Investment Plans for the Rest of 2009

Perhaps I'm getting recession weary. I'm starting to think that the economic recovery will be slower and longer than current expectations. I believe the next couple months will be telling. Here's what I plan to do:

Wait until November before making significant investment changes. Historically, September and October have been volatile months, with September being the only month with a negative average return. I expect there will be a pull back during those months.

For now, we will continue to maintain our investments in the managed accounts and our trading accounts, and only periodically take some profits.

Use call options to hedge against a big advance. If the market advances significantly, I will participate in some of the gain. If the market declines, I will only lose the call premium.

Focus on large cap growth companies. In a slow recovering economy, I believe large cap growth stocks will gain the most since they have the wherewithal to make it through the tough economic conditions. Thus, when the economic recovery takes offs, large cap growth companies will be among the survivors to benefit.

Buy into the next correction. When the market declines, I plan to buy from my latest stock buy list and my core stock holdings. In addition, I will start building a list of large cap growth stocks to consider.

If the market should move up, we are sufficiently invested to benefit. However, if the market should correct, as I believe it will, we are prepared to put some funds back into the market.

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 © 2009 Achievement Catalyst, LLC

Starting to Chill Out

I admit that I'm a workaholic. In the later half of my career, I routinely put in 10-12 hours per day, skipped lunch and worked on weekends. In addition, most of my reading was also work related. To make matters worse, during my last couple years I experienced life with a Blackberry.

Almost 23 months after taking early retirement, I'm still a bit of a workaholic. I've been publishing daily, with only a few exceptions, since starting My Wealth Builder on August 13, 2006. However, this past week, I decided to take a break and only publish two articles. I must admit, it was an excellent vacation.

I think I'll take more breaks in the future. So don't be surprised if there are some more four to seven day gaps between publishing posts :-)

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

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

Copyright © 2009 Achievement Catalyst, LLC

Links To Carnivals From August 18 to 24, 2009

Here is the link to the Carnival in which My Wealth Builder participated from August 18 to 24, 2009:

Economy, Business, Credit and Debit at the Roundup #10

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

Recognizing Code Words

When I was working, I noticed that managers to used certain code words conveyed poor performance to other managers, but not necessarily to the employee. In our company, an example code phrase was, "doesn't speak up in meetings." To managers, that meant the employee wasn't effective enough to present and defend their point of view to others. Or it could mean the employee didn't show the needed leadership skills. To some employees, this type of feedback seemed minor. they often thought their performance was very good, with the exception of public speaking.

In many cases, new hires and minorities were the main employees that missed the meaning of the code words. In my mentoring role, I would sometimes explain the meaning of a code phrase to an employee.

Since retiring, I've had to learn a new set of code words, those spoken by mother's. Last week, I was as a soccer camp, and a mother said to me, "Your daughter is so cute. She came up to us and ask about the types of snacks we brought to share. I told her that she would need to check with her parents." I said thanks, and thought nothing else about it. My spouse immediately said, "Thanks for telling us. I'll have to talk to her about that."

I immediately recognized that I had missed the code phrase of "your daughter is so cute" followed by an action that needed parental intervention. I guess I'll need to learn the new set of code words quickly to make sure I don't miss any opportunities :-)

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

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

Copyright © 2009 Achievement Catalyst, LLC

The Story of Competing Crew Teams

My boss once used this analogy of competing crew teams to explain the challenges of working at our company.

After several unexpected losses to Company B and Company C, Company A hired a consultant to analyze the reason. After watch several competitions, the consultant returned with this report:

" Company B has an average boat and average rowers. Yet, they work together pretty well as a team and win a few races each year. Company C has an above average boat and above average rowers. They work well as a team and win over half their races each year. Your company, Company A, has the best boat and the best rowers, year after year. Unfortunately, during the race, everyone is rowing is a different direction . . ."

We both laughed, but inside we knew there was some truth. Our culture encouraged debate, decision, and then commitment. However, what often happened was debate, decision, and then further debate.

Does this situation sound familiar to others :-) ?

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

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

Copyright © 2009 Achievement Catalyst, LLC

Electronic Gadget Skills

I'm amazed at how fast children learn to use electronic gadgets. Our daughter, who is almost five, has already mastered using the DVD player. Since turning four, she could choose the right TV set up, insert and play her own DVDs, and skip the commercials. One day I got a big surprise on her skills. As we were watching, she said, "wait," pressed the pause button, and went the bathroom. Upon returning, she pressed play and proceeded to watch the rest of the DVD.

