Thursday, December 23, 2010

Planning for the future: Establishing a legacy

We picked up a free book on personal finance by pastor Jamie Munson from Mars Hill Church Seattle. Chapter 13 is a good chapter and talks about a similar planning type strategy that I hope to evaluate at years end. Excerpt from Money: God or Gift by Jamie Munson...

What would we like to see in ourselves and in our family in the next 5, 10, 15, 25, 50 years?

What would it look like? I actually expand on some of them with more questions to help push me to next steps.

Walk with Jesus - Who will be impacted by my walk with Jesus? A particular age group, culture, neighbor, family member? In what ways will I walk in holiness, seek greater faith in doing, serving? How am I growing in grace?

Giving - How much will I give between today and my last day? Have I given generously throughout my life, and will I continue to do so through my estate? How have I planned my investments to give to be as generous as possible, as consistently as possible, and as sacrificially as possible?

Family - What will my family look like? How many children? Where will we live? What kind of education do I want my kids to have? What kind of relationship do I want with my wife? How am I building these relationships? What am I teaching my children to teach their children and their children's children?

Friendships - Who will my friends be? To whom will I have been a friend? What kind of friend will I be? Who have I befriended that is further down the road with more experience that I can learn from? Who have I befriended that is a newbie that I can speak my life into?

Mission - What will I have done in obedience to Jesus' commandment to "make disciples of all nations" and fulfill the Great Commission? In what ways am I doing this now?

Career - What will I have spent my life working on or working for? What kinds of skills will I need? What type of continuing education will I need? What types of mentors am I seeking out?

Housing - Will I pass on real estate as part of my legacy? Where do I want to live? How much room do I need, how much parking? What type of kitchen does my wife like? What kind of office do I need?

Finance - What will I leave behind financially and to whom? Where will the money God has entrusted to me have the greatest impact for the gospel? Am I being a good steward with my purchases? How is my budget? Are there excesses that I can cut out? Am I saving for future expenses including college, retirement, house, etc.?

Note: italics are my questions to ask...

Saturday, December 18, 2010

Frugal in life, generous in death

What do you think? Save as much as you can, so you can give as much as you can?

Visit msnbc.com for breaking news, world news, and news about the economy

Monday, December 6, 2010

A Christmas Carol


Just watched Disney's A Christmas Carol with my kids off Youtube! As I was watching the character of Scrooge McDuck, I couldn't but help notice the similarities I have with him.

He is very meticulous in counting his money and doesn't let anything go to waste. He is very stringent on how he spends especially on frills and other things. Not even a piece of coal to heat up his office. There's enough heat to go around.

The one thing that got to me was when he went with the Spirit of Christmas Past and saw the girl that he loved. He was engaged to her for 10 years and finally she gave him the ultimatum. Do you love me or do you love your money more? Not even looking at his girlfriend, he gives her a foreclosure notice for a payment that was one hour late.

Oh, how easy our hearts are captivated by things of secondary and tertiary concerns. Money as with is a tool for building relationships, to be used for charity and security but when it becomes primary in one's life it turns into a god. That's why scripture is so clear concerning money: it warns us to flee from the love of money. Not to be lovers of money, but rather lovers of God... For us not to store for ourselves treasure on earth, but store treasures in heaven... concerning charity to give in proportion to how much you make... in all things, to be generous since God has been so generous to us.

May God bless you this Christmas with a change of heart... not like the Scrooge of Christmas past, but the repentant and compassionate Scrooge after he wakes up.

(around the 3:30-6:00 mark)

Tuesday, November 30, 2010

Net Worth (Nov 2010)

I'll do the percentages later, but we just refinanced so don't have all the updated numbers yet.

We are expecting a bunch back as well...

Learning vicariously through people's mistakes

Just read this article off Yahoo! Family fall from affluence is swift and hard.

This is followup of my previous post If I had a million dollars.  This is a man who was given a 10+ million dollars and had no plan.  He didn't do anything to earn it except having a daddy who had a good business and brothers who ran that business.

In any case, due to reckless spending and some bad luck in the real estate market... ALL of his inheritance went down the drain.  This is a man without a plan and he has the nerve to complain that he didn't get more money.

Still, Mr. Martin is prone to ruminate over the loss of so much money. He is furious at the banks and the bankers, who he thinks gave him bad advice, and he still sounds angry at his brother and others who decided to sell the company and who he says gave him little voice. Some of them got more than $100 million each, he said, while he got $14 million, as did his father and his sister Ann, because they were all minority shareholders.

He was angry at banks, bankers for giving him bad advice...

Here's my free advice: God gave you a brain, use it. Do the homework and due diligence on your own. Find advisors who you trust and are smart and have no interest in your money. But first of all, admit that YOU ARE THE CAUSE OF YOUR OWN PROBLEM.

Time for bed. What can a budget do for you?

Saturday, November 27, 2010

Happy Thanksgiving

Happy Thanksgiving to everybody. What are you thankful for?

Philippians 4:10-13 I rejoiced greatly in the Lord that at last you renewed your concern for me. Indeed, you were concerned, but you had no opportunity to show it. I am not saying this because I am in need, for I have learned to be content whatever the circumstances. I know what it is to be in need, and I know what it is to have plenty. I have learned the secret of being content in any and every situation, whether well fed or hungry, whether living in plenty or in want. I can do all this through him who gives me strength.

Contentment is key.

Tuesday, November 23, 2010

Teaching your kids money management

Great article on the MINT Blog. Teaching your kids money management by opening your own bank.

I think I'll do this with the girls.

Friday, November 19, 2010

2010 3rd Quarter Expense Report



Well, here's the latest in terms of our bills for 3rd quarter. In comparison with 1st Quarter and 2nd Quarter we had a few extra expenses.

3rd Quarter Income: $14.2k
3rd Quarter Expense: $16.8k
3rd Quarter Net Income: -$2.6k (DEFICIT)

We spent about $16.8k in Quarter 3 and made $14.2k in salary.  So net income down $2.6k this quarter

(29%) In preparation for our refinance, we had paid down a considerable amount of principle,
(27%) gifts due to weddings and tithes and offerings, and support, 
(17%) I also decided to continue my classes.  I had taken 1 year hiatus,
(10%) food was average,
(7%) auto - gasoline, insurance and shipping "george" to Texas
(5%) util bills lower than expected but we had fraud alert on our cell phones, so didn't actually receive the final bill until October, so I'll expect a higher 4th quarter bill for utilities.
(3%) went to shopping a bulk went to buying pillow pets... ehem...
and all others... you do the math.

This was a bit more spent than we budgeted for in Quarter 3.  I don't like seeing the $2.6k deficit, but I did make it up end of the year with some overtime...

Thursday, November 18, 2010

If I had a million dollars

What would you do if you had One Million Dollars? I hate these hypothetical questions, but they are good to ask especially before you actually have that level of money.

People spend 40 years working and saving will understand the value of it because they earned it through hard sweat. I've also seen people who earn it through hard sweat but in a lot shorter period of time like famous athletes. Those who are good make that in a matter of months but what happens to their money in a few years? There are stories where they went crazy buying new houses, cars, throwing parties, and because they worked hard during the season, they partied hard during their off season... and in the end they don't have much to show for the tens of millions they earned.

Well, this past week was similar. Our two roths were up about 85%. Like I said in my previous post about being under-diversified. Well I hit a new high of almost 50k. However, not knowing when this run-up would stop, I kept our money invested in a couple stocks. In a matter of days, this 50k dropped to 35k. A 30% decline in less than a week. Since I was still up 30% for the year, I didn't fear much, but losing 30% in a week really hurts.

Which is why I have to ask you... do you have a plan for $10k? Do you have a plan for $100k? What makes you think you can handle $1M?

