March Is Consolidation Month

After writing the post Account Proliferation or Consolidation?, I've decided to make March the month to re-consolidate the companies who handle our financial business. Our goal will be one bank , two brokerages and two credit cards.

Banks. We currently have two active accounts at different banks, our joint account and one I opened for direct deposit for my part time job. Unfortunately, since writingAccount Proliferation or Consolidation?, I realized I had forgotten about two dormant accounts, an Internet account and a left over account in Japan from my assignment there. My current plan is to close out all accounts except our joint checking and savings account at the place I have been banking for over 20 years.

Credit Cards. We currently have three credit cards, one in my spouse's name and two in my name, Discover and American Express. Our goal is to have one account in each persons name for the purpose of personal credit rating scores. Thus, one of mine will have to go.

Brokerages. We currently work with three brokerages, of which two are discount brokers, Charles Schwab and TD Ameritrade. The other is the brokerage of my financial advisor. For risk management reasons, we like to split our money between two brokerages, in case one has significant financial issues. At this point, we will likely eliminate one of the discount brokers. In addition, we will also get to a single type of account (e.g. IRA or Roth IRA) per person.

In the remaining three Sundays of March, 2008, I will write about our analysis and final decision in each area. Our guiding principle will be "Simple is good." Hopefully, this consolidation will significantly reduce our financial record keeping.

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

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

Copyright © 2008 Achievement Catalyst, LLC

2008 Could Be A Very Bad Year For My Long Investments

"Things are going to get a lot worse before they get worse." Lily Tomlin

First of all, let me say this is my opinion, based on my experience investing over the past 20 years. I could be very wrong :-) I hope I am wrong, since I own a house, am invested in the stock market, and recently retired early. However, here's why I think I need to plan for a bad year, economically speaking.

Everything looks pretty bleak. It's tough to think of any recent good news. Job growth -none. Oil and gasoline prices - none. GDP - none. Stock market - none. Real estate - none. Municipal bonds - none. Mortgage defaults - none. Bush administration - maybe, yes. Edward Lazear, who is Bush's top economic advisor, recently said, "I'm still not saying that there's a recession," but says economic growth could be negative in the current quarter. Global markets - some, yes, but many are weakening.

More bad news keeps coming. First, there were sub prime mortgages. Next came CDOs, mortgage company failures, financial institution write downs, rogue traders, and bond insurer troubles. Now people who can afford to pay their mortgages are choosing to walk away. Unfortunately, I believe the next few months will bring more bad news.

In December, 2007, I wrote about Protecting Our Savings Against A Recession. We have implemented the first two approaches and part of the third approach. This month I will be putting in place the rest of the third approach by shorting select stocks.

It has been a while since I've shorted stocks. The last time was in 2004, with mixed results. In today's market, many stocks have already declined significantly. The challenge will be to find stocks which still may decline in the upcoming months. However, if I am correct that 2008 will be a negative year for the stock market, I expect I will find a number of stocks appropriate for shorting.

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

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

Copyright © 2008 Achievement Catalyst, LLC

Why We Will Spend More During Retirement

Our initial retirement spending target was slightly higher than our pre-retirement spending. In a February, 2007 retirement spending analysis, we thought a slightly higher number was a good estimate since we didn't expect much change in our spending habits, except for higher health insurance premiums. After five months of retired life, I now expect that we will spend more in retirement. Here are the reasons:

Entertainment. Of course, there is the usual reason of more travel. However, there are also local attractions such as memberships at museums, the arts, amusement parks (for our daughter:-), and regional parks. In addition, we are taking the opportunity to eat out for entertainment more often.

Pay to have things done. This ranges from for household maintenance to eating out. While working, we had already begun to outsource our lawn cutting, shirt pressing and car maintenance. In retirement, we continue to hire services to cut our lawn and maintain our car. As we get older, we will initially pay to have more of the yard and exterior house work (e.g. gutter cleaning) done by others. At this point, we still do the majority of minor interior house maintenance (e.g. faucet leaks or caulking) for which I expect we will pay service companies to do in the future.

