Wealth Builder Ratios - Q4 2007 Update

Here is our Q4 2007 Wealth Builder Ratio update. This update also represents results for the 2007 year. I am very pleased with this year's results versus goals and 2006 results. The second half of 2007 has delivered significantly higher returns versus the first half of this year. As a result, we exceeded our financial goals for 2007. For more details on the relevance of these ratios, please see this How Much Is Needed To Be Wealthy - The NUMBER.

Ratio and Target	Q3 2007	Q4 2007	Comments
Investment Income to Salary Target=0.8 2007 - 0.8	1.07	1.11 (3.41)	Exceeding the target of 0.8 is due primarily to a 16.7% gain in our company stock, which is a significant part of our retirement account. In addition, since I retired in Q4 this year, I have included the value of stock options for the first time. The impact of stock option returns on the ratio is shown in the parentheses. Tracking this ratio is giving me an indication of what our income might be like during retirement. With investment income at 9% of my salary for the first half of the year, we would have been spending our retirement principal during Q1 and Q2 2007. However, for the second year in a row, significant gains were achieved in the second half of the year.
Savings to Salary Target>20 2007 - 16.5	16.4	17.2 (23.0)	The significant gain this quarter is due to 16.6% rise in my company's stock, the gain in my taxable accounts and a contribution by the company to my retirement account. Of note, we achieved our target of 20.0 this year due to inclusion of stock options in the calculation for the the first time this quarter. This calculation is show in parentheses.
Debt to Salary Target=0 2007 - 1.53	1.55	1.51	Currently, our only debt is our home mortgage. In January, we made a payment equal to 4% of our principal. Although our target has been to pay off our mortgage at retirement, we decided to keep the mortgage for at least one to two more years.

My financial goals for 2007 were:

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

2. Add 1.5 to my Savings to Salary Ratio for a year-end value of 16.5. (exceeded)

3. Reduce my Debt to Salary Ratio by 0.1 to 1.53. (done)

(For reference, Salary refers to gross salary.)

Both #1 and #2 were directly correlated with how well our stock, bond, and CD investments did. Due to a strong second half, our stock, bond, and CD investments return 14.6% in 2007. This compares with an S&P return of 3.5% and a Dow return of 6.4% for 2007. Number 3 was achieved since we made an additional payment equal to about 4% of our mortgage principal.

2007 has been a good year financially. However, I don't expect our investments to regularly have double digit returns every year. Our financial situation could change significantly with a downturn in the stock market. While we have met our targets for retirement, our goal now is to meet them in 2008 and later. We will be adjusting our asset allocation, with the help of our financial advisor, to help mitigate market risks going forward.

2008 will be an interesting (and probably volatile) year, given the economic and political uncertainty, and the upcoming Presidential election. Next year will be a good test of the effectiveness of our investment strategies.

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

12/31/07 Stock Purchase Update - A New High

In my 12/24/07 stock purchase update, I wrote about how the 10/15/07 updated buy list of Potash (POT), Southern Copper (PCU), CNH Global (CNH) and BHP Billiton (BHP) was performing. In that article, the portfolio had rebounded to a gain of $3,404 for a 23.9% return. As of 12/28/07, the portfolio had achieved a new high with a gain of $4,098 for a 28.8% return, based primarily on the strength of POT, which had a share price gain of $12.31 last week. The new purchases of PCU, CNH and BHP are only up slightly at $458 for a 4.3% return. Both PCU and BHP continue to have small losses. Here's the current status of the stocks I own in the portfolio:

	My Wealth Builder 10/15/07 Buy List
Stock [purchase date]	Shares	Purchase Price	Current Price 12/28/07
Potash (POT) [6/7/07]	50	$71.59	$144.19
Southern Copper (PCU) [11/13/07]	40	$108.24	$105.76
CNH Global NV (CNH) [11/13/07]	50	$55.22	$66.55
BHP Billiton (BHP) [11/27/07]	50	$71.54	$71.36

The market activity continues to be concerning, with either narrow breadth or a high number of new lows. I believe that the probability of a recession in 2008 is relatively high. The multitude of negative factors will eventually outweigh any actions by the government. However, the Fed interest rate cuts and other actions lead me to expect that the bull market will last through summer, 2008, although it may be choppy. At this time, I do not plan to add any more to the amounts that I have already invested in the above table.

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 - Six Month Status

Those who joined the Retirement Saving Challenge on July 1, 2007 have just about completed six months. On Monday, December 31, 2007, one should have six 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:

	Six Month Amount by Age To Achieve Savings Equal To 12 Times Salary
Salary	20	30	40	50	60*	12% of Salary
$20,000	272	627	1,515	4,173	19,682	1,200
$30,000	408	940	2,273	6,259	29,523	1,800
$40,000	544	1,254	3,031	8,345	39,364	2,400
$50,000	680	1,567	3,788	10,431	49,205	3,000
$60,000	816	1,881	4,546	12,518	59,047	3,600
$70,000	952	2,194	5,304	14,604	68,888	4,200
$80,000	1,088	2,508	6,061	16,690	78,729	4.800
$90,000	1,224	2,821	6,819	18,776	88,570	5,400
$100,000	1,360	3,134	7,577	20,863	98,411	6,000
$110,000	1,496	3,448	8,334	22,949	108,252	6,600
$120,000	1,632	3,761	9,092	25,035	118,093	7,200
$130,000	1,768	4,075	9,849	27,121	127,934	7,800
$140,000	1,904	4,388	10,607	29,208	137,775	8,400

* 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 $680 by December 31, 2007. If more aggressive, one can choose to have saved $3,000.

This concludes the My Wealth Builder Retirement Saving Challenge. I hope challenge participants have found the process useful and beneficial. As seen in the above table, followers of the saving challenge have a made a good contribution to their savings. I wish everyone good luck in their own retirement savings journey.

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

Five Month Update - November, 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

My New Year's Resolutions For 2008

I try to keep my New Year's resolutions short, simple and achievable. I also start working on them before the end of the previous year, to give myself a running start at the beginning of the new year. Here are my four resolutions for 2008:

Healthier lifestyle. My big goal is to lose 10% of my weight, and achieve the weight I had as a freshman in college. I will attempt to do this via increased exercise and better diet. The main challenge will be to triple the amount of exercise each week.

For a head start, I've already cut back on coffee (caffeine) and alcoholic beverages. I'm getting at least eight hours sleep most nights, with seven hours being the minimum. And I've started doing yoga.

Implement tax strategies to maximize income as a retiree. Since retiring in my forties in October, 2007, I've been learning several ways retirees can maximize income by reducing taxes owed. Specifically, as a retiree, I am now in a lower tax bracket, resulting a significant tax savings when implementing these ideas after retiring. The strategies range from minimizing the long term capital gains federal tax to doing Roth IRA conversions. I will target to implement five tax strategies that will reduce my tax liability by 10% or more.

