An Ivy League Degree Means More Pay on Average

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

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

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

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

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

Copyright © 2008 Achievement Catalyst, LLC

Early Retiree Health Insurance

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

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

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

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

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

Copyright © 2008 Achievement Catalyst, LLC

How to Handle a Parent's Belongings

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

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

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

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

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

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

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

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

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

Copyright © 2008 Achievement Catalyst, LLC

A 60/40 Approach to Budgeting Money

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

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

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

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

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

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

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

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

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

Copyright © 2008 Achievement Catalyst, LLC

Our Internet Provider Reduced the Monthly Charge

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

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

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

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

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

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

Copyright © 2008 Achievement Catalyst, LLC

Links To Carnivals From August 2 - 4, 2008

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

Carnival of Finanical Planning

Carnival of Family Life

Festival of Stocks #100

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

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

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

Copyright © 2008 Achievement Catalyst, LLC

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

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

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

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

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

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

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

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

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

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

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

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

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

Copyright © 2008 Achievement Catalyst, LLC

Wealth Creation and Accumulation

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

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

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

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

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



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



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



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

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

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

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

Copyright © 2008 Achievement Catalyst, LLC

Managing Wealth is a Skill

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

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

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



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



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

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

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

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

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

Copyright © 2008 Achievement Catalyst, LLC

My Retirement Award

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

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

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

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

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

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

Copyright © 2008 Achievement Catalyst, LLC