Personal growth and development. I expect that we will spend more on enrichment learning through courses, lessons, or experiences. Some topics may include: cooking, golf, nature, health and fitness. In addition, we will be investing in growthful experiences for our three year old daughter.

Currently, most of these items are discretionary, meaning that we can reduce spending if necessary. However, over the long term, I expect these areas will become regular spending items during retirement. Otherwise, retirement wouldn't be as enjoyable:-)

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

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

Copyright © 2008 Achievement Catalyst, LLC

Account Proliferation Or Consolidation?

Having multiple bank, credit card, dividend reinvestment, mutual fund , or stock brokerage accounts does have benefits. Generally, different banks and credit cards offer better interest rates at various times. In addition, multiple dividend reinvestment or brokerage accounts can reduce the cost of investing. The upside is that multiple accounts can help improve one's financial situation if managed well. The downside is the maintenance that comes with multiple accounts, specifically the handling of paperwork which needs to be done on a monthly or yearly basis. In addition, many financial accounts require reconciliation when doing one's taxes.

Consolidation simplifies the maintenance work by reducing the number of accounts that require one's involvement. The fewer accounts one has, the fewer statements one has to handle, either monthly or for filing taxes. However, one may miss out on getting the best financial deal by not using multiple providers.

During my twenties and thirties, I enjoyed opening new accounts to get the best deals. I would have bank accounts at multiple banks to get better CD rates, even if the difference was only 0.1%. I had up to three brokerage accounts since each one had better costs or service in different investment areas. I would carry multiple credit cards since there were great new account deals. It was fun to create a few extra few dollar through this process.

However, as we've gotten older, I began to appreciate the benefits of consolidating accounts, even at the expense of getting the best deal. Our first consolidation was to purchase mutual funds and CDs via our brokerage accounts. Doing so gave us access to the excellent funds and rates with the convenience of only one account statement. We also consciously reduced to one credit card for each person. At one point, we had consolidated to one bank, two brokerages and two credit cards to handle all of our financial transactions. This seemed like a reasonable number minimum accounts to protect against an institution failure and a credit rating for each spouse.

For a couple of reasons, we are currently one above our desired minimum in each account area. However, it still makes sense to keep consolidating and we continue working towards the desired minimum number of accounts. It will likely take a couple years in order to minimize the fees of closing accounts.

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

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

Copyright © 2008 Achievement Catalyst, LLC

How Our Emergency Fund Helped Us Retire Early

Building and maintaining savings for emergency needs has always been part of our wealth building plans. Having a financial cushion has provided a sense of financial security, because there was a safety net upon which we could depend. Luckily, we never had an emergency need while we were earning a wage income. As a result, our savings for emergency needs helped us achieve early retirement in our forties.

Why you need $500 in the bank by Liz Pullian Weston of MSN.com shares how to get started with $500 in an emergency funds. The article concludes with some examples of what constitutes an emergency and what doesn't. "Essentially, it's an event that puts your livelihood or your family's safety at risk. The television dying, for example, is not an emergency. The furnace dying is."

Here were some of the guidelines we used for our emergency fund:

1. Limit using unexpected use to true emergencies. We only considered one or two events true emergencies. They were job loss or catastrophic medical expenses. Fortunately, neither of these ever happened to us while we were working.



2. Keep the majority of funds in cash or cash equivalents. For us, it would have been disastrous to have emergency funds invested in the stock market and then need to use them when the market is down. An emergency is bad enough. Needing to sell when the market is down makes the emergency even worse.



3. Emergency funds shouldn't replace insurance coverage or saving for routine large expenses. To me, emergency funds should be in addition to and not instead of major medical, auto, home and liability insurance. Also, I would consider large purchases (e.g. car, furniture, electronics), car repair, and major home repair (e.g. roof, furnace, or air conditioning) to be planned expenses and therefore, not a reason to use emergency funds.
   
