Disappointed in the Women in Red

I have been a fan of the Women in Red Column by MP Dunleavy since it's inception 2 years ago. I was an original fan and poster on her first message board on MSN. I have avidly followed people's journey's to become debt free and leave the red to become black. I believe that it MP is one of the few financial writers out there in major financial trouble. And she is definitely the only one so honest about it. That is what drew me to the Women in Red (WIR). Her honesty, her openess to write about things she didn't know or understand, and how it applied to everyday people.

But this week she wrote and update on the WIR here. She says that it's been a pretty rough two years and not quite what she expected.

She starts with Carole, who has bought a home this Valentine's Day, but also has acquired $5k in CC debt. Yet even with this regression she has been allowed to graduate from WIR. I think she needs another 6 months to finish off her debt and then should be allowed to graduate.

Next up was Beth, another WIR member who increased her consumer debt and education debt. BUT the article says she wiped that out with a home equity loan. Which I'm not sure was the wisests move, and yet she is ready to graduate from the WIR as well.

The next member Stephanie has made great progress in her journey however. She has earned a major promotion and paid off $7k in debt while saving $10k at the same time. She too is graduating from the WIR, however this seems like a well deserved graduation.

The fourth member is Tricia, a single mother in debt. Another member who incresed her consumer debt from the last update, however that was mainly due to starting up a business which failed. However she has decided to not graduate from the group until possible the fall.

Unfortunately the next member Anna, though she does not have any consumer debt, some retirement savings, and home equity, because her husband is a stay at home spouse they have been tapping savings to make ends meet every month. This needs to stop before they spend their way into debt.

Lyndsey the next WIR is probably the worse of the bunch. She increased her salary by $25k over the past two years, and yet her CC debt has increased by $1k. This is very disappointing and instead of moving towards the black, she's moving more red.

However newer addition Bryce, has done amazing well. She has paid off about $9k in debt in 1 year and is quickly moving towards being a woman in black.

Finally the article wraps up with MP's own situation. She has decreased her debt by $2200 and incresed her savings by $5700. Not much terrible when you consider they had a baby this year. However it appears that her debt dipped in the fall of last year to nearly doubling this Spring. And that is very disappointing. She is nearly back to the same level of debt she had one year ago.

Typically I would be happy for the women in red as people trying to get their fiscal lives in order. But right now after reading this article, I wonder how much progress they've really made or will make. It seems like they are spinning their wheels more than gaining traction. So are they really making progress or are they falling further into debt?

Less than $25k saved for retirement?

On April 11, 2007 the Employee Benefit Research Institute (EBRI) released a retirement confidence survey here. This survey was done by a nonpartisan research group of Mathew Greenwald and Associates. Major change have been occuring this decade with pensions and the retirement benefits people would previously have received from such plans.

First the survey round that less than 50% of workers are confident about receiving a pension. However less than 40% of these workers who are not confident about receiving a pension have done anything in response to these cuts. They have not yet accepted the potential dearth of their retirement pensions.

Second 41% of workers have indicated they or their spouses are covered currently by a pension plan. However, strangely 62% of workers think they will somehow be covered by a pension plan. That means a serious disconnect is occuring between actually having a pension plan and expecting a miracle pension to arise.

Third and not unexpectedly 50% of all workers have saved more then $25k for retirement not in pension plan. While 70% of workers who have not saved for retirement at all, have assets less than $10,000. While perhaps one can argue young workers without much saved have skewed the $25k amount because of their lack of savings. However in a time when people should be saving $1 million dollars for retirement to generate $40k/year in income, it appears that people have barely saved 1/10 of that amount (or $100k).

Fourth strangely is that 72% of workers feel confident for having saved enough for retirement. Which is unusual given the fact that in the last two years alone 20% of workers have had a cut in their retirement pension benefits. And that 45% of workers are worried about their pension benefits being cut.

Fifth, only 50% of workers say they would or have taken advantage of the advice given out by the 401k management companies regarding retirement. However of that 50% only 2/3 or 66% of those people would comfortably follow the advice. Which means that half of all people would ask for advice, and even less would implement it.