She must have learned this on her own, because neither my spouse or I use the pause feature on our DVD. Hopefully, this will translate into some exceptional computer skill in the future:-) However, I am beginning to suspect that most kids in her generation have the similar level of skills when it comes to electronics.

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

Cost of Raising a Child

According to this CNBC article , the government estimates it will cost $291, 570 to raise a child born in 2008 to age 18, which does not include the cost of college or childbirth. On average, the cost is $16,200 per year or about $44 per day. That sounds pretty high to me, especially during the child's younger years.

I suspect that the total reported amount is not the incremental cost of raising a child, but rather a combination of fixed cost allocation (e.g. housing costs) and incremental variable cost (e.g. daycare, clothing and food). For us, we'd live in the same house, whether we had children or not. So, I wouldn't assign any housing cost to our child. Also, since we're retired, we only have pre-school costs, which are much lower than full day child care costs. Thus, I would expect our child rearing costs to be much lower than the reported average in the article.

Finally, as I previously posted, our total household expenses have only been slightly higher after having our daughter because we had become more frugal and were choosing to spend less in other areas. In addition, we also qualify for a $3500 exemption and the $1000 child credit on our tax return. Thus, for us, the incremental cost of raising our daughter is about the same as our monthly expenses prior to having a child.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Links To Carnivals From August 11 to 17, 2009

Here is the link to the Carnival in which My Wealth Builder participated from August 11 to 17, 2009:

Festival of Frugality

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 investment advice. Please consult a professional advisor.

Copyright © 2009 Achievement Catalyst, LLC

I Always Use a Lock

The unluckiest woman in the gym reminded me of an incident I had when I was a freshman in high school. Members of the football team had a separate locker room and we routinely left my locker open while dressing and showering. Upon returning from showering one day, the new gym shirt I had just bought was missing. At that point, I realized I had been naïve to believe that my all my teammates could be trusted. I always had my suspicions of a senior, who wore a gym shirt much too big for him. However, I knew I would never be able to prove it.

From then on, I locked everything which could be, even if I was even away for a short time. I lock my house, even when just working in the yard. I lock my car, even when making a short stop in the convenience store. And I always lock my locker in the gym, even for the few minutes needed for taking a shower.

I'm probably overly cautious. However, I'd rather be safe, than regret not locking something after it's gone.

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

Avoid Risking Catastrophic Downsides for Low Upsides

Although my career was in R&D, I worked in enough plants to be an honorary manufacturing worker. As a result, 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. Unfortunately, in real life, people regularly take small risks that occasionally result is catastrophes. Here are some risks I that I like to avoid:

Reaching into live equipment. In our plants, people are not allowed to reach into moving equipment or work on equipment can be switched on accidentally. However, in the real world, people try to dislodge toast without unplugging the appliance, put utensils or a hand in a garbage disposal, or working on a lawnmower engine without disconnecting the spark plug.

In 99.99% of the cases, nothing happens. However, if something should happen, the injury could be big. Personally, I don't work on any equipment until it is unable to be activated, either accidentally or on purpose.

Not using a seatbelt. I've always buckled my seatbelt since a high school friend was killed in a car accident. It's such a habit that I even buckle up to move the car in our driveway.

Most of the time, the drive is uneventful and I don't need a seatbelt. However, a seatbelt has saved my life or prevented serious injury three times in my life. In two of the cases, the accident was caused by others.

Leaving a child in a parked car. Every summer there are stories of people who leave their children in a parked car for an extended period, resulting in the death of the child. In some cases, the parent just forgot the child was in the car and went to work.

Our solution is to never ever leave our daughter in the car, even when we are only away for a short moment. That way, we are always consciously aware of our daughter's location. If leaving her in the car became the norm, a distraction could keep us away for awhile, leading to a potentially catastrophic outcome.

Risking large losses for small gains. For investing, a great example is selling short term way out-of-the-money puts on indices. The person writing the put makes a small premium, with relatively low risk of loss. This works well in a rising or flat market. However, when the market falls steeply as it did in October, 1987 and October, 2008, some investors incurred significant losses that wiped out their gains plus much more.

To me, risk is not bad. However, taking potentially big risks which have low upside gains are not worth it.

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

Frustrations with Buying a New Toaster Oven

I'm a technology laggard. Often, I prefer my appliances to be exactly the same as the one being replaced, especially if I was satisfied with the performance. Recently, our toaster oven switch broke after 15 years. Since I knew it would be difficult and expensive to repair, we decided to buy a new toaster oven. I really just wanted the same toaster oven, perhaps with the additional capability of mounting under a cabinet to save space on the counter top.