   The Chief Family Officer writes how she created and infrequent bills savings account because they were using emergency funds to pay for "routine" large bills. Before getting married, I used to co-mingle emergency and big expense (e.g. car, real estate tax) funds and reconcile the amounts periodically. In the last couple years, we created a separate big expense fund, for items such as home repair, car purchase and insurance premiums.

We have always made regular contributions to our savings, both for emergency needs and retirement. Since we were fortunate not to have any true emergencies, our emergency fund was never used. Eventually, the unused emergency savings became part of the funds we used to enable retirement in our forties.

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

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

Copyright © 2008 Achievement Catalyst, LLC

Another Reason I Don't Like Gift Cards

I have never been a fan of gift cards. While touted to be as good as cash, I never thought they were. First, gift cards are limited to being used at one store or group of stores. Second, the products that I need to buy may not be offered by the store. Third, gift cards are high maintenance, needing to be managed and tracked on their own.

Now I have a fourth reason for not liking gift cards. Bankruptcy makes gift cards worthless describes how The Sharper Image has temporarily stopped honoring its gift cards since it filed for Chapter 11 bankruptcy last month. It has been estimated that The Sharper Image has issued as much as $25 million of gift cards. Worst yet, the gift card holders may never get their money back, since they are considered unsecured debt holders, who often get little or no money from a bankrupt company.

Right now, we have about five gift cards from three major retailers and two local restaurants, mostly due to rewards programs in which we participate. While I don't expect any of the establishments to go out of business soon, I will make an effort to "enjoy" the cards in the next few months:-)

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

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

Copyright © 2008 Achievement Catalyst, LLC

Links to Carnivals from March 3, 2008

Here are links to Carnivals form March 3, 2008, in which My Wealth Builder participated:

Carnival of Family Life

Carnival of Personal Finance #142

Festival of Stocks #78

For some excellent articles from the blogosphere, check out these great Carnivals.

In addition, this month Free Money Finance is hosting his annual March Madness Tournament for PF bloggers. The winner will receive a prize of $500 dollars donated to the charity of his choice. My Wealth Builder's submissions were included in Games 17 and 20 of this bracket .

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

Copyright © 2008 Achievement Catalyst, LLC

3/3/08 Stock Purchase Update - Tempted To Bail Out In This Ugly Market

With the market decline of early 2008, the stock purchase updates have not been as fun to write. However, I am going to remain disciplined and do a weekly update until I sell the positions from the portfolios. Currently, the portfolio is based on a 10/15/07 updated buy list of Potash (POT), Southern Copper (PCU), CNH Global (CNH) and BHP Billiton (BHP) and a January, 2008 stock pick update of Apple (AAPL), Research in Motion (RIMM), Intuitive Surgical (ISRG), Priceline (PCLN), Core Labs (CLB), and Google (GOOG). The total portfolio has a gain of 4.4% due primarily to the strength of Potash. Unfortunately, GOOG and PCLN declined significantly this week. I made an additional purchase of GOOG while it was declining. I will continue to try to sell CNH. Here's the current status of the stocks in the portfolio:

	My Wealth Builder 10/15/07 Buy List
Stock [purchase date]	Shares	Purchase Price	Current Price 2/29/08
Potash (POT) [6/7/07]	50	$71.59	$158.90
Southern Copper* (PCU) [11/13/07]	40	$108.24	sold 2/19/08 @ 109.05
CNH Global NV** (CNH) [11/13/07]	50	$55.22	$51.50
BHP Billiton*** (BHP) [11/27/07]	50	$71.54	sold 2/19/08 @ $73.98

*On 1/18/2008, the system gave a sell signal for PCU.
**On 2/1/2008, the system gave a sell signal for CNH.
***On 2/15/2008, the system gave a sell signal for BHP.
I will try to sell CNH during an upcoming market rally, hopefully above the purchase price.

