Continuing Education

As part of my decompression in retirement, I've decided to take a few continuing education courses at a local vocational school. The focus is primarily on interest areas that could lead to a next phase job opportunity. Here are the courses of study that I plan to take this school year:

Starting a business. I've been a "corporate guy" for my entire working career, and thus have had a company doing most of the back office work for me. In presentations by a business banker and a business broker, both implied that corporate guys were sometimes naïve about basics of owning and running a business. So I'm getting myself educated, or at least a bit less naïve.

Home repair and improvement. I believe the next couple years may be a good time to invest in real estate. To improve my skills for selecting good deals, I am taking courses in electrical wiring, plumbing, masonry, interior decorating, and landscaping. In addition, I may take a course to get a real estate license.

Environmentally related. Recently, we've been buying organic foods since my spouse is sensitive to pesticides. As an engineer, I am always interested in technology solutions to energy issues. Although I am not particularly environmentally conscious, I'm taking a course on organic home gardening and solar energy for the home, to learn how I can implement these ideas.

Chinese. I'm convinced China is the next region of long term sustained economic growth. I fully expect that my daughter will spend a major part of her career in China. I want to be prepared if that happens.

Miscellaneous. I had to take some courses that sounded cool for being ideal retirement jobs - Travel and Tourism, and Gourmet Cooking. It likely they sound better than reality. However, it doesn't hurt to take a course to find out.

I have a full load of courses. Starting this week, I will be going to classes every evening from Monday to Thursday until next summer. While I hope to find a next phase career from these courses, I know I will enjoy taking these courses whatever the outcome.

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

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

Copyright © 2008 Achievement Catalyst, LLC

Still Decompressing

Although it's been 11 months since I retired in my forties, recently, I realized I am still going through decompression. If someone had told me it would take this long, I wouldn't have believed him. Here are the signs I am still decompressing during my initial stages of early retirement:

1. Getting comfortable with being unconnected. While I tossed the Blackberry on my last day of work, it took me 8 months before I stopped taking a laptop with me on vacations. On our last vacation, I was away from the Internet for 4 days, without any connection. When I was working, the longest I did was only a few hours of not being connected, not including sleeping
   
2. Doing physical activity for fun. Throughout my childhood, I participated in two to three sports a year, because I enjoyed them. As I got older, sports became a scheduled activity for staying in shape. I am now starting to do sports again mainly for fun, instead of just for exercise.
   
3. Being more spontaneous. I am now less constrained by a planned schedule. If our daughter is having a boring summer day, we'll decide that day to go to a water park. Last week, we decided to go camping a picked a weekend in September. Recently, a neighbor started calling to play tennis on the spur of the moment, because he knows I'm retired and like to play. Instead of being scheduled for other things, typically, I have been able to play within the hour.
   
4. Reconnecting with old hobbies and interests. Over the past 20 years I've routinely set aside hobbies and interests in order to put more focus on my career. I had stopped being involved in 95% for my hobbies and interests, which included from stamp/coin collecting, model building, magic and small projects for the house. As I was reducing personal accumulation and came across the materials, I realized how much I missed them.

At this point, I am still spending too much time following our investments. The current volatility of the stock market has not enabled me to distance myself yet. When I am able to disconnect periodically from our investments, I will be on the way to complete decompression from working :-)

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

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

Copyright © 2008 Achievement Catalyst, LLC

Non-Financial Events that Could Negatively Impact my Retirement

In financial areas, I think I am well covered for a wide range of situations during retirement. However, I realize that there are non-financial events that can also affect retirement. Here are some of the one's I've considered:

Early demise. Yes dying shortly after retiring would be a bummer. I've seen it happen with people who retired in their sixties and passed away within two years. However, it is not uncommon for people in their forties and fifties to die unexpectedly.

Of course, this is an area in which I don't any control. So I don't worry about it...too much. Currently, since I retired in my forties, good health and retirement age statistics are in my favor.

An approach I am trying is break retirement into five year chunks and live those with gusto :-)

Loss of spouse. For me, retirement is to be enjoyed with the person who also worked so hard to make it happen. This is our time to do all the things we want to do, without the restrictions of jobs, careers and other commitments. It wouldn't be fun without my spouse.

I've already told my spouse she can't die before me :-), but other than that, I don't have a clever solution.

Loss of lifelong friends. When my dad passed away at 79, only one of his close friends was still alive. Many had passed away in their fifties and sixties. Although he did have some new younger friends, it wasn't the same as being around those with whom he went to school or started a career.

My college class is now in the middle of the alumni newsletters and we occasionally have a memorial. Luckily, there have been no losses in this area yet. At this point, I keep in touch mostly through Christmas letters and occasional mini-reunions with a few classmates.

Living past 100. While dying early is bad, living a long time has its issues also, among them finances and quality of life. Financially, we plan to be solvent up to our mid-nineties, but it difficult to predict with accuracy past that age. Also, it may be difficult to do many of the daily activities without assistance.

At this point, 100 still feels a long time away. I don't think I'll worry much about this one for another 25 years. Hopefully, it will be an issue I get to consider.

While I don't worry about these possibilities too much, I do want to make sure I enjoy the fruits of early retirement. I'm used to planning for the future, and working hard in the present. Now that I'm retired, I will continue plan for the future, while completely enjoying the present.

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

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

Copyright © 2008 Achievement Catalyst, LLC

Best Colleges for 2009

U.S. News & World Report has published its Best Colleges list for 2009. Yahoo! Finance published a great synopsis. This year's top five schools and 2008-2009 tuition and fees are:

Harvard $36,173

Princeton $34,290

Yale $35,300

MIT $36,390

Stanford $36,030

For more details, see the Best Colleges 2009 article at U.S. News & World Report.

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

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

Copyright © 2008 Achievement Catalyst, LLC

My Simple Wealth Building Formula

"Think simple" as my old master used to say - meaning reduce the whole of its parts into the simplest terms, getting back to first principles. ~ Frank Lloyd Wright

When I first started working, my wealth building formula was:

Income - Spending = Savings (i.e. Wealth Accumulation)

My personal goal was to manage spending to be lower than income. Therefore, I would have some money leftover each month, and contribute that amount to my retirement savings.

After a while, I realized a small problem with this formula and approach. It implied that one should actively manage income and spending and the resulting outcome would be savings. So a large part of my wealth building effort was spent managing spending, since income was relatively constant. Also, since savings was the result, it sometimes could be zero or negative in some month.

