could afford it. Similarly, I admire home theaters, luxury automobiles, iPhones, and other wonderful things that my colleagues, neighbors and friends own. I am happy that they enjoy the items, am genuinely interested in the items, and am complementary about the items. However, in most cases, I don't translate admiration into a need to own it.

Making it a habit or automatic. Early in my career, I would target to have a small amount remaining each month in my checking account, which would be transferred to savings. In my mind, I wanted to have $10, $20, or more leftover each month. At first it was tough, but I soon reached having over $100 remaining each month. Once it became a habit, it was almost automatic.

Later, I did make it automatic. I started paying myself first, by transferring money into my savings at the beginning instead of the end of the month. By putting away part of every raise, I eventually achieved saving 20% of my monthly salary BEFORE paying any bills.

Association with an undesirable situation. I avoid using debt by convincing myself that it is the equivalent to paying more than sticker price for an item. Being a price negotiator, the thought of paying more than sticker makes me cringe, to the point that I don't think I would ever do it. With this association in mind, I easily keep myself from using debt.

While these "mind tricks" are not infallible, they work most of the time for me because they cause me to feel good for making a good personal finance decision for our future. And when I feel good, I usually am very motivated:-)

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, Dawn M. Turner

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

Copyright © 2007 Achievement Catalyst, LLC

Giving Thanks To My Parents

Thanksgiving has become a bit more sentimental for me in the past few years. In 2005, my dad was recovering in the hospital from pneumonia and it was the last Thanksgiving he was with us. Since then, my mom broke her hip in a fall and had to go into a nursing home. In 2007, we spent Thanksgiving with her at the nursing home. For each of these Thanksgivings, I wanted to make sure I also thanked my parents for everything they had done.

In 2005, I optimistically believed that my dad would recover and didn't expect it be our last Thanksgiving together. However, I still took the opportunity to tell him that he was a great father to me, and I thanked him for everything he had done. While we didn't many have heart to heart discussions, my dad had always been there for me when I needed him. I'm glad that I didn't miss the chance to say, "Thank you for everything" before his passing. I'm glad he heard me say it, even though I think he always knew.

This year, I told my mom that she was a great mom and thanked her for everything. In her typical modesty, she said, " I'm just happy we could be with you through college and until you were out on your own." We reminisced about my childhood - favorite foods, activities and other memories. I was very glad that I said "thanks" to her.

In both cases, I felt that time had gone by so fast. In the past, I never thought about my parents being this old and didn't say thanks often enough. Now with time seeming to pass even faster, I definitely want make sure my mom hears "Thanks" from me many more times.

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

Photo Credit: morgueFile.com, Dawn M. Turner

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

Copyright © 2007 Achievement Catalyst, LLC

Avoiding Wash Sales While Taking Losses For Stock Investments

If one plans to take a loss on a stock or mutual fund this year and own it again before next year, selling or buying in November enables one to avoid the wash sale rule. The wash sale rule requires that substantially identical securities cannot be bought within 30 days before of after the sale of securities for a loss. Otherwise, the loss cannot be claimed.

Here’s a scenario where one may want to sell some losses, even though the stock is still a good one for the portfolio. (For the purposes of this discussion, the term stock will refer to either stocks or mutual funds.) Because of some successful investing, one has made $5,000 on a stock that has been sold. This is good. However, another stock is down $5,000 and expected to go higher next year. If nothing is done, taxes will be owed in 2007 on the $5,000 gain.

If the shares with a loss are sold, the gain for the year will be zero, $5,000 gain minus $5,000 loss. The IRS will allow this. It would be great if one could buy back the stock the next day, thus taking the loss and still keeping the stock. However, the IRS does not allow buying back the stock within 30 days of the sale. Thus, there is risk the stock price may be significantly different when repurchased.

Personally, I like to avoid paying taxes. So I try to sell as many losses as possible near year end. Often, it is an easy decision. Sometimes, there are stocks that I want to sell outright. For those stocks that I want to continue to own next year, I manage them to avoid the wash sale rule.

I use a buy first and sell second strategy to avoid wash sales. Here are details on how strategy works:

Buy identified stocks in November. October and November are typically months when people do tax loss selling. Thus, the stock price is likely to be depressed in these months. I had had two stocks with a loss that I wanted to keep next year, Genta (GNTA) and Chico's (CHS). I bought shares of GNTA and CHS on Tuesday, November 6, 2007.

Sell identified stocks in December after 30 days. For GNTA and CHS, I can sell the older original shares for a loss anytime after December 7, 2007 and avoid the wash sale rule. My long shot hope is that GNTA will benefit some good news in 2008 for their cancer drug and CHS will benefit from improved clothing sales this winter.