To get started, I completed a basic tax course in November, 2007.

Execute contingency plans for creating retirement income. As I've written before, a big risk for my retirement income is a negative stock market return in the first few years. We plan to mitigate the risk by having three years of income in CDs and bonds, taking some part time jobs and possibly starting a small business. Our contingency goal is to earn 20-40% of our retirement income needs during the first three years.

As a head start, we have already purchased the CDs and bonds, and I have started a part time seasonal financial services job. In addition, I am testing a "dream job" business opportunity that has a very low start up cost.

Have fun. I have never been able to "work hard and play hard." For me, it usually has been "work hard and work hard," as my job evolved to 24 by 7. I was never able to achieve the holy grail of work/life balance. However, now that I am retired, it is much easier to plan fun. Part time work, by definition, has limited hours, typically less that 20. Thus, while I will work hard for those 20 hours and sleep for 56 hours, I will easily have good part of the other 92 hours to play.

We've already have a head start for 2008 with memberships to the zoo, aquarium, amusement park, and local museums. In addition, we've started planning our 2008 and 2009 major vacations.

Franklin Covey just released a survey that shows 35% of respondents break their New Year's resolutions by the end of January. In addition, only 23% don't ever break them. I hope to be among the 23% at the end of 2008:-)

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

Photo Credit: morgueFile.com, Author Name

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

Copyright © 2007 Achievement Catalyst, LLC

Dealing With Issues That Can Ruin Retirement

9 dumb moves to ruin your retirement by Bankrate.com presents some typical ways people can negatively impact their retirement. Since I retired in our forties, I used this checklist to make sure we won't have any concerns. Here's Bankrate.com's list of nine issues with my comments on how I think we're doing:

1. Buying too much house. We're OK, I think. While I stretched for my first house, we were more conservative in our second house, making a down payment of 40%. This kept the mortgage payment at 20% of our take home pay. When I retired in my forties in October, 2007, we did the calculation on paying off the balance and decided to keep the mortgage at least one or two more years, since the interest is 5.375%. A payoff would require 135 times our mortgage payment, which didn't make sense financially at this time.
   
   Based on my parents experience, I expect our house will be too big for us 30 years from now. At that time, we would likely sell and move to a smaller home or assisted living apartments.



2. Ignoring the effects of inflation. We're covered. Our financial advisor has included 3% inflation for our planning. We use 5% inflation for our long term care insurance. It's amazing how these levels affect estimated prices 30 or 40 years down the line. At 40 years, 3% and 5% inflation result in 3.3 times and 7.0 times higher costs, respectively.



3. Raiding retirement accounts early. Not a problem for us. We've never touched ours. Since we are in our forties, we expect to wait until 59 1/2 before making any withdrawals.



4. Counting primarily on Social Security. Not an issue for us. We have targeted to save 20 times our income for retirement.



5. Expecting company retirement benefits won't change. We're OK, I think. My company has a defined contribution plan, which provides a lump sum at retirement. Historically, our health plans change periodically, transferring a higher proportion of the costs to the employee. I expect the same in retirement and am planning for it.



6. Letting your kids needs trump yours. OK, for now. Even though we've retired in our forties, we are still putting aside money for our daughter's education. At this point, we expect to continue contributing to education funds.



7. Depending on your partner's income. Need some improvement. When I did the analysis of my Social Security benefits, I realized being outside of the workforce significantly reduced retirement payments. My spouse has not been working for seven years and I think we may need to boost her social security benefits in the next few years.



8. Planning to work forever. Not an issue. We've already retired in our forties. :-) I expect that we'll do some part time work periodically for interest or to augment income, but nothing on as " required" basis.



9. Not worrying about health costs. We need to review periodically. I think this is our main uncertainty. While we will have retiree health insurance and long term care insurance, a significant medical crisis can still be a major financial burden.

Overall, I think we have most of the areas covered. However, we still need to do some additional work in the Social Security benefits and health cost areas.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Having A Three Year Old Keeps Us Young

Life has changed for us since the arrival of our daughter in our forties. Overall, the changes have been good. One of the benefits is that our daughter is keeping us young, both physically and mentally. Here are some examples:

Physical fitness. I constantly joke with friends that we need to have regular physical fitness training to keep up with our three year old. Being physically fit is not an option, it's a requirement:-) The main area of focus is flexibility, for which my spouse and I are doing yoga. We also both do some aerobic exercise (e.g. walking and tennis). I'll also be adding strength exercises (e.g. weight training) in 2008.

I realized today that my current exercise routine of playing tennis once per week is not enough. A neighbor and I started a tennis drill routine yesterday and my body is pretty sore today, after only a three hour workout.

Better diet. Kids should eat an three servings of vegetables and two servings of fruit each day. We have to set a good example, with more vegetable and fruit for ourselves.

Better sense of humor. We spend a lot more time laughing and playing than before. Daily life is funnier and we take time to play. I estimate I am laughing at least an hour per day.

A culture of learning and experiences. We take more effort to create experiences and memories for our family. We go to many more museums, parks, zoos and special events than before. And we spend more time on taking extracurricular educational and activity classes.

Also nowadays, we don't agonize as much over the cost of attending the attractions. However, when it's cost effective, we do purchase a family membership. We consider membership a good option when venue is close by and the break even cost is between two to four visits.

Connection to parents in their twenties and thirties. We are going through many of the same experiences, such a potty training, pre-school, and play groups. It always refreshing to have a connection with younger age groups.

I do admit that I am also a bit more tired than before. However, if I can keep this up, I expect that I will gain strength, both mentally and physically:-)

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

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

Copyright © 2007 Achievement Catalyst, LLC

Maybe It's Time To Consider Real Estate Again

"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."- Warren Buffet

Since I'm a bit of a contrarian investor, the possibilities for real estate are of interest to me right now. Articles like Will Prices Hit Bottom in 2008? Yes but... are calling for continued decline through 2008 followed by a recovery. While I do believe real estate will continue to decline near term, I don't know when the bottom will happen. However, I think it is a good time to start investigating possibilities. Here's what I am considering and not considering:

Potential Investment Opportunities

Real estate ETFs. I have been considering Vanguard REIT Index ETF (VNQ) since September, 2007 when I began investigating an ETF portfolio. VNQ is currently at $63.31, down about 9% from September. In addition, it is down 28% from its high of $87.44 earlier this year. One benefit of an ETF is that it is very liquid and I can make a small investment.

Commercial real estate. Some of my dad's most successful investments were commercial real estate. His best was a partnership interest in a property that has returned four times his original cost. In addition, the rents are currently at 25% of his original cost. The second best was a property that he rented to the same business for 18 years and then sold to the business owner at a 100% gain.

While I think commercial properties are a good investment, I think many in our area are still over priced. Also, I would still like to find an opportunity that minimizes the investment and tenant risks.