Over time, I modified my wealth building formula to:

Income - Savings (i.e. Wealth Accumulation) = Spending

In this formula, savings also became relatively constant (at a percentage of income) since I could calculate how much was needed to retire. Savings was no longer the outcome. Spending now became the result, i.e. the money left over after managing income and savings.

Using this formula simplified our lives. First, I didn't need detailed budgets, since the amount for spending was determined by other factors. Second, every month, we knew we were making progress on our savings since we were paying ourselves first. Third, in hindsight, I realize that it caused me to shift my personal finance focus to significantly increasing income, since that was the main factor we could change in this formula.

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 © 2008 Achievement Catalyst, LLC

De-Accumulation Bonus

In Sorting a Lifetime of Accumulation, I wrote how cleaning out my parents' house had given me motivation to eliminate my own saved documentation and to complete started projects. Upon returning home, I began working on my work areas and the guest bedroom.

While reducing accumulation was great, there were were a few unexpected benefits from the effort:

Missing items found. In the past few months, we have been looking for items that we hadn't seen for a year or two. Examples included an autographed picture and some jewelry. These were found during the initial clean up process. I hope to find a lost book and childhood pictures as I continue.

Old hobbies re-discovered. I collected stamps and coins as a child, but had stopped in my twenties. I found the various of parts of my collections, including elements that my dad had given me. Since I am not actively collecting any more, I am considering selling the stamp collection, or using the stamps for postage, if there is no value over face. At this point, I will keep the coin collection.

Forgotten items found. I used to buy things expecting to use them later on. Some examples are model airplane kits, magic tricks, camping supplies and books. As I've been cleaning out areas, I've been running into many items that I have been saving for the future. In some cases, I will give away the items. In others, I will take the effort to use the items.

Since I am de-accumulating my own belongings, I don't expect to re-discover anything of major value, even when we sell some items. However, I expect to enjoy reminiscing about the missing or forgotten items and my old childhood hobbies.

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 © 2008 Achievement Catalyst, LLC

Links To Carnivals From August 25, 2008

Here links to carnivals in which My Wealth Builder participated on August 25, 2008:

Carnival of Personal Finance #167

Carnival of Family Life

Check out these carnivals for some interesting articles from around the blogosphere.

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

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

Copyright © 2008 Achievement Catalyst, LLC

8/25/08 Stock Position Update - Still Maintaining Positions

I continue to take no further action based on my buy list and short list of 7/7/08. So far I have taken four long and one short position, which has been closed. At this point, I believe the market is in a short term rally. Given the volatility of the market, I continue to be cautious for both purchases and selling short.

At this time, the holdings are up from last week but still not doing well. The overall portfolio has is down 6.1% and the remaining holdings are down 13.3%. The only positive still has been the gain from shorting Las Vegas Sands.

For reference, the stocks on my 7/7/08 buy list were: Potash (POT), Research in Motion (RIMM), Bucyrus (BUCY), Williams Cos. (WMB), Southwestern Energy (SWN), Hess (HES), and Range Resources (RRC). On August 8, 2008, the system gave a sell signal for Williams Cos. and it has dropped off the buy list. The stocks on my 7/7/08 short list were: Las Vegas Sands (LVS), Sears Holdings (SHLD), and Life Time Fitness (LTM).

	From My Wealth Builder 7/7/08 Buy List
Stock [purchase date]	Shares	Purchase Price	Price on 8/22/08
Range Resources (RRC) [7/10/08]	50	$58.17	$45.47
Potash (POT) [7/18/08]	10	$215.09	$180.29
Southwestern Energy (SWN) [7/18/08]	50	$39.46	$37.67
Potash (POT) [7/24/08]	10	$192.02	$180.29

The rebound in oil and commodity prices has caused Range Resources, Southwestern Energy and Potash to rise this week. However, demand for gasoline and fertilizer is expected to keep falling and the bounce may be short lived. At this time, it appears that this portfolio is negatively correlated with the holdings by my financial advisor and my company stock.

At this point, I will continue to hold these stocks, but will make no additional purchases.

	From My Wealth Builder 7/7/08 Short List
Stock [short date]	Shares	Short Price	Price
Las Vegas Sands (LVS) [7/7/08]	100	$38.10	closed 7/11/08 @ $33.69

I have only able to short Las Vegas Sands so far, which I have closed. I won't be shorting Sears Holdings and Lifetime Fitness since both stocks need to be "rented" from a shareholder for about 0.1% a day and a minimum of $50,000 needs to be shorted. Too expensive for me to short. I need to find other stocks for shorting.

On 8/22/08, Las Vegas Sands closed at $40.33, significantly lower than the close of the previous week at $56.30. It looks like I may have missed the opportunity to short Las Vegas Sands again. At this point, I plan to wait for it to rally before opening a short position again.

The market continues to be choppy. All three indices have been in bear market territory. As of the close on 8/22/08, the Dow, Nasdaq and S&P 500 indices were respectively down 10.8%, 8.96%, and 10.78% year to date. The three indices are still significantly above the second bottoms of 15.2%, 15.58%, and 14.63% in my 7/14/08 Stock Purchase Update.

I continue to believe that the probability of a recession in 2008 is relatively high, if we are not already in one. The multitude of negative factors will eventually outweigh any actions by the government and financial institutions. Originally, the Fed interest rate cuts and other actions led me to expect that the bull market would last through summer, 2008. However, the economic data of the first half 2008 has caused the bull market to end earlier. I expect the market to continue to be choppy in 2008 with many short term rallies and declines.

For now, I will try to create a long and short portfolio in my trading account. I will continue to maintain my holdings managed by our financial advisor, and plan to sell a duplicated funds during any strong rally which may occur.

Disclosure: At time of publication, I am long Range Resources, Potash and Southwestern in my trading account. The managed accounts are long Range Resources, Hess, and Sears Holdings.

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 © 2008 Achievement Catalyst, LLC

Will Higher Tax Rates Create More Tax Revenue?

My expectation is that federal income taxes will increase, no matter who is elected, since it is unlikely Congress will extend the Bush tax cuts. Of course, I expect that the Democrats will significantly hike taxes if they should win the Presidential elections, since a win may cause Democrats to believe there is a mandate for higher tax rates.

