A Million Isn't What It Used To Be

When I was a child, a million dollars was a lot of money.  Back then, someone with a million dollars would be rich.  A million dollars would earn $50,000 a year at 5% interest, which once could easily live on since the median family income of $6,900.     I don't think we knew anyone that was a millionaire, i.e. someone that had a net worth of a million dollars.

Due to inflation, a million dollars isn't worth as much today.    A million dollars earns only $10,000 at 1% interest, compared to the 2012 median family income of $50,500.  Today, housing prices are much higher than when I was a child.  For example, the house my parents owned when I was a child cost $28,000.    That same house has an estimated value of $333,000 according to Zillow.com.  So accumulating a million dollars in net worth is more achievable nowadays.   Finally, I know lots everyday people who I estimate have over a million dollars in net worth.

Perhaps, the new benchmark for being wealthy is having 10, 50 or 100 million dollars.   While I know some company executives that may have 10 million dollars in net worth, it is not likely I know anyone with 50 or 100 million dollars in net worth, which would make those values equivalent to being a millionaire when I was a child.

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

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

Copyright © 2013 Achievement Catalyst, LLC

Looking for a Near Term Buying Opportunity

Like many others, I expect the stock market to pull back soon.  There has been a terrific stock market rally for the past couple months and the upward trend will likely pause soon.  In addition, some sectors like small cap biotechs, retail and gold are already starting to decline.  

For now, I expect the decline will be short and shallow.  My challenge will be to make some purchases after the decline starts since the main fear is the market will fall significantly further.    To overcome the challenge, I will focus on buying more in stock for positions that I have partly purchased or that I have sold at the top of the trading channel. That way, I will be increasing my stake at a lower price than if I had made the purchase all or once, or buying back a good stock at a lower price than when it was sold.

In addition, I may take the opporutunity to put funds in a managed account or to create an ETF portfolio if there is a significant correction.

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

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

Copyright © 2013 Achievement Catalyst, LLC

The Wealth Builder Carnival #114

Welcome to the one hundred fourteenth edition of The Wealth Builder Carnival. The purpose of this carnival is to collect articles from the blogosphere on building, preserving and keeping enough wealth for a comfortable retirement. For reference, I have tried to keep the carnival content tightly focused on wealth building and did not include submissions that were off topic. For reading convenience, the posts are listed with a brief summary or comment by the submitter and organized into seven categories: Earning, Insuring and Protecting, Investing, Living Frugally, Retiring, Saving and Taxes.

And now on to the Carnival.

Earning

Fitz Villafuerte presents How To Price Your Service as a Freelancer posted at Ready To Be Rich, saying, "One of the most difficult tasks that freelancers face is pricing their service. Here's a few tips on how to know the value of your work."

Jules Wilson presents Why You Need to Diversify Your Income Sources posted at Faithful With A Few, saying, "Diversifying your income is the best way to protect your financial future in this economy. Learn why you should and how best to diversify your income sources!"

Insuring and Protecting

R.J. Weiss presents Personal Umbrella Insurance -- How Much Is Enough? posted at Weiss Insurance Agencies, Inc., saying, "When it comes to purchasing personal umbrella insurance, when should you start to purchase it, and how much is enough?"

Investing

Dividends4Life presents 15 Stocks Not Missing Their Opportunity To Increase Dividends posted at Dividend Growth Stocks, saying, "In everything we do, we always want to be the best or be associated with the best. You never hear fans yelling, ‘We’re number 2, we’re number 2′, while holding two fingers in the air. The same is true when selecting dividend stocks. One attribute of the very best dividend stocks is a long history of consecutive dividend increases..."

Bryan presents Best Short Term Investments posted at Gajizmo, saying, "Even multi-billion dollar corporations are always trying to maximize the returns of their short term cash and investments, so why shouldn't you? Here is a comprehensive list of all your short term investment options, from money market market accounts and Treasuries to "I-Bonds" and property tax certificates. Find where you feel comfortable parking your cash for the short-term."

Living Frugally

Cherry Liu presents How to Save Money on Your Cable Bill When Times are Tight posted at House Sitting Jobs, saying, "In a troubling economic climate that’s still struggling to rebound, more and more families are finding themselves in a position that requires them to cut corners wherever they can in an effort to save money."

Shaun Rosenberg presents 10 Reasons To Give Minimalist Living A Try posted at Shaun Rosenberg, saying, "Cutting down on your expenses doesn't have to be a bad thing. Here are some reasons to try living frugally"

William presents Zero-based budgeting for your household posted at Card Guys Blog, saying, "If you have tried to reign in your spending and get control of your unwieldy household finances, but still the credit card balance and other loans are heading upwards, you might be ready for a tool many governments and companies have used successfully – zero-based budgeting."

