Links to Carnivals from December 22 to 28, 2009

Here are the links to the Carnivals in which My Wealth Builder participated from December 22 to 28, 2009:

Money Hacks Carnival #96

Carnival of Financial Planning #121

Carnival of Money Stories

For some interesting articles from the blogosphere, check out these Carnivals and give the hosts some recognition for their hard work.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Taking Qualification Tests to Increase Compensation

When I was working full time, level advancement and pay increases was primarily determined by management decision and evaluation, which can be subjective. Since retiring, I've noticed some jobs use objective methods to do non-management advancements and pay increases.

For example, my seasonal part time job offers compensation increase for experience (i.e. years of service) and certification level. In the past, higher certification levels were achieved by completing company developed courses, but increases were limited to two each year. It would take nearly six years of course hours to reach the highest level. This year, the company changed the certification process from education hours to passing an administered test. In addition, there is no longer a limit to the number advancement levels I can achieve in one year.

My goal this year is to advance as many levels as possible. Although I waited until November to begin, I've already passed four certification tests, putting my level one year ahead what was possible in the previous system. I plan to keep taking tests until I don't pass, or the deadline occurs, which is December 31, 2009. At my current level, I've increased my compensation about 10%. If I am fortunate enough to qualify for and advance four more levels, my compensation will increase about 25% in 2010.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Recession Silver Linings

Although the recession has been tough, there have been some expected and unexpected benefits. Here are a couple that I've seen:

As might be expected, prices for many things seem to be getting lower. I've personally noticed and taken advantage of off peak dinner deals and happy hour beer prices lower than in a store. Similarly, lower housing prices were also predicted. Housing Affordability Hovers Near Record-High Level for Third Consecutive Quarter reports that housing affordability is at the highest levels since the index was started 18 years ago.

However, this societal benefit was unexpected. Recession’s good news: Cities see burglaries fall by the Associated Press at MSNBC.com reports how burglaries have have fallen by 15 to 25% in many cities, a surprising outcome given the state of the economy. The article speculates the reason may be related to the job loss during the recession. More people are at home now during the day, creating less opportunities for a burglar and providing more neighborhood watchers during working hours.

As the recovery continues, it is likely the benefits will disappear. So I'm going to try to enjoy them before the recession silver linings go away.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Merry Christmas 2009

I'm looking forward to a festive day and a fun weekend. We'll be celebrating Christmas with my in-laws, and exchanging our family presents. This Sunday, we'll be hosting my spouse's extended family holiday gathering for the second year.

Wishing you and your family a Merry Christmas and prosperous New Year.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Streamlining our Christmas Traditions

For Christmas 2007, we started our own set of Christmas traditions and in 2008, we added a family Christmas tradition from my childhood. In 2009, we continued the same traditions, didn't add any new ones, and worked on streamlining the Christmas Eve events.

For reference, our Christmas Eve tradition is to attend an early church service and then take a drive, which enables Santa Claus to make an early visit to our house. In 2008, we had not thoroughly considered the process, which resulted in a less than perfect execution of the tradition. The problem was the church service ended about an hour before darkness. As a result, we needed one hour of activity before taking a drive. We chose to have dinner at a local restaurant. While we enjoyed eating out, it didn't give us enough time to prepare for Santa's visit.

This year, we decided to have dinner at home after attending Christmas Eve service. That enabled us to adequately create evidence of Santa's visit, which involved putting out the presents, eating the snacks by the fireplace and leaving a Santa note for our daughter. For our drive, we toured a holiday light show, and then returned home, while looking for Santa's sleigh in the sky. Our daughter cautioned us not to look too hard, as it might scare Santa from visiting :-)

When we arrived home, our daughter quickly went to the fireplace to check on whether Santa had eaten the snacks. She excitedly exclaimed, "Santa came and he left me a note!" Darn, we didn't get our camera out in time to capture that moment, but we were able to get it in time for the present openings.

Overall, this year's Christmas traditions were done pretty well. Next year, we'll need make sure the camera is ready when we arrive home on Christmas Eve :-)

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

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

Copyright © 2009 Achievement Catalyst, LLC

Ways to Keep from Growing Wealth

7 surefire ways to stay poor by Liz Pulliam Weston at MSN.com shares seven money management issues that can keep people from accumulating wealth :

Spending too much of one's income on the large expenditures, e.g. rent/mortgage.

Confusing needs and wants.

Basing purchase decisions on monthly payments.

Failing to track the money flow.

Carrying credit card debt.

Living paycheck to paycheck.

Cashing out retirement accounts.

Overall, I agree with Ms. Weston. To me, these issues are money drains that can significant decrease wealth. Our personal solutions to these issues are to : 1)pay ourselves first, and 2)live below our means, which I shared in Strategies for Building Wealth and Retiring Early.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Links to Carnivals from December 15 to 21, 2009

Here are the links to the Carnivals in which My Wealth Builder participated from December 15 to 21, 2009:

Carnival of Road to Financial Independence #14

Money Hacks Carnival #XCV

Baby Boomer's Blog Carnival #18

Boomer's and Seniors News You Can Use Carnival

Cavalcade of Risk #94

Carnival of Financial Planning #120

The BoBo Carnival of Politics

Carnival of Personal Finance #236

Tax Carnival #61

Carnival of Twenty-Something Finances

For some interesting articles from the blogosphere, check out these Carnivals and give the hosts some recognition for their hard work.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Diagnosing the Cause of Leaks from our Water Heater

Last week, I checked in our utility room and saw a couple of small puddles below our gas water heater. I though, "It's finally time to replace our water heater." As background, it is the original water heater in our house, which was built 21 years ago. Until now, we haven't had any major issues with it. Two years ago, the pilot light went out, but I was able to re-light it. Last summer, I drained the tank, for the first time in five years, and there was no sediment in the tank.

Thinking that the water tank was leaking, I checked the Internet to confirm my diagnosis. To my surprise, I found three possible causes of the puddles. The first was a tank leak, which would require replacing the water heater. The second was condensation resulting from cold water filling the water heater, which is a normal occurrence in cold months. The third was a valve leak, which might require tightening or changing the valve. Since valve connections were dry and the puddling occurred shortly after a bath was drawn, I thought the water might be due to condensation.

As a precaution, I got an Internet estimate for replacing our water heater from a local retailer. Afterwards, I called the store to confirm the estimate of $1069 and asked a few questions.

Q. About how long do water heaters last?
A. About 12-13 years.

Q. Can puddles be caused by condensation?
A. Yes.

Q. How can I tell the difference from a leaking tank?
A. Puddles from condensation disappear. Puddles from leaks are always there.

That was enough information for me to do the final trouble shooting. Within a day, I confirmed that the puddles were disappearing, meaning we did not have a leak. Thus, for now, the water heater is still functioning well and we won't be replacing it.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Strategies for Building Wealth and Retiring Early

At a recent holiday gathering, I ran into a friend who had also retired in his forties. We compared notes on what strategies enabled us to retire early. There seemed to be two recurrent themes in our discussion:

Paid ourselves first. Essentially, we put money in savings before paying bills and other spending. I have posted before about why I believe this is a great saving strategy, which has helped us build wealth.

Lived below our means. Our lifestyles were a conscious decision. Even though we could afford more, we would have lifestyles that were below our peers. We would drive less expensive or used cars, live in moderate housing, and avoid extravagances. As a result, we didn't use debt to expand our lifestyle.