However, higher tax rates does not necessarily mean higher tax revenues.

An article in The Wall Street Journal titled You Can't Soak the Rich shares a concept called Hauser's law. Ken Hauser is an economist who published an interesting analysis of the U.S. tax system comparing tax collections, normalized to GDP, and top marginal tax rates. The article concludes that, "The data show that the tax yield has been independent of marginal tax rates over this period, but tax revenue is directly proportional to GDP." The reason is that higher tax rates cause more people to shield income from taxes.

I believe Hauser's law because it is based on actual data from 1950 through 2007. During that time, the highest tax rate declined from 91% to the present 35%. Yet, during that same time frame, tax revenues collected was a relatively stable 19.5% of GDP. Since GDP has been going up since 1950 , total tax revenue has also been increasing, even as the top tax rates were declining.

If we want to increase tax revenue, we need to increase GDP. The Wall Street Journal article further states, "Economists ... accept that a tax rate hike will reduce GDP," meaning higher tax rates will likely reduce tax revenue, if one believes Hauser's law.

It seems those advocating tax rate increases do not believe in Hauser's law. The next four years will prove whether Hauser is or the proponents of a tax rate increase are correct.

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

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

Copyright © 2008 Achievement Catalyst, LLC

2008 Presidential Nomination Conventions

"The Democrats are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans are the party that says government doesn't work and then they get elected and prove it." - P.J. O'Rourke

While I typically do not engage in Presidential elections this early, I am looking forward to watching the nominating conventions this year. The Democrats will hold theirs from August 25-28, 2008 and the Republicans will have theirs from September 1-4, 2008. Since the conventions are highly scripted events, it is unlikely there will be any new revelations or surprises. However, I hope to hear more details on both candidate's platforms.

At this point, I think the election is Obama's, to either win or lose. His organization runs an excellent campaign, as demonstrated in the primaries. But McCain is not out of the race yet. The polls currently show a tightening margin between Obama and McCain.

It will be interesting to see which candidate, if any, gains significantly after the conventions are complete.

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

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

Copyright © 2008 Achievement Catalyst, LLC

Considering Retirement? - Think How Much Then When

Figure Out if You Can Retire by Walter Updegrade off CNN.com advised a couple who planned to retire at 65 to think first about whether they had enough funds and capability to generate income needed for 25 years of retirement. He suggested that it was more important to determine how much yearly income is needed and from where it is coming, than setting an age for retirement. The author offered a self assessment process for estimating how much is needed and also suggested possibly consulting with a financial planner.

We used both approaches, a self assessment and using a financial planner. With the self assessment, we estimated that we needed to save about 16 times of my gross salary.

Our financial advisor provided a balanced analysis, i.e. both the best cases and the worst cases. We decided we needed income equal to 100% of our pre-retirement after tax income. With that as a base, our financial planner ran different scenarios, e.g. paying off the mortgage, various life expectancies, saving for education, social security, etc. Based on his analyses, we increased our savings target to 20 times gross salary.

Knowing our target savings amount was helpful for our retirement planning. Although we had originally planned to retire in our mid-fifties, we achieved our target savings earlier than expected in 2007. Thus, we were able to retire earlier than originally planned.

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

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

Copyright © 2008 Achievement Catalyst, LLC

Men's Age In Their Minds

Older men see themselves as 31 as 32 in their heads theorizes Douglas Copeland in an MSN.com article, no matter what their actual (older) age. I checked with a few colleagues at a recent happy hour, and they nodded their heads. I also recall my father-in-law saying that it took him a minute to recognized the older guy, i.e. himself, in recent family pictures.

I guess 31 to 32 is even a little old for me. I used to tell friends that I'm don't feel much different from when I was 18 years old, with the main difference being much more responsibility, and a bit more money. Okay, and more maturity:-) Here are some of the areas that I see being the same:

Highly involved. I was very active in high school, with the major areas of interest being student council, sports, and academics. I continue to be actively involved in similar areas (politics, athletics and personal education) in adulthood.

Personal finance. Even back then I was a frugal spender and a big saver. The entire earnings from my first summer job was put into college savings. As a junior in college, I managed a student run business. As an adult, I continue to be just as frugal and as big a saver.

Spontaneity. At 18, I loved the ability to do things at the spur of the moment, and having unplanned time. While there aren't as many opportunities now, I still enjoy spontaneous moments, even if it occasionally distracts me from my work.

However, there are major changes from those youthful times. Physically, I am no longer an 18 year old. Although my mind wants to compete like I'm that young, my body is no longer capable. Even trying can lead to injury. And when a waitress flirts with me now, she probably sees someone who is her dad's generation :-)

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

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

Copyright © 2008 Achievement Catalyst, LLC

A Quick Way to Value a Small Business

Recently, I attended presentations on financing a business (by a banker) and buying a business (by a broker). In both, the speakers shared that a business was worth about 2 to 3 times cash flow. In the first case, banks would only loan money based on 2 to 3 times cash flow. In the second case, a business broker would typically price a business at 2 to 3 times cash flow.

For reference, cash flow is defined as the total of profit, depreciation, amortization, interest and owner's draw. All this information is easily obtainable from the owner's tax return, and it is common practice to request copies of the most recent three year's of returns during the due diligence phase. In financial terms, cash flow is related to EBITDA (earnings before interest, taxes, depreciation and amortization), which also adds back taxes paid.

Interesting, the broker shared that most small business owners will claim that tax returns don't represent the true earnings potential of their business. A common reason is that the current owner may have optional expenses, such as travel to conferences, higher end business vehicles or hiring of family members, that don't have to be incurred by a new business owner. While the reason may be accurate, banks will still only accept the financial information on a tax return for determining loan amounts.

While the valuation of a business seems to be complicated, I now have a good point from which to consider whether the price is reasonable or not. I can now do a quick analysis and confirmation of the market value of business and know whether a seller is listing too high. In addition, I know to watch out for statements such as "can have higher sales with right owner," which may mean the price is based on potential and not current cash flow. On the other hand, by comparing the cash flow to similar businesses, I can determine if the current business is underperforming and has more potential with a knowledgeable owner.



