If you’re a regular here, you would be aware of my interest in fun interactive tools and web sites on the subject of personal finance and money management. I’ve already showcased quite a few interesting tools here.

But this time around, I thought to show you this CNN Money graphic that gauges your financial health. If you enter your age and income, it will let you know how your family finances are doing along several tracks, based on conventional financial principles and recommendations. After I answered the questions, I only got a grade of “B”. Well, let’s take a look at where I need some improvement — I’ll go through the various financial categories to discuss the results I got for each:

Click the image to try out the tool!

My Family Finances

Our Housing Payment: I’ve got to be careful here because my family spends too much on housing. So currently, we spend more than 28% of our gross income on housing related expenses and that’s a no-no. But we have a few good excuses for this: first, we live in an area where the cost of living and real estate costs are considered insane. Second, we have a 15 year fixed mortgage which will be paid off fairly soon. So the money we’re putting towards our home isn’t as bad as it seems since most of it is now going to principal. Third, we can try to do more to increase our income, which we believe we can do over time.

Our Debt Profile: Again, our debt picture looks cloudy on account of our mortgage, but only if you don’t see the big picture. However, our mortgage is the only real debt we carry and I’ve justified its existence. Good debt should be fine, right? Plus, this mortgage won’t be hanging around for too long.

Our Emergency Savings: We’ve got ample funds in high interest savings accounts and other safe, liquid investments, so we scored well here.

Our Asset Allocation: Apparently, we’re not aggressive enough. The “120 minus Your Age” rule was used to point out that we’ve been too conservative with our investment portfolio. According to this investment rule, we should have 80% of our portfolio in the stock market (120 – our average age). Eh, I’d say we should consider our risk profile here as well, and by taking that into account, we feel perfectly fine with our asset allocation at this time.

Our Company Stock: The tool suggests that we keep our company stock ownership to 10% at most. We’re way below that.

Our Life Insurance: The rule here is to have enough life insurance to replace at least 5 years of your salary (or up to 10 years if you’ve got dependents). If you have no dependents, life insurance is optional. We also scored well here.

Our Retirement Savings: The tool complained that we should beef up our retirement savings a bit more. A couple of things about this: perhaps we don’t plan to retire in the traditional sense — I see ourselves continuing to work on things (perhaps on income generating projects) that we enjoy, well into our golden years. The worst case scenario? Sell the house and move somewhere cheaper!

So how about you, care to try this out and tell us your score?

For more personal finance, do check out my suggested readings below!

Personal Financial Articles

• Free Money Finance: What Made You Care About Money?
• Wise Bread: 15 Ways To Manage Risk In Your Financial Life
• Len Penzo: A Layman’s Guide to Mortgage Application Junk Fees
• One Money Design: Values and Personal Finance: Letting Values Determine Goals
• Lazy Man and Money: Amazon Friday Sale – Health Edition
• Pinoy Smart Life: Tracking My Daily Expenses
• Bad Money Advice: Why Go to College?
• Dividend Tree: Clarcor and ConAgra can Sustain Dividends
• Cash Money Life: Top 10 Consumer Complaints And How to Protect Yourself
• Darwin’s Finance: Why Verizon FIOS is WAY more Expensive than you Think
• Brip Blap: Leaving The NorthEast, A Retrospective
• Intelligent Speculator: Apple-AAPL-A Stock To Buy?

Recent Carnivals

• Carnival of Personal Finance: I am thankful to Studenomics for selecting my post on fast cash loans as an Editor’s Pick! It’s been a while since I’ve received such a special mention, so I’m pretty happy.
• Money Hacks Carnival
• Carnival of Financial Planning

Family Finances: How Is Your Financial Status?

YNAB Pro Giveaway Code: fibonacci

What would you like to do when you grow up? That’s the standard question we all ask our kids at one point or another, when dreams are sweet and fertile and options are limitless. When I was a kid, I wanted to become a professional tennis player and a horse trainer, and at one point, I even wanted to be a nun or a priest (can’t tell you why but I remember this phase).

Anyway, now that I’ve reached the halfway point of my existence, the question I ask myself today is: what would I like to do when I retire? I pretty much know what I’d like to do…. I’m going to be completely unexciting and tell you that at this point, I only want to keep doing the same thing I’m doing now, because in a way, I feel like I’ve already “retired” — at least from the 9 to 5 workforce. You may or may not remember the following posts I had written some time ago, when all I aimed for was a flexible schedule.

• Ready To Retire Right Now? Find Out If It’s Time To Quit The Rat Race
• Why I Want To Retire Early, Change Roles and Live On One Income
• Quitting My Job, Retiring Early: 5 Steps To Lifestyle Change

So What’s Your Retirement Plan?

The term “retire” really is a misnomer of course. All it means is that you’ve entered a phase in your life where you’re doing what you want to do — on your own terms — whatever it is. I believe that retiring simply means having enough time in our hands to do whatever it is that we want to do, to know what it is that we’d like to do, and finally, to actually enjoy those activities that we now have time to pursue. In my mind, I would say that you’ve retired if there’s no other place you’d rather be, than where you are right now.