To my surprise, we were unable to find the toaster oven we wanted. Here's how toaster ovens have changed in the past 15 years:

Feature inflation. Many toaster ovens are now convection ovens that can handle large items such as a 12" pizza. They also have automatic shutoff and some have digital displays. It seems the top end toaster ovens could replace a kitchen oven for all but the largest items.

Size increase. Most toaster ovens were 50% to 75% larger than the one we were replacing, mostly in depth to handle large items. Thus, we would need to give up more counter space.

More effort for just toast. Making toast on ours was simple. Set the darkness and push a switch. Most of the new toaster ovens required the turning of a timer each time to make toast. To me, this approach did not seem efficient or reliable for making toast.

We finally did find a toaster oven that replicated our old one. However, it was a brand I did not recognize and didn't seem well made. So, we decided to upgrade to a larger convection toaster oven with digital functions. However, we did get one with a one button toaster mechanism.

We've had the toaster oven for a month now and so far we've just used it for toast. It is a bit over designed for that purpose and it takes up too much space. The good news is that the new toaster oven was only 30% more than our previous one, which was a pretty good price. For now, we'll keep it and test how it works on cooking other items in the next month.

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

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

Copyright © 2009 Achievement Catalyst, LLC

The Value of Experience - A Mom Example

"If kids died from eating dirt, there would be no people." ~ me

In my previous job, I learned I could easily tell a first time mom from an experienced mom by how concerned they were about dirt. One great example of the difference is how the mothers treat a pacifer that's just fallen from their baby's mouth onto the floor. Here's a summary of how I see the mother's reacting to the situation:

First time mom. She will pick up the pacifier, take it to a sink, wash it with soap and water and dry it before returning it to the baby.

It is natural for the first time mom to think cleaning the pacifier reduces risk for the baby. After all, we know germs can cause diseases in adults and therefore, we want to avoid having a baby come in contact with things that aren't clean. In fact, there is even a desire to be anti-bacterial.

Experienced mom. She will pick up the pacifier, shake off the large particles, and wipe it on her shirt before putting it back in the baby's mouth.

The experienced mom knows there is very little change in risk between a clean pacifier and one that has fallen on the ground. It's not uncommon for babies to put non-food items in their mouth, when moms are not watching. The reality is that babies are coming into contact with a lot of items from the ground. If dirt was dangerous, there wouldn't be many people alive, because they wouldn't have made it passed being a toddler.

Of course, I would never tell a mother not to wash a pacifier that has fallen on the floor. However, first time moms become experienced moms very fast and understand that dirt on a pacifier is one of the lower risks to a baby.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Retirement - Making the best of this life stage

Since we retired in our forties, we will have quite a bit of time in this life stage. Based on the current life expectancy tables, I'm planning on about thirty to forty more good years. Up until now, I've been focused on doing well in education and work. For this next phase, my focus will shift to the following areas:

Make a difference. I think back to all the individuals that made a difference in my life, e.g. parents, siblings, teachers, coaches and friends. These people help me develop, mature and be successful. I hope to have such an impact on others, especially our daughter.

For now, I want to focus on individuals versus a broader goal of society and world :-)

Nurture interests. Since retiring, I've been rediscovering my early interests, which had fallen aside during my work years. I will spend more time on these interests and, hopefully, be able to share with my spouse and daughter.

Keep connections. For me, many of my best friendships were developed before I was 30. I have been consciously re-connecting with old friends, with whom I've lost touch over the past 40 years. This goal may even lead me to join social networking sites such as Facebook.

Explore new areas. Without the demands of work, I will have time and opportunities to explore areas that are new to me. I look forward to the excitement of learning new things.

By focusing effort on these four elements, I expect to have a interesting and productive life stage in retirement.

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

Our Daughter's Major Food Groups

I grew up with four basic food groups: dairy, meats, grain, and fruits and vegetables. The food groups have now evolved to a food pyramid with grains at the foundation level, vegetable and fruits at the next level, meat and dairy at the third level, and fats, oils and sweets at the top. As parents, we try to encourage healthy eating using these food groups. However, our four year old daughter has her own idea of the categories of food groups. Without our guidance, she would easily gravitate towards the food groups listed below:

Cheese - I think she could live on cheese if needed. While cheese is part of the dairy group, too much of a good thing can sometimes be bad.