Not Likely Investment Opportunities

Vacation home. While the thought of owning property in a desirable tourist location is appealing, I still can't justify the cost of having a second home which is used for limited times during the year. It seems that renting is much more cost efficient. In addition, I would feel slightly constrained in vacation locations, since I would want to utilize property that we owned. Also, I am not particularly interested in being a distant landlord for vacationers.

Single family homes. Whether for renting or renovating, I feel that effort wouldn't justify the return for me. In addition, I believe their will still be significant turmoil in this segment as adjustable rate mortgages reset over the next couple years.

If I didn't already own a home, I would consider buying a home at this time, especially if I planned to live at least five years. However, I already own a house and am happy with where we live.

Land. Owning land tends to tie up money, producing no revenue while still requiring expenses (e.g. taxes and maintenance). In my situation of being retired, I can't afford to have money tied up in an investment that doesn't have the potential to produce recurring income.

Overall, I consider myself a novice real estate investor. Other than the two homes, in which we lived, and a partnership with my dad on one property, I have no real estate investment experience. Thus, although I am investigating the possibilities with real estate, it is highly likely I won't buy any properties.

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

Photo Credit: morgueFile.com, Andrea Church

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

Copyright © 2007 Achievement Catalyst, LLC

Our New Christmas Traditions

Our daughter turned three this year and is now beginning to anticipate annual events. In the weeks leading up to Halloween, she recalled the previous year, her costume and the candy she received. For Christmas this year, we decided to create our own set of family traditions to repeat each year as she grows older. Here are the ones we've started:

Christmas stories. We've selected two stories to read during the season: The Night Before Christmas, by Clement C. Moore and illustrated by Niroot Puttapitpat, and Once There Was A Christmas Tree, by Jerry Smath. In the week leading up to Christmas, these are her bedtime stories.

Holiday displays. There are several train and lighting displays in the area. This year we visited several of the major ones. I expect we'll be rotating attendance in future years.

Treats. We decided to have lemon bars, pecan pie and egg nog as our holiday treats. We also put out a plate of lemon bars and carrots for Santa and his reindeer.

Stockings at the fireplace. Many years ago, I bought three Disney themed Christmas stockings in anticipation of our first child. This will be the first year we use all three, in hopes of Santa bringing extra gifts:-)

Christmas Eve service. In addition to going to church each week, we are adding Christmas Eve to our attendance. Our church does a special service for children, with the youth group doing a presentation.

We hope to continue these and add others, making the event one that is anticipated with delight.

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 or family advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Links to Carnivals from December 24, 2007

In this holiday shortened week, here is a link to one Carnival from December 24, 2007:

Carnival of Personal Finance #132: Whimsical Christmas Edition

Please give Silicon Valley Blogger recognition for her hard work and check out the Carnival.

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

Copyright © 2007 Achievement Catalyst, LLC

12/24/07 Stock Purchase Update - Returns Continue To Be Choppy

In my 12/17/07 stock purchase update, I wrote about how the 10/15/07 updated buy list of Potash (POT), Southern Copper (PCU), CNH Global (CNH) and BHP Billiton (BHP) was performing. In that article, the portfolio had pulled back to a gain of $2,910 for a 20.4% return. As of 12/21/07, the portfolio had rebounded slightly to a gain of $3,404 for a 23.9% return. The new purchases of PCU, CNH and BHP are only up slightly $379 for a 3.6% return. Both PCU and BHP continue to have small losses. Here's the current status of the stocks I own in the portfolio:

	My Wealth Builder 10/15/07 Buy List
Stock [purchase date]	Shares	Purchase Price	Current Price 12/21/07
Potash (POT) [6/7/07]	50	$71.59	$131.88
Southern Copper (PCU) [11/13/07]	40	$108.24	$105.77
CNH Global NV (CNH) [11/13/07]	50	$55.22	$65.63
BHP Billiton (BHP) [11/27/07]	50	$71.54	$70.69

The market activity continues to be concerning, with either narrow breadth or a high number of new lows. I believe that the probability of a recession in 2008 is relatively high. The multitude of negative factors will eventually outweigh any actions by the government. However, the Fed interest rate cuts and other actions lead me to expect that the bull market will last through summer, 2008, although it may be choppy. At this time, I do not plan to add any more to the amounts that I have already invested in the above table.

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

Brushing Up On Job Interviewing Skills

Recently, I wrote about doing some seasonal, part-time or call-in work while in retirement. Also, based on my analysis of Social Security benefits, I realized I need a minimum threshold level of wage income in retirement to maximize Social Security payments when I reach the full retirement age. So far, I have done two interviews with one successful and one "too soon to tell," since it was just this past Friday.

Since I had hiring responsibility in the job from which I retired, I know how the process works from the hiring side. I now find it interesting to be on the other side as the interviewee. Here are the key interviewing points I will carry with me as I investigate more part time positions:

1. It's all about the employer. Since I have no professional experience in my new fields of interest, I invest effort in helping the interviewer understand how my experience and skills are of benefit to their company. After reading the job description and company information, I think of several examples in my previous career that demonstrates my ability to do the work and meet needs that their company has. As I have coached others, just having high interest in the job is not sufficient.



2. Have superior test taking skills. Many employers now use written behavioral and skills assessment tests. Be ready to do well in these. Generally, if one doesn't pass, the interview is finished. Fortunately, I am still a pretty good test taker, even though I haven't done this regularly in over 20 years. So far, I've passed both tests that were taken and made it to the next stage.



3. Assess the company and interviewer. While the company is interviewing me, I also learn more about the company, including culture, and the people that work for it. In one case, I determined the interviewer made the assessment, but didn't make the hiring decision. The office manager made the hiring decision. The next day, I went to the office, where I know several people and let them know I was applying. While the office is currently overstaffed, I'm now on the top of the "to be considered" list when a position becomes open.



4. Don't share salary information. I don't tell people the salary of my previous job, which would make me look very over qualified for these positions. Even if it was a job comparable to my previous position, I wouldn't share my previous salary. I've put "confidential" on both applications so far and it hasn't caused a problem. If they asked, I would qualify my preference of not sharing with, "I'm sure your salary offer will be appropriate for the level and duties and my previous job had very different responsibilities."



5. Let them know your "no deal" elements. I know that interview guides recommending negotiating terms after an offer. That may be true for full time jobs. For part time jobs, I think it's better to let interviewers know the no go elements of the job, especially when there are only one or two. That way, the company doesn't waste its or my time with an offer I won't accept.
   
   For me, a prime criteria of acceptability is proximity to my home, say less than three miles. The interviewer implied that office was full and asked if I wanted to work at an office over 15 miles away. After contemplating 15 seconds, I replied, "No." To which he responded, "OK, do well on the test and we'll see what we can do." I received an offer and I'll be working at my first choice office.