So what is your picture of retirement? I know lots of people who enjoy traveling, though I did find it interesting that the survey I featured in my post called “Time Is Money” showed that many senior citizens (and I suppose, retirees) don’t spend as much time on travel as younger people do. Do you think you’d fall in this boat? Have you considered thinking about the activities you’d like to pursue as a retiree?

I will say that I feel quite inspired by this one fellow I found on CNN: he’s a 93 year old stock broker who’s been trading and investing for over the last 74 years. To watch the video about this gent, click this link or the image below.

He wakes up at 7 AM, works till 4 PM and pretty much defines his days around the financial markets. After trading, he even manages to have the energy to visit his trainer for some weight training sessions. Plus, I’m impressed by just how computer savvy he is: he keeps one computer screen on the markets, one on clients and one for all other miscellaneous computer activities. He’s the man! Now you may say that he’s decided to never retire, but I’ll argue that he’s been in retirement for a while now!

I’d love to be just like this guy if I’m ever fortunate enough to get to such a ripe old age.

That’s my inspiring financial story for today. So what other cool financial stories are out there? Let’s see what the PF community has to say this week:

Personal Finance Articles

• Wise Bread: Make Your Computer Faster
• Free Money Finance: Is Speaking More the Way to Grow Your Career?
• Five Pence Piece: My Financial Meltdown: Part 3
• Lazy Man and Money: Make Money Without Another Job
• Brip Blap: Take Small Risks
• Dividend Tree: Start Running Only After Knowing the Finishing Line
• One Mint: Bing Cashback!
• The Financial Blogger: 6 Killer Questions To Ask HR About Your Pension Plan
• Gen X Finance: Add More Tools to Your Financial Toolbox to Solve Money Problems
• My Dollar Plan: When Saying Goodbye to $1030 is a Good Idea
• Frugal Dad: Five Lessons I Learned From My Own Frugal Dad

Recent Carnivals

• Best of Money Carnival: If there’s any carnival I always hope to make — I cross my fingers each week — it’s this one. I’m very grateful to the Studenomist for this honor: thanks for selecting my post on how to get promoted at work for this week’s edition!

My Retirement Plan Or What I Plan To Do When I Retire

YNAB Pro Giveaway Code: fibonacci

INGCompareMe is a new web tool from ING that helps you compare your bank balance, savings and investment levels against those of your peers.

The first rule in finance? Know yourself!

Are you curious about how well you stack up against others when it comes to your personal finances? Do you wonder what your net worth should be by now? We receive a lot of this kind of information and transparency through tools like Mint, Wesabe and NetWorthIQ, which also have a community feel built around them.

I like free tools like these — there’s always something new you may be able to learn about yourself when you use them. So when I heard that ING just launched a new peer comparison tool called INGCompareMe a few days ago, I decided to check it out.

INGCompareMe, A Free Savings Comparison Tool From ING

Here are the tool’s objectives:

It lets you see how you measure up against your peers, those people with the same profile as you have. ING asks you a bunch of questions, and based on your response, you’re scored for how you handle your money. You can then analyze yourself in various financial areas such as saving, spending, investing and debt management and gain visibility on how well you’re doing.

Once you see where you stand, you may decide to take action, as peer comparisons can be pretty motivational. By knowing how others are doing on average, you may feel inspired to do a better job with your money. Maybe subtle peer pressure works in this case?

Compare Your Bank Balance With Those Of Your Peers

ING initially surveyed 5,000 people who were saving for retirement and the data they gathered here is what’s being used for comparison purposes through the tool. Here’s what else the survey found: those people who spent time dwelling on their finances more often saved 60% more than those who didn’t. I guess that makes sense! If money and your finances are a priority for you and happen to be in your mind often (in a positive way), I can see why you’d be doing well in this area of your life.

The data you enter then gets incorporated in the information used by the tool; there are measures in place to ensure that the comparative data remains fresh and current, and accurately reflects present conditions.

So how do you use it? It’s pretty simple really. As I’ve mentioned, INGCompareMe has a simple questionnaire you fill up about yourself and your habits / interests (for profiling purposes), after which you answer a set of questions about your finances. Throughout the process, your identity is kept completely anonymous. You won’t have to worry about anything since they don’t ask for sensitive information at all.

Here are some snapshots of this application:

Your retirement savings are compared against those of your peers.

How much credit card debt do you carry?

After I looked it over and entered some information, it allowed me to print out a report that detailed my results. Here is the PDF report that it generated for me (this is just a sample).

I appreciate how ING took the time to prepare a cool tool like this to help us evaluate our financial picture. I’d use a profile analysis like this to gauge my financial health. Do you think this helps? How does your money stack up?

ING Savings Comparison Tool: Compare Your Bank Balance With Your Peers’

YNAB Pro Giveaway Code: fibonacci

Our Personal Financial Goals and Updates, The Year In Review

Like several other bloggers, I ended up quitting my job in early 2008. I didn’t expect that the rest of the year would go to pot, financially speaking, and if I knew this ahead of time, I may have thought twice about leaving the workforce!