Chips - She hasn't met a chip she didn't like. I would also include crackers in this category. To help in this area, we've also cut down on our consumption of chips.

Sweets - Candy, especially chocolate, is one of her favorites. I would also include ice cream and cake in this category. Luckily, she is quite good about letting us ration the candy she receives at Halloween, Christmas and Easter.

Juice - Sweet, liquid and easy to consume in the car. She would probably drink juice all day, if that were an option.

Unfortunately, nothing green makes it to her list. However, being conscientious parents, we do ensure she gets at least a couple servings of vegetables, fruit, and meat everyday. We've even modified our diets to be more healthy, and therefore, set a good example. Of course, we are probably also seeing benefits from eating more healthy :-)

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

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

Copyright © 2008 Achievement Catalyst, LLC

Happy Blogiversary - Three Years Old

Today , August 13, 2009 is the three year blogiversary of My Wealth Builder. Here are some fun facts related to My Wealth Builder from August 13, 2006 to August 12, 2009.

Reader Statistics

Visits: 185,394
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Most Viewed Articles

2008 Tax Tables

Achieving Financial Freedom - I've Retired In My Forties

How Much Is Needed To Be Wealthy - The NUMBER

Net Unrealized Appreciation

Retirement Calculator Evaluation - Vanguard


My Personal Favorites

Is There Anything Really New In Personal Finance?

The Only Saving Strategy You'll Ever Need

More than 40% Pay Zero Income Tax

Why I Pay Cash for a Car

Geographical Reach

Top countries:
United States
Canada
United Kingdom
India

Top cities:
New York City
Los Angeles
Chicago
Houston

Top non U.S. cities:
London
Toronto
Vancouver
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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 (67), Fidel Castro (83), and Dan Fogelberg (1951-2007).

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

Copyright © 2009 Achievement Catalyst, LLC

Average Salaries by College Attended

When I was graduating from high school, it was assumed that graduates from elite colleges would make more than graduates from other colleges. Based on a recent study, it appears the assumption is still a relatively good one. Do Elite Colleges Produce the Best-Paid Graduates? by Catherine Rampell of The New York Times shows that the Ivy League and elite private colleges on average result in higher pay than non-elite or state colleges. Here is the list of all colleges in the report.

My conclusion from the article is that the choice of college does affect one's salary, when averages are considered. Thus, people attending Dartmouth College will, on average, make more than a college below it on the list. However, it won't determine if a specific individual will make more or less than another. Although I haven't seen the data, I would expect that there are top individuals from the mid-list colleges are making more the average of a Dartmouth College graduate.

Of course, one shouldn't choose a college only on future salary potential. However, the information may help answer the question of whether the additional cost for attending an elite college is potentially worth it.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Links To Carnivals From August 4 - 10, 2009

Here are the links to the Carnivals in which My Wealth Builder participated from August 4 to 10, 2009:

Carnival of Pecuniary Delights #19

Carnival of Financial Planning #101

Carnival of Twenty-Something Finances

Carnival of Personal Finance #211

Festival of Stocks #153

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 investment advice. Please consult a professional advisor.

Copyright © 2009 Achievement Catalyst, LLC

2009 Tax Tables

With 2009 more than half over, here's some information to get ready for 2009 tax returns. Since the IRS publishes the tax rates in the previous fall, the 2009 tax brackets, as well as amounts for standard deductions, personal exemptions and credits, are already available. The following tables can help you develop tax strategies and estimate your tax bill for 2009.

If interested in additional details, you can get more information from the IRS website.

2009 tax rates and brackets

These tables can help you estimate your tax bill
For single taxpayers
If taxable income is over --	But not over--	The tax is:
$0	$8,350	10% of the amount over $0
$8,350	$33,950	$835 plus 15% of the amount over $8,350
$33,950	$82,250	$4,675 plus 25% of the amount over $33,950
$82,250	$171,550	$16,750 plus 28% of the amount over $82,250
$171,550	$372,950	$41,754 plus 33% of the amount over $171,550
$372,950	no limit	$108,216 plus 35% of the amount over $372,950
For married couples filing jointly*
If taxable income is over--	But not over--	The tax is:
$0	$16,700	10% of the amount over $0
$16,700	$67,900	$1670 plus 15% of the amount over $16,700
$67,900	$137,050	$9350 plus 25% of the amount over $67,900
$137,050	$208,850	$26,638 plus 28% of the amount over $137,050
$208,850	$372,950	$46,742 plus 33% of the amount over $208,850
$372,950	no limit	$100,895 plus 35% of the amount over $372,950
* Or qualifying widow(er )
For married couples filing separately
If taxable income is over--	But not over--	The tax is:
$0	$8,350	10% of the amount over $0
$8,350	$33,950	$835 plus 15% of the amount over $8,350
$33,950	$68,525	$4,675 plus 25% of the amount over $33,950
$68,525	$104,425	$13,319 plus 28% of the amount over $68,525
$104,125	$186,475	$23,371 plus 33% of the amount over $104,125
$186,475	no limit	$50,447 plus 35% of the amount over $186,475
For heads of households
If taxable income is over	But not over	The tax is:
$0	$11,950	10% of the amount over $0
$11,950	$45,500	$1,195 plus 15% of the amount over $11,950
$45,500	$117,450	$6,228 plus 25% of the amount over $45,500
$117,450	$190,200	$24,215 plus 28% of the amount over $117,450
$190,200	$372,950	$44,585 plus 33% of the amount over $190,200
$372,950	no limit	$104,893 plus 35% of the amount over $372,950