If there is a sudden rise in GNTA and CHS before December 7, I will benefit from owning twice the number of shares. (I would be extremely disappointed if I had sold first and the rise happened during that time.) Of course, there are no guarantees. GNTA and CHS could go lower, creating more losses.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Links To Carnivals from November 19 - 21, 2007

Here are links to select Carnivals from November 19 - 21, 2007:

Carnival of Family Life

Carnival of Personal Finance #127

Festival of Stocks #63

Carnival of Money Stories #35

Festival of Frugality #101

Thanksgiving Cavalcade of Risk

Please give the hosts recognition for their hard work and check out their Carnivals.

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

Copyright © 2007 Achievement Catalyst, LLC

Amazon.com Black Friday Deals

While I am not a big fan of Black Friday shopping, I was intrigued by an e-mail from Amazon.com which said, "This year we’ve created a Black Friday page for holiday shoppers at amazon.com Black Friday (affiliate link). Amazon.com will be offering hourly deals from 6am to 6pm PST along with thousands of products on sale for a limited time."

Being an owner of Amazon stock and part of the affiliate marketing program, I am interested in how well Amazon will leverage the power of the Internet to drive sales this holiday season. With the credit crisis, this year will be full of challenges, which hopefully Amazon will be able to overcome. In addition, I will be interested if they can offset any sales weakness with growth in handling supply chain logistics for other companies. Otherwise, Amazon (AMZN) stock will likely be flat for a while.

I probably still won't do any shopping on Black Friday, but I will at least take a look at the Amazon Black Friday site.

Full disclosure: I own shares of Amazon stock and am a member of Amazon's affiliate marketing program.

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

11/19/07 Stock Purchase Update - New Purchases Added To Remaining Holding

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. Second, I avoid the stocks that have a high percentage of shorted shares Third, I then look at the businesses of the remaining stocks. The result is a short list of stock selections which I attempt to buy when market conditions appear favorable for the selections.

The latest update of my buy list using this system was on 10/15/07. The previous update of my buy list was on 5/28/07. Interestingly, one stock, Potash (POT) was selected in both lists. Since Potash is the one remaining holding from the 5/28/07 list and two purchases have been made from the 10/15/07 updated buy list, this and future updates will be based on the 10/15/07 selections.

	My Wealth Builder 10/15/07 Buy List
Stock [purchase date]	Shares	Purchase Price	Current Price 11/16/07
Potash (POT) [6/7/07]	50	$71.59	$113.05
Southern Copper(PCU) [11/13/07]	40	$108.24	$110.05
CNH Global NV (CNH) [11/13/07]	50	$55.22	$53.59
BHP Billiton (BHP)	tbd	tbd	tbd

While the buy list was created on 10/15/07, I had decided to wait before making any new purchases. Waiting a month has been fortuitous, since prices of my selections have dropped below their 10/15/07 price. At this point, the total portfolio is up $2073.90 for a 19.5% return. However, the new purchases of PCU and CNH are down slightly $9.10 for a -0.1% return.

The market activity continues to be concerning, with narrow breadth and a high number of new lows. However, the Fed interest rate cuts lead me to believe the bull market will last about another year, although it may be choppy. Currently, I am limiting my purchases until the market develops a more clear direction.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Capitalizing On The Internet Revolution

"I skate to where the puck is going to be, not where it has been." Wayne Gretzky

Society has gone through major changes with the agricultural revolution and the industrial revolution. Both of these events changed the way people lived and worked, and significantly increased our standard of living. I believe we are in the midst of the the next major revolution, involving knowledge and the Internet. Here are the elements of the Internet that I think will drive this revolution.

1. Low barriers to entry. The capital needed to get started is very minimal. One only needs a computer and Internet access to get started. Thus, participation is available to almost everybody.



2. Unlimited distribution or access to knowledge and services. Content created on the Internet is theoretically available to everyone with access to the Internet. On the other hand, if something is needed, but not easy the find, the Internet can also help on discover it. One is no longer limited by relationships or contracts with retailers, individuals or other entities.



3. Low cost monetizing infrastructure. Others have already built infrastructure that can be used, including Google Advertising, PayPal, EBay and hosting. Most of it is free or very low cost.

There are already some great examples of people capitalizing on the Internet Revolution. In Crain's Detroit Business, Dennis Duggan writes about a 17-year old making millions from designing MySpace pages for teens. In USA Today, Jefferson Graham writes about retirees who make up to $100,000 annually from advertising revenue on their website.