I see the year 2008 as the year our investments plummeted by 30%, our income lowered by 40% and our expenses shaved by 25%. It was a year when things shrank. By a lot. But by the same token, our stress levels, in general, have diminished as well, thanks to some lifestyle changes we’ve made that meant adjusting to work and life on our own terms (as our own bosses) but with a much smaller household budget.

As things stand right now, the digerati spouse is still tinkering away with his business ventures (the one on digital cameras is moving along), as am I. We both try to supplement our business revenue and earnings through some contract jobs we pick up on occasion. Let me just say that I do miss the income stability of a full-time job though! I still debate with myself whether I should reconsider going back to the 9-to-5 (is the grass always greener?) now and again. So far, plans towards this end haven’t materialized to any degree. I *still* have to update my resume and LinkedIn profile as a start, and I haven’t gotten around to doing this just yet.

2008 Financial Goals Check Up

I had financial goals all drawn up for 2008, 75% of which I believe I’ve been able to fulfill. Last year’s accomplishments:

1. Launched a new blog called The Smarter Wallet. Sorry, no Cafepress store in the works at this time.
2. Began doing some freelancing projects. I’ve joined Wisebread and ePlay as a contributing blogger.
3. Growth on this site met half of my blogging goals for the year, so it’s all good (fell short of subscriber growth but handily beat visitor traffic goals).
4. Investment growth failed miserably, as you’d expect!
5. We managed to get additional life insurance, as I’d hope we would.
6. The biggie: I left my job early last year!
7. Health goals: I’m devoting a whole discussion on this below.

Looking Ahead To The New Year

With the country smack dab in the midst of an economic slowdown, I’m not quite sure what to expect of the upcoming year though I remain hopeful and wishful that things will start turning up eventually. Our goals for the new year are simple — that we can close the gap further between our income and expenditures, so that we can start saving again and not just keep “treading water” or bleeding our existing savings dry. This means tending continuously to our business projects and even the possibility of looking for extra income and additional work in some capacity, and to quit spending on non-essentials. We’re getting there, but it’s all truly hard work mixed with some worry that we’d be able to stay on track financially.

Health Goals Discussion

I’m also wishing that we all maintain our good health going forward. I’ve been in poorer shape in the past and had some medical situations that were just recently resolved thanks to the lifestyle changes and work adjustments I’ve already mentioned. So my goals to improve and then maintain my health and fitness level are those that still top my list. I’d say I met this goal to some degree in the past year, since I’ve successfully cut down on medical and health-related expenses over the past several months. I am now more convinced than ever that if you need to heal yourself, one way to do it is to quit the rat race for a bit of time and get your bearings. I got sick of spending the money I was earning at my higher stress corporate jobs to pay for healing tonics and medically prescribed stress relievers. If you’re going to choose between health and money, wouldn’t you say it’s a no-brainer?

My Personal Goals for 2009

In summary, I have some fairly simple personal goals:

1. Live beneath my means, as the cliche states, and begin saving again (this is a family goal).
2. Keep fit, stay healthy, be healthier and trimmer. Everyone’s favorite resolution!
3. Keep blogging. Maybe hit 2,000,000 uniques within the year?
4. Increase my personal income by an additional 25% above last year’s earnings.

Something I won’t specify is how I’m going to manage increasing income in the midst of the recession. It may entail reentering the workforce or it may just mean adding more paying projects to my ever-increasing workload. I’m giving myself some leeway on how I’ll be addressing this.

And for the rest of the world, my hopes are much like everyone else’s — that we get out of this global recession soon and that peace be restored, especially in places that need it desperately.

From Other Bloggers: Reflections from 2008, Musings for 2009

I thought I’d end with a few recaps and resolutions from the blogosphere for some inspiration:

• No Credit Needed: Wrapping Up The Year 2008
• Five Cent Nickel: Financial Goals for 2008: Reviewing Our Progress
• Prime Time Money: My 2009 Financial, Blogging, and Personal Goals
• Credit Withdrawal: My S.M.A.R.T. Goals for 2009
• The Money Hawk: Goals for 2009
• Money Smart Life: New Years Action Plan
• Simply Forties: New Year’s Resolutions and Goals for 2009

Personal Goals For 2009 Plus The Year In Review

YNAB Pro Giveaway Code: fibonacci

We listed our Honda for sale on Craigslist, our favorite online classifieds web site. Sold it in 4 days.

Remember the car we bought a month ago? Well now that we have that car, we had to sell our old one. We sold it through Craigslist and the process was easy as pie. We had listed the car at a price equivalent to its blue book value — $7,000 for a Honda Civic with 100,000+ miles on it.

The car we sold looked just like this one, a Honda Civic Si.