6. Be confident that I am the best candidate. Simply, if I don't think I'm the best candidate, why should the interviewer? I recall two interviews in college when I wasn't confident. Needless to say, I didn't get an offer in either case. On the other hand, I won't worry if I don't get an offer. I'll think, "Their loss" and move on.
   
   A corollary to this is, "Don't be desperate to get the job." In my experience, this often results in an immediate regret.

Initially, I was hoping employers would give more credit to my previous career and skills. However, I guess I will need to go through the same process as any interested applicant. Therefore, as with my work, I will make sure I do well in the process, and therefore, positively differentiate myself from the other candidates.

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

Photo Credit: morgueFile.com, S. R. Cherry

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

Copyright © 2007 Achievement Catalyst, LLC

A Creative Idea To Get Broader Health Insurance Coverage

The 2008 Presidential campaign is already getting old to me. It seems to me there is continual discussion about the same topics, e.g. Health Insurance, Federal Tax Code, Economy, Social Security, etc., with no new ideas. The Democratic line is to raise taxes and eliminate tax breaks for the wealthy. The Republican line is to reduce taxes and improve the business environment. If there is anything else new, besides the Iraq War, I am not hearing it. I wish one of the candidates would come up with an innovative, creative and new plan to address the issues.

I've been thinking about health care insurance and how to create incentives for people to buy health insurance on their own. I am not a fan of mandating people to buy insurance and having government or businesses required to pay for it. However, I am OK with making health insurance a requirement of another benefit people may want. My solution would be to make proof of health insurance a criteria for highly used non-critical consumer services. Here are some examples what I consider high penetration non-critical services in the U.S.:

Cell phone contracts. It is estimated that over 250 million people subscribe to a cellular phone service. There were an estimated 303,651,573 people living in the U.S. as of December 22, 2007.

Cable and Satellite TV services. Cable has a penetration 58.3% or 65,300,000 households. Satellite penetration was at 29% in 2006 and approximately 88% of household have either cable or satellite services according to Consumer Affairs.com.

Credit card usage. Penetration of credit cards is about 70 to 80% in the US.

Notably, critical services such as utilities, mortgages, and rents would not be included. Thus, individuals would not be caused to make a choice between an essential service versus health insurance. For reference, I provided the above services as examples and expect that there are others that could be considered.

Finally, this solution enables the consumer to make a conscious choice versus a default choice about affording health insurance. If the consumer has one of the above services, they will either need to have health insurance or give up the service, which then frees up money for health insurance. Given their popularity, I think most people will not be willing to give up such services, and thus, there will be a significant increase in the number people with at least a minimum health insurance coverage.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Social Security - Maximizing Future Benefits

Kathleen Casey-Kirschling will be America's first boomer to collect Social Security benefits. She was born one second after midnight on January 1, 1946 and will begin collecting benefits in 2008. Since I retired in my forties, it will be quite a while before I am eligible for retirement benefits. However, The Wall Street Journal article The Baby Boomer's Guide To Social Security by Gary Ruffenach provided some interested information that caused me to start thinking about optimizing Social Security benefits.

The article offered an interesting strategy for maximizing social security benefits for a married couple where the higher wage earner is between zero and four years older than the lower wage earner. In the past, the recommended strategy was to wait until 70 before the higher wage earner claimed Social Security benefits. That's because the lower earning spouse gets the higher of 1/2 of the higher wage earner's benefit or their own benefit. Also, the lower wage earning spouse will get the bigger benefits when the higher wage earner dies. I think the break even is one person living past 80-84 depending on the situation.

However, waiting until 70 can be a long time. The Baby Boomer's Guide To Social Security provided another approach where the lower wage earning spouse takes reduced benefits at 63 based on her on earnings. The higher wage earning spouse then applies for spousal benefits at 66, the full retirement age. At 70, the higher wage earning spouses applies for their own benefits and the related spousal benefits. With this strategy, one can get Social Security benefits while waiting for the older higher earning spouse to reach 70. What a great idea!

The article also highlighted the Social Security Calculators which enable one to estimate benefits at retirement. I used the Online Calculator (#2) to estimate my future Social Security payment benefits and learned some interesting facts. First, I estimated full retirement benefits if I had continued working until the appropriate age. Second, I calculated my full retirement benefits if I have zero wage income from now until the appropriate age. Third, I projected my full retirement benefits if I earned $20,000 , in today's dollars, until the appropriate age.

Having zero wage income until full retirement age reduced my Social Security payments by about 40%. While I expected some reduction, I was surprised by the magnitude. Interestingly, if I earn $20,000 a year from now until my full retirement age, I can recover about 80% of the reduction, and therefore, only have a 12% reduction in Social Security benefits.

Based on the results from the Social Security calculator, I don't think I can just let Social Security benefits "happen." I'll need to do more analysis of on how maximize future Social Security benefits.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Jonathan Clements On Making One's Kids Financially Savvy

Jonathan Clements is one of my favorite reporters in The Wall Street Journal. He generally writes easy to understand personal finance articles that are consistent with my own values and beliefs. Recently, he wrote 12 Ways to Make Your Kids Financially Savvy on December 17, 2007. Overall, I agree with his concepts, and identified a few new ideas to use with our daughter. The only point of major disagreement for me was in #5 on the use of variable annuities. I'm still not comfortable with the idea of variable annuities, since it is a possibility a financial company may go out of business in the future, due to some unforeseen issue.

Here are six of the ways that I will give high priority for our daughter's financial education.

#1 learning the concept of deferred gratification. This trait is often considered important for life success. I like the idea of giving children the choice between a dollar or a soda when eating at a restaurant.

#2 making purchase decisions with their own money. I think it's a great idea that money comes from earning or saving, not credit cards. Better yet, I like teaching the discipline of saving for something one wants.

#4 learning that wealthy appearances does not equal being wealthy. It's one of the reasons I Don't Judge People By Their Car.

#8 learning how to use credit cards. Specifically, charge only what one can afford with cash and pay off the balance each month. This will create a good credit score for her future.

#10 getting a higher education. To me, a college education is a must for most people to be financially successful. We will target to cover 100% of college 15 years from now, with the understanding she should be self sufficient after graduating.

#12 learning the basics of investing. I learned because my father taught me about investing in stocks and real estate. I hope pass my interest in investing to our children.

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

Photo Credit: morgueFile.com, Gracey Stinson

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

Copyright © 2007 Achievement Catalyst, LLC

Links To Carnivals from December 16 - 20, 2007

Here are links to select Carnivals from December 16 -20, 2007:

Carnival of Making Real Money - Issue #4

Carnival of Personal Finance: Naughty or Nice Edition

Carnival of the Capitalists

Carnival of Family Life

67th Festival of Stocks

Tax Carnival #26: Stocking Stuffers

Please give the hosts some recognition for their hard work and visit the Carnivals of interest to you.