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 © 2008 Achievement Catalyst, LLC

Choosing a New Furnace and Air Conditioner

In May, 2008, we needed to replace our furnace, which had failed. At the same time, we decided to replace our air conditioner, which was working during 2007, but had not yet been turned on in 2008. From our discussion with the estimator, we decided to go with an 80% AFUE furnace, with a dual stage burner and variable speed fan, and a 14 SEER air conditioner. These were below the maximum AFUE of 95% for a furnace and 19 SEER for an air conditioner.

Here's what we considered when making our decision:

Efficiency and payout - In discussing options with the estimator, we learned that one component of efficiency is AFUE, which determines the percent of fuel converted to heat energy. Thus a 80% AFUE converts 80% of the fuel to heat and exhausts 20% to the atmosphere. This was the area of efficiency with which we were most familiar. Since our existing furnace was rated 60% AFUE, we would be getting a significant savings with the minimum 80% AFUE furnace.

However, the estimator also shared that a dual stage burner (e.g. low and high) and a continuous variable speed fan could increase efficiency above the AFUE. A single stage burner always burns in high mode. A dual stage burner can use a low mode, when less heat is needed. Thus, while both burner stages may be 80% AFUE, the low stage will use much less fuel. A continuous variable speed fan provides two benefits. It keeps the house temperature more uniform and continues to transfer heat at the lower fan speed. We decided to pay the extra cost for these options.

For the air conditioner, the minimum was 14 SEER for units with the new 410A refrigerant. We briefly considered buying a higher SEER unit. However, the incremental cost did not payout in our climate zone. Thus, we chose the lowest SEER unit, which was still a significant improvement over our existing 8 SEER unit.

Comfort efficiency - We wanted a system that would regulate the temperature well, versus surging past the set point and then allowing the house to equilibrate back to the set point. The dual stage burners and continuous variable speed fan would contribute to maintaining tighter temperature controls.

Installation difficulty - The 80% AFUE furnace could use the existing exhaust venting trough the roof. However, both the 90% and 95% required PVC venting through the basement wall. Unfortunately, we have a finished basement with drywall ceilings, which would have made it difficult to install new venting without damaging the drywall.

Finally, we contracted the work with the company that had installed a furnace and air conditioner in a previous house. From that experience, I knew they would have reasonable costs and do excellent work.

At this point, we are very satisfied with the air conditioning choice. Using the same set point as last summer, we are more comfortable than with the previous system. It is hard to compare the cost savings since this summer has been much cooler that last year. We'll have to wait until winter to do a comparison on our furnace choice.

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

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

Copyright © 2008 Achievement Catalyst, LLC

8/18/08 Stock Position Update - No Changes

I have taken no further action based on my buy list and short list of 7/7/08. So far I have taken four long and one short position, which has been closed. At this point, I believe the market is in a short term rally. Given the volatility of the market, I continue to be cautious for both purchases and selling short.

At this time, the holdings are not doing well. The overall portfolio has fallen 9.7% and the remaining holdings are down 18.3%, which is up slightly from last week's update. The only positive has been the gain from shorting Las Vegas Sands.

For reference, the stocks on my 7/7/08 buy list were: Potash (POT), Research in Motion (RIMM), Bucyrus (BUCY), Williams Cos. (WMB), Southwestern Energy (SWN), Hess (HES), and Range Resources (RRC). The stocks on my 7/7/08 short list were: Las Vegas Sands (LVS), Sears Holdings (SHLD), and Life Time Fitness (LTM).

	From My Wealth Builder 7/7/08 Buy List
Stock [purchase date]	Shares	Purchase Price	Price on 8/15/08
Range Resources (RRC) [7/10/08]	50	$58.17	$43.26
Potash (POT) [7/18/08]	10	$215.09	$169.81
Southwestern Energy (SWN) [7/18/08]	50	$39.46	$35.18
Potash (POT) [7/24/08]	10	$192.02	$169.81

The fall in oil and commodity prices has caused Range Resources, Southwestern Energy and Potash to continue declining this week. Apparently demand for gasoline and fertilizer is expected to keep falling. At this time, it appears that this portfolio is negatively correlated with the holdings by my financial advisor and my company stock.

At this point, I will continue to hold these stocks, but will make no additional purchases.

	From My Wealth Builder 7/7/08 Short List
Stock [short date]	Shares	Short Price	Price
Las Vegas Sands (LVS) [7/7/08]	100	$38.10	closed 7/11/08 @ $33.69

I have only able to short Las Vegas Sands so far, which I have closed. I won't be shorting Sears Holdings and Lifetime Fitness since both stocks need to be "rented" from a shareholder for about 0.1% a day and a minimum of $50,000 needs to be shorted. Too expensive for me to short. I need to find other stocks for shorting.

On 8/15/08, Las Vegas Sands closed at $56.30, significantly higher than 7/11/08 probably due to short covering. I will likely short Las Vegas Sands again once this rally weakens.

The market continues to be choppy. All three indices have been in bear market territory. As of the close on 8/15/08, the Dow, Nasdaq and S&P 500 indices were respectively down 10.3%, 7.53%, and 10.4% year to date. The three indices are significantly above the second bottoms of 15.2%, 15.58%, and 14.63% in my 7/14/08 Stock Purchase Update.

I continue to believe that the probability of a recession in 2008 is relatively high, if we are not already in one. The multitude of negative factors will eventually outweigh any actions by the government and financial institutions. Originally, the Fed interest rate cuts and other actions led me to expect that the bull market would last through summer, 2008. However, the economic data of the first half 2008 has caused the bull market to end earlier. I expect the market to continue to be choppy in 2008 with many short term rallies and declines.

For now, I will try to create a long and short portfolio in my trading account. I will continue to maintain my holdings managed by our financial advisor, and plan to sell a duplicated funds during any strong rally which may occur.

Disclosure: At time of publication, I am long Range Resources, Potash and Southwestern in my trading account. The managed accounts are long Range Resources, Hess, and Sears Holdings.

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 © 2008 Achievement Catalyst, LLC

Voting Independent or Not at All

"I'm as mad as hell and I'm not going to take this anymore!" ~ Howard Beale in the movie Network

I'm sending Congress a message that I'm tired of their wasteful spending and I, as a citizen and voter, am not going to take it anymore. In a business, people resign, or are fired, if issues like the recent financial crisis happened on their shift, e.g. Citigroup, and Merrill Lynch. In my opinion, people in elected offices accountable and be voted out for poor performance.