So here's the moral of the story: Unless you know what to do with $1000, don't even think about that $1M or more, because without a plan, in a few years you're just gonna waste $1M or however much you have. Whether its gambling in the stock market or gambling in the casinos or just gambling without a budget/plan, when it come to easy winnings, what follows is most definitely easy losings.

What can a budget do for you?

Saturday, November 13, 2010

Utilities Expense: Is your refrigerator running?


Here's the latest breakdown of our Utilities expense for the past two years.

41% Mobile Phones
25% Electric
15% Gas
11% Internet
5% Water

Looks like a lot going to our phones. It is. We're paying about $350/month or 7% of our income. Of that $140 is going to phones including applicable taxes and other surcharges... almost 3% of income. That's huge.

I want to cut back. but oh well.

Home Expense: Joys of Homeownership



Our running average over the past two years of homeownership is about $1600/month or about 32% of income.

This includes mortgage, tax, insurance, HOA, and various other stuff.  With our newly refinance our mortgage will drop $344, saving us over $4128/year and paying for itself in 16 months.  In any case, it looks like our housing expense will drop to 25% of income, a great deal of savings.

Giving Expense: Two years in review


I actually should wait until next month since December is the big gift giving month. In any case, here is the breakdown of our gifts for the past two years.

Here's the breakdown of our giving
51% Tithes and Offerings
37% Personal Gifts
12% Charity/Missionaries

We averaged about $876/month in our giving or about 17.5% of income. Not bad, but I do want to increase that to about 20% this coming year especially with our newly refinanced house and the extra cashflow because of that.

Food Expense November 2010


Looking at our food expenditures for the past three years we have averaged about $550/month. This includes groceries, eating out, McDonalds, Costco, and others.

Here's the breakdown of our food expense:
72% Groceries
16% Restaurants
10% Fast Food
2% Misc (coffee, alcohol, etc.)

In comparison with our current income it is about 11% of our budget. Not bad. We'll aim for 10% so as to not rock the boat too much.

That's a great job considering we currently host a bible study on Thursdays which includes dinner for our friends and many other dinner parties. My wife has a gift of hospitality and I believe she has been doing a great job exercising her gift.

Friday, November 12, 2010

Quantitative easing

Funny video I found from Greg Mankiw's blog.

Wednesday, November 10, 2010

Mortgage Update

We just closed on our refinance today. God willing everything will be in order in the next month or so. We got a 4.125% interest rate for 30 years.

The closing costs with all the taxes and fees and everything else came out to be about 6k. Although they say we should be getting 2k back from escrow because of random taxes and insurance they had to collect up front.

In any case, our new mortgage is $1070 or $344 less per month. Incredible. We actually paid down over 40k + 30k in renovations. So in effect we have put over 70k into this house. But it's good.

We like it and we like how manageable this new mortgage is. We have been owners of this house for almost 2 years now. Bought in Dec 2008 and will probably stay here for another 2 years just so we make back what we lost through this refinance. $6000 divided by our $344 savings is 17.5 months or about one and a half years. Not bad.

On the horizon: we have been actually contemplating renting out this house. With a mortgage of $1070 and the going rental rate going between 1500-1700 we could actually make a decent cashflow. But we will definitely need to examine who rents this place.

This townhouse is old, so there is still stuff that needs fixing especially electrical, plumbing, and other minor stuff that may be annoying to renters.

This reduces our housing costs to less than 25% of total income. Definitely a huge boost in our budget.

What can a budget do for you?

Friday, November 5, 2010

Investment Strategy

I was looking at my portfolio this past week and noticed a real imbalance in my portfolio.  Diversification is a key word that I've adhered to most of my investing life.  I realize that if we put all our eggs into one basket, one little drop can crack a LOT of eggs.  If we have many baskets, then one drop only affects a small portion of our eggs.  BUT there is opposite is also true.  Finding those many other baskets takes time and requires more work so collecting your more eggs is a slower task than if you just carried one basket.

Last month, on the advice of some advisors and some research,  we purchased some stock in our retirement fund that went high pretty quickly.  I ended up buying more shares as well as some call options.  Usually I don't buy naked calls and if I do I usually balance with a covered call or some other hedge. 

But I got carried away and by the end of this week, we had about 90% of our ROTH IRAs in 5 stocks.  THAT's RIGHT. FIVE STOCKS.  This is NOT good.  Although the gains have been astronomical, doing so incurs great risk.  The same upside gains could equally be downside losses.  So why did I do this and HOW do I know this this will work? 

Good question.  First off, I can't predict the future.  I just know that it is earnings season, that stocks historically go up during Thanksgiving/Christmas time, that these companies are growth companies, that they have good balance sheets and that they have been helped by a weakening dollar, some are international stocks, others are commodities, and some are US stocks.  So even in these five stocks there is a bit of diversity, but still not enough to justify such a large position in them.

REASONS FOR RISK:
Here are some reasons I did this. 

1) I only have 50% of my money in individual stocks.  The other 50% which is in my work TSP is split into 4 funds, S&P fund, Small Cap fund, Gov Bonds and International Fund.  So I do get some diversity there.
2) They are in my ROTH account.  Which means I can't touch it until I retire.  I have a long time horizon for this money, so taking a bit of risk is definitely warranted.
3) I get greedy and sometimes I bite off a bit more than I can chew.

So if I was a portfolio manager of $100k, I would definitely have to diversify.  I cannot justify putting 100% of my money in one or two stocks. THat's just plain stupid/insane.

My breakdown is this:
15% S&P Fund
15% Technology (semiconductors, computers, automobile)
15% Financials, Real Estate
15% Commodities (oil, metals, industrial materials)
15% Retail, Food (entertainment, clothes)
15% International
10% Cash/Bonds

I'm a little bit imbalanced in my current portfolio, ideally this is what I would do. Have fun investing. Play safe but definitely take calculated risks and track them like a hunter... :)

Update: November 2010

As November goes into full swing, we are planning to close on our refi on Wed of this coming week.  We were able to lock into a lower interest rate of 4.125.  We'll see how much that saves us.  They said our mortgage PLUS tax and insurance should be somewhere in the ball park of $1075 a month.  That is incredible.  We've actually paid $43k into this house as downpayment and extra principal + over $20k in interest payments over these last two years + $30k for renovations. 

That's right... over $20k in interest payments alone and almost $100k put into a house in 2 years...  I am kinda glad we got a lower interest rate.  It cost us a couple thousand to refi, but that gets rolled into our new mortgage.  Oh well.  Owning a house definitely has a LOT of cost up front, but if it will definitely take a bit of time for it to pay for itself. 

Had we just rented a place for $1500/month for the past two years, it would have been: $36k.  But instead we paid about $1414/month of which we got about $300 went into principal and $100 came back after taxes... Our house is currently worth about $233k according to Zillow.  If we sold today, we would have lost about $31k.  Which would have been about the same as renting a place for two years. 

If we bring this calculation out to 5 years... based on the same assumptions: 1500/month rent would be about $90k.

On our current 5.5% interest rate, we would have paid about $45k in interest payments + $19k in principal + $18k in insurance/tax...

If there was appreciation on home prices in five years, my estimate about $269k... we should be ahead by about $21k... compare that to a complete loss of $90k had we rented...

If there was no appreciation on home prices... if in 5 years, it stayed at current Zillow estimate of $233, we would have lost $15k... not bad compared to $90k if we just rented. 

Home prices would have to decline to $158k in order for us to be equal to renting.  I definitely do not believe this will happen considering all that money the mint is printing.  We probably get inflation before that happens. 

Of course I didn't take into consideration this new interest rate and new mortgage rate.  But had we continued it still would have made sense to buy. 

Thursday, October 28, 2010

Net Worth OCT 2010 (+3.94%)

This was a large boost in the investments.  I worked some overtime, so also a big boost in salary this month.