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

Copyright © 2007 Achievement Catalyst, LLC

My Quick Reference For Financial Success

There are lots of finance and investment books. I find many have similar messages, with different "how to's." Some have messages and systems that don't appeal to me. For me, I try to distill concepts that are relevant to us into simple points that are easy to remember and by which I can live. Here are five points I think have helped us to be successful at personal finance:

Save, save, save. Building wealth for us has been simply spending less than we earn and putting the difference into the bank. My personal target was to save 20 times my salary before retirement. For us, that meant saving as much as 20% of my salary.

Increase earnings faster than inflation. Get a job that pays well. Work to advance oneself and get yearly raises that are greater than the rate of inflation. Keep doing this over and over again.

Invest wisely. I personally invest to preserve wealth, using an allocation between equities and CDs. Historically, I have been invested primarily in my company stock, other individual stocks and CDs. While this allocation has done well for me to date, I will be diversifying away from my company stock over the next year.

Don't use debt for living expenses. I think using credit card and debt to cover living expenses can be a death spiral to disaster. For the category of living expenses, I include utilities, food, household goods, entertainment, vacations and vehicles. I do believe a mortgage to buy a home and student loans are acceptable when used properly, i.e. one can sustainably cover monthly payments.

Money is a tool that is used to achieve other goals. It is important to learn how to use a tool properly. Used well, money can help one live well and retire comfortably. Improper use can sometimes lead to disastrous results.

For more on The Practice of Personal Finance, check back every Wednesday 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

Needing Bifocals - The Options I Considered

I really hate writing this post:-). My eye doctor told me that I am fortunate to have gone until last year without needing reading glasses. Since I am near sighted, I can read fine without glasses or contacts. However, once I correct to 20/20 distance vision, I need reading glasses. This year I went the next step, bifocals, which made me grimace a bit :-) I was still thinking about the type that had the visible half moon lens in the lower half with the distinctive line in the middle.

Actually, the options for bifocals have become a lot better recently. Here are the options I considered with the prices from Costco:

No-line bifocal glasses. The eyeglass industry has figured out that glasses that look like bifocals are not appealing. They've created no-line bifocals that make an invisible transition from distance to near sight. While it still takes time to get used to looking in different areas, bifocal lenses provide a single all purpose set of glasses. The total cost was $245, with about $65 being the cost for the bifocal feature and $60 for the frames.

The optician warned me about a short adjustment period. Apparently, the no-line bifocal feature can sometimes cause people to misjudge steps; However, I was lucky and was able to use the glasses immediately without any problems.

Bifocal contacts. After trying a test pair from the Costco optometrist, I decided to purchase a year's supply of Bausch & Lomb PureVision multi-focal contacts at about $190. As it was explained to me, these contacts put the bifocal feature in the center of the contact. Previously, the technology was concentric circles of different power. It seems the brain can sort out the near and far images and provide an appropriate picture in the brain. Amazing.

Again, I was fortunate that my adjustment time to the new lenses was relatively fast.

Although I am happy with the bifocal options, I will also continue to use my initial approach of single vision contacts ($118 per year for 8 packs of Acuvue2) with reading glasses ($18 for three). Periodically, Costco will have $10 coupons (for 4 packages) and $30 rebate for 8 packages to lower the cost to $68 per year for Acuvue2 single vision contacts.

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

Photo Credit: morgueFile.com, Andrea Church

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

Copyright © 2007 Achievement Catalyst, LLC

Stock Market Contest - Guess The Daily Close To Win $20

Fellow personal finance blogger Sun is running a contest all week, with prizes of $20 and $50 Amazon gift certificates. To participate, visit The Sun's Financial Diary through December 20th and leave a comment on the contest post with the closing value of the specified market index. For details on the rules and participation guidelines, see Celebrating the Holiday with $200 Cash Giveaway.

While entering the contest, check out the rest of Sun's blog. He is one the bloggers I read regularly. His posts have excellent detailed "how to" information and analyses on various investing ideas.

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

Photo Credit: morgueFile.com, Michelle Kwajafa

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

Copyright © 2007 Achievement Catalyst, LLC

12/17/07 Stock Purchase Update - Pullback Eliminates Most Of New Purchase Gains

In my 12/10/07 stock purchase update, I wrote about how the 10/15/07 updated buy list of Potash (POT), Southern Copper (PCU), CNH Global (CNH) and BHP Billiton (BHP) was performing. In that article, the portfolio had just achieved a new high of $4,024 for a 28.3% gain. As of 12/14/07, the portfolio has pulled back to a return of $2,910 for a 20.4% gain. The new purchases of PCU, CNH and BHP are now only up $195 for a 1.8% return. Both PCU and BHP now have small losses. Here's the current status of the stocks I own in the portfolio:

	My Wealth Builder 10/15/07 Buy List
Stock [purchase date]	Shares	Purchase Price	Current Price 12/14/07
Potash (POT) [6/7/07]	50	$71.59	$125.68
Southern Copper (PCU) [11/13/07]	40	$108.24	$105.18
CNH Global NV (CNH) [11/13/07]	50	$55.22	$62.04
BHP Billiton (BHP) [11/27/07]	50	$71.54	$71.07

The market activity continues to be concerning, with either narrow breadth or a high number of new lows. I believe that the probability of a recession in 2008 is relatively high. The multitude of negative factors will eventually outweigh any actions by the government. However, the Fed interest rate cuts and other actions lead me to expect that the bull market will last through summer, 2008, although it may be choppy. At this time, I do not plan to add any more to the amounts that I have already invested in the above table.

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

No Resting On Laurels Anymore

When I started my career, it seemed that outstanding work achievements gave me the opportunity to relax and bask in the glory, at least for a short time. New products would have two to three years of market leadership, and product upgrades would have one to two years of market share growth before competition responded significantly. But that has all changed. Nowadays, it seems that competition catches up within six months, if not immediately. So there is not as much time available to celebrate and enjoy one's accomplishment. In my company, it seemed we were on to the next project before the current one was completed.

While I think this phenomenon has been great for the consumer, I think it has been tough on workers and will even be tougher on our children when they begin working. As a consumer, I benefit from competition, e.g. lower prices and better quality. As an employee, I get caught up working longer and harder. I remember getting ahead involved coming in 1/2 hour earlier and staying 1/2 hour later. Now it's working at least 2-4 hours more per day, including at home and on weekends. 24 X 7 is becoming the norm and is no longer the exception. Even for children, I see more demanding standard in order for them to succeed. For example, in many sports, I see children practicing year round to be able to make the cut for a team.

