Tuesday, February 16, 2010

Happy Chinese New Year 2010: Year of the Tiger

Happy Chinese/Lunar New Years!  As the Chinese would say "Gung Hay Fat Choy" loosely translated to "Congrats, you're rich!"

Just recently we've met/talked to people with varying levels of expertise in finance and investing and real estate stuff and that got us thinking... how much should we be investing and what type of return should we be getting?

I come from the "slow and steady" or "gather little by little" philosphy and that requires a larger time frame like 20-30 years in order to reach your goals. I think this is necessary since we do have 2 kids and we plan on seeing their kids and their kids' kids. So 20-30 years isn't THAT long a time frame. We only have to look at my parents as an example. By the time we're 50 or 60 we will be well enough off to start another career, spend more time with family and travel as much as we want.

But as I talk with more people, they don't want to wait until they are 50 or 60. They want to do by 40 or earlier.  So many people try to accelerate their income, investing/gambling in higher returns but also bringing on greater risk.  There are many other investment strategies, flipping real estate, leverage your way to wealth, daytrading, starting your own business and stuff out there that smarter people know more about than I.  So, I'll leave that to the professionals.

We're currently on the: make as much as we can, save as much as we can, and give as much as we can.  We have about 64k in retirement/savings and 32k in unrealized property gains (of which we have already put in over $50k for downpayment and renovations).  We have about $9k in cash for short term use.  That totals to around $105k. 

So what are our updated financial goals for the Chinese New Year? 
- Paying off our loans ($12k in TSP)
- Pay as much principal off our mortgage as possible ($13k to go below 80% LTV)
- Start saving $40k for investment purposes (starting business, rental property, etc)

My father used to say you can make money with money, and of course I see the logic in that.  Many people leverage/borrow to do their investments and for some that is a great way of doing things.  You have a much better payoff but along with it is greater risk.  It's risky because if your business or investment doesn't pan out you're left with a huge pile of debt and possibly bankruptcy or foreclosure.  If you can start a business you can afford with cash on hand and possibly with little to no debt, you're on much better playing field.  It's also much safer for us as a family since we do have two small girls.

So for us it is by changing our philosophy from "retirement at 40" to "leaving a legacy or inheritance for our children's children".  We need to broaden our horizon, broaden our timeframe. 

See what a budget can do for you!

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