The trouble is that, often, the opposing candidate from a major party is no better. To me, most Democrat and Republican candidates are typically poor in fiscal responsibility, with the choice often being the lesser of two evils. However, this year, I refuse to vote for either the Democrat or Republican candidate. Based on my observations, candidates from major parties have little fiscal restraint, are significantly influenced by lobbying money, and are in the business of getting re-elected, instead of governing well.

This year, I am giving serious consideration to voting for an independent congressional candidate. If there is a viable independent candidate who had demonstrated fiscal responsibility, not accepted lobby money and would vote "no" for bills with earmarks, that candidate would get my vote.

Unfortunately, there probably aren't enough viable independents running in 2008 to make a difference. The challenge is that a significant number of districts would need to have viable independent candidates to cause large enough change to have impact. Perhaps this will happen in 2010, since I don't expect the economic and international situations to be any better by then.

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

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

Copyright © 2008 Achievement Catalyst, LLC

Do You Know a Millionaire?

The answer is probably yes for those living in North America and Europe.

The World Wealth Report, by Capgemni for Merrill Lynch, is about individuals with a net worth of at least $1 million in assets, not including a primary residence. Using information from this report, Wikipedia summarized the number of millionaires in the following table.

Individuals with more than $1 million in 2006
Region	Number	Percentage
Global	9,500,000	0.15%
North America	3,000,000	0.62%
Europe	2,900,000	0.41%
Asia-Pacific	2,600,000	0.06%
Latin America	400,000	0.07%
Middle East	300,000	N/A
Africa	100,000	0.01%

Based on this table, North America has the highest ratio of millionaires with 1 out of 16o people being a one. Europe has the second highest ratio with 1 out of 240 being a millionaire. So if you live in one of these regions, you've probably met a millionaire.

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

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

Copyright © 2008 Achievement Catalyst, LLC

Keeping More of MY Money

Since I retired in my forties in 2007, very little of my tax liability is withheld, since I don't have a full time employer. Therefore, I file estimated tax payments, which requires me to approximate my tax liability for the year on a going basis.

Because calculating estimated taxes is similar to doing one's taxes, I already have an indication of how much I will pay in taxes in 2008. Here are some of the interesting statistics (well, interesting to me, at least).

In 2008, my income will be 33% of the 2007 income, with the majority being non-wage (e.g. interest, dividend, capital gains, and Roth IRA conversion) income. However, my after tax income will be 50% of the 2007 after tax income.

Thus, I made 3 times more money in 2007, but only ended up with 2 times more after taxes.

In 2008, my federal income taxes will be only 5% of the 2007 taxes, for a 95% reduction. For reference, in 2008, federal income taxes will be 3% of income. In 2007, federal taxes were 24% of income.

The primary reason is that in 2008, we will now qualify for certain tax credits/deductions and the 0% long term capital gains tax rate.

Since most of my income is non-wage, I am paying 25% of of the FICA tax paid in 2007. Of course, this will also cause my Social Security benefits to be lower.

These statistics were very interesting. While I was working, I would never have considered reducing my income to reduce taxes. However, I now realize that I was working about 100 times harder for that additional income, only to have a significant portion wasted, in my opinion, by those in Congress.

Thus, for now, I am happily making less and paying less taxes to support what I consider wasteful spending by Congress, such as earmarks, bailouts and constant income redistribution.

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

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

Copyright © 2008 Achievement Catalyst, LLC

Sorting a Lifetime of Accumulation

Since our dad passed away 2 1/2 years ago and our mom has been in a nursing home for 1 1/2 years, we've realized that we would need to sell our parent's home. However, we've been putting off cleaning out the house, because emotionally we didn't want to admit that our parents wouldn't be going back to their house.

Last week, we began clearing the house and hopefully sell it in the spring of 2009. It has been an interesting process, one in which I learned more about my parents and myself with respect to belongings.

Here are the insights I had:

1. Most paperwork saved is not useful. My dad preferred having a paper trail for most of his activities. An great benefit was that we have been able to find all the important documents, such as trust papers, copies of deeds, and tax records. However, we sorted through at least a hundred times more paper that was shredded and discarded, e.g. old account statements, paid bills, and receipts.
   
   However, reviewing six years of documents did have a benefit. I was able to reconstruct and understand more about my dad's investment strategies and results. It was almost as if he were there explaining his investments to me.



2. Even frugal people may have too much of some stuff. My parents were great savers and didn't spend money on many things. Even so, there were two areas that my parents had more than overstocked, clothing and health supplements. In these areas, we were giving away items that were used or unopened.



3. Use treasured items during one's lifetime. Throughout our childhood, my parents saved and bought several things they treated with great care (i.e. used infrequently) including living room furniture, dining room furniture and fine china. We have rarely used any of these items and will need to sell or give away some of the items.



4. Pass on heirlooms early. Over their lifetime, my parents were very good about passing along family heirlooms and their history. The only remaining items were pictures, a few pieces of jewelry and a piano, which we plan to keep.



5. Sentimental is valuable. As we sorted through their belongings, we felt the most attachment to items with a memory related to our parents. We will keep their diplomas, awards, and other personal memorabilia.

These insights have caused me to rethink how I manage my belongings. Admittedly, I probably save too much documentation, and have too much of certain items such as supplies for new projects and books. I think it's time to reduce my saved documentation and complete projects or book before acquiring more.

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

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

Copyright © 2008 Achievement Catalyst, LLC

Happy Blogiversary - Two Years Old

Today , August 13, 2008 is the two year blogiversary of My Wealth Builder. Here are some fun facts related to My Wealth Builder from August 13, 2006 to August 12, 2008.

Reader Statistics

Visits: 112,607

Page views: 168,842

Most Popular Articles

How Much Is Needed To Be Wealthy - The NUMBER

Achieving Financial Freedom - I've Retired In My Forties

Retirement Calculator Evaluation - Vanguard

Ranking One's Net Worth

My Personal Favorites

Is There Anything Really New In Personal Finance?

The Only Saving Strategy You'll Ever Need

Did You Know?

Why Aren't We All Wealthy (Yet)?

Geographical Reach

Top countries:
United States
Canada
United Kingdom
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Top cities:
New York City
Chicago
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Top non U.S. cities:
London
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August 13 Birthday Trivia

August 13 is also the birthday of several well known people or characters: Alfred Hitchcock (1899-1980), Bambi (66), Fidel Castro (82), and Dan Fogelberg (1951-2007).