The best time to plan and prepare for taxes is before the tax year is completed, especially if one has self employment or retirement income. The tax tables are among the elements that can help one get started.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Using Call Options

In Preparing to put Funds Back into Stocks, one strategy I am using is to buy call options on certain stocks that I think will advance a lot. Thus, for the small cost of the option price, I can have significant upside gains, while limiting the downside to only the option price.

For reference, buying a call gives the owner the right, but not the obligation, to buy a stock at a certain price before the expiration date. Selling (writing) a call obligates the writer of the call to sell a stock at a certain price up to the expiration date. For a more detailed definition see this Wikipedia article on call options.

For example, many market strategists believe that technology companies, e.g. Cisco (CSCO), Microsoft (MSFT) and Intel (INTC), will lead the economy out of this recession. Therefore, own these stocks would be profitable as the economy recovers. However, I think there is a reasonable opportunity for another dip in the economy before a longer term recovery. In such an instance, investment in these stocks might result in large short term losses.

To minimize short term losses, and participate in a short term rally, I am choosing to buy call options on selected stocks. For example, I recently purchased Intel options that expire on Jan 2010 (strike 22.50) and Jan 2011 (strike 30) for a price of $43 and $31, respectively, per contract. If Intel rises above $22.50 before January 15, 2010 or $30 before January 21, 2011, I will make at least $100 per contract for every dollar above the strike price. However, if Intel closes below the strike price after the expiration date, then I will only lose the $43 or $31 per contract.

Since Intel is current around $18.50, the stock can rise up to $4 and I would still lose my option payment in January, 2010. However, if Intel falls to $4 per share, I will only lose my option payment of $43 per contract (or $.043 per share). Thus, for me a call option is low risk way for us to participate in a short term advance in the market, without large potential loss if the market goes down.

Disclosure: At time of publication, we own Intel calls in our trading account, and shares of Intel, Cisco and Microsoft in our managed accounts.

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

My 2003 Truck is a Clunker

I was surprised last week to find out my truck qualifies for the cash for clunkers program. No, I'm not considering buying a new vehicle. I bought the truck new in 2003 and it now has only 51,000 miles on it. I plan to keep it at least another 4 years, before I even start looking at possible replacement options. With luck, I will be able to drive this truck for another 10 years. So it doesn't make sense for me to take advantage of the Cash for Clunkers program, especially since I would need to pay an additional $12,000 for a new car.

Even if I were looking for a new car, the truck averages about $5,000 in a private sale transaction, which is higher than the $4,500 voucher I might receive. However, now I know I'm frugal since the government has made it official that I drive a clunker :-)

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

Why this Recession will be Different

Since World War II, the U.S. has recovered relatively quickly from recessions. However, this time, it appears this recession will be much worse because consumers are the main cause of the economic decline.

In From Bubble to Depression in The Wall Street Journal authors Steven Gjerstand and Vernon L. Smith hypothesize the difference is the cause. They conclude that this recession, like the Great Depression, was due a financial crisis that originated from consumer debt, which quickly transmitted in to the financial system. Recoveries from such an economic downturn tend to be long and drawn out.

The Great Recession: A Downturn Sized Up by Justin Lahart of The Walls Street Journal offers that the cause of the recession, a collapse of housing and credit, has made Fed interest cuts less effective and eliminated more consumer wealth than previous recession. Thus, consumers are saving much more than previously to make up for the loss of wealth, which will likely slow down this economic recovery.