Of course, the first are likely to make more money and there may be less for later entrants. However, I believe there is still a lot of opportunity since there still many niches with potential high appeal and the cost of entry is low enough to take a chance :-)

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

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

Copyright © 2007 Achievement Catalyst, LLC

Pondering Financial Risks In Our Retirement

I have been thinking about scenarios that could have a negative on our retirement savings and contemplating possible solutions. Here are the major potential issues that I have identified so far:

Stock market crash or a long recession. With the recent stock market volatility and credit crisis, this appears to be the biggest risk to our retirement savings. Based on analyses by our financial advisor, our highest risk is below average market returns during the first few years of our retirement (i.e. right now). Interestingly, low returns in later years have less of a negative effect since the portfolio had an opportunity to grow initially.

While I have no solutions for a 10 year crash or recession, I believe we can weather a short term (one to three year) correction by putting a portion of my retirement savings in short term CDs, bonds and money market funds. Thus, if there is a market correction, we won't need to sell stocks at a loss to fund living expenses. Another option I am considering is to take on part-time work to slightly reduce the withdrawal amounts during the initial years of retirement.

Health issues. Thus far, we have been fortunate to have good health in our family. However, I recognize that a catastrophic health event can cause significant financial challenges. While future health issues are not predictable, we are taking the following precautions:

1. Lifestyle and food. We are consciously increasing our physical exercise and I am improving my eating habits. My spouse and I are doing weekly yoga classes, in addition to my weekly tennis matches. Over the next few months, I plan to add some running and weight training back into my regimen. While my wife has always been a very healthy eater, I have been a relatively poor eater. Since retiring, I have adopted some of my wife's food preference, resulting in me feeling better and losing about 10 pounds.



2. Medical insurance. As a retiree, I will be able to maintain my company's medical insurance, although at a much higher cost. However, I am glad to pay this insurance premium since it will provide some protection for our retirement savings from major health issues.



3. Long term care insurance. Both my wife and I have long term care insurance, which provides for the cost of nursing home, assisted living or home care if we should need it in the future. With the cost of nursing home care at $5,000 to $9,000 per month, we wanted make sure it can be covered in the future. Fortunately, since we are in our forties, the premiums are still relatively low and worth the peace mind we get.

Longer life. Recently, I have heard some scientific reports that the human body could make it to 150 years or more. However, disease and other factors keep people from reaching those ages. What if there are medical advances that enable 150 years of age during our lifetime? While I think our retirement savings will last 40 to 50 years, I'm not as confident it will last over 100 years :-) On one hand, I want to make sure we enjoy the next 5o years, but it could be devastating if we run out of funds in the final decades of our lives.

At this point, I don't have any firm solutions developed. One option I have considered is to use our home to fund the later stages of retirement. Since we will likely need a smaller home as we get older, the equity in our home could be monetized via a sale or reverse mortgage. Another option I will investigate is buying a variable lifetime annuity which will provide an income stream for the rest of one's life. While I don't think this a good option for us now, it may be something worth considering in our eighties or nineties.

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

Photo Credit: Wikimedia Commons, CJ

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

Copyright © 2007 Achievement Catalyst, LLC

Our Journey To Financial Freedom #7 - How Luck Played A Role

In early October, 2007, I announced that I had retired in my forties. As promised, I am writing a Friday series on "How We Did It," of which this is segment #7. ( #1 is about our childhood , #2 is about education, #3 is about working, #4 is about lifestyle , #5 is about goals, #6 is about staying on track.) While our planned actions significantly contributed to success, there was also a degree of luck, good fortune, or serendipity, without which we would not have made it. Here are the three areas where I think luck contributed the most.

Career luck. In school, sports or work, I have always been most successful when working with the right leader, manager or organization combined with the right situation that enabled me to to best leverage of my strengths and skills. At work, this happened in the middle of my career. I transferred to a team where the individuals complemented each other strengths and worked well together. In addition, due to the geographical dispersion of the work, we were given more decision latitude than other project leaders. It was during this time, I felt I did my best and most significant work for the company. Apparently, the company also thought so, as I was promoted twice during this time frame.

I consider it great luck that I was transferred into this organization. No assignment before or after was as good as the ones from those years. Also, the additional total compensation from the promotions enabled us to put significantly more into retirement savings. I'm pretty sure if I had not been promoted, I would still have at least a decade more of work before retirement.

Retirement plan luck. My retirement plan is based primarily on company stock. As many of you know, it can be very high risk when one's retirement account is dependent on the performance of one stock. On the other hand if that stock is Microsoft, Wal-Mart or Google, one would be very lucky:-)

Count me on the luckier side since our company stock has outperformed the S&P index during my participation, returning about 16% annually versus 9.6% for the S&P index . If the retirement plan had just match the S&P returns, I'd still be working.

