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.

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.



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.


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.


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.


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.


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?