Even in these economically challenging times, he and I have managed to stay in early retirement, for four and two years respectively. I'd like to think it is the results of a good execution of the above two 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 © 2009 Achievement Catalyst, LLC

The Mortgage Refinance Dilemma

Despite Low Mortgage Rates, Homeowners Can't Refinance by David Streitfeld of The New York Times reports the difficulty of refinancing a home mortgage due to declining home values. Even though a homeowner is current and can make the lower payments on the new mortgage, the lender won't refinance the mortgage since the property is below the value of the mortgage. So it appears the lender would rather have the owner potentially walk away from the higher interest loan, than give the person a lower fixed rate mortgage at the same amount of principal.

I had a similar experience with our lender, but for a different reason. Since taking early retirement in 2007, we have been living off our savings, both principal and earnings. Our income from wages, interest and dividends is low, which is what our bank considers when make the loan. The bank does not include income from capital gains, e.g. the sale of stock, since the amount is not predictable. Thus, even though we were comfortably making payments, had 60% equity in our home, and enough cash to pay off the mortgage, our lender would only qualify us for less than 1/2 of the remaining principal, based on the predictable sources of income, wages, interest and dividends. Our decision? We simply paid off our mortgage in May, 2009.

While I understand the basis for the lender's decisions, it doesn't meet my standards of common sense logic. Since the loan already exists, why not refinance the existing principal to a lower monthly payment, especially if the owner has a job or liquid assets to cover the monthly payment? In my opinion, during the housing boom, many lenders ignored common sense logic and lent money to borrowers with insufficient income or savings, and now during the housing bust, lenders are again ignoring common sense logic and not lending to people with sufficient income or assets to comfortably make the payments.

That seems to be the nature of bubbles, i.e. standards are too loose during expansion, and stanards are too tight during recovery.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Should we buy a golf car?

Since writing Tax Credits for Golf Carts - Another Unintended Consequence?, I thought about whether it would be worth buying a street legal golf cart for local trips, if the cost were free. However, even with the tax credit, we can't justify owning a golf car. Here are the reasons for not buying a street legal golf cart:

Limited opportunities to use. The main road connecting to our neighborhood has a speed limit of 40mph, making it difficult to drive a golf cart (with a maximum 25mph speed) on the main roads to nearby shopping.

Ongoing yearly expenses. While the tax credit may make the purchase free, there are still yearly costs of maintenance, license plates, and liability insurance.

We don't need a third vehicle. I am a proponent of buying only what we need. Even though it might be almost free, we really do not need a third vehicle for a two driver family.

Thus, we are once again saved from spending due to a stimulus credit, the others avoided being the home buyer's credit and the cash for clunker's credit.

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 © 2009 Achievement Catalyst, LLC

Tax Credit for Golf Carts - Another Unintended Consequence?

After reading about this yesterday, I thought, "Unbelievable, taxpayers paying for golf cart purchases." Then I thought, "Nah, situation normal, another unintended consequence from government stimulus intervention."

As part of the Emergency Economic Stabilization Act (ESSA) and the American Recovery and Reinvestment Act (ARRA), two tax credits were created for plug-in electric cars, which includes neighborhood electric vehicles (NEVs). The ESSA tax credit is between $2,500 to $7,500, up to 100% the cost of the vehicle, which expires December 31, 2009. The ARRA tax credit is a maximum of $2,500 or 10% of the vehicle cost, whichever is lower, and expires December 31, 2011. Here is the IRS list of vehicles eligible for the tax credit.

Interestingly, as pointed out in Golf car credit controversy, by Kay Bell, golf carts can qualify as NEVs, if they include required safety features to make them street legal, such as side/rearview mirrors, headlights and three-point seatbelts. Although, the ESSA tax credit typically offsets about 1/2 to 2/3's of the golf car price, one manufacturer has price their golf car at $6496.53, which is precisely the amount of the tax credit. Hence, a free golf car, courtesy of a government stimulus bill.

What will the politicians think of next? Perhaps the health care reform bill will include a exercise tax credit for buying golf equipment and playing golf, making the sport a benefit that is entirely supported by government and taxpayer funds :-)

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

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

Copyright © 2009 Achievement Catalyst, LLC

Incentives to Retire Early

With the current recession, retiring early is probably not being considered as frequently as in the past. However, as companies continue to cut back, there are often incentives given for people to retire early, which may increase people's interest in retiring early.

Here are some of the incentives of which I am aware:

Severance pay. Typically, severance pay is based on the years of service. For many people near retirement, this means about one year of severance. I have heard of some companies offering two years, and I seen a Japanese company offer four years severance.

Extension of employee benefits. Some companies will offer continuation of benefits, e.g health and life insurance, at employee rates for a time period equal to that of the severance pay.

Full retirement benefits before normal eligibility. In some cases, companies will provide normal retirement benefits at an age that is 5-7 years below the usual early retirement age.

Outplacement services. This is offered even for retirees, even though it is usually meant for people who leave prior to retirement age. This can be helpful for determining what direction to head in retirement, e.g. new job, new careers, or full retirement.

Although the information is not generally public knowledge, what is offered by a company can be learned from recent early retirees or managers who budget responsibility. Also, since not every company offers the same incentives, it is worthwhile to check before considering early retirement.

Of course, one of the best outcomes is retiring with incentives, and then finding equivalent or better employment at a different company. I'm aware of several people who have done that, and essentially were compensated more than double in their "retirement" year.

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 © 2009 Achievement Catalyst, LLC

First Bank Deposit

I often take our five year old daughter with me to the bank to make deposits or withdrawals. I do it primarily because our bank has refreshments and she enjoys getting a snack when making a visit. However, I also hope that she is learning as she watches me make deposits to our account.

Yesterday, our five year old daughter asked to make her first bank deposit, from a bag of coins that she had been saving. I estimate she has saved about $15 to $20 of coins. After some contemplation, she decided to deposit $0.77 to her account. However, before doing the deposit, she had several question about the concept.

Will they give me my money back? As with most children, she was concerned that whoever she gave anything to would keep it and not return it. Probably a reasonable concern given the number of banks that have failed, but I didn't think that was the question she was asking :-) My answer was, " The bank is just holding your money for you. You can get it back anytime by asking for it."

How will they know which are my quarters? Another good question. If she gave a friend a stuff animal to use, she certainly would want the same one returned. I tried to explain that the case for money was different. I showed her two different quarters and asked if it mattered which one she received, because they were both worth 25 cents.

After her question were answered satisfactorily, I filled out a deposit slip and we drove to the bank. I modeled the activity by making our deposit first. She then put her money on the counter and said, "I want to make a deposit." After getting her receipt, the teller gave her a child friendly balance book to track her savings.

Hopefully, our daughter will make many more deposits and begin to learn the virtue of saving :-)

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

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

Copyright © 2009 Achievement Catalyst, LLC

Giving Saving Priority over Spending

In managing our personal finances, we typically have given savings higher priority than spending. Here are our reasons for doing so:

Spending before saving can sometimes lead to reducing wealth. From my observations, many people think of finances in the order of earnings, spending and saving.

Money Earned - Money Spent = Money Saved

In this scenario, savings is a result after all the money has been spent. An issue arises when the amount of money spent is greater than the amount of money earned, which causing savings to be negative. In addition, the amount saved can vary significantly from month to month and even be negative.

Saving before spending can often help increase wealth. We prefer to "pay ourselves first" and thus, think of our finances in the order of earnings, saving and spending.

Money Earned - Money Saved = Money Available for Spending

For this scenario, the amount of money saved is defined ahead of time, before the spending has been done. Thus, every month savings grows as a contribution is made regularly. Also, since we pay off credit card balances every month, we only spend the amount of money available.

For us, we believe that choosing a saving before spending financial approach created good spending discipline and significantly increased our probability of building wealth.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Cavalcade of Risk #94 - Alert Level Edition

Welcome to the Cavalcade of Risk #94. As the name indicates, this Carnival is about risk - e.g. insurance, health, financial, and other types. Thank you to all bloggers who made a submission to this Cavalcade. (For reference, the number seem to be 1/2 normal, meaning either Blogcarnival is malfunctioning, holiday shopping is taking priority, or there is just less risk in the world today :-) I enjoyed reading every one of the articles. While every post was a great submission, I only included those I judged primarily related to risk management.