Investing luck. This one is more about avoiding bad luck. I did not invest heavily in tech stocks during the late nineties and I completely avoided speculating during the real estate bubble. Thus, in both cases I avoided losing significant amount of savings when the bubbles burst.

I admit it was hard to avoid participating when colleagues, neighbors and acquaintances were making significant amounts of money in the early stages of each bubble. In hindsight, I am glad (and lucky) that I didn't invest in these bubbles and avoided the eventual large declines.

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, Clara Natoli

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

Copyright © 2007 Achievement Catalyst, LLC

Inexpensive Fall Activities With Our Three Year Old

Now that our daughter is three, it seems there are many more activities in which we can involve her. Here are some of the inexpensive fun activities in which she has been able to participate this fall:



Pumpkin decorating. Throughout October, we painted several pumpkins and carved one, in preparation for Halloween. The painted ones lasted quite a while, providing a great decoration for our family room.

Movie screening. We received passes to the Veggie Tales movie, The Pirates Who Don't Do Anything. After seeing the trailer, we thought is would be an excellent first movie for her. It was a great G rated movie that she enjoyed. And it had a great lesson, which I enjoyed.

Holiday light show. Because of one of our memberships, we have free admission to an elaborate holiday light show in our area. This year our daughter was much more interested in and appreciative of the decorations. I think we'll be going back to this one several times this year:-)

Raking leaves. Every fall, we have a large amount of leaves to rake, mulch and compost. This year, our daughter joined us for the raking part and had tremendous fun playing in the piles. It made doing yard work much more fun :-)

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

Photo Credit: morgueFile.com, Mary R. Vogt

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

Copyright © 2007 Achievement Catalyst, LLC

Links To Carnivals from November 11 - 15, 2007

Here are links to select Carnivals from November 11 to 15, 2007:

Carnival of Family Life: Now Showing at a Blog Near You

Carnival of Personal Finance #126

Festival of Stocks

Carnival of the Capitalists

Festival of Frugality 100: Remembering

Carnival of Money Stories

Carnival of Financial Planning

If you're interested in some good reads about Personal Finance, Family Life or Stock Investing, check out these Carnivals for some interesting articles.

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

Copyright © 2007 Achievement Catalyst, LLC

Sticking To My Stock Investment Strategies

The August, 2007 correction and the volatility of early November, 2007 have tested my conviction in the investment strategies that I use. I am pleased to say that I haven't wavered yet and am staying with the strategies. Here are the strategies that I am using:

Diversified equity portfolio (domestic and foreign) with a bias toward large cap growth. This is the majority of my stock portfolio and it is managed by a professional advisor on an asset based fee. I have hired a manager because I believe it is important to be invested in the stock market AND I know the manager will keep me invested during the volatile times when I might cash out. My personal inclination is to trade and time the market, which is not necessarily a good strategy as I wrote in Afraid Of Investing In The Stock Market?.

Even though it has been painful to see the declines of the past few days, I have not withdrawn any funds from this segment.

Modified Unemotional Investor Growth portfolio. For a small part of my portfolio, I use a modified Unemotional Investor Growth system to buy and sell stocks. Since I starting using this system in late 2004, I have had positive returns with each portfolio. The most recent results were shared in the 11/12/07 Stock Purchase Update.

One selection from the 5/28/07 buy list, Potash (POT) has not received a sell signal and I continue to hold this position. Originally, I delayed purchasing the 10/15/07 updated buy list. Yesterday, I decided to buy Southern Copper (PCU) and CNH Global NV (CNH) because they were below the price on 10/15/07, when I thought they were a little over priced.

Core Long Term Stock Holdings. For another small part of my portfolio, I have purchased three stocks that I believe will have large returns in the long term, Google, Amazon and General Electric. Even though Google and Amazon have recently declined 20%, I am still holding on to these stocks.

Foreign ETFs is the area where I don't have a good buy and sell strategy yet. I purchased the China ETF (FXI) and the Brazil ETF (EWZ) in early September, 2007 and sold out in October, 2007 because both had a 25+% gain in six weeks. Since FXI has declined below my October sell price, I have repurchased some shares, but I have not repurchased any EWZ yet.

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

Photo Credit: morgueFile.com, Derek Lilly

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

Copyright © 2007 Achievement Catalyst, LLC

Stock Trading Strategies Based On Historical Patterns

Can You Get Rich With These 7 Stock Market Oddball Indicators by Silicon Valley Blogger is a nice post on stock market timing strategies based on historical patterns or events such as the Super Bowl winner, month of the year, or hemlines to predict future market performance. While I consider many of the indicators are purely coincidental (e.g. hemlines, Super Bowl winner, and Chinese numerology), there are a couple that I think are relatively good indicators of short term trends.