We had a few interested buyers, and even one suspicious one who hailed from Sacramento: this buyer’s email messages and terms sounded “odd”; he was offering a pretty good price on the car sight unseen. While other buyers wanted to negotiate, he sounded eager about buying the car at full price without checking it out first. And why would he want to drive all the way to the Bay Area just to buy a used car? Ah, it all sounded too suspicious and too good to be true. I could just imagine him chomping at the bit for the chance to offer us a money order or cashier’s check, no questions asked. So we didn’t bother pursuing this lead. Sure, it could have been a legitimate lead, but I’ll take my losses. During times like these, I refer to my tips for selling safely online to guide our decisions.

Fortunately, within a day, we got a buyer to settle on a decent price (around $500 off our original offer) — a young man and his mother came to a doorstep, did a test run and left happy. And we too, were left happy as we tucked our money away and got that smooth car sale out of the way — just one more among the many car sale experiences we’ve had through the years. Though we’ll miss our pretty dependable import, we’re very satisfied with the slick and fairly new family wagon we replaced our old car with.

Before I go, I’d like to leave you with some parting tips. From my own experience as a loyal user of Craigslist, I compiled some thoughts on how to list and sell your stuff online:

Quick Tips To Sell On Craigslist

#1 Use pictures. I still don’t know why there are ads that don’t include images. If I were a buyer, I’d immediately filter out those ads without accompanying photos. Who would buy something sight unseen (maybe potential scammers)?

#2 Be descriptive about what you’re selling. You only have a few seconds to catch someone’s attention.

#3 Write a good ad title. What’s good? Avoid overloading your title with punctuation marks and caps and whatever else that can put off your audience. Strange ads are a good way to scare off potential buyers. Have someone else review your ad to ensure its palatability.

#4 Deal with local buyers as much as possible so you can easily screen them. Try to pick up information about your buyer wherever you can find it. They may have an internet footprint, or a conversation with them over the phone may help you get a feel for who you are dealing with before you even meet with them. According to Craigslist’s scam manifesto, you’ll avoid 99% of scam attempts by meeting your buyer in person.

#5 Be patient. If you’re selling a popular item, there will always be a buyer out there for your stuff — at the right price. Fortunately, I have never had a problem selling anything worth selling by posting it on Craigslist. The stuff I have trouble selling won’t move for good reason (not enough value or use left in them) so I donate them instead and take the tax deductions.

#6 Price your item right. If the price is too high, you may not get enough interest. If it’s too low, potential buyers may become suspicious of your listing.

#7 Have an electronic trail of your correspondence with interested parties. Any kind of trail is useful, in case you need to refer to it at a later time (and hopefully you never have to!).

#8 Beware of fake or bounced checks and money orders. Because of this, it’s a good idea to transact with cash.

#9 Find your right sale price. Your sale’s success hinges on your ability to value your item in the used market. An item will sell for the “right price”: you can figure this out by periodically readjusting your price to gauge interest and by checking similar ad listings to your own.

By the way, I’ve also scored well by doing my online shopping with Craigslist, where we’ve picked up some awesome bargains on furniture and housewares. I’ve saved lots of time and money by going to sites like these through the years and frankly wouldn’t know what to do if these online services didn’t exist. Can you imagine having to revert to traditional paper listings, garage sales, dealerships and brick and mortar consignment centers to get the job done? Find out more about my thoughts on this topic in my post: Great Places to Earn and Save Money on Used Items.

How To Sell on Craigslist: Listed Our Honda For Sale and Scored

YNAB Pro Giveaway Code: fibonacci

A stretch? Of course I’m pulling your leg with this post title, but if you read on, you may find some semblance of truth somewhere in there…

This is the time when everyone declares what their goals are for the coming year, so I figure I’ll join the crowd on this one.

Last year, I set forth some goals that I hoped to achieve at some point within the year. Unfortunately, it doesn’t look like we did all too well with meeting them spot on, though some progress was made to some degree. But if I were to give ourselves a grade on these matters, it would be around a B-.

All the stuff I write about here is something we expect to address and hopefully complete by year’s end. And when I describe these as “our” goals, I’m referring to the fact that my spouse and I look upon these matters as a joint effort. So how did we fare with last year’s goals and what do we have in store for 2008?

Business

What we thought would take a year to complete has taken over a year and a half to do. It took my spouse and his business partner from August of 2006 through December of 2007 to get their new web site up and running. It took the loss of their stable, relatively well-paying full-time corporate jobs to do it. It also took a good chunk of shared savings (between two households: ours and the business partner’s) to fund and complete.

So far, this web site hasn’t officially launched yet but the url is live. The guys are taking their time doing a lot behind the scenes and planning their next move, which is to raise some sort of outside funding. More tweaking, site design work and user tests are on the way so they’re not quite ready to promote nor market the site at present.

As any start up adventurer will let you know, the journey takes a while to unfold — sometimes taking half a decade to transpire. And as any such entrepreneur in the Bay Area will tell you, success in a start up can go three ways:

1. being able to launch your start up as profitable in its own right
2. getting lucky enough to be bought out by a bigger company
3. or going public

But for now, these outcomes are but distant aspirations for the immediate goal at this time is to work on securing the funds to keep not just the business afloat but the family as well! We’ll be hoping, praying and striving to make it through the year without going too far underwater.