Tuesday, October 26, 2010

Budget Auto: October 2010

Just examined our driving habits for the past 6 months.  Ouch... we spend a lot of money on our cars.


Gas and Fuel is up $1100 for the past 6 months.  Or on average about $180/month.  At $2.80/gallon that comes to about 1300 miles/month.  We are on average driving a little less, but with the loss of George (our honda civic) our gas mileage has dropped to around 20-21mpg.  I drive my truck to work maybe once or twice a week, but also have class twice a week meaning... 60 miles round trip for work or 40 miles round trip for class.  That comes to be about 120 + 80 = 200 miles = 10 gallons of gas which is about $30 just for work and class/week.  Kind of a waste, but been looking for better ways of reducing this cost. 

Thinking of selling my truck and getting a smaller car (used).  This would be ideal.  Let's see what happens.


So average over these two years was $376/month or a little over 7.5%. This could defintely be better.

Thursday, September 30, 2010

Net Worth Sept 2010 (+17.5%) And UPDATE

Ok, enough talk about refinance.  It's a great idea and as we are awaiting closing, here's an update of our net worth for month ending September.


Mint now uses Zestimate to appraise the house. It came out to be $233k opposed to the previous $217k so from that perspective our net worth has increased dramatically, but I know paper value is no value at all (gain of about 7.3%).

In our investments we have made tremendous gains as well. Last month was at $68.5k but thanks to the rally in the market it has spiked to $75.5k an almost 10% return in one month.

So overall, our networth has increased by a value of 17.5% if you include the house, or about 6.6% without the house. Not bad.

Today is end of fiscal year at work. I have produced 110% at work which means BONUS + I finally worked some overtime (which meant doing more work than I had to). This 40hours of extra work + bonus = faster savings/payoff of house.

Why didn't I think of this earlier? I think I did think of this, but just too lazy to implement. In any case, I'm not sure how sustainable all this overtime is, but I'll try my best.

On a side note, I have continued to attack the remainder of my seminary degree in full force. I have completed 23 credits in the past 3 years. I am taking 5 credits this semester, plan to take 4 credits in the winter, and 9 credits in the spring. This will take me to 19 credits to go for the Masters in Religion.

I first started taking classes once I was laid off from my teaching position and started at my current gig. Now that my learning curve has ramped up, I am able to do more work with better quality at a much more efficient rate. As a result, I have more time to study. I hope to finish before 2012, God willing. haha.

So goals for the next 5 years:
- Finish MAR degree (Goal Spring 2012)
- Get my next promotion at work (Goal 07/2011)
- Possibly work from home (Goal 12/2012)
- Have more KIDS!! (TBD)
- Buy a new house to fit more kids (TBD)

Near term goals:
- Continue serving at church with teaching duties
- Create/establish home school curriculum for my girls
- Increase production to 120% plus 40 hours of overtime per bi-week
- Refinance house - reduce mortgage w/ possiblity of renting/buying a new place
-

Thursday, September 23, 2010

Refinance Analysis Part 4

Okay, so Bankrate has a number of questions they ask you in order to determine if a 15 or 30 year mortgage is best for you.  I think this is the best tool out there.  It actually looks at your specific situation in regards to what you will do with the extra money, retirement, investments, etc. etc.

So here's the breakdown:

Your Costs for a $172,000.00 Fixed-Rate Mortgage:

15-Year at 3.80 %
Monthly Payment = $1,255.00
Interest First 5 Years = $28,443.00
Total Interest = $53,917.00

30-Year at 4.25 %
Monthly Payment = $ 846.00
Interest First 5 Years = $34,957.00

Total Interest = $132,609.00

Here's how we got it: Your viewpoint on monthly payments: Your answers indicates that you are concerned about the size of the your monthly mortgage payments. This points in favor of a 30-year mortgage which allows you to have lower monthly payments. Specifically, in your case, based on the numbers you entered during this session, the monthly payments for a 30-year mortgage will be $409 lower than those of the comparable 15-year mortgage (see the chart above).

Your monthly budget: You indicated that you have some flexibility in your monthly budget. This suggests that a 15-year mortgage, which requires higher monthly payments, may be a good choice for you. (In contrast, if you had said that your monthly budget were very tight, that would point in favor of a 30-year mortgage, which allows lower monthly payments).

The type of home you are seeking: You indicated that you don't expect to buy the "most house" you can possibly afford. This suggests that the 30-year mortgage may not be right for you because one of the main advantages of the 30-year mortgage is that it enables people to borrow the most money they can based on their monthly budget. In contrast, a 15-year mortgage is generally better for people who are willing to buy less house than they can afford and want to spend additional money each month to pay-off the mortgage more quickly.

Your investment habits: You indicated that you are a diligent investor looking for the best returns on your money. This points strongly in favor of a 30-year mortgage because a 30-year mortgage allows you to make lower monthly payments that can give you "extra" cash each month to put into investments that can provide a return higher than the 15-year mortgage rate, which you indicated to be 3.80%. Also, you are in a good position to invest relatively aggressively now because you are not yet close retirement, which means you have the time to ride-out the volatility of more-aggressive investments. But note: To make the most of your 30-year mortgage, you need to be diligent about investing the extra cash you'll have each month due to the 30-year mortgage.

Your retirement savings: You said that you are contributing the maximum to retirement savings plans. Good job! That's a great way to secure your financial future, especially for you because you still have approximately 30 years until retirement, which give you lots of years to benefit from compounding interest on your pre-tax dollars. The fact that you are already maximizing your contributions to retirement savings plans suggests that you may not need the lower monthly payments offered by the 30-year mortgage.

Your emergency savings: You indicated that you think you probably have a sufficient emergency fund, which is something you should feel very good about. This suggests that you may not need the lower monthly payments that come with a 30-year mortgage.

Your years to retirement: You indicated that you have 30 years remaining before you plan to retire. In general, the further you are from retirement, the more a 30-year mortgage makes sense for you. Here's why: As you know, the 30-year mortgage allows lower monthly payments which can give you extra cash each month that you can put into investments that can provide a return higher than the 15-year mortgage rate.In your case, you are in a very good position to invest relatively aggressively now because you have a lot of time to ride-out the volatility of more-aggressive investments. (But remember: To make the most of your 30-year mortgage, you need to be diligent about investing the "extra" cash you'll have each month due to the 30-year mortgage.)

SO FINAL ANALYSIS: We think you should go for the 30-YEAR MORTGAGE

Wednesday, September 22, 2010

Refinance analysis Part 3

Still thinking about what is a better deal both in the long run and in the short term.

Interest rates are at historical lows, so getting as much money in hand is better than having it stuck in the mortgage.  However, 30 years is a long time to have mortgage payments especially if I have to pay interest.

So here's the breakdown as I see it:



Refinancing is the best option.  It reduces my mortgage payment as well as decreasing my total interest paid.

The questions is should I do 15 years or 30 years?  With an interest rate of 3.8% for 15 years and 4.375% for 30 years, the monthly payments are about $1,300 and $890 respectively.  That means I pay about $400 more to reduce it 15 years.  As I've done the calculation before, that $400/month put into any investment fund that averages more than 5% a year would make over 100k in 15 years, just enough to payoff the remainder principal at that time.  If that investment does better than 5%, say 10%, we'll have $150k, or $50k extra after paying the remainder of the principal. 

As some of the financial advisors have said, it all depends on what your situation is at this time.  Knowing that we'll have put 20% of our equity in our house, putting any more money in there might not be the best option.  So having some on the side for other purposes including: college fund, retirement fund, vacation fund, investment fund, new house fund, etc. might be better. 

For example:  You're 30 something, you have $150k in your house making zero (at least in this current market), but you could have this invested in some low cost stocks/mutual funds... that average out to 5-10% annually.  I know it's risky, but over the 15 year time frame, I think you can find at least 1-2 stocks that go up... 