For your reading entertainment, I have grouped the articles into five levels of risk, using the Homeland Security designations: Green, Blue, Yellow, Orange, and Red.

And now on to the Cavalcade ...

Green Alert - Low Risk

Tom @ Canadian Finance Blog presents Insurance You CAN NOT Do Without posted at The Canadian Finance Blog, saying, "A look at a few insurance policies that you CAN’T do without."

For our situation, we've learned that the necessity of insurance also depends on life stage. Since taking early retirement in my forties, I have dropped life and disability insurance. I do continue my retiree health insurance, which will continue to be important as we grow older, along with the requisite vehicle and homeowner's insurances.

Jeff Rose presents Why Term Life Insurance is the Best Choice posted at Jeff Rose, saying, "Life insurance is the foundation of a smart financial plan, particularly when there are family and loved ones who depend on a person’s financial support ."

Blue Alert - Guarded Risk

Nancy Germond, ARM, AIC, ITP presents Wage and Hour Suits Heat Up for Heath Care Organizations posted at AllBusiness.com - Risk Management for the 21st Century, which offers some tips to reduce the risk of employment litigation for hourly workers. An important read for employers who let workers continue "off the clock."

Steve Faber presents Preventing Identity Theft - The Next Level posted at DebtBlog which shares a number of tips to reduce the risk of identity theft happening.

Yellow Alert - Significant Risk

June Tree presents Leveraged ETF Investing: More Risk With More Reward posted at The Digerati Life, saying, if "you feel that you can afford to take on some risk to give your portfolio that extra nudge, then there’s a way to leverage by simply relying on the right stock picks you make. By using a little money to make a lot of money, you’ll be able to 'leverage' what you already have. This is possible with a type of exchange traded fund called a leveraged ETF."

My experience is been there, done that, and won't do it again. To me, tracking risk is a major issue of these Ultra ETFs.

Jason Shafrin presents Taiwan’s National Health Insurance System posted at Healthcare Economist, saying, "How does the Taiwanese government handle health care risk for their population. With their innovative National Health Insurance Scheme. The Healthcare Economist gives more details on Taiwan's NHI."

Financial Tales presents A Tale of Two Titans; Financial Tales posted at Financial Tales, which shares an interesting approach for determining an investor's risk tolerance. It's a simple test of choosing among the returns from four different portfolios, over a 21 month period.

Orange Alert - High Risk

Henry Stern, LUTCF, CBC presents Food Pyramid Update: Brew vs Cancer posted at InsureBlog, saying, "Summary: Hey guys: Want to reduce your risk of prostate cancer? Beer's the way!" The post also notes that it would take 17 beers to get the risk reduction benefit, which would probably significantly increase my risk of falling down :-)

Louise presents Reform Worth the Costs at Colorado Health Insurance Insider, saying, "Because individual policies are medically underwritten in Colorado, and because our family is healthy, the individual option is quite a bit less expensive than a group policy would be. If the health care reform bill makes it through the senate and ends up becoming law, that will probably change. We’ll still have a few more years of the status quo, but in 2013 we’ll likely see significantly higher premiums for those of us who are healthy and buy our own health insurance. The difference in premium between a group plan and an individual plan for our family will likely be much less than it is today, due to both the increased benefit mandates and the end of medical underwriting that is expected in the individual market."

Unlike Louise, I have low confidence in politicians developing good, cost effective, sustainable long term health care solutions, but that would be a topic for a different carnival ;-)

Red Alert - Severe Risk

Super Saver presents Avoid Risking Catastrophic Downsides for Low Upsides at My Wealth Builder, saying "I've learned to never do anything that is unsafe, even if the risk of danger is extremely small. The reason is that there is very little upside, e.g. a few seconds saved, versus a catastrophic downside, e.g. losing a limb or life."

That concludes the 94th edition of The Cavalcade of Risk. I hope you enjoyed reading this carnival as much as I enjoyed editing it.

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

Copyright © 2009 Achievement Catalyst, LLC

Potential Scam Phone Calls

Recently, we've been getting phone calls where there seems to be no party on the other end. Since we have caller ID, I decided to find out the origin of the phone call. When I typed the phone number in search, it returned a list of phone numbers which were associated with scam complaints. Apparently, anyone who called the list of numbers was charged $1 on their phone bill. Thus, the scammers are depending on people with caller ID to call back because the caller receiver believes they are returning a legitimate missed call.

I know this happens because I've occasionally made calls to wrong numbers, and the receiver called me back immediately. However, now that I know about this scam, I won't automatically call back numbers that I don't recognize.

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 © 2009 Achievement Catalyst, LLC

Links to Carnivals from December 8 to 14, 2009

Here are the links to the Carnivals in which My Wealth Builder participated from December 8 to 14, 2009:

Carnival of Financial Planning #119

Carnival of Money Stories #32

Carnival of Personal Finance #235

For some interesting articles from the blogosphere, check out these Carnivals and give the hosts some recognition for their hard work.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Accelerating Tax Deductions to 2009

After doing a preliminary 2009 tax return and forecasting our 2010 tax situation, we've decided to accelerate appropriate 2010 tax deductions to 2009 to maximize our Schedule A itemized deductions, and take the standard deduction for married filing joint in 2010. By my estimates, this will increase our total deductions by about $8000 for the two years, resulting in higher total refund of about $1200 over the two years.

Here are the tax deduction that we can accelerate to 2009 from 2010:

Charitable deductions. Charitable contributions are deductible in the year they are made. Our plan is to pay our 2010 pledges before December 31, 2009, to enable them being deducted in 2009. A extra benefit is the charity gets the money a little earlier.

Property taxes. In our county, property taxes are paid six month in arrears. For example, June, 2009 taxes are due in January, 2010. December, 2009 taxes are due in June, 2010. This year we will choose to pay all our 2009 property before December 31, 2009 and deduct them in 2009.

For reference, I also looked into the possibility of accelerating mortgage payments and health insurance payments as a way to increase itemized deductions. Unfortunately, I learned that accelerating these payments won't work, since the payment is required to be related to the current tax year to be deductible. Thus, prepaying our 2010 health insurance premium in 2009 is not deductible in 2009. It is only deductible in 2010. However, since mortgage payments are done one month in arrears, the January, 2010 mortgage payment is deductible in 2009, if made in 2009.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Business Experience in President Obama's Cabinet

It's Still Too Early to Worry Too Much by Michael Santoli at Barron's (link may require subscription) contains a table that shows the percentage of cabinet appointees with private sector experience going back to 1900. President Obama's cabinet is the lowest at 8%. Next lowest were President Kennedy's at 28%, President Carter's at 31% and President Clinton's and President T. Roosevelt's at 36%. Presidents George W. Bush's was at 53% and President F. D. Roosevelt's was at 50%.

On the surface, the level of business experience in the current cabinet seems to be cause for concern. However, I could argue there isn't much correlation between private sector cabinet experience and economic performance. While the economy faltered under President Carter (31%), the economy prospered under Presidents Kennedy (28%) and Clinton (36%). The economy did well initially under President Bush (53%) and then crashed at the end. Under President F. D. Roosevelt (50%), the economy languished for years, until World War II helped end the Depression. In addition, poor government regulation during the Bush years may have made the economic crisis worse, which would support having more people with primarily public sector experience.

To me, it really doesn't matter what percentage of a cabinet has business experience. In the end, the administration will be judge on results, with economic results being the major factor. At this point, it's still not clear to me on whether this administration will be a positive or negative for the long term economy.