As for me, I had plans to launch a couple more web projects including the development of a Cafepress store and another blog. But due to my perennial excuse of having limited time and energy at this time, I have for now moved these ideas to the back burner. The good news though is that I have been pleasantly surprised by the growth of this site in the past year, and am inspired by other bloggers’ stories to further improve its monetization prospects. What I plan for The Digerati Life is to double its average daily traffic by the end of the year and to double the income it’s made in the past year (to several thousand dollars a month). It would be nice to see subscription numbers go up to 4,000 and for total visitor traffic to hit 1,000,000.

Finance

Our emphasis in the coming year is to improve our income prospects since 2007 saw us with limited cash flow. Our consulting gigs yielded reasonable returns but I’d love to learn new skills in order to take on additional paying projects. It remains to be seen if I will have the bandwidth to pick up Ruby on Rails (the latest “it” technology).

Meanwhile, our investments have fared better than expected and have held on to some gains for the year. We successfully hedged our holdings by building up our international position — it was not as risky a maneuver as we initially planned to do (which was to buy into currencies) and we’re fairly satisfied with the results. For the coming year, we’d be happy to grow our investments in line with market returns. A stretch goal is for us to grow our investments to the point that it offsets the deficits in our savings; since our combined household employment income cannot currently cover our annual expenses, it would be simply wonderful if our investments could grow enough to eke out additional gains beyond just covering those expenses.

In the realm of expenses, budgeting and frugal living, we’ve done much better. Our expenses are lower by around 20% compared to the previous years. We’re much more ultra conscious about our spending and we’re more self-sufficient than we used to be. For example, last year, we relied less on hiring outside help to do home repair work: we ended up doing the jobs ourselves. Plus, we’ve decided to defer many big ticket expenses further into the future such as:

• replacing one of our cars
• getting a new couch
• and taking on various home projects

In 2008, we plan to keep our expenses along the same lines. I doubt we’ll be able to cut any more fat from our budget so I’d be happy if we kept at similar expense levels.

Still to be done because we didn’t make much progress in these areas: IRA and 401K rollovers and account consolidation, estate plan updates and additional life and disability insurance policies. On top of this, further changes in my corporate status will entail changes to our health insurance situation as well. I’m also going to be decluttering our house extensively by selling our stuff to consignment or donating our items, particularly our baby and child specific materials. Lastly, I’m planning to overhaul our money management and bill paying systems. I aim to start using more standard financial software to run our household finances and investments going forward.

Job

Well, one of my biggest goals for the year is something I’ve discussed ad nauseum here: retire from my job. But this is completely dependent on my spouse getting his startup funding that would then pay his salary. Once he gets the salary and the health insurance for the family, then I’m good to go!

Personal

Okay, I failed to meet my goal last year to lose 15 lbs. In fact, I may have gained an additional number of pounds which I refuse to acknowledge by standing on a scale. I had some health issues that prevented me from pursuing a regular exercise schedule and I understand that this is but a lame excuse so I’ll go ahead and just insist that I’ll be doing better this year. I’m sure that when I quit my job, I’ll have more time to focus on my health, emphasize and develop a healthier lifestyle, improve my diet and follow a more rigorous exercise program. Then I expect that 15+ lbs. to magically melt away.

In short, I’d love to end 2008 the same way most people would like it to end: with a healthier physique, a healthier bank account, a less stressful lifestyle and a happy household.

What else is everyone else saying? Here are more goal setting exercises and end of year stories around the web:

• Making Financial New Year’s Resolutions @ Alpha Consumer (thank you Kim for including my resolutions in your writeup!)
• Setting Financial Goals For 2008 @ Five Cent Nickel
• Flexo’s Financial Goals and Resolutions for 2008 @ Consumerism Commentary
• Thanks for 2007 and goals for 2008 @ Mighty Bargain Hunter
• 1st Carnival of Financial Goals: 2008 Resolutions Edition @ Cash Money Life
• Single Ma’s Goals for 2008 @ Single Ma’s Fabulous Financials
• RateLadder 2008 Goals @ Rate Ladder
• Goals for 2008 @ Frank the Financially Savvy Atheist (The F.S.A.)
• 2008 Financial Goals @ Personal Finance Moron
• Financial Resolutions for 2008, Part II @ Queercents
• 10 Goals for 2008 @ Gather Little By Little

 
Image Credit: The Source Is

Our Financial Goals and Resolutions for 2008: #1 Fund A Web Startup, #2 Retire

YNAB Pro Giveaway Code: fibonacci

Our Business and Financial Year In Review…

I thought to end this week with a post that discussed how the last year turned out for us financially, while sometime next week, I’ll cover some of our goals for the coming year. 2007 was quite eventful with several decisions being mulled over in our household that we expect to change the face of our home life, careers and financial status in the years ahead.