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 © 2008 Achievement Catalyst, LLC

Links To Carnivals From August 9 - 11, 2008

Here are links to Carnivals from August 9 - 11, 2008. in which My Wealth Builder participated:

Carnival of Financial Planning

Carnival of Personal Finance #165

Carnival of Twenty Something Finances (link TBD)

For more Ideas You Can Use, check back Tuesday for the next segment.

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

Copyright © 2008 Achievement Catalyst, LLC

8/11/08 Stock Position Update - Ugly is an Understatement

I have taken no further action based on my buy list and short list of 7/7/08. So far I have taken four long and one short position. At this point, I believe the market will have a short term rally. Given the volatility of the market, I continue to be cautious for both purchases and selling short.

At this time, the holding are not doing well. The overall portfolio has fallen 11.1% and the remaining holdings are down 20.2%, during a time the S&P has been rising. The only positive has been the gain from shorting Las Vegas Sands.

For reference, the stocks on my 7/7/08 buy list were: Potash (POT), Research in Motion (RIMM), Bucyrus (BUCY), Williams Cos. (WMB), Southwestern Energy (SWN), Hess (HES), and Range Resources (RRC). The stocks on my 7/7/08 short list were: Las Vegas Sands (LVS), Sears Holdings (SHLD), and Life Time Fitness (LTM).

	From My Wealth Builder 7/7/08 Buy List
Stock [purchase date]	Shares	Purchase Price	Price on 8/8/08
Range Resources (RRC) [7/10/08]	50	$58.17	$41.80
Potash (POT) [7/18/08]	10	$215.09	$171.51
Southwestern Energy (SWN) [7/18/08]	50	$39.46	$32.56
Potash (POT) [7/24/08]	10	$192.02	$171.51

The fall in oil and commodity prices has caused Range Resources, Southwestern Energy and Potash to continue declining this week. Apparently demand for gasoline and fertilizer is expected to keep falling.

At this point, I will continue to hold these stocks, but will make no additional purchases.

	From My Wealth Builder 7/7/08 Short List
Stock [short date]	Shares	Short Price	Price
Las Vegas Sands (LVS) [7/7/08]	100	$38.10	closed 7/11/08 @ $33.69

I have only able to short Las Vegas Sands so far, which I have closed. I won't be shorting Sears Holdings and Lifetime Fitness since both stocks need to be "rented" from a shareholder for about 0.1% a day and a minimum of $50,000 needs to be shorted. Too expensive for me to short. I need to find other stocks for shorting.

On 8/11/08, Las Vegas Sands closed at $50.95, significantly higher than 7/11/08 probably due to short covering. I will likely short Las Vegas Sands again once this rally weakens.

The market continues to be choppy. All three indices have been in bear market territory. As of the close on 8/8/08, the Dow, Nasdaq and S&P 500 indices were respectively down 10.18%, 8.98%, and 10.6% year to date. The three indices are significantly above the second bottoms of 15.2%, 15.58%, and 14.63% in my 7/14/08 Stock Purchase Update.

I continue to believe that the probability of a recession in 2008 is relatively high, if we are not already in one. The multitude of negative factors will eventually outweigh any actions by the government and financial institutions. Originally, the Fed interest rate cuts and other actions led me to expect that the bull market would last through summer, 2008. However, the economic data of the first half 2008 has caused the bull market to end earlier. I expect the market to continue to be choppy in 2008 with many short term rallies and declines.

For now, I will try to create a long and short portfolio in my trading account. I will continue to maintain my holdings managed by our financial advisor, and plan to sell a duplicated funds during any strong rally which may occur.

Disclosure: At time of publication, I am long Range Resources, Potash and Southwestern in my trading account. The managed accounts are long Range Resources, Hess, and Sears Holdings.

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 © 2008 Achievement Catalyst, LLC

Negotiating Prices

It's a Buyer's Market. Haggle by Bob Tedeschi at CNN.com shares that it may benefit consumers to negotiate prices in areas such as mortgage fees, cell phone service, cable/telephone/Internet services, health club, and consumer goods (e.g. electronics and clothing). I'm always game for negotiating prices, especially if I pay cash. Recently, however, I've found that I don't even need to negotiate to get lower prices.

Here's my recent experience with Internet and health club providers:

Internet service. My Internet provider recently contacted me and offered to reduce the monthly fee. What a pleasant surprise.

Health clubs. Recently, we've been considering joining a health club to take advantage of classes that we normally take, e.g. yoga. I've toured a few health clubs and all are offering discounts of the administrative fee and occasionally, a discount in the monthly fee. When I miss the deadline for the "special," they call me back with new "special" that is usually better than the previous one.

I think it's a great time to negotiate with providers where there is lots of competition or where demand is low. However, some businesses in our area (e.g. top home repair companies) seem to have more business than normal and do not need to offer discounts.

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

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

Copyright © 2008 Achievement Catalyst, LLC

An Ivy League Degree Means More Pay on Average

Ivy Leaguers' Big Edge: Starting Pay by Sarah E. Needleman of The Wall Street Journal shares that the median salary of Ivy League graduates is 32% higher than other liberal arts graduates at 10 or more years of working. While the data confirm what many believe, the article questions whether the difference is due to the school or due to the person that chooses to attend.

The article begs the question of whether the cost of an Ivy League education is worth the future income difference. In my experience, while the differences are true on average, the disparity does not necessarily exist on an individual. In my experience as a manager, people with Ivy League degrees on average make more than many of their colleagues with non Ivy League degrees. However, the salary difference is due to advancing further in the company. On the other hand, I've seen many individuals from non Ivy League schools advance further than their Ivy League colleagues, resulting in higher salaries.

My assessment? The biggest factor is probably the individual, and an Ivy League education can help, if one can afford the cost.

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

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

Copyright © 2008 Achievement Catalyst, LLC

Early Retiree Health Insurance

Once of the main enablers to retiring in my forties was being able to get retiree health insurance through my company. Without good affordable health insurance, I probably would not have taken early retirement.

It seems that businesses and companies now realize good affordable health insurance is an opportunity to help people who retire early. Retiree Health Access is a program that is working with businesses and insurance companies to create large pools of early retirees that can help keeping health insurance costs affordable. According to the article, if employees qualify for the plan, they won't be turned down due to health status.