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 © 2009 Achievement Catalyst, LLC

Options to Avoid Outliving Our Savings

My first supervisor told me an interesting story about his late uncle. After amassing a respectable nest egg, his uncle retired at 65 and expected to die before 85, since his health was not good. He lived in a nice house, ate and dressed well, and took nice vacations, with a plan of exhausting his savings at age 85. Unfortunately, he lived until 95, in spite of his health issues. In the words of my supervisor, "The first twenty years were the best years of his life, the last ten were really tough."

Although I haven't talked to many retirees, I know that some are concerned about outliving their savings. I am one those that could have the issue of outliving our savings. Here are a few potential solutions we are considering to address the issue.

Maximize Social Security payments and have a pension or lifetime annuity. Although getting rarer, there are still defined benefit plans, also known as pensions, which pay for the entire lifetime of the beneficiary. Both pensions and Social Security make payments for the lifetime of the recipients and are adjusted upwards for inflation each year.

My father-in-law retired after 30 years in the armed forces, with a full pension. In addition, he receives Social Security benefits. My mother-in-law receives a teacher's pension. My mom receives survivor spouse Social Security payments. Since my dad waited until 70 to start his benefits, my mom receives the maximum Social Security payment each month.

For those like us, who do not have a pension, a lifetime annuity can be bought to duplicate some of the benefits of a pension, specifically the lifetime payments. For a lump sum payment between the ages of 55 and 65, one can purchase an annual stream of payments close the value of the lump sum beginning at age 85.

Monetize one's home. A paid off home significantly reduces debt expense, but can tie up a lot of funds in an illiquid asset. A reverse mortgage is one monetization option that allows the owner to withdraw equity from their home, and repay it upon sale or death. For more details on the process, see the reverse mortgage information at the U.S. Department of Housing and Urban Development website.

Another option is to sell one's home and buy or rent a smaller home. This option will reduce monthly expenses (e.g. maintenance, utilities etc.) and provide significant funds to be invested for future use.

Work part-time. Earning money through part time jobs reduces the withdrawal rate , and therefore, extends how long the savings will last. Also, working part-time may improve the chances finding full time work, if needed.

At this point, we are considering maximizing our Social Security payments, downsizing once our children graduate from college, and doing part-time work to cover 20% of our annual expenses. For now, I am not comfortable with lifetime annuities, which carry the risk of the financial company and not paying. Also, since a reverse mortgage is basically debt, we would prefer not to use that option to generate funds.

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 © 2009 Achievement Catalyst, LLC

Fact Checked by a Five Year Old's Network

Prior to my daughter's fifth birthday, I explained to her that turning five meant there would be higher expectations and she would have more responsibility. In fact, I jokingly told her, that she would be given a five year old rulebook, which she would need to follow.

At first, she resisted by saying no. After I explained she couldn't say "no," she told me that since she wouldn't be able to use a rulebook, since she couldn't yet read. In response, I explained that learning to read was the first rule. For several months, our daughter would come up with a clever reason for not getting a rulebook, and I would respond with a counterpoint that negated the reason.

Then she got me.

One day, she informed me that she had checked will her friends that turned five on whether they had received a five year old rulebook. She reported that the answer was a unanimous no, and therefore, there was no such thing as a five year old rule book. Busted, and what could I do? I admitted there was currently no five year old rulebook. ( I wonder when it was eliminated :-)

Daughter: 1 Daddy: 0

Next year, I need to prepare better and ensure all her friends get a six year old rulebook ....

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

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

Copyright © 2009 Achievement Catalyst, LLC

A Return from the Abyss

Soon after I retired early in October, 2007, the Dow reached an all-time high and our retirement savings was at 23 times my annual salary. About a year later, Lehman Brothers filed for bankruptcy and confidence in the U.S. financial system was destroyed. From November, 2008 through March, 2009, a full depression appeared to be a reasonable concern, and the Dow declined 54% from a closing high of 14,164.53 to 6547.05. Our retirement savings declined 41% to 13. 6 times my previous annual salary. It seemed that financial systems would collapse and not recover.

Since March, 2009, the Dow has rallied 58% to 10,337.05, and our retirement savings has grown 25% to 17.1 times my annual salary, when adding back the amount used to pay off our mortgage in May, 2009. Although the Dow hasn't returned to the highs of October, 2007, it feels to me that a financial catastrophe has been avoided. For now, there is a reasonable chance the economy will recover, although it will likely take a long time.

The financial experience of the pass two years will likely affect our investment strategies for the rest of our lives. The next time the market seems to be going no where but up, e.g October, 2007, we will definitely sell stocks and lock in some profits. On the other hand, when the market looks like it is in freefall , e.g. November 2008 to March, 2009, I hope we have the discipline and courage to put money back into the market, and benefit from an inevitable return from the abyss.

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 © 2009 Achievement Catalyst, LLC

Links To Carnivals From December 1 to 7, 2009

Here are the links to the Carnivals in which My Wealth Builder participated from December 1 to 7, 2009:

Festival of Frugality #206

Baby Boomers Blog Carnival #16

Carnival of Financial Planning #117

Tax Carnival #60

For some interesting articles from the blogosphere, check out these Carnivals and give the hosts some recognition for their hard work.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Choosing Certainty or Additional Returns

Knowing Your Own Risk Tolerance shares an interview with chief investment officer Michael Cembalest in which he notes that people can trade off liquidity for higher returns. Unfortunately, he observes, this trade off was overdone in the recent financial crisis.

His comment made me think about our allocation across certainty and additional returns for retirement savings. For us, funds needed in the short term (3-5 years) are in certain but low return investments. Mid term funds (5-10 years) are invested in CDs and bonds. Long term funds (over 10 years) are invested in equities, which offers higher returns. Spreading our savings across all categories results in an overall lower average return, but provides more stability during periods of high volatility, like last year.

Even though it appears the economy and stock market has stabilized, we will continue to allocate our savings across certain and higher return investments. While the short term investments continue have a very low return, the peace of mind of certainty is a worthwhile trade off for us.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Further Reducing Contributions to my Alma Mater

After reading Alan Blinder's op-ed How Washington Can Create Jobs in The Wall Street Journal, I decided to further reduce my annual giving contribution to my Alma Mater, at which Mr. Blinder is a Professor of Economics and Public Affairs. I'm getting tired of economists believing that government holds the proactive solutions to our economic problems. In my opinion, government does best by creating good regulatory frameworks that support sustainable business growth and then enforcing them. Mr. Blinder recommendation of further direct government intervention is not what I would consider good for sustainable business growth.

Of course, my reduction in contribution to my Alma Mater is entirely symbolic. I already reduced my annual contribution several years ago to what I consider a token amount. The next time I want to make a stronger statement, I can reduce my contribution in that year to only $1. Perhaps, I'll use the difference to invest in a business that will really create jobs :-)

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 © 2009 Achievement Catalyst, LLC

Maximizing our Social Security Benefits

Although we are still quite a long ways from being eligible for Social Security benefits, I've looking into ways we can maximize our benefits. For our situation, a strategy know as the 62/70 solution appears to be most promising, allowing us to have the proverbial cake and eating it too.

The 62/70 solution is relevant when the the lower paid spouse is younger, by less than eight years, and the older and higher paid spouse is delaying until 70 to receive the maximum Social Security benefits. While the higher paid spouse is waiting, the younger spouse can file for reduced Social Security benefits at 62, which enables the older spouse to collect spousal benefits at full retirement age. (12/13/09 update: Getting spousal benefits isn't likely for the higher paid spouse. I check with Social Security and they said the older spouse would automatically gets the higher of their own or spousal benefits when filing for Social Security payments at full retirement age.) Thus, the couple can collect Social Security payments, while waiting for the higher benefits to take effect at age 70 for the older spouse.