Anyways, the key to this is DIVERSIFY.  Dave Ramsey says to payoff your house as fast as possible, i.e. ZERO DEBT.  Some say don't put all your eggs into one basket.  Spread out your investments, so you get tax break from the interest in your mortgage, etc. etc.  I think Ramsey is right because people are naturally stupid and greedy.  If they have money on hand, they'll waste it on stuff, which means those who stash their extra money away by paying off ALL debts might be the wisest thing to do. 

But alas, I do like having money on hand... but alas, I know if I do, I'll spend it.  Oh the decisions I have to make. :)

Tuesday, September 21, 2010

Refinance Part 2

Going over all the numbers over deciding to refinance or not.  According to this simple... very simple Bankrate calculator, it will take me 20 months in order to break even.


So that means the extra $5k I paid in principal reduction would be lost to the closing costs. The new monthly mortgage is $250 less... meaning:
$5k/$250= 20months. Or even less than that if you include the canceling of PMI...

$5k/$350 = 14.3months or 2years.

It'll pay for itself in the long run. I hope. The new interest rate is 4.375 for a 30 year loan. Should I go for 15 year loan at 3.8?

Sunday, September 19, 2010

Refinance?

So I called our Mortgage company.  Apparently they won't automatically cancel our PMI even though we have passed 80% LTV.  I called a couple times and they required we do an appraisal.  So this will cost us about $300-500 depending on who does it.

Without PMI, our mortgage at 5.5% would be 1098.  Add 200 for insurance and tax, and that means a monthly payment of about $1300.

Looking at our current situation, a refinance would reduce our monthly payment considerably but the closing costs are higher than I expected.

Okay, here's the breakdown from one loan officer:

A 177,000 loan for 30 years @ 4.375% would be: $883, plus $200 would be $1083, saving us about $220 a month.

A 177,000 loan for 15 years @ 3.8% would be: $1291, plus $200 would be $1491, an extra $200 a month but reducing the interest over the entire loan by about $75,000.

So, I'll let you know what we decide to do.  I'm also considering a cashout, but that depends on how much the house appraises for.

Wednesday, September 1, 2010

PMI - Home Mortgage


After this month's mortgage payment along with accelerated principal reduction we have dropped under 80% LTV meaning PMI could be dropped.  I will call our Mortgage company tomorrow to do that.  But this is a good milestone for us.  Something we worked on for the past year considering we put 10% down when we bought the house. 

So here's the question: Should we continue to pay down the mortgage OR save the extra principal payments to buy a new house?

I think I know what we should do... but let me hear your opinions.

Thanks.

Tuesday, August 31, 2010

Net Worth - August 2010

Latest update on our net worth for August 2010

Saturday, August 28, 2010

Visual Budget - August 2010

Updated Visual Budget: Expenses are 20 month moving average and salary is current salary.


Looking at my first visual budget: Most expenses have been reduced.  Savings has increased. 

I am actually pretty happy.  Compared to January 2010, we have reduced some of the expenses by a day.

Mortgage came down from 8 days to 7 days.
Giving has increased from 3 days to 3.5 days.
FOOD has increased from from 2 days to 2.5 days.
AUTO has increased from 1 day to 1.5 days.
UTILS and Misc Expenses has dropped from 2 days to 1.5 days.

I've also included Travel expense which wasn't in the first budget.

Savings has increased from 3 days to 4 days. I must be doing the calculations wrong something. Why does it say I have so much money left over? Oh well. Must be going down the drain in investments.

Monday, August 23, 2010

Expense Report Aug 2010

Here's a quick update as to how we have been doing. The expenses are averaged over the past 20 months based on the data from MINT.COM

We are saving about 14% of income which is a nice number. I hope to increase that mainly through more productivity at work and some reduced spending at home. We'll see how that turns out.


We've been paying down the mortgage.  Though I'm rethinking that plan now.  Savings have been fairly consistent.  Our Auto/Gas includes repairs so that is a little bit higher than what we have budgeted.  I included traveling expense since that has been a big chunk of money over the 20 months.

ANALYSIS:
Our mortgage payments should decrease by about 12.5% ($100) with the elimination of PMI.  This means we could actually increase giving by 20% without hurting.

If we could decrease FOOD expense by 20% (about $56) we should be able to cover another family vacation for the next 20 months with no problem.  This comes at a good time when I am watching what I'm eating. :)

Misc shopping includes supplies, life insurance, medical expense, household items, etc.  I don't think we need to touch that.  We'll hold it steady at 5%.

That's it for now.  We'll see what a budget can do for us. At least a general one.  I know my personality and my wife's personality.  I like to detail every line item.  She likes a general plan and go from there.  Well, I guess we've compromised enough and understand each other's strengths and weaknesses to compensate.

MEANING=at least we won't fight for another month. haha.

Wednesday, August 11, 2010

Inflation Part 3: Federal Workers

here's an excerpt from CBS article about Federal workers salary widening compared to the private sector.

(CBS) For those fortunate enough to have a job in this tough economy, there's a growing gap in salary between government employees and those who work for private companies.

While many Americans have suffered pay cuts or job losses, one group is bucking the trend: federal workers, CBS News Investigative Correspondent Sharyl Attkisson reports. A USA Today analysis finds that federal employees have gotten bigger pay and benefit increases than private employees for nine years straight.

"It made me think, man, I should be a federal employee," one woman said on the streets of the capital.

Federal salaries have grown 33 percent faster than inflation. Their pay and benefits averaged $123,049 in 2009, up 36.9 percent since 2000. Private workers averaged $61,051, up just 8.8 percent during the same time.

"So you have Wall Street, you have big oil and now you have federal civilians," said Tad Dehaven, a budget analyst for the Cato Institute.

And the bonuses are flowing. CBS News has learned taxpayer dollars funded $95.8 million in Transportation Security Administration bonuses last year, including a $35,400 bonus for the head of the agency.

"They're really overpaid," one man said on the streets of the capital.

Federal employees see things differently.

"I definitely don't think I'm paid too much," one such worker said.

Defenders of federal salaries say they reflect the higher skills and education often required for their jobs, and many are paid more because they've stuck with their jobs so long.

President Obama has ordered a freeze on bonuses for 2,900 political appointees and wants the smallest pay hike in more than a decade for two million other federal workers: 1.4 percent.

When I read about this I get kinda sad. The government should only be here to serve the people. But because government has gotten so big... people think they are entitled to the government and government employees think they are entitled to their high salaries. I guess my original post on inflation was a little bit pre-mature. Fed salaries are increasing higher than inflation... but if everyone and their mother works for the government and salaries reflect inflation... wouldn't that mean that whoever is calculating the inflation index is a bit off... or is it the other way around?

I also don't see where CBS got that 123k average salary and benefits from. Who knows, maybe I'm underpaid... CBS needs to list their sources. They're pulling some of these numbers out of thin air (I think) for some of these.

Monday, August 9, 2010

Inflation... Part II

Just came to this realization while talking to a college student. I was talking about my weight. After high school, I was probably at the fittest period of my life since I was running track and exercising every day. I was about 135lbs (that was 1995). Fast forward to the end of college. I think I was about 150lbs (1999). Fast forward to now 2010. I weighed 185 at the beginning of last week.

Over a 15 year time span, I gained FIFTY POUNDS. But if you do the simple division, 50/15 that would only equate to about 3.3 lbs a year. How can that be? Who would have thought that gaining 3 and a third pounds a year would bring me fifty pounds in fifteen years. Goes to show you that speed diets and other lose 50 lbs in 5 weeks and other things like that is just not sustainable.

There was just a gradual increase, some years more than others, but over the long term, gaining 50 lbs just isn't that significant if you just gain a little bit each year. How does this deal with finance? Well, saving a little bit every year doesn't sound like a big deal, but over 15 years, even a little bit adds up to a lotta bit.