Presidential term cycles - This indicator shows that the third and fourth year of a Presidential term are the higher return years, on average, for the stock market, with the third year (in this case 2007) being the best. I have seen data through 2003 that shows average returns of 7.5%, 8.1%, 18.5% and 13.7% for the first through fourth years, respectively. Of course, any one year can vary from the average and there is no intrinsic reason the third year will be the best.

Year end effect - This strategy capitalizes on tax loss selling that occurs during the final months (October to December) of a calendar year. Stocks with losses will be pushed lower in the short term by sales, sometimes leading to a rebound in January of the following year. The risky part is that one is typically buying a stock that is down from its peak of the year. There are times when the stock will go much lower.

While neither of these timing strategies are sure wins, I have been incorporating them into my purchase activities for 2007, combined with a modified Unemotional Investor Growth system. I also plan to utilize these Presidential Term and Year End strategies into 2008.

Lately, I've noticed a new indicator related to my financial advisor:-) My advisor, coincidentally, was on vacation during the August, 2007 correction and during the part of market decline in early November, 2007. I have mentioned the correlation to my advisor and have asked him not to take any more vacation for the next forty years :-)

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

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

Copyright © 2007 Achievement Catalyst, LLC

11/12/07 Stock Purchase Update - Remaining Position Is Still Strong

In my 11/5/07 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 $3,543 for a 20.2 % gain, for a new high. As of 11/9/07, the portfolio achieved a new high of $3,543 for a 20.2% gain. I had owned AVT for 5 months before selling it for a 5.1% gain,TEX for 4 months before selling it for a 3.9% gain and SJR for 5 months before selling it for a 22.8% gain. Here's the current status on the one remaining stock:

	My Wealth Builder 5/28/07 Buy List
Stock	Shares	Purchase Price	Current Price 11/9/07
Potash (POT)	50	$71.39	$119.75
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 very happy with the performance of these four stocks, given the volatility in the market. The system has worked well in closing out positions in TEX, SJR and AVT. If I were still holding all four stocks, my portfolio return would be much lower at $1795 for a 10.3% gain. Since the last update, POT was down $1.55, weathering last week's big market decline. I have owned POT since June, 2007 and it has contributed significantly with a 67.7% gain in that time.

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. However, because of the recent decline, I may close out the final position of POT this week. Even a strong stock will eventually be impacted by an overall market decline.

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 identified a new set of stock purchases in 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. The market activity continues to be concerning, with narrow breadth and a high number of new lows. I have been staying on the sidelines for new purchases until the market strength and breadth is better. However, if their appears to be a major capitulation, I may make some small purchase in PCU, CNH and BHP.

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

Expat Financial Packages Are Getting Smaller

If one is considering an expatriate (expat) assignment, Expat Life Gets Less Cushy by Katherine Rosman of The Wall Street Journal will be good to read. The article notes that expat benefits are declining as the dollar weakens and more companies expect an international assignment to be part of a normal rotation for advancement. For example, the average expat compensation for Tokyo has declined from 3.6 base in 1994 to 1.8 times base today.

When we did an expat assignment 2000, our total compensation was about 2.5 times base salary. To note, about 35% of the additional compensation was for housing, which was paid directly to the landlord. The balance was for cost of living differences (food, utilities, entertainment), currency fluctuation offsets, and travel home one time a year. If we had children that would have added another .25 times base for each child, for education and living costs.

Reducing expat compensation seems to be another sign of the times as companies are trying to cut costs in every area possible. While I didn't think 2.5 times base was excessive, the amount was still reasonably generous. However, at a compensation of 1.8 times base, we might have lost money living overseas and therefore, it would have been a more difficult decision on whether to accept the assignment.

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

Photo Credit: morgueFile.com, Alan Mort

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

Copyright © 2007 Achievement Catalyst, LLC

Not Buying On The Dips

This week has been a tumultuous one for stocks, especially the financial, retail, and technology sectors. For me, it's been very tempting to try "buying on the dip." Many financial and retail stocks are at a 52 week low. In addition, some financial stocks have trailing dividend payments in of up to 11%.

However, with the exception of a foreign ETF, I have resisted "buying on the dip" for beaten down stocks. Here are my reasons for holding back:

1. Still more bad news coming. Credit market issues, once limited to home builders, subprime mortgage originators and mortgagees, continue to expand. Recently, retailers, financial institutions and even insurance have been pulled into the mess. Unfortunately, it seems to be trickling further to manufacturing. I don't believe any company yet understands their full potential exposure to the credit market issues.