At 70, the older, higher paid spouse can apply for the higher Social Security benefits, and the younger spouse will be eligible spousal benefits at full retirement age. If the spousal benefit is higher than the younger spouse's retirement benefit, the Social Security payment will be increased to the level of the spousal benefit.

The benefit of the 62/70 solution is two fold:

1. The couple can collect some benefits while waiting for the older spouse to reach 70 and maximize the Social Security payment. Otherwise, the couple receives no payments while waiting for age 70.
   
2. When one spouse dies, the surviving spouse will continue to collect the maximum Social Security payment of the higher paid spouse.

My understanding of the 62/70 solution seems almost too good to be true. Therefore, I plan to confirm my understanding with our financial planner, and the Social Security administration before proceeding with this approach as a firm plan.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Becoming My Parents

The older I get, the more I realize I am my parents' child when it comes to some financial habits. Here are a few that I've noticed:

Buying gas. In the days of 28 cent gas, my dad used to search out the lowest priced gas station and save 1 or 2 cents. On a percentage basis, he was saving 3.5 to 7%. While I won't go out of my way, I tend to also look for the lowest price gas among the stations in our area. The difference ranges from 5 to 10 cents, with the percentage being about 2-4%. Usually, one of to gas stations has the lowest price in our area.

Investing. My dad liked higher risk/higher return investments and my mom preferred certain returns. I like both types of investing. Our savings are split between higher risk stocks and lower risk CDs/bonds.

Living frugally. My parents were very frugal, since they grew up during the Great Depression. When I was a child, my parents focused purchases on basic necessities (e.g. basic food, clothing, home). They rarely ate out, took occasional, modest vacations, drove their cars over 10 years, and paid for major expenses with cash that was saved. While we eat out and take vacations more often, I still drive cars over 10 years and pay for major expenses with cash.

Filing taxes. My dad always did his own tax return, even into his seventies. He enjoyed identifying and taking advantage of all the tax breaks, especially those for investing in rental real estate. He routinely filed for an extension, resulting in an October filing of his previous year's income tax return.

It's surprising how many financial habits I learned from being around my parents. They never formally taught me these habits, and yet I'm doing them much like my parents did. As a result, I'm sure our daughter is also learning her future financial habits from us :-)

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

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

Copyright © 2009 Achievement Catalyst, LLC

Real Estate is not a Sure Gain

I know people who are wary of investing in stocks due to the bear market of the past year. Instead, they are putting their money into real estate. While I'm not opposed to real estate, I think believe that good real estate always makes money is based on some assumptions that underestimate the risk and expenses of keeping real estate.

Here are some of the assumptions that I believe can be misleading:

Real estate value always increases with time. Over long periods for time, this assumption is true. We all know the story of settlers buying Manhattan from Native Americans for some beads. However, over short periods of time the price of real estate can decrease significantly as in the case of the Pontiac Silverdome which cost $56 million to build in 1975 and recently sold for $583,000.

Real estate is easy passive income. In my experience, real estate usually requires quite a bit of work. For rental property, there are always maintenance and repairs, collecting rents and finding new tenants. For vacant land, there is also maintenance cost, in particular to keep others from using the property without permission. Finally, there are the usual taxes that need to paid.

Leverage multiplies the gain from investment. Yes, and leverage can also quickly also eliminate the equity in a property in a declining market, as shown the CNN article 1 in 4 mortgages 'underwater' .

Real estate is not a sure thing, as the recent recession has confirmed. As with any investment, due diligence needs to be done to determine if there is a reasonable probability of getting a good return.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Our Approach for Choosing a Contractor

As we're getting older, we are having contractors do more of the repair and maintenance work around our house. In our area, we usually choose company with a good reputation, especially if neighbors and friends have referred them. The cost is usually on the higher end of the estimates, but the work and follow-up is also better.

Recently, I've had to help mom with some property. Since I live a long distance from my mom, I've had to do more due diligence than usual, because I don't have neighbors and friends in the area. Here's what I did to identify a contractor for the work on my mom's property:

Ask for local referrals. In this case, I checked with local government officials for their recommendations since the work was regulated. In some cases, I was given a specific name and in other cases, I was given a list of approved contractors.

Get at least three estimates. For me, getting estimates is an educational experience. I usually ask lots of open ended questions and learn about how contractors think about and do their work. Having three estimates gives me a better understanding of the range of costs for the work.

Check Better Business Business Ratings. I check the rating (A+ to F) and look at the complaint history. Most important to me is a low level of complaints and 100% resolution.

Get a copy of insurance coverage. For us, it is important that the business carry general liability, vehicle and worker's comp insurance. Otherwise a homeowner could be liable for any damages or injury that occurs during the project. In my mom's case, her own liability coverage would not cover any suits against the homeowner for damages caused by a hired contractor.

After getting all the above information, we chose a contractor who best met all the criteria. For reference, we gave the job to the contractor with the middle price estimate.

For our own work, we were regularly doing the first three steps, but were not always doing the insurance verification with the larger, well known companies in the area. However, we have decided to now include insurance checking even for large companies, since it is better to confirm than to find out a company has let it's insurance lapse.

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 © 2009 Achievement Catalyst, LLC

Links to Carnivals from November 24 to 30, 2009

Here are the links to the Carnivals in which My Wealth Builder participated from November 24 to 30, 2009:

Festival of Frugality #205

Carnival of Financial Planning #117

Carnival of Money Stories

Carnival of Twenty-Something Finances

Carnival of Personal Finance #233

Festival of Stocks #169

For some interesting articles from the blogosphere, check out these Carnivals and give the hosts some recognition for their hard work.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Getting a Jumpstart on 2010

It seems we never get caught up with the tasks we need to do. Whether it be paying bills, household maintenance, taxes, or gardening, we always seem to be getting to things just in time, without an margin of safety. Starting now, we're going to consciously make a change and try to get ahead, by jumpstarting some of the things we need to do in 2010. Here what we've started early:

Yard work. Our only major task in the fall is to rake up the leaves, for appearance and to avoid killing the grass. Usually, I over seed the grass in the fall, which leads to a great lawn the following spring. In the past we have not done much else.

This year, we decided to weed and mulch our gardens in the fall. I've heard that a fall mulching can reduce the weeds next spring. In addition, I will use any warm days in the winter to trim off the branches on the trees and reduce the amount of ever increasing ivy in our beds.

Taxes. For the past few years, I've taken an automatic extension and filed our taxes around October for the previous year. However, after filing my 2008 tax return in October, 2009, I decided to start working on my 2009 tax return. Although, I usually do some tax planning at the end of the year, I have actually done a rough draft of my 2009 tax return, and have very accurate estimate of our tax liability.

In addition, I've also starting doing our 2010 tax planning, which hopefully, will enable us to significantly reduce our tax liability for 2010.

Household maintenance. I'm targeting to get a number of interior maintenance items done over the winter, which will, hopefully, make the house relatively maintenance free from spring through fall of 2010. This will involve some bathroom caulking, tile grouting, and light fixture upgrading. The one item I may need to leave until spring is replacing the window weather stripping.

Vacation planning. 09/10 is our daughter's last pre-school year, when we still won't feel guilty for having her miss class while on vacation. In the spring of 2010, we'd like to take one more off season trip, to avoid the crowds and get low non-peak prices. At this point, we're starting to consider a visit to the Grand Canyon or Yellowstone.