Anyways. Where am I now? I've joined the GYM at work. Costing $10 a bi-week. This is money that I should have spent earlier. I am eating better and doing consistent exercise. I'm going to slowly lose this belly fat as well as regain what I had after college, around 150-160 range.

My goal for this year is to lose 20-30lbs and hopefully keep that weight off. It's not a significant amount, but even if I can't do it in one year, I'll hopefully start a habit of watching not only what I spend, but also what I put in my MOUTH. Lord help me.

For my health and for the health of my offspring.

Cheers.

FOLLOW ME AT: PATENTED WORKOUT

Saturday, August 7, 2010

Adjusted Rate of Inflation 2004-2010

Just looked at my current salary rate adjustments between the years of 2004-2010.

Year % Increase
2004-2005 2.5%
2005-2006 2.1%
2006-2007 9.3%
2007-2008 4.87%
2008-2009 2.90%
2009-2010 1.5%

In 2006-2007 the office received an across the board pay increase due to some extra funds. But also note the economic downturn in 2009-2010. Office ran into a little bit of trouble and had to cut back.

Why am I bringing this up? Over the course of 6 years, the salary at my current position went up over 20%. On average that is a rate of 3.5% increase per year. If this is a reflection of the rate of inflation then putting money in a savings account making less than 3.5% a year interest means you are actually losing value on your money.

What do I mean by that?


For example: If I saved $500 a month in the bank that gains <1% return over 30 years, I would have about $200k (or less depending on actual rate of return). Not bad you think. But not good either. At the rate of inflation, that $500 would have a real future value of about $300k meaning that we would have lost about 1/3 of its value due to inflation. In other words you lost $100k by just letting your money sit there. Where did your money go? In short, the government took it. In long, the government took it.

TAXES, TAXES, and MORE TAXES

Two ways the government can tax the people. One is to raise income tax. But this is very unpopular especially with those making money. The second and more hidden way is to increase money supply. They can do this by selling debt to foreign countries (like China). By "creating" more money, governments can fund many MANY programs, stimulate the economy, fund WARS, etc. etc. etc. but in doing so they decrease the real value of their currency.

Why would the government want to decrease the value of its own currency? Two reasons. It makes its debt cheaper. If you owed 10 Trillion dollars it's easier to print a 10 Trillion dollar bill than to outright tax your citizens 10 Trillion dollars.


That leads to the second reason. Most people don't realize what's going on. Ignorance is bliss. When a large percentage of the population receives subsidies, welfare, tax rebates, social security or other "government monies". Who are we to complain? My yearly salary increase keeps my happy. I'm making over 50% of what I was making 5 years ago. Everything is going OK, right?

Well, the thing with inflation, messing with the money supply, More and more debt... we are playing with fire. I don't know how to solve this problem. Fiscal austerity, higher production, raise retirement age, encourage debt reduction, I don't know. Everyone thinks they know the solution. Nothing is "popular." When we talk about losing weight, when we talk about budgeting, cutting programs, these words/phrases are very unpopular. Everybody wants a cut or a piece of the pie. Everyone has an interest they do not want to give up. Nobody is willing to sacrifice... and because of that, the only people sacrificing are those who have saved. I don't know. I just know if we continue on this route the end results will match that of Zimbabwe with hyper-inflation and hundred trillion dollar bills... meaning the couple thousand dollars I have saved in the bank is worthless. This happened in South American countries, Germany after WWI, and countries in Africa, etc. etc.

QUESTIONS

How do we preserve capital? Where should we then invest? Gold, Silver, Copper, Oil and other commodities? Real estate and our homes? Stocks and other companies? or should we invest in countries that will escape the crisis: Switzerland?

Is all this meaningless? Can we place our trust in our elected officials to lead us? We have a lot of HARD work to do in the next 20-30 years. If we don't change, we will be saddling our CHILDREN and our CHILDREN's CHILDREN with a huge DEBT and HIGH INFLATION. We will not be leaving them an INHERITANCE.

I'm sounding like those GLOOM and DOOM crackpots on TV and the RADIO. What I do know is this: It starts with one person. That's how a leader leads. That's who a LEADER is. Others will follow when they realize this is the RIGHT THING TO DO.

Change that matters

I think Jesus was right. The only way to lead a revolution is if you are willing to LIVE and DIE for it. How do we as a nation change? How do we as citizens of the world change? It'll happen one person at a time. That's the only way.

With that I'm optimistic. If one person can change, two people can change. If two, then four. If four, then more. So it starts right here. Not my blog, but my HEART.

What kind of change do I need to have? I need to change my views on money, my views on people, my views on being a citizen of this world (not just as an America), my views on LIFE. It starts with a right view of how things work... This is what I must learn all over again... and this is what I need to teach my children. One person at a time.

This is the inheritance that cannot be purchased with money and this is the education you cannot learned in school. We'll look at some of these changes we personally can do as individuals, as a family, as a community... in the next few weeks... hopefully.

Tuesday, August 3, 2010

Expense: Pillow Pets and other As Seen on TV ads

Pillow Pets


They're cute and cuddly. "It's a pillow, it's a pet... it's a PILLOW PET!" My girls went to the mall yesterday and wouldn't you know it they were selling pillow pet for $25 each.



Background: The commercials are on tv. Little girls and boys flock around a pillow with a velcro strap. When the strap is attached, the four corners become little legs of an animal (a pet) and when you release the strap... it's back to a pillow. Easy EASY concept, but very good marketing.

So my daughter wants one. She wants a ladybug. I tell her for the past 3+ months. Let's save up our change, our pennies, quarters and all those other loose dollar bills we've been getting. Well it all came to a head yesterday when she actually held one and was VERY close in buying one. These marketers know the heart of a child.

Anyways, mommy tells her that we'll go home to count to money in the piggy bank when daddy comes home and we'll get one.

Counting the Piggy


When I get home we empty all 3 piggy banks... count... count... count... $27 and change. Okay enough to buy one pillow pet. But you know what? She also wants one for her younger sister, cousin and a friend's birthday. Ok. That'll be almost $100 for four pillows.

That's breaking the bank.

Oh well. What do we do with these sly marketers? Grandma wanted to make one for her. She was going to design a pillowpet and add the "patented" hook and loop strap.

Suggestions


Here are my suggestions for not falling for these marketing people:

1. Watch less TV, you'll be bombarded with less commercials
2. Stay out of malls, toys r us and other large stores that offer many temptations for kids.
3. Teach your kids to be content with what they have.
4. Give stuff as a response to your desires for wanting more stuff.

Anyways, there's more, but most important it is the heart of the child that is the main issue at hand. Learning to say NO and learning to defer gratification is a discipline that must be learned. We are not naturally inclined to say NO. We are not naturally inclined to be disciplined in saving and spending. When temptations are too great and many toys and gadgets overwhelm us (even adults, let alone kids), we just have to have it... we can't say no. We need help. We need a third party or some other menas to help us to put things into perspective.

If someone can't handle saying no, then we help them a little at a time. Don't overwhelm them with such great desires they cannot control. This is same with adults. I know if I walk into a Best Buy or Microcenter, I start to drool. I like electronic gadgets. I like to touch them and play with them. But I also know I have other responsibilities that are greater than buying the latest toy. So my conscience, with the help of being reminded of my responsibilities to my kids, my wife, my family, I try to seek that which is most beneficial. I'll run these scenarios in my mind, cost benefit analysis, utility, enjoyment, what are my goals... etc. Stuff that will help me to see if this is truly a WANT or a NEED.

But what about a child who only understands. I want this? Well, this is a definitely a teachable moment. I've taken my daughter to Toys R Us many times. And each time before I enter the store, I tell her: "When Daddy says let's go home, it means time to go home."