It's the way of the world today. A competitive advantage is needed to be sustainably successful, often meaning more hours, more training, and more contributions. There just isn't any time to rest on one's laurels anymore.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Pizza Logic Won't Solve Our Federal Tax Code Issues

"You better cut the pizza in four pieces because I'm not hungry enough to eat six." - Yogi Berra

Based on what I've heard from Presidential candidates , I don't have much hope for Federal Income Tax and Federal Spending solutions. Every proposal seems to be variation of cutting the pizza into different slices. The slices may be different sizes but the total pizza available and the number eating are still the same.

For example, the Democratic party proposals seem to be about increasing taxes for the "wealthy" and corporations. I didn't see any discussion about reducing spending. To me, the Democratic party plans are the same as deciding between six or four pieces for a pizza.

On the other hand, the Republican Presidential candidates recommend tax cuts and reductions in spending . Again, the proposals are partly about resizing pieces of pizza. The Republicans at least realize that reducing the number eating the pizza may help. However, I have yet to see the Federal government effectively reduce overall spending. From 2000 to 2006, Federal spending rose every year except for 2004, which was down 0.3% from 2003.

Here's an out of the box idea that I haven't yet heard from any candidate. Instead of continually redistributing of tax liability among the 60% that already pay federal income tax, perhaps we could continually increase the number who qualify to pay federal income tax. For example, we could increase the number of highly paid technical and engineering workers in the U.S. Here are a couple of approaches that could help:

1. Increase immigration quotas for higher paid professions. Currently, the immigration number is limited to 65,000 per year and is causing some companies, such as Microsoft, to open offices in Canada where immigration restrictions are not as limiting. Every incremental immigrant admitted would be a new person pay federal income taxes. For example if 100,000 additional immigrants paid $10,000 federal tax each, that would be $1 billion additional tax revenues.



2. Incent students to choose majors that lead to higher paying jobs. I have seen municipalities give homeowners temporary property tax abatements to encourage luxury home building within the city limits. Perhaps, something similar (e.g. federal income tax credits for five years) could be done to encourage people to major in and working for technical and engineering fields.
   
   While these people would pay lower federal taxes for a short time, eventually they would be paying more in the long run, due to a higher paying career.

While these are not fully workable solutions, I think they may be possibilities if people would consider ways to increase the number of people paying taxes. Also, I think using tax breaks to generate more tax revenue in the future would be an "elegant solution." In any case, I'd sure like to hear more ideas than "Tax the wealthy," "Redistribute taxes" and "Reduce spending" from the Presidential hopefuls. I'd like to see some new ideas that would address the problem instead of just getting votes.

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

Photo Credit: morgueFile.com, Joe

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

Copyright © 2007 Achievement Catalyst, LLC

Wealth Building - A Family Project

Recently, I retired in my forties and published a series on "How we did it." An important part overall was that we were working together as a family, to achieve our goals. Building wealth is not unlike other team projects. When the members are working well towards a goal, outstanding results can happen. When the team is not functioning well, members have different goals, or do not have the needed skills failure can be a result.

In retrospect, it evolved to being a family project over time, versus being a formal declaration. Here are the elements that I found that enabled successful team work:

Agree on the big stuff. We had an agreed approach on these major parts of our plan:

• How much to pay ourselves first. In recent years, we began automatically setting aside 20 percent or more of my salary, before paying monthly bills. In addition, we set aside 10% for future known (e.g. property taxes, routine maintenance, car purchase) and unknown (e.g. minor storm damage) expenses. As a result, we were able to put money in savings and create an emergency account.



• Make choices on where to spend AND not to spend. For higher priority areas, we spend higher amounts for better quality or value. One high priority area is to have a home in a good neighborhood, providing great neighbors, an excellent school system, and stable home values. We also make sure that we have enough funds to maintain and keep our house in good condition. Another priority is our health. We spend more on fresh, low processed, low/no additive foods and my spouse does cooking at home. We also take time to exercise and maintain our health.
  
  Low priority (i.e. reduced spending) areas included: automobiles, entertainment and gadgets. We buy quality, economical vehicles and drive them for at least 10 years or 200,000 miles, which ever comes first. We take big vacations (e.g. a cruise) every few years and smaller vacations in the intervening years. We take advantage of local memberships (museums, amusement parks, etc) which provide a year of admission for only 2-3 times the cost of one visit. We try to avoid the black hole of electronic gadgets. We don't own a wide screen TV, video game controller, and don't have cable or satellite services. In addition, I don't have a cellphone.

Divide up the work. In the nineties, we were a two income family, with no kids. When we both worked, we tended to split all the responsibilities, e.g. earning income, household maintenance, nutrition, entertainment and financial management. In 2000, we changed to a single income household and split the responsibilities. Having one person focus in each area gave us better overall results, resulting in higher total income, better quality of life (food, entertainment), more timely household maintenance, and better financial returns.

Utilize one's strengths and interests. My spouse has a degree in food science and is very interested in nutrition and culinary arts. In addition, she loves to do gardening and has a good sense of quality and design. I have a degree in engineering, enjoy pondering financial matters, and like to solve minor household problems. We leverage our interests and strengths to build the family wealth.

For example, my spouse will choose the furniture to buy and I will negotiate the price. While I do have input on the furniture, I usually go with her decision. And she lets me ask for a cash discount, even though the price may be acceptable to her.

Overall, these elements have made wealth building a family project. As our daughter becomes older, I expect that we will also have her participate in the financial decisions of the family, including such topics as higher eduction.

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

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

Copyright © 2007 Achievement Catalyst, LLC

College 529 Savings Account Results

In preparation for our personal year end financial review, I looked at the college 529 savings account for our three year old daughter. We originally opened the account in December, 2005 and have made the maximum state tax deductible contribution for each year. To date, we have split the contributions and invested equal amounts in each fund. Here are the results as of 12/11/07:

	Returns
Fund	YTD 12/11/07	Overall Gain (not annualized)
Vanguard Aggressive Growth Index Portfolio	6.97%	17.9%
Vanguard 500 Index	5.87%	16.0%
Vanguard Extended Market Index	4.85%	11.6%
Vanguard Developed Markets International Stock Index	13.11%	32.9%
Total	-	19.6%

The table shows that the International Stock Index has done the best this year and over the past two years. Notably, the Vanguard Extended Market Index, which invests in small to mid-cap stocks, has under performed the other funds, indicating that we are likely in the late stages of the bull market when large cap stocks tend to perform better than small cap stocks.

Based on this analysis, I will make an adjustment to the allocation of next year's contributions. Instead of putting 25% in each fund, we will put 50% in 500 Index fund and 50% in the International Stock Index fund. The reason I didn't choose the Aggressive Growth Index is that it appears to approximate a 85%/15% blend of the 500 Index and International Index funds.