Finally less than 50% of workers realize what their medical costs in retirement will be. 30% think it will be less than $100k, 52% think it will be $250k. However EBRI has calculated that the average couple will need $300k to cover health care, prescription drugs, and nursing home care not covered by Medicare, and assuming the levels covered by Medicare stays the same. This number should increase because companies are cutting the acceisibility to medical benefits for retirees, from 2006 the number went from only 31% of companies to 26% of companies offering medical benefits to retirees. A 5% drop in one year. Eventually it will be phased out, sooner rather than later.

This means that medical costs are potentially the reason why people need to save more for retirement as I mentioned earlier. However if anything people are counting more on pensions that do not and will not exist. And they are expecting greater medical coverage than will be available.

Need versus Want

Well found out that my cousin just bought a Toyota Sequoia. They traded in their Toyota Camry, a relatively new car they bought used in 2005 for Toyota Sequoia. I'm not sure if it was new or used, but it's still a pretty expensive car. I understand why they bought it, because they wanted a cooler car than a camry. But I'm not sure it was a need.

They really want 3-4 children, which is awesome. But I think they probably should have gotten a minivan because of the better gas mileage. Granted they only are on child #1, going on two, but still, I personally would have planned for a vehicle that can carry many children but has good gas mileage. And yes the Toyota Sequoia fits 8, but it doesn't fit 5 car seats the way the Sienna (Toyota's minivan) does. Of course my cousin's plan could be to sell their small car, a Chevy Aveo in a year or two and buy a Toyota Sienna. That would also work, because as their kids get older they don't need car seat and they can still fit in a Toyota Sequoia for now.

But is this a want or a need? I'd catergorize it under a want. Because while they did need a larger car with their growing family; I think that they could have bought something a bit more practical long term. But at least they are happy.

Growing up rich or poor?

I grew up mainly middle class. I think back about everything I had, was given to me by sacrifice of my parents. They worked hard and felt their children came first. But this came later in my life. My life I think started out a bit on the poor side. Do I think this is bad? Nope, I barely remember the sacrifices made by my mother.

I've never talked about this time in my life before and it's a little strange. My mother was a single parent, thus she didn't have a choice about allowing me to be raised by both daycare and my grandmother. Why? Well my biological sperm donor did not provide any financial or physical support and was out of the picture after a few months. Actually if anything he contributed to more work than necessary. One day my mom came home from work to a baby crying and no husband present. Guess I'm lucky to be alive.

I have to add that earlier this week when I posted about the risks of being a stay at home parent, I'm really offended by people who think that daycare is bad. They obviously have not walked in the shoes of someone whose been divorced, widowed, or living with a disabled spouse. Life is not always how you plan it and to immediately say that daycare is bad and staying at home superior obviously is very narrow-minded.

Were we poor? I certainly didn't feel poor. Fortunately my mother had worked since 15 helping to support her family who were very, very poor growing up. She had worked through college 3 job, and earned a master's in less than 4 years. She had support from her family, including my uncle who took 8 years to finish college to support his younger sisters and parents. He also started picking pineapples at 12 for money. They grew up in a 2 bedroom shack on a farm, which I remember fondly. This shack did not have plumbing, but an outhouse, which was an improvement over my great-grandmother's home which didn't have a bath for years. Instead they used the public baths at a penny a bath. My grandfather drove a tour bus, so money was always an issue. But the love and support were priceless and cannot be measured in $.

But my mom had a great job, worked hard and though we didn't have a lot, we always had food, shelter, and clothes. My mom worked so hard, I remember her sometimes crying because she was so tired and lonely. She would rush back and forth to drop me off/pick me up, and we would often go back to work after picking me up. My grandparents were fantastic, they would watch me at night when my mom would go back to work to pick up extra shifts so she could pay the bills.

I know we often did not have material goods, but my grandfather knew everyone in town and would often barter services for goods. So we were able to get a bed, car fixed, in exchange for help with painting, gardening, etc. He would often find things my mother needed for free in exchange for his physical labor. He really was a good man, he also would find things people were throwing away and fix it for us to use. I saw my biological sperm donor at my grandfather's funeral for the first time in over 20 years, I think I've seen him 4 times in my life (maybe).