2. Market strength and breadth is poor. I continue to be unimpressed with market strength based on the comparison of new lows new highs. The number of new lows is often close to or exceeding new highs, sometimes even on up days. It appears only a few stocks are driving up the market indices.



3. 2002 broke my habit of buying on the dips. I profited from buying on the dips in the late nineties through 2001. Unfortunately, in 2002 stocks just kept going lower, and my "buy on the dip" investments created significant losses. After that experience, I stopped buying on the dip.

To note, I am extremely tempted by some financial and housing stocks which have had significant declines. But I continue to resist.

However, I am considering small purchases in three areas, foreign ETFs, commodities, and farm equipment, all of which have remained relatively strong during this correction. As I have written in before in Fed Rate Cut Signal and my 10/15/07 Stock Buy List Update, FXI(bought on Friday 11/9/07), BHP, and CNH are selections which I may buy at these levels. I will also give PCU consideration if it further declines below its $114.07 close on November 9, 2007.

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

Photo Credit: morgueFile.com, Mary A. Pen

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

Copyright © 2007 Achievement Catalyst, LLC

Our Journey To Financial Freedom #6 - Staying The Course

In early October, 2007, I announced that I had retired in my forties. As promised, I am writing a Friday series on "How We Did It," of which this is segment #6. ( #1 is about our childhood , #2 is about education, #3 is about working, #4 is about lifestyle and #5 is about goals.) This segment is about how we remained committed to our saving plan.

First, let me acknowledge that it is hard to stay the course. There are too many temptations such as electronic gadgets, advertising, friends, or coffee houses, that require spending of extra money. It's hard to not be distracted. The key is to know what's needed and how much distraction one can afford.

Let me start with an analogy of doing a trip from point A to point B, which should take 9 hours driving at 60 miles per hour. However, up to 12 hours is acceptable. Along the way, there are several exits advertising scenic detours, shopping deals, and great restaurants. However, each stop adds an additional hour to the trip. Knowing this, I would take only up to three stops, to keep within the target of 12 hours. If I take more than three stops, I will need to drive over 60 mph to make up the difference. If I make too many stops, it will become impossible to finish in 12 hours.

Taking this back to achieving financial freedom, here are two approaches that helped us determine whether stay on the highway or take an exit:

Knowing in our hearts what we really wanted and checking progress regularly. For us, this was the most important factor in keeping us focused. Simply, we wanted to get from point A (working) to point B (retirement) within our target time. Therefore, we took some stops (i.e. extra expenditures) but not too many. And we had to drive faster (i.e. earn more money) for some of the time.

My original target was to retire by 55. With that in mind, it was easy to estimate how much was needed (and how much we could deviate) each year to be financially secure by that age. If we were way behind, we would reduce our spending. When we were way ahead, we would sometimes take a one-time increase in spending, e.g. a more luxurious vacation.

Deciding what was (and what was not) really important to us. We narrowed down the important ones to three items: our home, our food and entertainment with family and friends. For these areas, we would spend extra money for additional quality, benefits or enjoyment.

For example, we spend more to get fresh, organic and better quality food, because we believe it is healthier for us. Or we choose higher priced contractors with excellent references or reputations to do home maintenance.

Everything else was an unimportant area where we could choose to save money if needed. Thus, we didn't mind (as much) cutting or eliminating expenses in these areas, when appropriate. Examples in the unimportant category include: cable/satellite TV, wide screen HDTV, new luxury cars, and electronic gadgets (e.g. cell phone, GPS, etc.).
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, Ronnie Bergeron

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

Copyright © 2007 Achievement Catalyst, LLC

Personal Finance Lessons For Our Daughter

While our daughter is only three, she seems to understand some basics of saving money. When she was two, I gave her a coin sorting bank from my childhood. Although we put some starter coins in it, she really didn't have much interest initially. However, recently, she has been collecting loose change from around the house so that she can add it to her bank.

While I know that she doesn't fully understand the concept of money yet, I am thinking ahead to the first couple of financial lessons to teach, and how using her bank may help. Here are a couple of foundational financial principles that I think are important to learn early:

1. Always spend less than one earns. This has been the foundation many a good wealth building strategy. Two good corollaries to this are: Buy only what one needs and Pay oneself first.



2. Save, invest and benefit from the magic of compounding. Be patient. A dollar saved today can be worth a lot in 30 to 50 years. Treat building wealth as a marathon, not a sprint.

In the near future, I think I will use an allowance in combination with the bank to instill these principles. By having her put part of her allowance in the bank before any spending takes place, I think she can begin making these principles a habit.