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

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

Copyright © 2007 Achievement Catalyst, LLC

Staying Calm In A Volatile Market

"I know that history shows the stock market will be higher 10 years from now." -My Financial Advisor

In late October, 2007, I began transferring funds from my company's retirement account to a rollover IRA account. Since the first amount transferred was cash, I was planning with my financial advisor on the investment options. My personal preference is to try to time the market short term, especially since the market was declining slightly at the time. I asked would it be better to wait a while before investing the funds. My financial advisor, as always, said he didn't make recommendations on when to invest, saying what he did know is that historical return shows the stock market has been higher ten years from any point. I thought for a moment and told him to invest the entire amount.

As it turns out, the market did decline further to a 10% market correction on November 26, 2007. The funds I had invested were down about 7%. Since I won't need the funds for at least ten years, I remembered my advisor's comment and didn't worry. I kept thinking that any short term fluctuation doesn't really matter. What matters is the value 10+ years from today. Therefore, I stayed calm and didn't sell out at a loss.

Today, the retirement account investments managed by my financial advisor are at almost break even after fees, i.e. the value when it was first invested in October, 2007. While break even is not the long term goal, it's a lot better than -5 to -7% if I had sold in the short term. Also, since I expect to a conservative 7% gain annually, being break even after 1-2 months is acceptable.

At this point, I think the Fed is doing well walking the fine line between letting speculators get washed out and avoiding a deep recession. Therefore I will continue to stay invested and consider adding some more funds early next year.

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

Photo Credit: morgueFile.com, Paul Anderson

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

Copyright © 2007 Achievement Catalyst, LLC

Links To Carnivals from December 9 - 11, 2007

Here are links to select Carnivals from December 9 - 11, 2007:

Carnival of Personal Finance - Edition 130

Carnival of Family Life

66th Festival of Stocks

103rd Festival of Frugality

Carnival of Money Stories #38

Please give the hosts some recognition for their hard work by checking out the Carnivals.

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

Copyright © 2007 Achievement Catalyst, LLC

Doing Routine Home Maintenance In The Fall And Winter

At one of our family gatherings, I was talking with my spouse's uncle who is a grain farmer. Since I like to learn about professions in which I have no experience, we were discussing his work as a farmer. In the conversation, he explained to me that he did most of the non-urgent maintenance and equipment repair work over the winter, when he does not have any crops requiring attention. Thus, he has much more discretionary time, which is invested in keeping his equipment in good working condition.

While I was working, I did the urgent maintenance work as needed, or hired someone to do it. However, it was challenging to keep up with all the non-urgent maintenance work that needed to be done. Fortunately, not many of the non-urgent work became urgent , due to over neglect.

However, now that I've retired in my forties, I have a bit more discretionary time. I've also found that it's difficult for me to do inside projects when the weather is nice outside. There are also some outdoor projects, e.g. trimming and eliminating ivy, that I think are easier to do in the non-growing season. So I've decided to take on some of these projects during the late fall and winter, specifically late November to late February.

INSIDE PROJECTS

Project Area	Project Activities
Painting	We'll prepare and paint water damaged areas from a roof leak and touch up other rooms as needed. Typically, indoor painting is a warm weather job, since opening windows will reduce the odors. However, my spouse has found low/no odor paints which enable us to do the work in the winter.
Bathroom	I'll be caulking around baths, sinks, and showers. If there are any dripping faucets, I'll replace the washers.
Kitchen	This area will be primary appliance maintenance and caulking around the sink. The igniters on the our gas stove sometimes spark even though the flame is present. I found some great information on solving the problem at Fixitnow.com. In addition, I may need to replace a heating element in our oven.
Floor	The wood floor in our kitchen squeaks in a couple areas. Since the floor is exposed in the crawl space underneath, I will attempt to eliminate the squeaks by putting 1-1/4" screws through the plywood into the oak floor.
Garage and basement	Like some others, our garage and basement storage areas are out of control. Over time both areas have become collection sites for items we use infrequently and items we may need in the future. I did find a good a good article from MSN.com on organizing a garage.
Household decorations	We have several items, such as a folding screen, that require use special techniques to display them on our walls. Our local framing shop has already provided some great ideas, with which I will be experimenting.

OUTSIDE PROJECTS

I already do a few outdoor projects such as grass seeding and fertilizing in the fall. I plan to add the following to my winter list:

Project Area	Project Activities
Gardens	We have four garden areas that need routine maintenance such as clearing out annuals, trimming back the ivy, edging the bed and mulching. I plan to do the work during the periodic warm winter days.
Trees	We have a number of 20 to 30 year old trees that need periodic pruning and thinning to ensure good future health. It's easier to prune when there are no leaves, but doing it in the early winter can harm the trees, due to sap bleeding. However, doing the pruning in late winter (e.g. February or March) is acceptable. I plan to tie markers on each branch to be cut off later.
Compost	With trees come leaves, lots of leaves. Every year, we compost as much of the leaves as possible. This year we'll be composting the entire amount, which will require some work during the winter, such as turning the leaf pile.
Equipment maintenance	I have not been doing maintenance on our yard equipment the past four years. Our leaf vacuum/mulcher needs an oil change a couple parts replaced. In addition, our leaf blower, weed trimmer, and electric mower need cleaning and a tune up.

Since I don't ski very well or play hockey, I do fewer leisure activities in the winter. Thus, winter provides more discretionary time to take on a few of these projects. Hopefully, getting them done during the winter will free up more time for leisure activities in the spring and summer.

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

Photo Credit: morgueFile.com, Mary R. Vogt

This is not financial, maintenance, or gardening advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

12/10/07 Stock Purchase Update - New Portfolio High

In my 12/3/07 stock purchase update, I wrote about how the 10/15/07 updated buy list of Potash (POT), Southern Copper (PCU), CNH Global (CNH) and BHP Billiton (BHP) was performing. In that article, the portfolio had just achieved a new high of $3,041 for a 21.4% gain. As of 12/7/07, the portfolio achieved another new high of $4,024 for a 28.3% gain. The new purchases of PCU, CNH and BHP are now up $1,134 for a 10.6% return. Here's the current status of the stocks I own in the portfolio:

	My Wealth Builder 10/15/07 Buy List
Stock [purchase date]	Shares	Purchase Price	Current Price 12/7/07
Potash (POT) [6/7/07]	50	$71.59	$129.19
Southern Copper (PCU) [11/13/07]	40	$108.24	$117.68
CNH Global NV (CNH) [11/13/07]	50	$55.22	$64.88
BHP Billiton (BHP) [11/27/07]	50	71.54	$77.00

The market activity continues to be concerning, with either narrow breadth or a high number of new lows. I believe that the probability of a recession in 2008 is relatively high. The multitude of negative factors will eventually outweigh any actions by the government. However, the Fed interest rate cuts lead me to expect that the bull market will last through summer, 2008, although it may be choppy. At this time, I do not plan to add any more to the amounts that I have already invested in the above table.

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

Seasonal, Part-Time, and Call-In Work

Since retiring in my forties this past October, I've been considering options for working as needed or when desired, either to augment income or because of interest. I'd also like to be prepared for the possibility of a decline in the stock market, which is providing the majority of our retirement income. Finally, I'd like to get some experience in areas that may help me in a future dream job. Here's a summary of options I will pursue further and those that I will drop.