Mr.CBB presents Becoming a Single Homeowner – Part 1 “The Plan” posted at Canadian Budget Binder, saying, "Becoming a single homeowner has been a trend lately with the ladies leading the way. Learn about the unique requirements of how the single person approaches buying a home."

John Schmoll presents Why You Should Just Say No to Refund Anticipation Loans posted at Frugal Rules, saying, "Refund Anticipation Loans are marketed as a way to get your tax refund quicker and just in a few days. The main problem is that they’re full of fees as well as the desire to spend the money once received."

Retiring

Super Saver presents Remaining Cautious with Retirement Savings posted at My Wealth Builder, saying, "Our retirement savings have benefited from the late 2012 to early 2013 stock market rally. However, if something seems too good to be true, it probably is. The market rally of the past few months falls into this category. br />

Taxes

Jason presents Best Online Tax Preparation Software posted at WorkSaveLive, saying, "To take the guesswork out of which online tax software is right for you, we've taken a tremendous amount of time to examine the best and most popular online tax preparation companies to determine which has the best software for your particular tax situation See the differences between TurboTax, H R Block, TaxACT, and FreeTaxUSA"

David de Souza presents Which countries pay the most tax? posted at Tax Credits, saying, "If you think that you pay too much tax in the US you should compare what you pay to other countries in the world. This blog post looks at which countries pay the highest tax."


That concludes this edition. Submit your blog article to the next edition of The Wealth Builder Carnival using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

Technorati tags: the wealth builder carnival, blog carnival.  

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

This is not financial, earning, insuring, investing, living, retiring, saving, tax, or wealth building advice. Please consult a professional advisor.

Copyright © 2013 Achievement Catalyst, LLC

Building a Margin of Safety

While the recent market rally improved our financial situation, I am skeptical about the sustainability of the uptrend.  I expect that there will be a significant pullback in the next couple weeks as the spending cuts from sequestration become more likely to happen.   To prepare for this, I am building a margin of safety in our finances to make it through a market downturn, in case the move significant.  Here's what I'm doing:

Short term expense buffer.  Since the 08-09 bear market, we have moved 3-5 years of living expenses into cash or cash equivalents (e.g. CDs).   That way we won't need to sell stocks at a loss to cover living expenses. 

Selling into the rally.  We've been selling stocks in our taxable and retirement at or near the 52 week or all time highs.   This will enable to take some profits, reduce our stock exposure, and buy back at a lower price if the stock market falls.  I am also taking profits in our managed accounts and moving the funds to cash.

Exercising stock options.  With my company stock at all time highs, I'm using the opportunity to cash in on a number of stock options, even though the expiration date is over a year away.  I hope to sell all my options through the 2014 expiration dates.   At this point, I have exercised about 40% of the target amount.

While these actions won't completely prevent our investment accounts from declining in a market pullback,  they should enable us to establish a margin of safety that helps minimize the effects of a significant market decline.

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


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

Copyright © 2013 Achievement Catalyst, LLC

Buying Gold ETF and Gold Mining Stocks

Last week, physical gold and gold miners took a signficant hit, declining 2-3%.  Gold fell to near $1600/oz. down from near $1900/oz. in mid 2011.  My spouse and I have been adding a small amount of gold to our portfolio through ETFs.   In addition, I've started making small purchases of some gold miners, whose stock price are near 52 week lows.   Some of the gold mining stock have 2-3% dividends.

I'm making these purchases primarily as a hedge against higher inflation, which I consider very likely due to the U.S. debt and Fed QE policies.  So while prices of the gold ETFs and gold mining stocks are declining, I'm able to purchase the hedge at a lower price.

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

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

Copyright © 2013 Achievement Catalyst, LLC

Compact Fluorescent Light (CFL) Underdelivering

Recently, we've had two compact fluorescent lights (CFL) burnout in less than two years.  This was surprising since the package claimed an 11 year life based on 3 hours of usage per day.  The bulbs that burned out were probably used 20 times max a week for less than an hour each time.  When I took the bulbs to a recycle, the bin was full.   I doubt many of these bulbs were 11 years old.

Since CFL bulbs cost 5-10 times more that incandescent light bulbs, the faster than expected burnout will make CFLs much more expensive.
While I haven't investigated in detail, I suspect that fluorescent lights work best when left on for long periods of time, versus being turned off and on several times a day.  The on/off cycling probably wears out the ballast, which is needed charge the gas.  