What has transpired for us over the last year? Here’s part of our story, told through some basic threads that cropped up repeatedly in the articles I wrote over the last year and a half:

Our Business Ventures and Entrepreneurial Endeavors

When you hear about others around you pursuing their interests, taking their destinies in their own hands with such gusto, you can’t help but be inspired to walk down the same path yourself. After one long entrepreneurial stint, my spouse had settled into a regular 9-to-5 job in the early 2000’s but found himself not too thrilled by the “corporate” environment he found himself in. I, however, enjoyed the financial stability it offered and found that it was so much easier to plan a future when both our career paths seemed clearly paved and marked for years to come. But stability was not meant to be.

Before long, after some huge debates about our finances and our future, we both agreed that my spouse should go ahead and start his own business FULL TIME. So as far as our household income goes, it declined to 30% of what it used to be. Despite that, we maintain some level of optimism that we’re on the right path, latching on to the Web 2.0 or even Web 3.0 idealogies that govern the technical landscape today. Definitely not easy, but we’re keeping the faith!

Our Everyday Finances: Insurance, Family Expenses, Taxes

What’s worse than fights with your partner about money? Well, that would be fights with other people about your money! I discovered quite early on that one of the worst things you can end up dealing with besides taxes ( ) is health insurance or any form of insurance for that matter! Anyway, some of my financial frustrations this year can be boiled down to dealing with some complicated insurance claims as well as dilemmas we face about our children’s future. Yep, and it won’t be long before I’ll be grappling with the tax cycle all over again, though the one thing I’m looking forward to is a much smaller tax bite given our significant income deflation this year.

Our Attempts To Achieve A Better Work / Life Balance

Partly because of various stressors, including the pressures of being the sole breadwinner over the last several months, partly because of more stressful hours at work as well as demands on my time by family responsibilities (especially the care of growing children), we felt that a change needed to happen at home. How did we handle it? We decided that we would take stock of our roles and the possibility of living on a reduced income indefinitely. This paved the way to determining if I should quit my corporate job, attempt early retirement and pursue more flexible income generating projects. So far, we’re still on track towards these goals.

Our First-Hand View Of The Real Estate Bubble Bust and Property Market Decline

The past year saw the pain of subprime take hold. In fact, I dedicated more than quite a few posts and a diagram to this subject. I saw and watched as friends, family and neighbors began to grapple with the property market and its gradual slide from its glorious peak to something quite concerning. Unfortunately, I side with many of the fortune-tellers out there who predict tougher years ahead before things get better.

How Our Investment Portfolio Performed In 2007 and Our Personal Investment Plans

Despite the gloom and doom of the credit and real estate markets, our investments themselves have fared better. There were some volatile spots throughout the year but we managed to roll with the punches. In May, we followed the general market in an upward trend, and by the summer, we pondered over rebalancing our portfolio further. By the end of the year, some earlier portfolio shifting helped us carve out some gains despite the volatility we’ve been seeing.

In addition, we also looked into other ways to hedge our portfolio: we sold our stock options, then evaluated opportunities in real estate, bonds, other cash investments, and currency plays courtesy of the dying dollar. We also reflected on increasing our international exposure and even pursuing additional home improvement projects. Though we didn’t act on every single idea or opportunity, we’re keeping these options in mind going forward as we keep an eye on our current financial climate and economic environment.

Pride In The Frugal Choices We’ve Made

Finally, we made some excellent frugal choices as we went about our daily lives: we went on vacation on a dime (well close to it ), we learned how to host an affordable kid’s birthday party, curbed our spending on family trips and obligatory family celebrations, and were able to snag some pretty nice furniture for a song (no, we haven’t settled for cardboard boxes yet).

All in all, it was an awesome year with its memorable ups and downs that make life such a great ride. I’ve always viewed managing our finances as invigorating, and I guess here was the proof! Okay some of you may disagree, but I don’t find finance boring at all. It sure can be a headache sometimes, but to me, it’s certainly not dull.

And yes, we’re hanging on, hoping for an even better year in 2008. We have high hopes for our business ventures and I’m quite hoping that by the end of next year, I’ll have even more interesting news to report especially on the entrepreneurial front.

 
Image Credit: File Dude’s Balloon Clock Screensaver

The Exciting Financial Year That Was At The Digerati Life

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One other way we’ve learned about money.

Timing the market is one subject that remains anathema among staunch long term investors. I would certainly consider myself a long term investor, having been in the market since 1990. However, here’s something I’m only now admitting: that I have since the early 1990’s subscribed to a newsletter that preaches long term investing yet also practices some form of market timing. I pay around $200 a year for it.

I am hardly a market timer as I rarely trade stocks or mutual funds. We’d be lucky to incur a few transactions a year on stock sales mostly triggered by portfolio rebalancing. So what am I doing with this newsletter? To our minds, the author of this newsletter truly understands the economy and the markets so thoroughly that we’ve decided to buy into the information he offers.

We try to keep ourselves abreast with what’s going on, reading up on trends, analysis, commentary by hearing what knowledgeable experts have to say. So far, the record of this particular “expert” has been pretty good, and probably beats whatever we could have done on our own.