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

Photo Credit: morgueFile.com, Michael Connors

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

Copyright © 2007 Achievement Catalyst, LLC

2007 Year-End Tax Strategies For A New Retiree

As 2007 winds down, here are some tax strategies that I am considering to minimize my tax liability in 2007. As background, I retired in my forties in October, 2007. Thus, I will be a much lower tax bracket in 2008 than in in 2007. Therefore, I am looking to increase the amount of deductions for 2007, while shifting taxable income to 2008. Here are the strategies I am considering:

1. Shift charitable contributions from 2008 to 2007. While I expect to get a deduction in either year, the tax impact of a contribution will be greater in 2007 because of the higher tax bracket. Therefore, I will be paying a number of our 2008 pledges in 2007, e.g. Church, our Alma Maters, and various charitable organizations. Of course, some payments which are normally spread throughout the year (e.g. Church) will need to paid as a lump sum in 2007. Others, such as goods donations will mean doing 2008 spring cleaning before the end of this year. However, the tax savings will be worth it.



2. Shift appropriate tax and interest payments from 2008 to 2007. I plan to pay any tax or interest payments which is already billed but has a 2008 due date. Two examples are property taxes and the January 1, 2008 mortgage payment. In my county, property taxes are paid six months in arrears. Thus, the January to June, 2007 real estate taxes is due in January, 2008 and the July to December, 2007 taxes are due in July, 2008. While people normally wait until 2008 to pay their 2007 real estate tax, I can choose to pay the tax in late December, 2007 and get the deduction this year. Similarly, I can pay my January 1, 2008 mortgage payment in 2008, or pay it in late December 2007 to get the deduction this year.



3. Capture investment losses in 2007. I can sell any stock investments that have losses to offset any gains in 2007. Personally, if I still like a stock, I buy it first and sell the losing shares 31 days later to avoid the wash sale rule. Otherwise, I just sell the stock outright.



4. Delay selling investment gains until 2008. While today's 361 point drop has me a bit nervous, I am going to attempt holding my stocks with gains until 2008. Only two more months, only two more months ....



5. Make estimated state tax payments for Q4 2007. In the past two years, I've owed state taxes when doing the previous year's return, primarily due to investment gains. Unfortunately, any additional state tax payments for 2007 paid in 2008 will need to be deducted on the 2008 returns. Therefore, I am doing a rough estimate of my 2007 investment gains and making a quarterly estimated tax payment in December, 2007.

To note, accelerating deductions only works 100% if one hasn't triggered the AMT tax. If it's not possible to avoid the AMT tax, then it doesn't help to pay real estate and state taxes earlier since the AMT negates the tax benefit of these deductions.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Links To Carnivals from November 5 - 7, 2007

Here are links to select Carnivals from November 5 - 7, 2007

Carnival of Family Life - Bonfire Edition

Carnival of Personal Finance #125

61st Festival of Stocks

The November Carnival of Career and Job Advice

Tax Carnival #24 - Return to Tax Standard Time

Carnival of Money Stories #33 - Autumn Beauty

Festival of Frugality #99

Cavalcade of Risk #38

Please give the hosts some well deserved recognition for theie hard work by visiting the Carnivals.

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

Copyright © 2007 Achievement Catalyst, LLC

Cavalcade of Risk # 38

Welcome to the Cavalcade of Risk #38. As the name indicates, this Carnival is about risk - e.g. insurance, financial, health, personal, and other types. While every post submitted was a great article, I only included those submissions that had actual (or implied;-) content on risk.

My thanks to Hank Stern for the opportunity to host the Cavalcade of Risk a second time. Besides being fun and educational, hosting a Cavalcade leads to a nice traffic increase for the week:-) It's easy to become a host. Just contact Hank at the Cavalcade of Risk site or send him an e-mail.

And now for the Cavalcade. For your convenience, I have grouped the articles into five categories of risk: Insurance, Health, Business, Investment and Personal. Within each category, the submissions are listed in the order received. If more than one submission was made by a blog, I chose to include the latest submission.

Insurance

Super Saver submits Collision and Comprehensive Car Insurance - When I Consider Dropping Them posted at My Wealth Builder with his guidelines on when the premium cost may be higher than the risk of loss.

Similarly, Phillip Brewer writes When to drop collision coverage on your car posted at Wise Bread, which offers a stepwise approach to eventually assuming the entire risk of collision damage.

George Wallace presents When the Night Wind Howls in the Chimney Cowls posted at Declarations and Exclusions, presenting risk management options for residents who choose to live in wildfire regions.

Paidtwice presents High Deductible Health Insurance vs A Traditional Plan - For Us posted at I've Paid For This Twice Already..., commenting "When faced with a choice between a high deductible insurance plan and a traditional plan, it pays to crunch the numbers and see what really will work the best for you. This is our family's situation and what we decided. Feel free to weigh in with your experiences or comments! Is the risk worth the potential reward?"