This doesn't really teach her to defer gratification, but it does teach her that at that time, what "Daddy says is best for her." And for ToyRUs is a great place to play with toys without actually having to buy them. So we make it a fun little date and hopefully she'll realize that it's not the stuff that she has that makes the experience, but who she's with and where her heart is directed that matters.

We'll see. We live in a very materialistic culture and it's going to be a huge battle (I already foresee it) to discern that which is best versus that which is not so good.

Lord have mercy on us :)

Monday, August 2, 2010

Net Worth July 2010 (+2.75)


Net Worth for month ending July 2010

Our updated net worth for end of July 2010. We moved some of our money into the mortgage to slowly bring it to 20% LTV. I've been listening to some podcasts on real estate investing. They're telling me to put as little down as possible and have as much in liquid assets as possible. That way you increase return on investment or ROI. Well this goes totally against the Dave Ramsey philosophy of having no debt, but I kinda like both.

A Look at ROI

So we'll see which philosophy wins out in my mind. An example of ROI is if you buy a 200k house and put 10% down you "invested" 20k. Let's assume an appreciation of the house instantaneously to 250k giving you a profit of 50k (just for an easy example). Your return on investment would be your (profit - original amount)/original amount = (50k-20k)/20k = 150%.

Example 2 would be if you put 20% down on your 200k house which would be 40k. If appreciation remains the same, your 50k profit would bring ROI of (50k-40k/40k) = 25%. Anyways, ROI for this house would only be 25% because of the larger original downpayment.

So real estate investor would like to leverage as much as possible to gain the largest ROI as possible. Anther way to put it: Use as little of your own money by borrowing other people's money to make as much money for yourself as possible. See how this leads to corruption and greed... or is it the other way around? Greed makes us want to use other people's money to make us as rich as possible. Anyways, that's what investors look for. Maximizing your return on investment.

Savings

Currently we have about 70k in retirement and savings (college) accounts. We hopefully won't be touching that for another 20+ years. Our largest liability is our home mortgage which is currently at 173k. I want it to be at 172k for 80% LTV.

Well, that's it for now. Let's see how much we can save and make next month. What can a budget do for you?

Tuesday, July 20, 2010

Expense Report: 2010 Midyear review

Here is a look at how much we've been spending for the first half of 2010.


We spent on average $4,150 a month.

Breakdown (percent of salary):
35% Home
19.6% Gifts & Donations
12% Food & Dining
7.8% Auto & Transport
7.8% Bills & Utilitiess
5% Travel
3.3% Other


Our take home pay over these 6 months was about $28k which means we were able to save about $500 a month or about 9.5%. Let's see what the next 6 months will bring us.





Updated Post: 2010 2nd Quarter Expense Report

Forgot to post this last month


(44%) Home
(21%) Food
(14%) Giving
(9%) Utils Bills
(7%) Auto

Since this included April, we had a huge tax return... go figure with our new house and all...
2nd Quarter Income: $23.4k
2nd Quarter Expense: $10.8k
2nd Quarter Net Income: $12.6k SURPLUS!

That's a great sign :)

Wednesday, July 14, 2010

Where should we start?

Just went through the six month review of the finances with my wife.  Where did we start?

Here is a list of articles that we went through:

Financial Goals for 2010 - I wrote this at the beginning of the year.  How are we doing?
Average American Budget - A good comparison on how we spend compared to average Americans
Family Budget for 2010
Net worth as of June 30, 2010

What are we spending our money on?
Basic spending over the last months - broken down by categories
Expenses:Food - what have spent over the past three years?
Expense:Auto and Gas - spending on cars over the past three years
Expense:Utilities
Comparing Renting vs. Buying - Our decision to buy vs. renting

What are our goals for the future?
Goals for Saving for College
Travel planning
Giving Goals for 2010

Monday, July 12, 2010

Spending by Category - May 2010

Here's the spending report for May 2010.  In comparison we have been eating a lot or just stocking up on a bunch of groceries.  Our June auto expense included two new tires for the mini-van.  Our giving and other funding have been fairly on track.  Same with utilities and other expenses.  I am hoping to reduce our utilities in the near future.  We'll see how that works.

Spending by Categories - June 2010

Here's a look at our June spending.

Thursday, July 1, 2010

Net Worth June 2010 (+2.80%)

This was a weak month, but oh well. Let the numbers speak for themselves.  Cash has been increasing but investments fluctuated.  Meaning we had positive cash flow.  We haven't tithed yet this month, so will have to do that.


Wednesday, June 23, 2010

Having a THESIS for LIFE

Over the past few months, I've been thinking of my career, my family's direction, our calling, our responsibilities and our commitments.

One of the things that we have been created for is community. We are social creatures and we need constant interaction with other people for nurture, development, and growth. It is within community that we find faith, love, morality, manners, social norms, etc.

As babies, infants, children, we were made to be receivers and as we grow up and mature as adults and parents, we become providers. There is a continued spectrum from being dependent, independent and being interdependent. As we grow older we not only grow less dependent on our parents and grow independent, our maturation also brings us to a place of interdependency where we realize that there is a give and take aspect within our community and society.

And this interdependency in a lot of ways is a calling, responsibility and a commitment we have to make to one another (as people of the human race on a macro level) but also within smaller levels as well including, family, company, city, state and other levels.

What is the best way to achieve these goals? Americans have a funny saying: life, liberty and the pursuit of happiness. This motto gives us an brief insight into the freedoms we want as well as the freedoms we want to ensure that others have.

Christians, especially those of the reformed faith quote the Westminster Shorter Catechism answer to what the chief end of man is:

To Glorify God and to Enjoy Him Forever.

It is this underlying "thesis" that provides a Christian with direction and perspective to life. A realization that there is a God, that we were created by him and exist to glorify Him and to live not as hedonists, but as "Christian Hedonists" as Pastor John Piper so aptly puts it.

When you have this "Prime Directive" in life, education and learning, as well as calling and career takes a much different route than if you had no overlying directive. Education, career, family, having kids, money, society, etc. is seen in a much different way than if you believe something else. There is a difference when God is the center of life than when we place family, or kids, or education, or career in that center.

So what is your THESIS in life? How does it affect the way you live? How does it affect how you interact with other people? How does this affect how you spend money? How does this affect how you decide about family? How does it affect your view of kids? How does it affect your view of free time?

My final question is this: Are you consistent with your THESIS in life? I've had this debate with so many people that I've come to the conclusion that most people don't have a working THESIS for life, and if they did, they are not consistent with it.

So what is it? And are you consistent with it?

Leaving an inheritance (THESIS) for my children's children.

Tuesday, June 15, 2010

The Mexican Fisherman

I was looking for this story after having read it in some book...:

here's the link to three different Fisherman versions. I'll leave you with one.



The American Dream

An American businessman was standing at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellowfin tuna. The American complimented the Mexican on the quality of his fish.

"How long it took you to catch them?" The American asked.

"Only a little while." The Mexican replied.

"Why don't you stay out longer and catch more fish?" The American then asked.

"I have enough to support my family's immediate needs." The Mexican said.

"But," The American then asked, "What do you do with the rest of your time?"

The Mexican fisherman said, "I sleep late, fish a little, play with my children, take a siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life, senor."

The American scoffed, "I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds you buy a bigger boat, and with the proceeds from the bigger boat you could buy several boats, eventually you would have a fleet of fishing boats."

"Instead of selling your catch to a middleman you would sell directly to the consumers, eventually opening your own can factory. You would control the product, processing and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually NYC where you will run your expanding enterprise."

The Mexican fisherman asked, "But senor, how long will this all take?"

To which the American replied, "15-20 years."

"But what then, senor?"

The American laughed and said, "That's the best part. When the time is right you would announce an IPO (Initial Public Offering) and sell your company stock to the public and become very rich, you would make millions."