If the conclusions from these articles are correct, then the recovery from this recession will likely be long and drawn out, and making it harder to achieve our personal finance goals.

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

Was Early Retirement a Good (or Bad) Idea?

"Retirement is underrated." ~ comment by an early retiree

I've been in early retirement since October, 2007. For a while, reactions ranged from disbelief to shock. Most people couldn't believe that I was actually going to retire. Typical questions were about what I was doing next, for work that is. However, after 22 months, most people have figured out that I am in it for the long run. Now the questions are about whether I miss my company or working:-)

Here's my assessment of the great, good and bad aspects of early retirement:

	Great, Good, or Bad?
Category	Rating	Reason
Lifestyle	Great	Less stress and more fun. I have 50 to 70 additional hours each week, if I include commuting. That's 2500 to 3500 hours per year, or 104 to 146 day equivalents, to spend on the activities of my choosing.
Health	Great	Just before retiring, I was under exercising and drinking eight cups of caffeinated coffee each day. As a result, I was overweight, feet hurt, and my heart had an irregular beat. Since retiring in October, 2007, my weight is down 8% (vs. target of 10%), my feet no longer hurt, and my heartbeat is more normal. In addition, I'm exercising 6-7 times a week, eating health, sleeping 7-8 hours a night, and drink 3-4 cups of coffee a week.
Family Time	Great	I no longer have to juggle work with family events such as vacations, extended family visits, and our daughter's activities. We take regular vacations, visit my in-laws a couple times a month, and I attend the majority of my daughter's presentations/recitals/games.
Income	Bad	Our annual income was down over 80% in 2008. Not surprisingly, the stock market collapse was the main cause :-( Fortunately, we had sufficient funds in cash, bonds and CDs to wait 3-4 years for the stock market to recover.

Except for the income, retirement has been great. Of course, early retirement isn't about making more money. Also, since we planned on living with 35% lower income during retirement, we were prepare a little for the actual decline.

Net, my overall rating is that early retirement was a pretty good idea. We've had to make some adjustments, but I'm glad we were able to do it in 2007. I would have been scared to do it by the end of 2008.

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

Successfully Teaching our Daughter to Swim

We've had our daughter in swim lessons since she was 18 months old in 2006. Her first lessons were getting in the pool with mom and, most recently, she has been taking group and individual lessons. She had learned some basic skills, such as holding her breath, floating, and kicking her legs. However, when we tried to get her to swim from one parent to another, she didn't want to do it. It was frustrating since I was pretty sure she had the ability to swim short distances.

To help the situation, I thought about when I was learning to swim. To the best of my recollection, it only took one summer for me to become a swimmer. The only difference was that I was a bit older, perhaps five to seven years old. As a result, I was able to stand up in the shallow section of the pool, which our daughter is still not tall enough to do. Thus, she worried about taking a mouth full of water if she failed to swim. Perhaps, I thought, she would learn to swim in the section of the pool where she could stand on her own.

I tested my hypothesis a couple weeks ago by taking her to a section of the pool that was only 2-1/2 feet deep. Because she could stand on the bottom, she was swimming the 7 foot distancewithin a few minutes. After a while, I took her to the 3-1/2 section and she continued to swim reaching distances of about 10 to 15 feet. I then taught her how to jump off the bottom to get air and she practice for a few minutes. Within a couple days, she was swimming across the 3-1/2 pool, which was about 20 feet long.

I was pleased to have figured out that fear of the deeper water was the factor that kept our daughter from learning to swim. Although she still has a lot to learn, I feel we've made great progress, at a much lower effort and cost :-), with the insight I had about water depth.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Recession Deals Make It Harder to be Frugal

As the recession continues, restaurants, retailers, and the government is making it harder to be frugal. The cost of many items are coming down, sometimes to a level I find unbelievable. I've been tempted many times, and occasionally give in. Here are some examples of great prices that I've been seeing:

Meal and Happy Hour Deals. I recently wrote about Happy Hour Deals, where beer was cheaper than retail, and Restaurant Meal Deals , with $5 and $7 menu entrees. The discounts continue and are expanding.

Pretty soon it will be cheaper to eat out than to cook at home :-)

Electronics. The main example is wide screen TVs. I saw a brand name 32" LCD HDTV for $437 at Best Buy. Costco had a brand name LCD HDTV for about $450. When I looked at wide screen TVs 5 years ago, the cost was about $2500 for a similar sized model. The same price reductions are happening for digital cameras. I haven't seen any super sales in computers yet, but maybe one is coming soon.