POSSIBILITIES

Seasonal financial services work. Banks and tax preparation services hire part time people help during season peaks, either due to demand or vacation. Given my interest in personal finance, these may be interesting jobs to do on periodic basis.

Professional temp work in my field of expertise. There are several organizations that specialize in temp project work for my profession. While I'm not a doctor, I know of retired physicians who do occasional work for hospitals a few months a year. I have signed up with an professional temp organization that may allow me to do something similar in my field.

NOT LIKELY

Seasonal retail work. In my ranking of things I like to do, shopping ranks pretty low on the list. I don't think I would even remotely enjoy working to help people shop. I'd probably want to ask them "Do you really need this?" :-)

Volunteer work. As I have written before, I had done significant amounts of volunteer work in my twenties and thirties, including being president of three different organizations. I feel that I have done more than my fair share of community service:-) I will limit volunteer work to occasional help for my three year old's activities.

General temp work. I don't have any interest is doing office or technical work placed through agencies such as Manpower or Kelly Services. It seems to me that one can make more money by applying directly to companies for specific temporary work.

Fast food service. I'd only do this type of work if I was considering becoming a franchise owner. In that case, I would want to have a better understanding of the business, day to day operations, and the environment. The probability of us buying a fast food franchise is very, very low.

I also have a few other criteria that I would like to meet, including: short commute, flexible schedule, and possibility to help people. At this point, I am pursuing both options that I shared in the Possibilities section. As always, I have purposely not shared specific details to maintain anonymity. However, in the future, I will provide an update as to whether these options meet my expectations.

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

Photo Credit: morgueFile.com, Dawn M. Turner

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

Copyright © 2007 Achievement Catalyst, LLC

Job Satisfaction, Annuities and Hard Work

Ben Stein is one of the columnists on Yahoo Finance! that I read periodically. Recently, he wrote a piece called Arm Yourself for Job Fulfillment and Retirement Bliss. In the article, Mr. Stein shares his perspective on concepts of true job satisfaction, financial security via annuities, and how wealth building requires hard work. While I agree with his points of view on job satisfaction and hard work, I am not comfortable with with purchasing a lifetime annuity. Here are my thoughts in these areas:

Job Satisfaction. Mr Stein writes that real job satisfaction results from meaningful and challenging work, where people genuinely respect, value and support each other. I can attest that my best projects have been ones where these criteria were met, both ways. On the other hand, my most challenging assignments were those where these criteria were not met either one or both ways.

If I should ever start a company, I would hope to make these characteristics the basis of longer term business partners and business colleagues.

Hard work. Mr. Stein acknowledges that building and keeping of wealth requires hard work. I fully agree since I have not found an easy path to riches. For me, it is been one of hard work, discipline and some sacrifice. I am always skeptical of people who promote or are looking for "easy" ways to get rich.

Lifetime annuities. Mr. Stein recommends that using a lifetime annuity to guarantee income late in life, especially if one can no longer manage one's affairs. While I recognize the simplicity of this approach, I think it ignores the risk of a losing the money due to potential mismanagement by a financial institution. The recent subprime debacle has shown me that even apparently strong companies can make financial mistakes that can put their company out of business. In fact, the one lifetime annuity for which I will be eligible in the future, Social Security, seems to be constantly at risk of going away.

I much prefer to count on my own trusted resources or advisors to manage my retirement funds. In addition, I may consider selling my house as source of income late in retirement.

Overall, I think Mr. Stein was on target for two topics. For the lifetime annuities, I would want a much better guarantee before considering putting my money with a single insurance or financial company.

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

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

Our Journey To Financial Freedom #10 - When Preparation Met Opportunity

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 #10. ( #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, #8 is about my personal finance mind tricks and #9 is about the professionals we consulted.) This segment is about how preparation enabled us to take advantage of the opportunities which created the possibility of early retirement.

I wish I could write that I had planned meticulously to retire in our forties and executed the plan with excellence to make it happen. I am not that good :-) The reality is we were tracking pretty well against retirement in my fifties. However, because we were solidly in the upper percentiles of readiness, a couple things going in our favor enable us to consider and then take the retirement much earlier.

PREPARATION

Here are some of key elements that were tracking well for us:

1. Savings outside of retirement accounts. As a result of good financial management, we have been able to save about 20% of salary income. While part was put into retirement accounts, we also put money into taxable account which can be used before we are eligible to withdraw funds from tax deferred accounts. Also, I have been taking bonuses as deferred income, which is expected to paid in the first 10 years of our retirement.



2. Creation of satisfactory quality of life. My spouse has been the COO (Chief Operating Officer) for our family since she quit her job when we transferred overseas. In the role, she manages the entire household, covering daily needs, maintenance and repair. For the past 4 years, my spouse has created a comfortable lifestyle while maintaining constant living expenses, even after arrival of our daughter.
   
   For reference, my spouse is exceptional at making sure routine maintenance (e.g. home, yard, car) is scheduled, essential needs (e.g. good health, nutritious cooking, clothing) are met and a high enjoyment of life (e.g. family vacations, entertainment) is maintained. Doing so often incurs a higher cost upfront, and I think avoids unexpected costs in the future which result from neglect. In addition, she has managed to increase the amount and quality of services while keeping costs the same.



3. Simulation to build confidence. For the past four years, we have been experimenting with the amount of spending needed for an acceptable lifestyle on a long term basis. Through trial and error, we have identified a "sweet spot" and have been able to come within +/- 10% of a spending target on a monthly basis for two years. Thus, we are pretty sure of the amount of money we will need during retirement, including saving for our daughter's college education.

OPPORTUNITY

Here were a couple events that happened in our favor:

1. A stock market recovery. At the end of the tech crash in 2002, I was starting to think it would be tough to retire in my fifties. My company retirement account had was still down about 33% and my taxable investments were down about 10%. In addition, interest income was only about 10-20% of pre-2000 years. Retirement didn't appear to be a near term option.
   
   However, the stock market has recovered, with the Dow hitting new highs. Similarly, my company's stock has recovered and achieved new highs. In addition, interest rates have risen to historically reasonable levels around 4-5%.



2. Lowered retirement age. While our normal retirement age is 55 or older, occasionally the option to retire earlier with all benefits is offered. This option can become full retirement if one has access non-retirement income until 59 1/2. Otherwise, people either decline and stay or take the option and find a new job.

Because of our preparation, we were able to give full consideration to early retirement when the opportunity presented itself. To be clear, there was and is still some risk, as the stock market is currently very volatile and could decline. If the market does fall precipitously, I may be among those retirees that need to go back to work :-(

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, JJM

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

Copyright © 2007 Achievement Catalyst, LLC