No matter how strong a position you take with investing, once the markets gyrate wildly, it becomes too easy to succumb to the extreme discomfort of volatility and uncertainty. Does this mean we are using a paid newsletter as some assurance to tide us over these bumps? Are we using this advice as some kind of crutch? To some degree, YES, but we also feel that we are aligning ourselves with someone whom we respect as a true expert, whom we have trusted over the last 20 years and whose investment philosophies we’ve wholeheartedly agreed with.

This is not, by any means, the only place where we get our financial information. We try to round up our information from various sources as well: from books, magazines, periodicals, sites, forums. We don’t blindly follow a single expert’s advice since we make decisions based on our own situation, but we do appreciate “the second opinion”, which allows us to feel assured about the direction we’re taking with our finances.

Some may think we are foolish to waste $200 a year on someone’s advice but we look upon it as yet another investment — not necessarily something we strictly adhere to at all times, but something we use to inspire and guide our decisions and the directions we’ve taken with our money. That said, it remains the case that the newsletter tries to time the market by watching economic indicators and long term timing models.

In order to defend the position that this newsletter takes in terms of market timing, I’d have to cover market timing strategies in more detail, which I unfortunately do not have room for in this post. So I promise to follow up on further thoughts on this subject at a later time.

As for my parting words — I’d like to know what you think of investment or financial newsletters in general. [The irony here is that any self-proclaimed guru can offer a newsletter: even "expert bloggers"!] This is just one more way I try to enlighten myself on the nuances of finance. Majority of newsletters do rub me the wrong way with their promises and prophecies of overnight riches. Also, a good number of them seem to focus on short term strategies or stock trading, which isn’t something we subscribe to. But there are some that espouse long term and diversified investing as well. Behind some newsletters there could very well be someone credible with a strong investment performance record for a long period of time.

For additional information, I may tend to look into the Hulbert’s Digest (a “rating service” that ranks investment newsletters) though I’ve heard that some long term performance rankings and ratings are given an artificial boost due to “backtesting”, which utilizes hypothetical portfolios and data that can be prone to manipulation. At any rate, I found this critical view of newsletters worth digesting, though I remain open-minded about the whole thing.

 
Image Credit: Wagner Blog

My Long Term Experience With An Investment Newsletter

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It’s been around 5 months since I’ve last checked our investment portfolio. We’re some of those people who really don’t spend that much time checking the details of our investments; we like how things are more or less in auto-pilot. I get some vague idea how we’re doing whenever I receive our account statements. But it’s when I do these reviews around twice or three times a year, that I see our net worth details and our full financial picture. I figure that’s good enough — the less I look at the numbers, the less chance I’ll do something impulsive!

At this time, I have mixed feelings about how things are going. Two reasons why:

1. The stock market is experiencing a lot of volatility in the last few months, and despite that, it currently maintains a gain of 9% for the year. It seems like it can’t make up its mind where it wants to go even after the last few rate cuts.
2. We’ve been partially living off our savings this past year which accounted for a decrease of 2% off our overall portfolio totals. This is telling me that it doesn’t seem like an impossibility to “retire early” based solely on the strength of our portfolio growth. Quite a tempting thought.

Since my last check in May, 2007, it appears that our investment portfolio and total liquid assets (from all sources, including our cash and emergency funds) have been flat to up 4% in the last 5 months depending on when a portfolio check was made. Still, the portfolio has logged almost a 15% increase for 2007 so far. For the time being, it looks like we’re beating the U.S. Total Stock Market, which has a year-to-date return of 9%. To what do I account this growth?

1. Heavier international equity weightings have certainly pulled up our overall rate of return.
2. We bought into the trough of the recent market correction, which is a contrarian approach we often use when there are dips. We used this time to rebalance our portfolio, again, shifting and adding funds into international holdings.
3. Our individual stock holdings have done surprisingly well in this time period, so it was time to lighten up from 5% to 2% of the total portfolio. I am not big on individual stocks but sometimes take a few positions with well-known companies.

Here are the details of our allocation.

Asset Allocation for October, 2007

And for easier reading, here are the numbers from which the chart is based on. On the table, I keep a column here for our target allocations, which represent the % numbers I’d like this portfolio to have, down the road. I am slowly rebalancing our portfolio allocations to reflect these numbers. Unfortunately, with the way the markets are behaving, the numbers get skewed ever so slightly here and there such that the target numbers are not met exactly. But overall, I am fairly satisfied by how things have turned out so far. [Rows in gray show the departure between our allocation percentage and the target allocation, no matter how small the difference.]

Our Investment Portfolio Highlights

We rebalanced our portfolio to some degree during the summer market correction. On May 2007, we used to have a weighting of 55% in US equities, 11% in International equities, 2% in Bonds and finally 32% in Cash. Today, we are 51% in US equities, 18% in International equities, 6% in Bonds and 25% in Cash.