A fully loaded laptop for under $300 might entice me to spend :-)

Cash for Clunkers. It's no surprise that paying someone $4,500 for a $1,000 car might encourage them to buy a new car. A friend of mine in turning in a perfectly good 1997 vehicle for a $4,500 credit towards a new car.

My spouse's car does not qualify for the program. Although my truck qualifies, it is still worth more than $4,500 in a private sale and therefore, I would be losing money on the deal. Besides, we both planned to drive our vehicles at least 4 more years.

Clothing. Although I'm cutting way back on clothing purchases, I still can't help noticing the deep discount prices. Golf shirts on sale are going for under $10, less than what I paid at sales 20 years ago. My spouse just found some dress buys on the 65% off rack, and then received another 20% savings for opening a charge card.

OK, I gave in and bought a specialized running top and shorts, but only for $7 each

While the offers are enticing, I have mainly resisted by sticking with the principle of buying only what we need. So still no wide screen TV or new car for us. However, with the cost of eating out continuing to decline, we may take advantage of dining deals more often.

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

Bitten by a Non-Poisonous Snake

Whenever something unexpected happens to me, I get to learn something new. Last week, while doing some volunteer work with animals, I was bitten by a non-poisonous water snake. It was a minor bite, barely breaking the skin, but still worth medical attention.

Here's what I did:

Cleaned the wound. I used soap and water to wash the bite site. Then, I used alcohol wipes to clean the area before putting on a band-aid.

Reported the bite to a supervisor. I learned that I needed to fill out a animal bite report for the county. It was also recommended that I make sure my tetanus booster was up to date.

Called insurance help line. My insurance has a nurse help line to assist in medical decisions. After reviewing my case, the nurse recommended that I determine if my tetanus booster was up to date or to get a booster shot as soon as possible. Since it was after 5PM, I couldn't check with my primary care physician. I thought I had received a booster prior to a trip to China, but was not able to confirm.

Urgent care. It was 7:30PM. I called two nearby urgent care facilities and discovered one closed at 8PM and one closed at 10PM. I decided to go to the one that closed at 8PM. There was no wait. I received a shot and was back home by 8:30PM.

Supplemental insurance. While my primary insurance covered the visit, the volunteer organization had supplemental insurance to cover my co-pay. I will send them the information once I receive the statement from my insurance company.

Overall, getting treated went fairly smoothly. The organization for which I volunteered was trained to handle animal bites, my insurance company was helpful, and the medical facilities were very good. Based on brief discussions, I expect 100% of treatment costs to be covered also.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Links To Carnivals From July 28 to August 3, 2009

Here are the links to the Carnivals in which My Wealth Builder participated from July 28 to August 3, 2009:

Festival of Frugality #188

Money Hacks Carnival #75

Carnival of Financial Planning #100

Carnival of Family Life

Carnival of Twenty-Something Finances

Festival of Stocks #152

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 investment advice. Please consult a professional advisor.

Copyright © 2009 Achievement Catalyst, LLC

Reviewing Strategies

The current bear market and economic crisis have been a humbling experience. The events have led me to review and rethink my financial strategies. Here are the questions I have been asking myself:

Is what we're doing working? Specifically, are our actions helping to make progress against our financial goals?

Is what we did the reason it worked? Did our specific actions lead to a result or would it have happened anyway?

Should we do something different? Is it time to change or should we continue with the same strategy?

These are tough questions, with no easy answers. I will be thinking about these questions over the next month and will revise our financial strategies based on my conclusions.

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

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

Copyright © 2009 Achievement Catalyst, LLC

Wealth Builder Ratios - Q2 2009 Update

Here is our Q2 2009 Wealth Builder Ratio update. 2009 continues to be brutal for our financial plans and goals. Through June 30, 2009, the Dow was off 3.8%. The Nasdaq rose 16.4% and the S&P 500 was up 1.8%. Due to the leverage of company stock options and paying off our mortgage, our retirement savings are down 22.6% this year.

For more details on the relevance of these ratios, please see this How Much Is Needed To Be Wealthy - The NUMBER.