"Millions, senor? Then what?"

The American said slowly, "Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take a siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos..."



It reminded me of what I did last week before I caught a cold. Played some tennis, went swimming, spent time with my kids and took my wife out for lunch. I guess you can do it in a poor fishing village or pretty much anywhere. It's just a lot harder when you have a 200k-500k home mortgage, monthly car payments, 50-100k school loans, and other debt that you have to worry about. We have kept ourselves relatively debt free with the exception of the house payments.

Anyways, set a goal for your life. What would you like to be doing in 5, 10, 15 years from now? What's stopping you from doing it now? Plan ahead!

Asking for the promotion

Well, my last promotion was in July of 2008 and since then I've received annual locality pay adjustments. I finally pulled my production up past 120% and of course nearing almost two years without a grade promotion, I decided to ask my supervisor for the next grade promotion.

I got really nervous. My numbers spoke for themselves, but I still had that fear of rejection or something inside me. What if he said no? What if he thought I wasn't ready? Anyways, all that's history now. This morning I asked him and he agreed it was time for me to move on.

So, I'm finally back to where I was before I left the government and moved to China. Kinda like the stock market, kinda like a do-over, a course correction. Pay scales are actually pretty relative even though most of the federal government uses them. I actually started my current position at the same level as when I started at my first job. But this time around, I stayed.

In any case, I'm well behind if I stayed at my first position back in 2001. It took me nine years to "return" back to the same grade as when I left the government back then. It took me two years to attain this level back then. It took me nearly four years at the current job.

But believe me, I'm not complaining. This is like a dream job. Flexible, challenging, in constant contact with attorneys and inventors, seeing the latest innovations and a broad range of technologies... time with wife and the kids, time for study, time for church, family, and friends. Not to mention great pay. In contrast, my previous position required constant traveling, night time work, field testing, as well as seeing the latest prototypes and military technologies. But in terms of a holistic comparison, my current position certainly is heads above the rest with the possibility now of working from home (once I pass an exam).

As this stream of consciousness post come to a close, just wanted to encourage you to not be afraid to start over, go for the promotion, realize that work/career/job is more than about money, the journey and experience is just as important.

Tuesday, June 1, 2010

Net Worth: 2010 May (-7.04%)

End of month report for May 2010.


So a little bit of fluctation in our property price, investments were down about 5k or a 5% drop. We also put in 3k into the Roth accounts.

Other than that, we did fairly well this month despite the bleak financial outlook in the rest of the world. Oil spill, Euro/Greek crisis, North Korea, Thailand, China, and other stuff that I don't even hear about... espcially in Africa like Uganda, Nigeria, and the Congo... So keeping my global ears open while we prepare for our future and for our children and our children's children.

Blessings!

Monday, May 31, 2010

How much money do you need to be happy?

TED has an interesting talk about Happiness is Earning $60,000.

The Q/A is around 17:15 minute mark. Interesting research..

“Clearly… money does not buy you experiential happiness, but lack of money certainly buys you misery,” he said. But the real trick, Kahneman said, is to spend time with people you like.

I remember as a college graduate, I thought that as long as I have $10k in the bank, I'm all set. Ever since then, that magic $10k has always been in the bank but money has been growing elsewhere, including house, investments, cars, etc. But we have kept about $10k in cash just to be there and I feel satisfied.



In any case, Happy Memorial Day. Enjoy the freedoms and remember those who sacrificed their lives for those freedoms we have.

Friday, May 28, 2010

Family Traveling

This expense is probably one of the most variable, but over that past three years of marriage we have spent almost $3000 in traveling expense. This includes trips out to the west coast, trips up north, hotel rooms, rental cars, etc.


As you can see in this chart, there are months where we stay mostly in the DC area, and the huge spikes represent airplane travel, the small to medium spikes usually indicate hotel rooms.

In any case, according to mint, we've averaged about $87/month in travel expense. Not much I can do about that.

We do want to save up for trips overseas as well. A trip to China would probably cost us $1000 each for airfare plus other expenses like taxi money, hotel, and food money. However, if we do go, I'll probably file some of the expenses under Education since trips like that would definitely improve our Chinese language/culture.

We'll see how that goes. I'm slightly dreading those trips already.

Leaving an inheritance for my children's children.

Wednesday, May 26, 2010

Expense: Gas and Fuel

The latest spill in the Gulf of Mexico made me reconsider how much gasoline we are using.  I know one person can't make that much a difference considering the millions of gallons (thousands of barrels) being spilled daily.  In any case, here's a break down of our gasoline usage.  We currently have 3 cars (though like I said in my previous month's rant, I'm getting rid of some).


Fuel Economy

We average about $163/month in fillups. If we go with today's average gas price of $2.90, that comes out to about 56 gallons of gas or about 1400 miles @25mpg per month.

So for a 30 day month that amounts to about 47 miles/day. A trip from our house to church in our minivan (20MPG) for example is about 40 miles roundtrip costing us almost $6. A lot of our relatives live in Springfield/Alexandria. A trip out there is 27 miles if we take 495-66 and 22 miles if we take Fairfax County Parkway. Either case, it would be about 50 miles roundtrip on average costing about $8 per trip out there.

A drive to work using George (somewhere between 35-40MPG) is about 28 miles or 56 miles roundtrip. So it'll cost about $4.50 on average for a round trip. This is well cheaper than the metro, but not when I got the transit subsidies from work. It's an unnecessary expense, a luxury actually when I drive. It saves almost 2 hours in my commute especially if I drive during the non-rushhour times.

Driving is a Luxury

Can I afford it? Of course I can afford it, but can the planet afford it? Our tendency is to think only of ourselves, but the logical conclusion of that is the congestion in the roadways, the dependency to oil that we may or may not deplete within our lifetime and the unnecessary drilling offshore and in places like Alaska, etc. Sure I may be conservative in my spending, but I also hope to see myself being a good steward of our natural resources, you know, God's creation. But I know I also have the tendency to consume and if everyone thinks that they need to follow the lifestyle of the developed world, especially the developing countries, we (ALL) are in deep trouble.

Soapbox anybody?

Here's my rant: Americans (myself included) and other developed nations have been very negligent of the world's resources because these are luxuries we could afford. The problem is going to arise when the developing countries including China, India, Brazil and others want similar luxuries and similar lifestyles. Technology will improve and more innovative ways of energy may follow, but if we continue on this current path, we'll end up with more oil spills, more wars, and less and less resources.
(Note: the latest Economist has a great section on WATER, go read it)

So here's a challenge to the rest of you out there... what are some ways we can reduce, reuse and recycle? What areas can we be less of a consumer and more contributors? What areas can we be innovative in consuming?

I like new stuff, I like cool gadgets, I like new toys, but I also realize so does everyone else. If everyone continues to buy buy buy, if this continues something is going to give and by that time I hope our desire to consume would be somehow satisfied. But I know the human heart has a God-shaped vacuum that can never be satisfied. We'll fill it with stuff and continue to fill it with stuff and will not be satisfied. That's just the human condition. It cannot be satisfied without the infinite glories and joys of God himself, but until then let's hope and pray at least you and I will be satisfied with life.

I'm not frugal because I'm cheap and want to save a lot of money (ok, that's also a reason), I also see now, that being satisfied with what you have helps the environment and helps us to be good citizens of this world.

As a friend used to tell us: leave this place better than when you first came in. Well, the way we're headed it might not be. But I surely hope we can do better.

Leaving an inheritance for our children's children.

To God be the glory.

Expense: Bills and Utilities

This is one expense that we can try to tweak, but more or less it has to be in order to maintain our current level of lifestyle.