So I have an experiment running in the master bedroom closets, where the lights are turned cycled several times a day and are not on from more than 15 minutes at a time.  One closed has CFL light bulbs and the other one has incandescent light bulbs.  If my hypothesis is right, the CFL light bulbs will be the first to burn out.

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

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

Copyright © 2012 Achievement Catalyst, LLC

Remaining Cautious with Retirement Savings

Like many others, our retirement savings have benefited from the late 2012 to early 2013 stock market rally.  However, if something seems too good to be true, it probably is.  The market rally of the past few months falls into this category.  Therefore, I still continue to be on the cautious side with our retirement savings and fund for our short term (3-5 year) livings expenses.   While we have recovered almost all of our losses from 08/09, I still remember the feelings of despair at the bottom in 2009.   I would like to avoid being there again.

Here are some reasons for my concerns:

Triple top  -   If the market index pulls back from the recent high, the market will likely go down.  This is common indicator of a possible market decline for technical analysts. 

EU sovereign debt  - This lurking issue has been out of the news lately.  The EU central bankers have been able to cajole markets to believe the risk is being managed.  Talk can only go so far before they need to really deal with it.

U.S. exit from QE -  QE has been reflating assets such as the stock market, bonds and real estate.  However, QE can only be temporary and must end.   The resulting credit contraction could be very negative for the economy.

On the positive side, businesses are doing well and running very lean.  If the economy should expand, I expect there will be significant upside to the stock market.

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

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

Copyright © 2013 Achievement Catalyst, LLC

50% of College Grads Umemployed or Underemployed

Half of recent college graduates are unemployed or underemployed according to this AP article .  The reasons are: type of degree,  degree inflation, and the economy.   

The article reports that while those with science, health fields and teaching degrees do better, people with degrees in arts and humanities have more difficulty finding a job in their field.   The increase in the number of  people with a college degree has also made a college education less valuable when looking for a job.   Finally, the high unemployment in the current economy makes fewer jobs available to college graduates.

That's quite a different experience than my mom and dad's generation, where a college degree created excellent career opportunities with top companies.  Even for my generation, people were still able to get much better jobs after graduating from college. 

Given the high cost of college, it will be important for our daughter to choose an appropriate major that will lead to a good job.   Fortunately, we sill have 10 more years before our daughter has to make that decision.

For more on Crossing Generations, check back every Thursday for a new segment.
This is not financial advice. Please consult a professional advisor.

Copyright © 2013 Achievement Catalyst, LLC

Certainty

Although I don't like the situation, there seems to be greater certainty than the past four years.  Here are the areas of certainty I see:

Central bank intervention.   The Fed will continue to keep interest rates low and increase asset values through targeted inflation.  For example, the Fed has a stated objective to increase equity and housing prices.  In Japan, the stated objective is to advance the stock market by 17%.

Social program emphasis.  The President is focused on social changes versus economic changes for the country.   Mr. Obama seems to have little interest in dealing with the economic issues.  He is more interested in gun control, entitlement growth, and bigger government (e.g. more regulations.) 

Growing government debt.  Overall spending cuts are unlikely, despite all the talk by politicians.  With the Fed buying debt and the increase of social programs, spending will grow which will lead to the debt growing also. 

Unfortunately, this isn't the type of certainty that will lead to significant economic growth, a bullish investor sentiment and increasing housing prices.  So  the economic situation in the near term future will continue to be same as it has been for the past four years, especially now that  I know what to expect.

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 © 2013 Achievement Catalyst, LLC

The Wealth Builder Carnival #113

Welcome to the one hundred thirteenth edition of The Wealth Builder Carnival. The purpose of this carnival is to collect articles from the blogosphere on building, preserving and keeping enough wealth for a comfortable retirement. For reference, I have tried to keep the carnival content tightly focused on wealth building and did not include submissions that were off topic. For reading convenience, the posts are listed with a brief summary or comment by the submitter and organized into seven categories: Earning, Insuring and Protecting, Investing, Living Frugally, Retiring, Saving and Taxes.

And now on to the Carnival.

Earning

Bryan presents Fun Jobs That Pay Well posted at Gajizmo, saying, "Not everyone gets to have their dream job, but if you are looking for a stress-free job with no real work, let us know if you find one, outside of collecting unemployment. Otherwise, here is a list of easy and fun jobs that pay well - better than most people would expect."