I'm hoping that getting ahead on a few of our necessary tasks will benefit us. At this point, it feels good that we already have a few things completed that we usually do in the spring. Hopefully, the jumpstart will enable us to have a more relaxing spring, and free up some time to enjoy new activities.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Fast Food No Longer Agrees with my Stomach

My spouse is a food scientist and she is very knowledgeable of what is healthy to eat and what is not. Since we've been married, I've been slowly converted to eating healthy. I'm sure I will live 10-20 years longer because of my spouse :-) I now eat lower fat, more whole grains, more vegetables and less meat.

However, I've noticed an unintended consequence from healthy eating. I no longer can routinely eat fast food menu items without my stomach feeling uncomfortable. At first, I thought it was related to the raw onions, but I realized it wasn't just the onions. It's the high fat, high salt and high calories. I now realize that I prefer to have a well balanced meal instead of a fast food quarter pound burger with two slices of cheese and a healthy dose of condiments.

Yes things have changed. I still enjoy a hamburger, but now it's organic, grass fed and 90% lean.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Top Cities for Finding Jobs after Retirement Age

With the recent recession, more people are considering working longer. However, finding a new job or career after 50 can be very challenging. America's Silver- Collar Capitals
by Joshua Zumbrun of Forbes, reports on 10 cities where the unemployment rate for retirement age works are low. In fact, the top city of Anchorage, Alaska had an retirement-age unemployment rate of 0%, meaning everyone that wanted a job could get one. Here's the list from the article.

1. Anchorage, Alaska


2. Washington, D.C.


3. Southern Connecticut


4. Lincoln, Nebraska


5. Lexington, Kentucky


6. Houston, Texas


7. Des Moines, Iowa


8. Raleigh, North Carolina


9. Dallas - Fort Worth, Texas


10. Tallahassee, Florida

Personally, we do not plan to move any of these location for a post retirement-age job. However, I was pleasantly surprised to find a high proportion of desirable locations in the top ten list. For those already living in these areas, finding a job as after retirement age should be less of a challenge.

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 © 2009 Achievement Catalyst, LLC

Being Thankful

On this Thanksgiving Day, 2009, here are some things for which I am thankful:

Family - I am thankful for my spouse, who has been with me through the great times and the tough times. I am lucky to have met her and that she said yes to marrying me. I am also thankful for our daughter, who we adopted in 2005, since adoptions are now expected to take more than 5 years after application. I am also thankful for our parents, from whom we learned about good work ethic, persistence, and financial responsibility.

Friends - I have only a few good friends and I met most of them in my teens and twenties, specifically high school, college and my early working years. Although I don't interact with them frequently, I can always count on them for feedback, counsel and support. Fortunately, all of my good friends are still available to help.

Opportunity - I have been blessed with many opportunities to do well. My parents immigrated to the United States before I was born. They were also strong believers in education, sending me to a parochial elementary school and an Ivy League college. In high school, I played for a football coach that started me on the Varsity team as a freshman and led us to a state championship our senior year. I majored in Chemical Engineering, graduating with highest honors, and was hired by a Fortune 100 company, from which I retired 27 years later.

Luck - I am the first to admit that I have been lucky to be in the right place at the right time. From becoming one of the first freshman starters on our Varsity football team to my last promotion at work, I would attribute to event to luck. Another time or another place and it wouldn't have happened for me. I am thankful for luck, especially since I don't know how it happens.

Finally, as always, I am thankful that I had another birthday and am a year older. Growing older is always better than the alternative :-)

For more on Reflections and Musing, check back on Saturdays which is the normal day for this segment.

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

Copyright © 2009 Achievement Catalyst, LLC

Spending because of Stimulus Money? Not Us.

Although we qualified for the Cash for Clunkers and the new Home Buyer's Credit program, we passed on on participating, for one of the same reasons we don't go to Black Friday sales -- if we needed it, we would have already bought it. The other reason we aren't taking advantage of these credits is that using them would cause us to take on debt or reduce our savings, neither of which we want to do. Here's our thinking on these stimulus programs.

Cash for Clunkers. We both drive vehicles that are 6 years old. Mine qualified for the Cash for Clunkers program because it is a truck. However, the trade in value of my truck was greater than the $4500 stimulus rebate I would receive, thus not making economic sense to participate. In addition, my truck only had 53,000 miles and the maintenance cost is only an oil change every three thousand miles, with a major tune up every 15,000 miles. Also, I was planning to drive it at least 10 years and over 100,000 miles.

Decision: Keep the truck.

Home Buyer's Credit. We did not qualify for the first time home buyer's credit, since we already own a home. We do qualify for the extended program, which includes all people buying homes, under certain income restrictions. However, since we just paid off our mortgage and achieved zero debt, we are not going to buy another home. Besides, we are happy with our current home and plan to stay until our daughter goes to college, in about 13 years.

Decision: Keep our house.

For us, the financial decision was easy. If we were currently looking to buy a car or house, we may have taken advantage of the tax credits. However, the new tax credits did not incentivize us to do something that we weren't already planning to do.

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 © 2009 Achievement Catalyst, LLC

It Doesn't Hurt to Ask

"Always ask for something you want. The worst that can happen is the answer is 'no'." ~ saying at work

Tonight I met a friend at a local restaurant. I chose the location because they previously had a great happy hour deal of $1 pints. Although I didn't call ahead to check, I noticed a poster advertising $1 pints when I entered.

However, when we received the check, we were charged $2 per pint, because the beers were imports. The bartender pointed to a new banner that advertised the new prices. I was surprised since I sure that I had seen something earlier advertising $1 pints for all beers. I walked to the entrance, found the poster and pointed it out to the hostess, who told me it was the manager's decision. I showed the manager the sign, which he acknowledged, but told me he couldn't reduce the beer prices due to state liquor laws. I told him I understood, but asked if he could comp the appetizer instead, which was an equivalent discount. I figured we were going to pay the new full price, but decided it wouldn't hurt to ask, very nicely.

The manager agreed and comped the appetizers, effectively giving us the $1 price for pints. We still gave the bartender a tip on the original prices, which was a 50% tip on the discounted price. Also, we left as satisfied customers, who will very likely return.

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 © 2009 Achievement Catalyst, LLC

Links To Carnivals From November 17 to 23, 2009

Here are the links to the Carnivals in which My Wealth Builder participated from November 17 to 23, 2009:

Baby Boomers Blog Carnival #14

Carnival of Financial Planning #116

Economy and your Finances

Carnival of Twenty-Something Finances

For some interesting articles from the blogosphere, check out these Carnivals and give the hosts some recognition for their hard work.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Why I Don't Shop on Black Friday

Black Friday is an annual event for retailers to entice consumers into stores with special, low price deals that aren't offered any other time of year. Every year, I enjoy reading about the great deals I could get. And every year, I enjoy staying home and avoiding the mad rush. Here are my reasons for not shopping on Black Friday:

4:00 AM is too early to rise. I'm not getting early on to go shopping. To me, it seems ridiculous to lose several hours of sleep for a chance at a good deal. When I was working, Black Friday was a holiday. Now, I'm retired and every day is a holiday:-) I'd rather get the sleep time.

If I needed it, I would have already bought. I follow a principle of buying only what I need. A great sale price does not change an item from the "not needed" category to the "needed" category.

Limited quantities mean I won't be in time. A lot of the great deals often have a disclaimer such as "limited quantities, minimum of (single digit) per store." Thus, only the first few customers wanting to buy the item will get it, meaning my chances are a like a lottery.

So this year, as with previous years, I will be sleeping and missing all the great deals from retailers.

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

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

Copyright © 2009 Achievement Catalyst, LLC

I Believe these Events are Inevitable

After watching the new administration over the past 10 months, I believe the following will happen in the next few years:

High inflation. The high level of deficit spending by the government is bound to create significant inflation. The more dollars that are printed, the less they are worth. In addition, as the dollar is devalued versus other currencies, the cost of imported goods will go up.