We actually used up 2% of our cash savings to cover our expenses thus far in 2007 due to our current cash flow situation. I am the only one currently bringing in a stable income this year, but the great news is that our alternative income through some consulting efforts and small business endeavors have added 18% to our household income, such that the effect is like getting an 18% raise. For the record, our current income for this year is 27% of what it used to be when my spouse was working, so any form of alternative income is helpful to the bottom line.

Our biggest planned portfolio move: Going forward, we are waiting in the wings, looking into how the real estate market correction will play itself out, as we plan to diversify into the property market in the next several months to a couple of years. Do we dare leverage ourselves into the property market and go into rentals? Do we put some money into REITs? I believe we’re eventually going to try both strategies at some point, but we’ll have to proceed cautiously and monitor this housing market since at this time, the bottom is still not in sight.

One last note: at some point in the past, I had mused over possibly buying into currencies and precious metals. For some reason, I’ve never really felt entirely comfortable getting into gold, given that I recall the 1990s when some family members used to gnash their teeth over the poor returns of their gold investment. Their negative experience seems to haunt my thoughts on this subject. So even as gold has run up in value and padded some pockets out there, we’re out of that play, especially now that the easy money appears to have been made. Now what about currencies? I’ve griped over the weak dollar a while back and discussed some good ways to hedge against it. Well, after some debate, we’ve decided not to put our money into foreign currency accounts and instead have simply added to our international fund weightings, which we expect should act as our hedge against the falling U.S. dollar. So far, we’ve been satisfied with this strategy. Going forward, we may increase our international allocation even further.

We’ll see how things go by the end of the year when I plan to do another check up. Hopefully that 15% jump in “net worth” holds! But you never know in this crazy market…

Latest Net Worth / Portfolio Numbers: Unexpected Increase Of +15% for 2007

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Seems like people sometimes get confused when they’re describing themselves. They’ll call themselves frugal when they’re really cheap, or they’ll say they’re practicing some budgeting when in fact, their budget can swallow the whole lingerie section at Macy’s. That’s why I wrote the article on the science behind money attitudes, to clarify the distinctions between the tendencies to be frugal, cheap or extravagant. Have you wondered where you stood in the frugality spectrum?

If you’re curious about what kind of money type you are, here are a few simple tests that can give you a hint (from The Tartan):

This quick check was part of a scientific survey that yielded results showing that 21% of respondents were tightwads, 18% were spendthrifts, and 61% were neither.

My Lamentations On Frugality

Seeing the scientific analysis backing these results, I’ve begun to question what kind of money handler I actually am. I say this because recently, I’ve found myself shifting from Dr. Jekyll to Mr. Hyde when it comes to money management. I believe I am a frugal person at the core, but lately, I feel like I’m one prodigal spendthrift.

Our expenditures from the last 7 years haven’t been as under control as I’d like them to be. It’s no coincidence that our household spending began to creep up right after our kids were born. This is no excuse, of course, since there are people out there who’ve managed to increase their net worth regardless of additions to their family — take for instance Nickel from Five Cent Nickel, NCN from No Credit Needed and Trent from The Simple Dollar, all of whom have been successfully navigating the financial challenges of parenthood.

This doesn’t mean that our net worth has not increased in this span of time — it has, due to well performing investments but no thanks to poorer savings habits. This just means that we could do so much better, if we can only control our spending better.

In our case, our spending has increased due to several factors: with kids came a roomier home which demanded more maintenance; then there’s preschool, plus child care services and just general living expenses that have gone up. For a self-proclaimed frugalist, these expenses and the guilt they bring are hard to wrestle with.

But when I took some profiling tests to check my pulse on money issues, it confirmed that despite saving less, I’m actually quite “normal” and neutral about finances, if not quite naturally inclined towards frugality. I answered questions such as these:

Answer the following with “Yes” or “No”:

Dressing fashionably is important to me. No.
I often worry that I will run out of money some day. Yes.
If I lose a $20 bill, it can spoil my whole day. Yes.
Shopping is fun for me. No.
How do you typically view shopping? As a chore.
I strongly prefer shopping on line rather than in stores. Yes.

Quizzes like this reassure me that I haven’t crossed the line to “spendthrift” mode. My cheesy-sounding test results now says I’m an “Unconflicted Consumer”.

You’ve got your wily ways, but you’re not wackily withholding. You’re practical, and interested in saving a few pennies — but not to the point, say, where you’d risk a trip to the pokey (far as we know, grooming your hair in-store with said store’s unpaid-for products is petty pilfering — though we doubt Death Row would be the end result).

You also wisely weigh all factors in making monetary decisions — i.e., if it saves you a sou or two, is it worth the time, trouble or perhaps loss of your good standing with others? Your final decision may not always be 100 percent on the money — but 100 percent is neither a necessary or obtainable goal. You embody an admirable balance between living large and living lean — living la vida in-between.

I guess I’ll take this. Still, it doesn’t change the fact that I feel I’m spending more than I should these days, especially since I’m seeing how some of you in the blogosphere have set the bar high in terms of your savings rate. I’m going to need to get my act together somehow.

 
Image Credit: The Tartan

I’m Frugal, So Why Can’t I Save More Money?

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