Spencer Hill shares When Does a Term Life Policy Have Value? posted at Hill's Personal Finance, noting "A secondary market exists to sell that unwanted term policy to institutional investors. The process is called a life settlement. " This market may offer a way for business to reduce the cost of providing life insurance for key executives.

Bob Vineyard, CLU presents I Am Not a Carpenter posted at InsureBlog, saying, "A major part of risk management is simply knowing what you don't know, and not being afraid to look for answers. Here's a recent experience with someone who didn't understand this."

Jay Norris submits Protecting The Insured posted at Colorado Health Insurance Insider, saying, "A lot of our clients are worried about the risks of forgetting something on their health insurance application, and for good reason."

Jon Coppelman presents Risk Transfer and Furniture: Betting Against the Red Sox posted at Workers Comp Insider. "Back in March, a Boston-area furniture store offered to refund their customer's payments if the Red Sox won the World Series. They lost the bet - or did they? It appears that they purchased insurance for what may well total $30 million in losses. The Insider speculates on the fan affiliation of the insurance underwriters."

Health

Zagreus Ammon presents Risk and Primary Care Income posted at The Physician Executive, observes that primary physicians may assume less risk for each patient, but assume greater aggregate risk if one normalizes for the number of patients. He asks if compensation is proportional to risk assumption, are primary physicians being under compensated?

David E. Williams presents Interview with Steve Harden, President of LifeWings (transcript) posted at Health Business Blog, which shares an interview transcript on "Applying the lessons of aviation to reduce risk in the hospital."

Lowering the Risk of Alzheimer’s Disease posted at Health Articles reports, "According to experts like Dr. Grace Petot, a professor at Case Western Reserve University, people can change their lifestyles to lower their risk. Boost your fruit and vegetable intake for a start."

Business

Noric Dilanchian writes A Whirlpool of Legal Risk at Dianchian Lawyers & Consultants, submitting "In Queensland, Australia a software company did not like the Whirlpool forum discussion about its product. Whirlpool is an online forum for geeks. The company sued Whirlpool. The court of public opinion throttled the company back into silence. There's Web 2.0 lessons here for companies on when not to sue. There's also a checklist of hints on how forum owners can minimise the risk of potential legal action."

Charles H. Green presents The Subprime Mortgage Crisis Viewed in the 12-Year Rear View Mirror posted at Trust Matters. "It took a long time mess up the mortgage market as badly as it has been. Charles takes a long look back to 1995, traces what went wrong" and why risk management failed to protect the parties involved.

Investment

Leon Gettler presents Fear and loathing on Wall Street posted at Sox First, commenting, "Less than a day after the Fed cut interest rates to stave off recession, and Wall Street is in the grip of fear and loathing. It means volatile times ahead."

Silicon Valley Blogger contemplates Deciding To Sell Or Keep Your Employee Stock Options posted at The Digerati Life, offering a strategy to manage the risk inherent with estimating the future value of stock options.

Numerian presents As Wall Street Awaits its Destruction posted at The Agonist. "Is this financial Armageddon? It’s at least as serious a financial crisis as has ever been seen in anyone’s lifetime. The vast credit creation, money making machine that has been Wall Street finance in the past two decades has been shut down. Other parts of the financial industry, like commercial paper and now overnight cash deposits, are being affected."

Logan Flatt, CFA says "Growth Investing" Nothing More Than Rank Speculation posted at PowerWealth.com. "Thanks to decades of promulgation by the financial services industry, it is now common for many people not unlike Mr. Authers to mistakenly use the terms 'value' and 'growth' to describe two contrasting styles of investing. However, there are not two styles of investing. Instead, there is investing and there is speculation. "

FIRE Finance shows analysis on Investing - The Mistake Of Timing The Market posted at FIRE Finance. The data show that market timing significantly under perform the indices making it a risky proposition for most investors.

Personal

Lisa Emrich presents New Freedom Initiative -- Medicaid, Employment, and Affordable Housing for Disabled Persons posted at Brass and Ivory, writes about a risk management decision she must make to maximize benefit from a Virginia disabilities program.

Pedestrian (and cyclist?) risk increases during clock roll back posted at Bike Hugger reports that a study shows "pedestrians are 3 times more likely struck and killed after the switch to Standard Time."

This concludes the 38th edition of the Cavalcade of Risk. To become a future host, please contact Hank Stern at the Cavalcade of Risk site or send him an e-mail.

Photo Credit: morgueFile.com, Clara Natoli

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

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