At the age of 18 months I developed grand mal seizures, but fortunately my mom had great medical insurance from her job. But she had to cover her portion of the massive medical bills. During this time she would barely sleep 2-3 hours a night because she would be washing sheets from when I was ill and wet the bed. She would also have to wake me to give me medicine and stay with me in case I had a seizure. She also spent time with me in the hospital when I was ill. During all this she was already a single parent. Stregth? Will? My mother had it in spades.

My grandmother would often come over by bus and try to clean our house to help my mom out. She would also try and cook dinner every night so my mom could come pick me up, eat, and drop me off with them so she could go back to work. My grandmother also worked by putting newspapers together, sewing, washing clothes for other people. Working was a necessity, not a luxury. I know my mom often laments over not being able to stay at home with me, but if she didn't work, we wouldn't have had a place to live or food to eat.

Though we were poor my mom NEVER took government help. She cut up all her CCs, after her divorce and didn't pay for anything if she didn't have the cash. We were so lucky to have so much family around to help though. Not financially with cash, but with love and support. We were often invited over to people's houses for dinner, sent home with food, and I was often watched so my mom could work. My aunts and uncles all struggled to make ends meet while trying to help their parents who had never had much money. Their sacrifices have built secure retirements for all, and all could be considered upper middle class with their impressive net worths.

My mom and I are still really close, I call her everyday. Every weekend she would work, but I remember her taking the time to make sure I studied. The only thing my mom recited to me growing up is "education will give you a better life. Education can never be taken away. It is your ticket out of here." My mom meet my now father when I was about 7 years old. During this time we had definitely moved from poor to lower middle class. I could tell because my mom no longer cried.

I remember taking our first trip to disneyland when I was 5. My uncle paid for a good chunk of it, till today I think of the many things he did which were a godsend for us both. And my other aunt also helped us afford it too though she was single. But that's what family does, that's where our strength comes from, our families. I live right now saving money because I hope that in case my mom should need it or my grandmother I will be able to give them money financially to help out with anything.

I am so proud that I come from a line of strong women. Women who worked to support their families, and sure it would have been easier to stay at home and take hand outs, but they didn't. Instead they worked 2-3 jobs both in and outside the home.

I remember my grandmother sewing me clothes or wearing boy clothes until I was quite old. My cousins were all boys, and I just wore what my cousin M (8 months older than me) outgrew. I also had a boy haircut because it was easier. I remember eating the farm raised chickens, eggs, and vegetables. I remember my grandparents trading services for food. My grandmother till today washes saran wrap, ziploc bags, and recycles everything. I learned garbage picking from her, when we used to collect cans and bottles for extra money. But I never considered us poor, I thought we were quite wealthy. After all we had a house, a car, and my mom could support me ALONE.

If anything I always felt so rich. I had so many experiences, so much love in our family. We were constantly together, I miss it even today. A day never went by where I wasn't with a part of my extended family. I think that those experiences shaped my life now. When I see single parents I know that their hearts break as they leave their children in daycare. And yet there are people who make them feel "lesser parents for not staying at home." This is a fact because my mom often wonders if she was as good a parent as everyone who stayed at home. These people need to get off their high horse and stop thinking that only you can love your child. They are obviously the same people who only believe families are bonded through blood. But something to consider is that these single parents are doing it to show their children that taking a hand-out from the government is not the answer. That hard work will be rewarded.

My mom remarried when I was 10 and I was adopted by a wonderful man. Our lives changed immediately. We had a lot more money and opportunities. This too shaped my understanding of people. I learned that family is built on love, not blood. That a person can love a child not their own because they participate in the raising of the child. That adopting a child can mean as much as one sharing your genetic material.

So did I grow up rich or poor? I think I grew up rich.

My family has risen from poor to probably upper middle class. We got there from helping each other, giving each other strength, encourgement, and a hand. I believe that families are built from love not blood. I feel bad for people who think that parenting is only done if you stay at home. Obviously that's not true, it's built by the values you instill in your child, the bond you build with your child. You can be at home and not spend as much quality time as a single parent who works 2 jobs. I also feel bad about people who think you can only love your biological children. Or that bond occurs at birth, rather than being nurtured through love, compassion, and participation in their lives.