Higher health care cost, lower quality. I have yet to see our government reduce spending, cut costs, or improve efficiency in any area and I don't expect it to be any different for health care. If the recent dispute over the use of mammograms is an indication, I also expect health care to be worse for the users of the government health care system.

Taxes will be higher for everyone. Only taxing the rich can't work, because the rich don't make enough money to cover all the additional government spending, even if they were taxed at 100%. The government will figure out a way to increase taxes on the broader population, even if they aren't call taxes.

Recession recovery will be slow. In my opinion, the government has used to recession to create political programs, instead of delivering the necessary economic programs. For example, about 25% of the $787 billion stimulus package has been spent to date. If it was so critical to rush the legislation through Congress, why has only such a small percentage been spent over the first 9 months?

Based on the direction that our government is taking, I see these outcome being very possible. I would be very happy to be proven wrong. In the meantime, we'll be modifying our financial plans to account for the possibility of the above scenario.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Not Aging Gracefully

In my opinion, aging gracefully must be an urban myth that's been perpetuated by personal development or self help literature. I, for one, am not aging very gracefully. Here are my examples of ungraceful aging.

Longer times to heal. Seemingly minor injuries take weeks, months and even longer to heal. I can no longer take it easy for a week and be full strength again in a short period. Three years ago, I had foot pains that lasted over a year. Recently, I strained my knee at the end of the summer and it still has not fully healed.

In addition, I seem more susceptible to injury, with small bumps and sprains becoming bigger issues.

Slower. Although I still have some quickness, I am much slower in the sports that I play. While my mind still thinks I can, I am no longer reaching balls that used to be routine in the past. For our household maintenance, it takes me much longer to do my current tasks or learn to do new tasks.

Aching joints. I'm guessing that some of my joints are starting to get arthritic. They ache, even though there is no apparent injury. In addition, they get stiff after sitting or lying in the same position for an extended period.

Aging gracefully definitely in not in my future. However, I do think I can age respectfully, by adapting to my physical changes, keeping a positive attitude and overcoming challenges on a regular basis. In addition, I can try to remain young in mind and young in heart :-)

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

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

Copyright © 2009 Achievement Catalyst, LLC

Estate Taxes

Several years ago, my spouse and I set up revocable living trusts to minimize our federal estate taxes. Under current laws, we would incur no federal estate tax since the assets in each trust are below the $3,500,000 exemption for 2009. Unfortunately, even though there are no federal taxes would be owed, our estates might be responsible for state estate taxes, since our residence is in one of 22 jurisdictions (21 states and the District of Columbia), that levy estate taxes on amounts less than the federal exemption.

The state exemptions are as low as zero, with the majority of exemptions at $1 or $2 million. The state estate tax rates range from 3% to 20%, with the majority in the 15 to 16% range. At this point, I'm not going to worry too much about state estate taxes, since we're not planning to die anytime soon:-) However, as we get older, moving to a state without an estate tax may become a consideration, especially if our assets exceed the state exemption.

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

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

Copyright © 2009 Achievement Catalyst, LLC

What We Learned from the Financial Crisis

"Those who cannot remember the past are doomed to repeat it." ~ George Santayana

The financial crisis of 2008 to 2009 has helped us clarify our thinking on our retirement investments. Here are the conclusions or changes we have made:

Keep short term fund needs in investments with certain returns. We were fortunate to have 3 - 4 years of living expenses in CDs, bonds and money market funds. The CD and bond yielded between 3 and 5%, while money market rates were much lower. Going forward, we plan to sell our stock investments to always keep 3-5 years of funds in fixed income investments with more certain returns.

We will also apply this concept to our daughter's college savings. About five years before she needs the funds, we will convert from equity investments to short term CDs.

Accept variability of short term returns with long term investments. A common investment mistake was to expect the 7-8% long term returns of the stock market for each and every year. As we learned, in the short term, there can be significant negative returns even with a positive long term average return. However, it is important not to sell long term investments just because the market is down in the short term.

Other than selling enough stock to pay off our mortgage, we have stayed invested in equities at close to the same level as before the market crash. In addition, we have kept our daughter's college 529 fund invested in stock mutual funds.

Be wary when an asset class yields big short term profits. When everyone claims to be making money, the peak for that asset class is likely getting close. This phenomena happened in both the tech stock bubble and the housing bubble. When it seemed everybody and anybody were making money in these investments, the market soon peaked and then crashed.

As a rule for the future, we will take profits if as the proportion of a specific equity or asset class increases significantly in a short period. In 2008, I sold some of my company stock near its 2007 high. My father-in-law took profits in his energy investments as they rocketed and became a larger proportion of their portfolio.

Now that the market has recovered and reached the levels of a year ago, I'm going to remember these lessons from the past year, especially if the stock market continues rallying into 2010.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Links To Carnivals From November 10 to 16, 2009

Here are the links to the Carnivals in which My Wealth Builder participated from November 10 to 16, 2009:

Health Wonk Review

Carnival of Financial Planning #115

Festival of Stocks

For some interesting articles from the blogosphere, check out these Carnivals and give the hosts some recognition for their hard work.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Expecting a Year End Rally

For now, I expect the current stock market advance to continue until the end of the year. The rally, which began on March 9, 2009, continues to avoid a 10% correction, although it has seen a couple 6-7% declines. Here's why I think the rally will continue:

Panic buying. Investors that have been out of the market and waiting for a correction have missed the biggest stock market rally since the 1930s. Soon some of these investors will get back in the market to avoid missing out on further gains, driving the market up more.

Incentives to buy are increasing consumer spending. From Cash for Clunkers to Home Buyer Tax Credits consumers are taking on more debt to do more spending. These government programs are giving the economy a short term boost and may even provide a psychological boost to help holiday retail sales.

Window dressing. Mutual fund managers will want to have good performing stocks in their portfolio at the end of the quarter. These purchases will drive up the stocks that have good returns this year.

For now, we will continue to stay invested in the market and, hopefully, benefit for the year end rally. However, should the market advance sharply in the next few months, we will definitely use the opportunity to sell and lock in some profits.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Our Green Shoots

Our investments is starting to show positive returns as a result of the economic recovery. For most of 2009, the gain/loss column was mostly red, meaning that most of our investments were losses. In the past week, the gain/loss column for our investments became mostly green, indicating that the majority of our investments had gains.

The gains are still small and we have not recovered all the losses that have happened since October, 2007, when the market peaked. However, small gains are better that large losses, and hopefully, the economic recovery will continue.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Accountability for Results

When I was working, we had a simple rule for accountability. Once I took over a project, I was immediately responsible for the outcome. If the project was a success, the team received the credit. If the project failed, it was my fault. I couldn't claim that my predecessor was the reason for failure. After all, my job was to ensure success, which meant making corrections if necessary.

Apparently, some in government do not have the same concept of accountability. There are still government officials that assign the slow economic recovery to the previous administration. HELLO, the previous administration has been voted out and has been out of office since January, 2009. Yes, the previous administration can be blamed for causing the crisis. However, I consider the status of the economic recovery to be the responsibility of the current administration.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Why I Consider Myself Retired

In October, 2007, I retired from my job, while still in my forties. I know that some people questioned whether it was really a retirement or whether it was just simply a job resignation, followed by unemployment. In my case, I consider it retirement and here are the reasons.

Retiree benefits. I received all the benefits that a retiree gets from my company - health insurance, access to company offices, and participation in all retiree programs.

Nobody in our family is employed full time, by choice. In addition, neither my spouse nor I are looking for full time employment. The only work we do are part time jobs, in areas we consider fun and interesting.

Live primarily on savings or pension. About 90% of our living expenses come from our savings and the earnings. Since we are both under 59 1/2, we cannot withdraw money from IRAs or 401Ks without penalty, and therefore have not used these funds yet. The other 10% of our living expenses is covered by the part time work I do.