Susan Wowe presents Use Pinterest to Sell Your Affiliate Products posted at Online Business - Make Money Online, saying, "Do you know you can use the popular Pinterest - the third largest social media to make good money selling your affiliate products. How much success you can have really depends on how much time and effort you put into it. Give it a try. You don't need a website for making money online."

Insuring and Protecting

Bryan presents How To Save Money With Cheap Car Insurance posted at BudgetWays.com, saying, "Most people spend at least a thousand dollars on car insurance, and if you have kids or multiple cars, you're probably spending at least twice that. Learning how to buy the right type and amount of coverage, while applying for discounts is essential to saving yourself a few hundred dollars a year with cheap car insurance."

Investing

Personal Finance Beat presents How to Invest in Dividend Stocks posted at Personal Finance Beat, saying, "How to invest in blue-chip, dividend stocks for consistent, passive income."

Dividends4Life presents 4 Higher-Yield Stocks Increasing Their Yield posted at Dividend Growth Stocks, saying, "When selecting income investments, the three most important questions to answer are : 1.) Is the investment increasing its dividend each year, 2.) Is the increase likely to continue into the future and 3.) Are you being compensated for the risk you are taking? When you answer yes to all three of the questions, you just might have found an excellent income investment..."

Living Frugally

Mr.CBB presents Shopping Tips We Use To Save Money posted at Canadian Budget Binder, saying, "Find out the inside scoop on how we shop and save money in this post about watching where your dollars are being spent."

Emily presents Irregular Income: Gravy Edition posted at Evolving Personal Finance, saying, "What do you do with irregular income that you don't depend on for your living expenses? Are you succumbing to lifestyle inflation or saving it?"

Daniel Long presents How to Save Money on Kids Clothes posted at hireananny.com, saying, "From the cost of diapers to the expense of extracurricular activities as kids get older, it seems as if they’re always on some new path that costs money."

Alaina Moore presents 10 Family Dinners that Cost Under $10 posted at aupair, saying, "As food prices rise and more families encounter sticker shock every time they look at price tags at the grocery store, the idea of feeding your entire family a meal that costs less than ten dollars can seem absurd."

William presents Non-Loan Reasons You Need Good Credit posted at Card Guys Blog, saying, "Even if you never get a loan, your credit may be the subject of intense interest from those who provide financial services. In some cases, you still need good credit to make the most of your money."

John Schmoll presents 5 Easy Ways to Save Money Lost Due to the Payroll Tax Increase posted at Frugal Rules, saying, "The Payroll Tax Holiday went away at the beginning of 2013. Some families were prepared, some were not. This is a list of ways to help make up for that, or if you’re looking to live more frugal and save money in general."

Maryanne Williams presents 20 Ways to Save on Your Child’s Next Birthday Party posted at Share a Nanny, saying, "Celebrating the anniversary of your child’s birth is a momentous occasion, but it’s also one that can quickly become prohibitively expensive."

Nick presents How to Save Money on Rent: The Top 5 Tips posted at Making It in Today's Economy, saying, "Apartment costs in my city are borderline outrageous. I grew up in the Midwest, so I would be embarrassed to reveal to my old friends the numerical figure on my monthly rent check, but the locals here are astonished at the savings I achieve by adhering to the advice presented in the article."

Retiring

Jason presents Five Ways to Fast-Forward Your Retirement Savings posted at WorkSaveLive, saying, "While most of us dream of a comfortable retirement, very few invest enough make those dreams a reality or don’t invest anything at all – due to a lack of money available to do so There are ways that you can fast forward your retirement savings, either to make your portfolio larger than it is now, or to even get one started."

Saving

Ben presents How Much Emergency Fund Do You Need? posted at The Financial Reader, saying, "Saving an emergency fund is fundamental to building wealth and gaining financial freedom. You will hear other personal finance experts recommend how much of your living expenses you should save in a liquid savings vehicle; 3 months worth, 6 months, sometimes 12 months. But personal finance is not "one size fits all". This article poses questions you should ask yourself when determining how much of an emergency fund you really need."

Taxes

David de Souza presents 3 Ways To Pay Less Tax On Your Savings posted at TaxFix Feed Update, saying, "This blog post will provide 3 tips on how you can maximise your tax efficiency on your savings."


That concludes this edition. Submit your blog article to the next edition of The Wealth Builder Carnival using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

Technorati tags: the wealth builder carnival, blog carnival.  

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

This is not financial, earning, insuring, investing, living, retiring, saving, tax, or wealth building advice. Please consult a professional advisor.

Copyright © 2013 Achievement Catalyst, LLC