Ratio and Target	Q1 2009	Q2 2009	Comments
Investment Income to Salary Target=0.8 2007=3.41 2008=-5.47	-3.04	-3.78	The stock market performance for the second quarter of 2009 improved our returns by a ratio of 0.70, but not enough to eliminate the loss of -3.04 of the first quarter. However, this gain was offset by paying off our mortgage which was 1.44 times my pre-retirement salary. This year's declines and mortgage payoff have caused our portfolio to lose 3.78 times my pre-retirement salary. Most of the loss occurred in my company stock which fell significantly during the first quarter. While we did sell some equities to pay off the mortgage, we do not yet need to sell any investments to cover retirement expenses. At this point, we are staying invested in the market for our tax advantage accounts, and taking the opportunity to increase our cash position during rallies.
Savings to Salary Target>20 2007=23 2008=16.7	13.6	12.9	My company stock advanced 7% during the second quarter which helped reduce the loss due to paying off our mortgage. Our total savings are still down 22.6% for the first half of 2009.
Debt to Salary Target=0 2007=1.51 2008=1.46	1.45	0	We said bye-bye to our mortgage on May 20, 2009. Eliminating a mortgage payment has reduced our expenses by 24%.

My financial goals for 2009 are:

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

2. Maintain a Savings to Salary ratio of 20. (off track)

3. Reduce my Debt to Salary Ratio by 0.1 to 1.36. (met final goal of 0)

(For reference, Salary refers to gross salary just prior to early retirement in October, 2007.)

Both #1 and #2 were directly correlated with how well our stock, bond, and CD investments returns. Factoring out the mortgage pay off, our stock, bond, and CD investments have lost -3.9%. Including stock options, our investments fell -14.0%. This compares with an S&P gain of -1.8% and a Dow return of -3.8% through June 30, 2009. When the market rebounded in May, 2009, we decided to pay off our mortgage, which increased are savings losses by about 10%, only 8% if stock options are included.

It has been very challenging retiring at the beginning of a bear market. Our short term expenses (next 3-5 years) are invested in CDs, bonds and money markets. So we can wait for the stock market to resume an upward trend, hopefully in the next 1 to 2 years. At this point, I am very concerned about reducing our withdrawal rate, and am looking at possibilities of generating regular streams of income through part time employment, and if needed, full time employment.

Hopefully, this will be the rebound year, as I propose in my 2009 economic predictions, and allow our retirement investments to recover. Otherwise, it's back to work I go :-)

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

Expecting Another Bubble

As the economy recovers from this recession, I believe that we will experience another asset bubble, like the recent ones in tech stocks (late 90s) and housing (mid 00s). In both bubbles, low interest rates were the main driver. Low interest rates were used to increase liquidity prior to Y2K and low interest rates were used to mitigate the 2000-2002 recession. Today, the Fed has made interest rates even lower than the previous two times. As Yogi Berra once said, "It's déjà vu all over again."

Of course, the three important questions to answer are: 1) In what asset?; 2) When will it start?; and 3) How long will it last? My answer is I don't know. If I were to guess, my answers today would be:

1. Emerging markets and commodities.
2. Within the next year.
3. A couple of years.

Why will the bubble happen? Everyone, including governments, gains during a bubble and therefore, there is little incentive to prevent one. It isn't until after the bubble bursts that the economy suffers and people realize there was bubble.

Hopefully, by expecting another asset bubble, I think I can protect our savings better than was done during the recent housing and financial crash.

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

Letting Annual Memberships Expire

In 2008, we had annual membership overload, at the local museum, zoo, aquarium, water park and nature center. Currently, we have the nature center and water park memberships. After this summer, we will no longer purchase a water park membership.

Even if we plan to rejoin, we will let a membership expire, since there is usually no incentive to renew. However, the water park is offering a two for one membership for 2010, with no additional charge for the parking pass. Since there is no family membership, this special enables our family to have a membership at 1/2 the regular pass. This is a pretty good deal, since we can get an annual membership for a little more than the cost of two visits.

I've decided to let this deal pass for the following reasons:

Novelty is over. This will be our second year of having the membership. Each year will have attended 10 to 20 times and have experienced most of the attractions in which we are interested. We'll probably attend much fewer time in the future.

More flexibility. I feel some obligation to use a membership when we have one. Thus, I may sometimes choose not to pay for similar activities to those in which we have a membership. Not having a membership lets us make choices primarily on the merits of the activity.

Financial concern. In my opinion, the water park has had significantly lower attendance this year. In addition, there seem to more elements needing repair this year. I have a small concern that the park may not survive the recession and go out of business, causing advance season pass members to lose their membership payment.

Thus, in 2010, we will probably only have a nature center membership. The reason we will keep it is that the cost of summer camp is equal to the cost of a membership plus the discounted member's cost for summer camp. Since we like to have her attend this nature camp, it is cost equivalent to have the membership. Once we stop sending her to camp, we will let the nature center membership expire also.

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