I still get a lot of quizzical looks when I say I'm retired, mostly because I look 5 to 10 years younger than my age. However, based on the criteria outlined above, I think I have earned the privilege of saying I'm retired.

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 © 2009 Achievement Catalyst, LLC

Enjoying Mom As She Is

My mom has been in a nursing home for almost three years. In my previous visits, I was always looking for my mom of my past. Throughout my childhood, my mother was always an energetic caregiver for her family, e.g. raising kids, maintaining the household and while keeping spotless home, which was her pride and joy. In the few years prior to my dad's death, my mom's capabilities were clearly declining. She no longer would clean the house, she stopped cooking and wasn't as agile with her grandchildren. She had loss the initiative and spirit she had in her younger days.

When she entered the nursing home, it only seemed to get worse, since she lost her ability to independently control her life. The visits to the nursing home have been challenging for me since I wanted my mom to match my memories . However, on this visit, I decided to follow some advice I heard on the radio, which was to enjoy my mom as she is today.

Here's what I did:

Let my mom control the visit. Instead of taking charge, as I did in previous visits, I would ask my mom questions and let her take charge. For example, my mom requires assistance for eating and did not seem to be eating enough. So in previous visits, I would always use the opportunity to feed her. This time I asked her if and what she wanted to eat. If she didn't want to eat, I didn't try to feed her.

Also, I let her do what she wanted. Even when her schedule required her to be sitting in the common room, I would take her back to her bed when she wanted to sleep. As she slept, I would stay in the room, watching TV. If she woke up, I would talk to her about my childhood memories.

Know my mom is a different person. As much as I want my mom to be the person with whom I grew up, I realize she is the is the person she is today. I accept that she will never cook my favorite meal again, nor will she help me with my new challenges. My mom of today enjoys life in a different way, and I have accepted that.

Change me, instead of change her. Instead of trying to recreate my mom of my childhood, as I had done previously, this time I adapted to become her child of today. I decided I would be there and be company. We talked about the past, I thanked her for raising us well, and let her rest. She seem to appreciate having me there, even though she spent most of the time sleeping.

The last visit has been my best time with my mom so far since my father passed away in 2006. I visited with her 6 - 7 hours each day, talking with her when she was awake, and reading or watching CNBC on TV when she was asleep. I'm sure she enjoyed having me there, since she asked for a nurse much less frequently, and I enjoyed sharing time with her or when doing my other activities.

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

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

Copyright © 2009 Achievement Catalyst, LLC

CNBC Quiz on Market Understanding

Quiz: Think You Understand Markets. Prove it. . . is a 14 question quiz on stocks, bonds and investing taken from Financial Industry Regulatory Authority's test of investor knowledge. As a personal finance junkie and an experienced investor, I was able to answer 13 out 14 correctly in about 5 minutes, without looking up any of the questions :-)

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

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

Copyright © 2009 Achievement Catalyst, LLC

How Tracking Net Worth can be Misleading

Net worth is a common measure used for tracking personal wealth. Net worth is the value obtained from summing all assets and subtracting all liabilities. Simply, net worth is equal to all belongings minus all debts.

When I was younger, I used net worth to measure my wealth accumulation. However, I as got older, I realized that net worth alone didn't provide enough perspective on readiness for retirement. For example, consider the three situations in the table below.

	Net Worth Comparison
Examples	Assets	Liabilities	Net Worth
High Debt	$5 million	$2 million	$3 million
Illiquid Assets	$3 million (houses, land, yacht, etc.)	$0	$3 million
80% Liquid Assets	$3 million ($600,000 in illiquid assets and the rest in stocks, bonds, and cash)	$0	$3 million

While all three have $3 million in net worth, the readiness for retirement situation is very different. In the high debt example, the person has a minimum debt payments of $140,000/year , assuming a 7% interest rate, before other living expenses. In the illiquid asset/no debt example, the assets likely have fixed maintenance costs and do not generate income. Assuming 2% maintenance costs, the person would need $60,000 per year. In the 80% liquid assets/no debt example, the investments are generating income, and the assets require less annual maintenance money (e.g. $12,000/year at 2%).

I came to this understanding back in 2006 and stopped using net worth as a measure of our wealth. As a replacement measure, I started using Savings Ratios and Debt Ratios, as explained in How Much is Needed to Be Wealthy - THE NUMBER .

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

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

Copyright © 2009 Achievement Catalyst, LLC

Links To Carnivals from November 3 to 9, 2009

Here are the links to the Carnivals in which My Wealth Builder participated from November 3 to 9, 2009:

Festival of Frugality

Carnival of Financial Hacks #89

Carnival of Financial Planning #114

Carnival of Money Stories

Carnival of Personal Finance #230

For some interesting articles from the blogosphere, check out these Carnivals and give the hosts some recognition for their hard work.

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

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

Copyright © 2009 Achievement Catalyst, LLC

A Bubble is Coming

While I love the stock market advance, I can't help thinking we're in the midst of a bubble, which is soon to be a very big one. Low interest rates have created two major bubbles in the past, the stock market tech bubble of the late 90s and the real estate bubble of the mid 00s. Low interest rates fueld both bubbles, which eventually burst after a few years.

Nowadays, we have a similar low interest rate environment and the stock market is making significant advances, not seen since the 30s. With the Dow crossing 10,200 on Monday, November 9, 2009, I expect panic buying to continue, resulting in a rapid rise. However, as with all bubbles, I expect there to be eventual bursting. In the meantime, I hope to profit from the bubble before the inevitable burst :-)

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

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

Copyright © 2009 Achievement Catalyst, LLC

Opportunity to Pay Zero Federal Income Tax in 2010

Since taking early retirement in 2007, I've have been managing our taxable income to minimize our liability for federal and state income taxes. In 2008, I thought it might be possible to have zero federal tax liability, due to the 0% long term capital gains tax for 2008 - 2010 tax years. Unfortunately, the bear market of 2008 -2009 created enough losses that I probably won't have taxable long term capital gains for several years :-(

However, in doing a year end estimate of our 2009 tax return, I realized there was a possibility of have zero tax liability in 2010, by taking advantage of three tax credits, the Child Tax Credit, Making Work Pay Credit, and Saver's Credit, which would offer as much $2800 in credits for our situation. To take advantage of the credits, we would need to do the following:

1. Keep Adjust Gross Income (AGI) at $55,500 or less. $55,500 is the highest AGI for which a couple filing jointly can qualify for a 10% Saver's credit on the first $2000 of contributions. Our maximum possible credit is $1,000, which we can achieve by making contributions to our Roth IRA accounts and keeping AGI below $33,500 for married filing joint.
   
   At this AGI, we would also qualify for the Making Work Pay ($800) and Child Tax ($1000)Credits.



2. Earn a minimum of $12,903 in wages. This will qualify us for the maximum Making Work Pay credit of $800 for a couple filing jointly. In addition, it will qualify us to contribute $11,000 to our Roth IRA account, qualifying us for up to a $1,000 Saver's Credit.



3. Achieve taxable income of $20,250 or less. According to the 2010 tax tables, the tax liability for a couple filing jointly with taxable income of $20,250 (line 43 of 2009 form 1040) and filing jointly is $2,200. We would qualify for enough tax credits to completely eliminate the tax owed.

For our 2010 situation, we will have deductions of $22,350 for personal exemptions and the standard deduction. Thus, tentatively, our AGI can be as high as $42,250 to have a federal tax liability of zero. The concept of paying zero federal income tax is appealing and to achieve that goal we will need to significantly reduce the planned Roth IRA conversions in 2010.

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

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

Copyright © 2009 Achievement Catalyst, LLC