If successful, this sounds like a program that can help more people choose early retirement.

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

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

Copyright © 2008 Achievement Catalyst, LLC

How to Handle a Parent's Belongings

Since my father passed away two years ago and my mother entered a nursing home, we've been procrastinating in making their belongings more manageable. Emotionally, we just couldn't get started on selling or giving away my parent's accumulations from a lifetime. However, we've come to realize that keeping a household without residents is not a good idea. Besides the monthly upkeep cost, there is maintenance and occasional damage due no one being there when an issue happens.

Recently, Liz Pulliam Weston wrote How to get rid of your folks' stuff on MSN.com. The article covered a range of topics, including family relationships, vetting what to keep and what to give away or sell, and looking valuables in hiding places.

Fortunately, since there are only two children, we don't have many issues in for family relationships. However, there are several other suggestions I found useful. Specifically, in the first round, we plan to do the following:

Review documents and shred those not needed. My dad kept all his financial documents, sometimes in duplicate, such as tax returns. However, they were organized in his own unique system. We'll need to go through all the documents and keep what's needed (titles, annual statement summary and tax returns)

Create keep, sell and giveaway rooms. We will start sorting items into one of these rooms for future disposition.

Check for valuables in various places. My mom and dad kept their valuables in different locations in the home. We'll need to inspect the home and all the items before transferring ownership.

This will be a good start. However, I expect it will take a few trips and a couple weeks of work to complete the task. Hopefully, if the real estate market improves, we'll be able to sell their house in the spring of 2009.

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 © 2008 Achievement Catalyst, LLC

A 60/40 Approach to Budgeting Money

In To Budget or Not to Budget..., I wrote that "we use budget-free money management." Our approach to "budgeting" was to save money first, then set aside money for future expenses (e.g. major home repair or improvements, new car, property taxes) and spend the rest. To quantify the allocation, I looked at the approximate percentages just prior to retiring in my forties in 2007. For reference, the percentages are based on net take home pay, i.e. after taxes.

Savings (24%) - We followed the principle of "pay ourselves first." Using automatic payments, a fixed amount was transferred from our checking account to our savings accounts within a couples days of receiving my direct deposit paycheck. The savings were to be used for future retirement and college for our daughter. We avoided using this savings for current expenses, no matter how large.

Savings for large expenses (16%) - We also saved separately for large expenses, both expected and unexpected, by depositing money in another savings account. Examples of large expenses include major home repairs, such as a new roof or new furnace, property taxes, new car, new furniture and yearly insurance premiums. To note, some of these expenses were yearly, e.g. property tax, and some were very infrequent, e.g. new roof. Therefore, this account grew every year, until the major expense happened.

Living expenses (60%) - The remaining amount in our checking account was used for monthly expenses, which include our mortgage, food, entertainment, clothing, routine maintenance (car and home), monthly health and life insurance premiums, and utilities.

In this category, we allowed ourselves to spend as needed without a budget. Of course, many expenses were already pre-determined, e.g. utilities. In the months we underspent, we rolled the money into the next month giving us a buffer, in case we overspent slightly in a future month.

In theory, once all the money was spent, we would stop spending. Practically, we always had a buffer of at least 1/2 months expenses in our checking account.

For reference, the percentages do not apply to earlier years, because we evolved over time to this allocation and I no longer have the records to track previous years. However, this allocation has became habit. Even in retirement, we are routinely spending about the same amount as the 60% for livings expenses when I was working.

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 © 2008 Achievement Catalyst, LLC

Our Internet Provider Reduced the Monthly Charge

Recently, I got a pleasant surprise from our Internet provider. Our monthly fee was reduced 25%, from $40 to $30 per month. It is now comparable to introductory offer prices from various providers. Interestingly, the price reduction was not automatic. The provider left two voice message, sent one post card informing us of the new price and gave instructions on calling to get the deal.

Of course, I called and the provider informed me that I could get a price reduction to $30/month. Here was the gist of the conversation:

"Any other fees?" I asked, expecting a one time charge.
"No."
"Any contracts, or other requirements?" I asked.
"No."
"It's a price reduction with no requirements?" I checked.
"Yes."
"This sounds like a no brainer answer. Is there any reason I shouldn't accept?" I questioned, with a bit of disbelief.
"No."
"The why do you need to ask?," I queried.
"We're required to ask the customer before making any change."

I checked with a friend later that week and he didn't get any offer to reduce monthly fees from the same provider. I wonder if it's because I've been periodically calling and asking if they will match the introduction cost of new broadband providers. Hmmm....

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 © 2008 Achievement Catalyst, LLC

Links To Carnivals From August 2 - 4, 2008

Here are links to Carnivals in which My Wealth Builder participated from August 2 - 4, 2008:

Carnival of Finanical Planning

Carnival of Family Life

Festival of Stocks #100

For some interesting reading from the blogosphere, check out the articles in these Carnivals.

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

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

Copyright © 2008 Achievement Catalyst, LLC

8/4/08 Stock Position Update - No New Purchases or Shorts Last Week

I have continue to take actions based on my buy list and short list of 7/7/08. So far I have taken four long and one short position. At this point, I believe the market will have a short term rally. Given the volatility of the market, I continue to be cautious for both purchases and selling short.

For reference, the stocks on my 7/7/08 buy list were: Potash (POT), Research in Motion (RIMM), Bucyrus (BUCY), Williams Cos. (WMB), Southwestern Energy (SWN), Hess (HES), and Range Resources (RRC). The stocks on my 7/7/08 short list were: Las Vegas Sands (LVS), Sears Holdings (SHLD), and Life Time Fitness (LTM).

	From My Wealth Builder 7/7/08 Buy List
Stock [purchase date]	Shares	Purchase Price	Price on 8/1/08
Range Resources (RRC) [7/10/08]	50	$58.17	$49.01
Potash (POT) [7/18/08]	10	$215.09	$201.06
Southwestern Energy (SWN) [7/18/08]	50	$39.46	$36.32
Potash (POT) [7/24/08]	10	$192.02	$201.06

The fall in oil and material prices has caused Range Resources and Potash to decline slightly this week. Southwestern Energy rose slightly.