Components

Our bills and utilities include:

  • Gas
  • Water
  • Electric
  • Internet
  • Cell Phones

Phone and Internet

I've stated in the past we could probably reduce some of our usage. Especially Internet and Cell Phone, but we have a fairly good deal. We currently have 6 people on our family plan and average $135/month coming out to about $23 a person. Not bad, but of course it could be better. We had a couple months where we had overage, random internet usage fees, and unnecessary texting (which we don't have a plan). I actually like the way China and most other countries does it where only the person sending the text is charged but here the companies double dip from both the sender and receiver of the text message. Oh well.

We're paying $50/month for Internet. We've considered sharing it with our neighbor, but we haven't had a chance to talk with him, since he's been out of town for most of the month.



Final Analysis

According to Mint for the past year and a half we've spent on average $339/month in utilities.

This comes out to be about 8.5% of total budget for the month which is slightly under what we planned for 2010. Nice going!

What can a budget do for you?

Friday, May 14, 2010

Obsession with Net worth

Well, NY Times has an article that looks at the psychology of people who track their net worth and other issues. This Net Worth Obsession as they put it is picking up steam. I thought I was just paranoid with tracking our spending, but with the recession and the high unemployment rates, it isn't really surprising that some people are going to have to cut back on their lifestyle.

I don't know if it is just knowing how much we have, how we compare with others, or just for the sake of security, etc... that we keep track. I think more than anything it keeps us focused and on the goal, leaving an inheritance for our children's children. If we spend too much we will start borrowing from our future and if we spend too little, we miss out on life. So finding that right balance is the key.

I hope you guys read that article. I think it is kinda funny how other people view money.

Enjoy!

Wednesday, May 12, 2010

Reduce Energy Bills

lower your electric bill infographic
Lower Electric Bills Graphic

Stuff we have done in the past couple of years: we got rid of our second fridge, re-did our insulation in the attic, got newer appliances, lowered the heat and A/C, limited usage of rooms...

unfortunately we have a side by side refrigerator... and one with an ice maker.

Stuff we still could do: insulate hot water pipes, new washer/dryer...

Monday, May 10, 2010

Investing: Turbulence in the market

Bad News

The last two weeks have been really bad in the stock market. Bad news always spook investors and we were full of bad news. It's these surprises that shock the market including the Oil crisis in the Gulf of Mexico that could wreck the ecosystem, environment, economy, and the way of life in that part of America... and of course the credit crisis in Europe that could derail the Euro and even the EU.

Equipped with the Economist and just having read Only 3 Questions, I feel like was a quick shock to the system, and I was pretty confident the markets would be fine in a week or two. Even as I type, reports of the "surge" is happening in the financial world. After nearly gaining 80% our portfolio this year, we had about a 20% decline in a matter of 2-3 days. In the past, that meant panic selling of stocks to retain as much cash as possible before more blood is spilt. Make the bleeding stop.

Stay on TARGET

But this time around, along with the confidence of my older sister, we waited on the sidelines and even bought as the market had major a correction, even a one day drop of almost 1000 points in the Dow Industrials. I also went in the day after that drop happened not knowing whether it was going further down or not.

Is this crazy? Like I said before, most of our investments are locked into 401k and Roth IRAs. This means we won't be able to touch it in 20-30 years, which means we have a long time horizon. Even if stocks dropped 20-30 percent, we still have time for it to recover. Whick I hope sooner rather than later.

There are too many crazies out there

But in any case, as I scope the panic selling, I notice that many of the solid companies were just being sold because everyone else is selling. The crazy overreaction towards the market was irrational. Just like the crazy bubbles during the Dot Com and Real Estate were irrational. So you got two very irrational feelings moving the market in two very different directions. The only RATIONAL thing to do is to stay calm when you are MAKING a lot of money really fast... and stay calm when you are LOSING a lot of money really fast. The market will correct itself sooner or later.

When rational, sane minds come back, the market will resume it's course. But along this ride will be irrational EXUBERANCE of 1990s and mid 2000s and you will also have irrational FEAR as in 2000-2001 and 2008-2009. Both cases will inevitably return to a more rational market because irration is not sustainable.

Invest in your Sanity

So here's to investing. Buying and owning companies that produce jobs, create innovation, grow America, and develop the world. That's the right thing to do.

What can a budget and an investing plan do for you?

Wednesday, May 5, 2010

Expense: Auto and Transport

I thought our Food Expense was the one area we could slim down, but I was mistaken. I think our #4 expense is one area we could actually cut tremendously, our Auto and Transportation expense.


Fuel Economy

In the past 33 months we have spent almost $5.4k on gas and fuel. This comes out to be about $163.15 a month or about 56 gallons @ $2.90/gallon or about 1400 miles @ 25mpg per month.

We currently have 3 cars, of which one I hope to get rid of two as soon as possible. A 1990 Honda Civic wagon (George) which gets an incredible 40mpg on the highway and a 1999 Ford Ranger (Deacon1) which gets an awful 15-20mpg depending on its mood. We also have a 1999 Nissan Quest (Mini) that gets anywhere between 20-22 depending on how we drive and the weather.

Our average usage is probably 70% Mini, 20% George, 10% Deacon1 which comes out to an effective rate of about 25mpg. In any case, we could be doing better.

Insurance

Our auto insurance is about 2,664 over these next 33 months plus months until August. So that averages to about $72 over 37 months. We have also hopefully reduced this amount as we have slowly moved from one insurance to another. This number will definitely be cut down, but the damage has already been done.

Repairs

As for service, we have spent about $2.6k over three years. Looking back at our numbers that included 5 major repairs, 6 oil changes, 3 oil changes by hand, and dozens of stops at advance auto for various other things. The major repairs alone cost $2,168. So I guess we've been okay avoiding major bills (I guess). 1 involved axle, 1 involved ball bearings, 1 involved suspension/steering, 1 involved brakes, and 1 involved something I should have written down.

Parking

The final major subcategory is parking in which we spent $683 over these 33 months. It doesn't come out to much, but a lot of it could have been avoided. We were towed by the local HOA 3 times. Poor George. Those tow guys had a thing with him. We also had a few tickets when we parked in front of the bus stop and forgot to get our inspection done. Poor George. I also work in Alexandria, so whenever I wake up before 6AM and feel like a quick day, I would forgo the 1.25hr (but subsidized) metro ride and drive in to work. Parking and parking meters are also an expense I could have avoided. I've since found some spots that have 3hr parking and if I get there early enough and walk an extra mile. But that's good for my health and my wallet.

So that could have been almost $700 in unnecessary expenses.

Conclusion

Overall, we could have saved $700 for parking expenses, $1000 in auto insurance (had we switched earlier), and about $1120 if we cut back 300 miles a month. This savings is about $85 a month. And using our nifty Future Value Calculator, $85/month at 10% return for 30 years will give us a whopping $167k. This would be more if we actually got rid of our cars... which would inevitably force us to drive less and change our lifestyle.

What can a budget do for you?

Update

This is how we are actually doing this year.


We're a little bit high on Fuel Economy, Parking is a minimum, Insurance and Repairs are just below target, so overall we just need to drive a little bit less and get better fuel economy.

Tuesday, May 4, 2010

Expense: Food and Dining

So last week my wife and I were talking about our savings plan. Over the course of almost 3 years we have tracked our expenses through Mint.com.

Our number one expense has been our mortgage/rent. Number 2 has been our giving and donations. Number 3 has been Food and Dining.



Over the past 33 months, our food expense averaged $511/month and our groceries averaged $377/month. We spent almost $17k on food. This comes out to be about 13% of total income. My wife has done a great job over these years in finding great deals and I hope this trend continues.

Our goal hopefully will be bringing that number down to $400/month or about 10% of income. In any case, most of the big spikes in our food expense was due to eating out... and treating friends to nice meals. Mostly people from out of town who come in to visit or some other special occasion. So if we are able to save that 3% and put it into savings, that could go a long way.

What can a budget do for you?