	My Wealth Builder January, 2008 Buy List
Stock [purchase date	Shares	Purchase Price	Current Price 2/29/08
Apple (AAPL) [1/17/08]	25	$160.93	$125.02
Research in Motion (RIMM) [1/17/08]	25	$88.71	sold 2/22/08 @ 103.23
Intuitive Surgical (ISRG) [1/18/08]	20	$261.81	$281.92
Priceline (PCLN) [1/18/08]	25	$92.33	$114.02
Core Labs* (CLB) [1/25/08]	25	$116.25	sold 2/19/08 @ $121.67
Google (GOOG) [1/25/08]	20	$582.66	$471.18
Google (GOOG) [2/1/08]	10	$521.27	$471.18
Google (GOOG) [2/26/08]	10	$457.44	$471.18

*On 2/8/2008, the system gave a sell signal for CLB.

The market activity is testing the short term bottom. As of the close on 2/29/08, the Dow, Nasdaq and S&P 500 indices were respectively down 7.11%, 14.36%, and 9.05% year to date, near or just past previous lows of 2008.

I continue to believe that the probability of a recession in 2008 is relatively high. The multitude of negative factors will eventually outweigh any actions by the government and financial institutions. Originally, the Fed interest rate cuts and other actions led me to expect that the bull market would last through summer, 2008. However, the economic data in early 2008 may cause the bull market to end earlier. For either case, I expect the market to continue to be choppy in 2008. At this time, I plan to sell CNH and continue to hold the balance of the portfolio. If the market goes down this week, I may also sell ISRG and PCLN. I do not plan to add any more to the amounts that I have already invested in the above tables.

Full disclosure: I own all the stocks mentioned in this post that are not indicated as sold.

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

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

Copyright © 2008 Achievement Catalyst, LLC

Rising Above The Noise

As many others are probably finding, our daily mail load has doubled with information from candidates running for public office. Sometimes, we get duplicates of the same mailing on the same day while some candidates use different literature to be mailed on different days. Most of this information gets thrown out seconds after being brought in to the house.

However, I did have interesting experiences with a couple of campaigns, where a volunteer or candidate knocked on our door to deliver the campaign information. The experience caused me to pause, listen to the person and read the literature. I also was impressed that the volunteer or candidate took the time to make door to door visits. In these cases, the visit caused me to give more thought to how to cast my vote.

This year's Presidential campaigns seem to have the quality of "rising above the noise," providing a great discussion for the upcoming election. I am much more engaged than I have been in any previous election. It seems more of America is more engaged also. I expect this broader engagement will create more accountability, no matter who is elected. That, in my opinion, would be a great start to a better future.

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

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

Copyright © 2008 Achievement Catalyst, LLC

2008 New Year's Resolution Report Card

My New Year's resolutions for 2008 were: 1) Healthier lifestyle; 2) Implement tax strategies to maximize after tax income; 3) Contingency plans for near term retirement income needs; and 4) Have fun. Here is a two month check on how well I am doing:

	New Year's Resolution Activities and Status
Category	Category Activities	Activity Status	Grade
Healthier Lifestyle	Lose 10% of weight	Lost 2% in January. Gained 2% in February. No net weight change.	C
	Better diet	Up to 3 servings per day of vegetables and fruit versus target of 5.	B-
	More exercise	At 1.5 times per week versus target of 3	C
Tax Strategies	Identify five strategies to minimize taxes	Will use IRA contribution, Child tax credit, and Roth IRA conversion in 2008. Two more need.	B
Contingency income	Earn 20-40% of retirement income needs in first 3 years	Achieved 20% in 2008. Part time seasonal work was not as useful or accomodating as I had hoped. Will be testing a new business idea later this year.	B-
Have Fun	Family activities and vacations	Attending 100% of daughter's pre-school activities. Planning 2008 and 2009 vacations.	B+
	Hobbies	Playing tennis and may take up golf again. May also learn magic :-)	B-

Overall, my report card is not as good I as I would like. And I no longer have any excuses like work being a barrier:-) It was good to do a two month check. It will enable me to make some changes and get better results next time.

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

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

Copyright © 2008 Achievement Catalyst, LLC