	From My Wealth Builder 7/7/08 Short List
Stock [short date]	Shares	Short Price	Price
Las Vegas Sands (LVS) [7/7/08]	100	$38.10	closed 7/11/08 @ $33.69

I have only able to short Las Vegas Sands so far, which I have closed. I won't be shorting Sears Holdings and Lifetime Fitness since both stocks need to be "rented" from a shareholder for about 0.1% a day and a minimum of $50,000 needs to be shorted. Too expensive for me to short. I need to find other stocks for shorting.

The market continues to be choppy. As of the close on 8/1/08, the Dow, Nasdaq and S&P 500 indices were respectively down 13.4%, 12.87%, and 13.14% year to date. Two of the three indices are significantly below the previous respective lows of 9.37%, 16.58% and 11.86% in my 3/17/08 Stock Purchase Update. In addition, all three indices have been in bear market territory.

I continue to believe that the probability of a recession in 2008 is relatively high, if we are not already in one. The multitude of negative factors will eventually outweigh any actions by the government and financial institutions. Originally, the Fed interest rate cuts and other actions led me to expect that the bull market would last through summer, 2008. However, the economic data of the first half 2008 has caused the bull market to end earlier. I expect the market to continue to be choppy in 2008 with many short term rallies and declines.

For now, I will try to create a long and short portfolio in my trading account. I will continue to maintain my holdings managed by our financial advisor, and plan to sell a duplicated funds during any strong rally which may occur.

Disclosure: At time of publication, I am long Range Resources, Potash and Southwestern in my trading account. The managed accounts are long Range Resources, Hess, and Sears Holdings.

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 © 2008 Achievement Catalyst, LLC

Wealth Creation and Accumulation

"The rich are different from you and me." -- F. Scott Fitzgerald
"Yes, they have more money." -- Ernest Hemingway

Recently, I had an epiphany about becoming wealthy. Building wealth consists of two different activities: 1) creating and accumulating wealth and 2) maintaining wealth. The first part has to be achieved by an individual through their own actions. The second part can be handled by professionals since managing wealth is a skill.

My realization? Creating and accumulating wealth is partially dependent on luck, which no one controls. Simply, there are no cookbook steps, no genetic aptitude and no predictable way to creating wealth. It is a unique combination of the personal drive of an individual with the right activities and a bit of luck. Perhaps, that's why it is hard (impossible) to teach someone to create wealth and, perhaps, that's why many people only are successful at doing it once or in one way.

Of course, there are some critical elements, before luck can help. In my opinion, the elements for successful wealth building include:

1. A good idea. It all starts with a good idea, but not necessarily a great idea. After the fact, sometimes some ideas appear obvious. For example, Starbucks, Dell Computers, and Microsoft all started with a good idea that made the founders very rich.



2. Focus. This often includes concentrating personal and financial resources on the idea, which by definition is high risk. Rarely do individuals become very wealthy through diversification. They become rich in their own business, working for a company or investing in a few stocks.
   
   Of course, concentration is a two edged sword. It can quickly reduce one's wealth in bad times, e.g. Enron and Bear Stearns.



3. Bringing the idea to life. Good strategy, excellent execution, hard work, and persistence are some of the elements to make an idea happen. An idea not implemented is nothing. As Thomas Edison once said, " Genius is one percent inspiration and ninety-nine percent perspiration."



4. Luck. Finally, I believe there is an element of being in the right place at the right time, whether that is previously unseen opportunity or the markets are now receptive. This element is not controllable. I've seen individuals deliver the first three parts, but have circumstances go against them, resulting in failure.
   
   For example, an investor could have hypothetically become very wealthy in 2003 to 2005 flipping real estate. Using the same idea and doing the work in 2006 to 2008, would have yielded poor results.

Of course, it doesn't pay to just wait for only luck to happen, e.g. big lottery win. To have a good chance at creating wealth, it makes sense to do the first three steps. However, doing the first three well won't guarantee success. Luck will likely have some impact on the outcome.

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

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

Copyright © 2008 Achievement Catalyst, LLC

Managing Wealth is a Skill

In my younger days, I often wondered how people with less wealth than their clients could competently manage finances of wealthier people. After all, I thought, if a person (e.g advisor, stock broker, accountant, financial analyst) was good, shouldn't they also be wealthy? However, I've come to realize that managing wealth is different than creating and accumulating wealth.

Maintaining wealth is a skill, a process that can be learned. That's why people with less wealth than their clients can competently manage the wealth of the rich or super rich. In my experience, maintaining wealth is about:

1. Maximizing return with low relative risk. The classic approach is diversification of asset classes such as equities, fixed income, real estate and hard assets. Within each asset class there can also be further diversification.



2. Preserving capital on an inflation adjusted basis. Although the markets will fluctuate short term, it is important to ensure the investments grow long term at a rate fast than inflation. In addition to asset diversification, controlling varying withdrawal rates for different market conditions can help. For example, withdrawing less when the portfolio is down can minimize principal loss.



3. Minimizing taxes and expenses. Keep more of one's wealth by paying less on one's earnings. Knowing the tax code and finding low investement costs are two opportunities

There are known and proven techniques for doing each of these elements. Someone knowledgeable in these techniques and good implementation skills can competently maintain wealth for those that already have achieved it.

On the other hand, creating and accumulating wealth is different than managing wealth. More on that topic tomorrow.

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

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

Copyright © 2008 Achievement Catalyst, LLC

My Retirement Award

When I retired in my forties in 2007, one benefit was a retirement gift. I kept putting it off because: 1) getting a retirement award made me feel old; and 2) there were too many choices. In June, 2008, after procrastinating for nine months, I decided to order the gift.

The choices were numerous. As a retiree, I could order any retirement gift or a gift from the previous service year awards (e.g. 5, 10, 15 ... years). The choices included watches, jewelry, luggage, telescopes, cameras, and household furnishings. In the past, I had generally chosen something fun and useful -- coasters, and a compact fishing rod were some of my previous choices.

There were hundreds of choices and I was torn between something fun and useful, or an item of recognition. In the end, I chose an award that does both, a clock for our dining room. The clock was useful, fun (since I could display items in it) and came with a brass plate acknowledging my retirement and years of service.

The award arrived last week and the manufacturer dispatched a service representative to unpack and set up the clock. Overall, the clock was an excellent choice. I get to see it everyday as a reminder of my first career, but it doesn't stand out as an award since it blends in with the other furniture.

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

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

Copyright © 2008 Achievement Catalyst, LLC