Tuesday, December 29, 2009

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

Monday, December 28, 2009

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

Saturday, December 26, 2009

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

Friday, December 25, 2009

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

Thursday, December 24, 2009

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

Wednesday, December 23, 2009

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

    Tuesday, December 22, 2009

    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

    Monday, December 21, 2009

    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

    Sunday, December 20, 2009

    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

    Saturday, December 19, 2009

    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

    Friday, December 18, 2009

    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

    Thursday, December 17, 2009

    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

    Wednesday, December 16, 2009

    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

    Tuesday, December 15, 2009

    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

    Monday, December 14, 2009

    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

    Saturday, December 12, 2009

    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

    Friday, December 11, 2009

    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

    Thursday, December 10, 2009

    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

    Wednesday, December 09, 2009

    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

    Tuesday, December 08, 2009

    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

    Monday, December 07, 2009

    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

    Saturday, December 05, 2009

    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

    Friday, December 04, 2009

    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

    Thursday, December 03, 2009

    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

    Wednesday, December 02, 2009

    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

    Tuesday, December 01, 2009

    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