All of this has contributed to making me a lot more conscious about money, a lot more cautious about life. I worry that if I stay at home and my husband dies or is disabled I will not be able to provide for my children. But I mitigate this by saving money now before we have children so that I can cushion any possible problems.

And yes because I was adopted by a wonderful man, I do not feel pressured to have my own biological children. People always say if you keep waiting, you won't have your own, but I can't say that's important. I already have a 529 started because I know I will have children no matter what. If I am unable to have them I will adopt without hesistation. I even hope that perhaps I can adopt after having a child of my own anyway. And my parents would cherish all of my kids equally. I know that my views are not shared by others, but this is my perspective on money and parenting.

Counting on a Pension?

An article in MSN this weekend called "Retirement plans under Siege" discusses how companies are moving away from traditional pension plans. I've discussed this before, but I think it really bears reminding, that people who are financially secure in retirement have a traditional pension. They get a set amount of money every month for the rest of their life.

This amount is determined by years of service and income earned during set period. However companies cannot afford to keep funding such plans and thus are moving towards a cash balance plan.

What's a cash balance plan? It's where the company put ins 10% of your salary since you start working and it earns 6% every year. Then when you leave they give you this amount and say good-bye. This is a great deal for companies because they are able to end their retirement obligation to you the moment you walk out the door.

However this is horrible and bad for the average consumer. Most people do not realize that they are not like their parents/grandparents. They will not have a pension plan to replace 50-7% of their income for the rest of their lives. They will instead need to draw from a cash balance plan/401k/IRA combination. Meaning if you do not save on your own the company will no long bail you out.

Want to guarantee pensions are dying? Look at Enron, or more currently GM, FORD, Chrysler. These huge automakers have large pension liabilities. Because of these obligations they are unable to turn a huge profit on selling cars. Thus American Car companies in Detroit are going bankrupt. The Motor city is dying and fast.

Japanese autocompanies don't have this obligation, and thus their companies look like better investments. For one thing their plants are not in states with strong unions. They are not going to set up pension plans that will destroy their companies. I don't forsee there is a way out for GM, Ford, or Chrysler without cutting future benefits.

I am not personally involved the automakers decisions in Detroit, but at least where I am from in Hawaii, there has been reform of the retirement pensions. It used to be very generous and comprehensive. Now it's much tougher to get a full pension including medical benefits. A person has to work for 25 years for the state instead of 10. They only it get for themselves and not their spouses. They are now obligated to work until 62 instead of 55.

Just this little changes have eased the burden for the state. And yet the state is slowly easing more and more reform, by introducing the 401k for their employees. By making it a longer duration needing to work for one entity without leaving to qualify, etc. So how many young workers will really stay 25-30 years with the state?

Thus companies are the ones changing the landscape of retirement. People will retire on less than 50% of their pre-retirement income. And there are those who say "great, I have no mortgage." But then I remind them what about medical premiums, what about property taxes still escalating, what about replacing a failing car, etc? Just because some bills go way, there will for sure be an increase in others.

Festival of Frugality #69

This week the Festival of Frugality #69 is hosted by the Digerati Life here. She provides a cute setup making days of the week focused on different areas of frugality. My post about my coupon update III was included for the carnival.

I enjoyed two articles "the joys of frugal living" at Frugal for life, and "10 baby items you don't need" at pfadvice. I think these two articles are great posts about living frugally and enjoying it.

I especially enjoyed the baby post because the truth is society and marketing tells you that you need everything for a new baby. And this is probably how and why people go overboard with their first child. However on their successive children they are a lot more frugal and into reusing goods. I totally understand why people do this, and I'm thinking that I may go overboard when we have our first child. But I'm hoping that I can try to curb my impulses and rein in the spending just a little bit.

The risks of being a stay at home parent

Everwhere there is the argument for staying at home versus working outside the home when you have children. But is there a clear cut answer? No. But what are the risks involved.

The biggest risk is losing your job skills. One may argue they make minimal amounts of money, but if you take 5 years off, those years of making say $10/hr could be $15/hr if you had stayed working versus having to come back and start again at $10/hr. Also that $10/hr purchasing power during those 5 years has taken a hit so it's worth less.

But it's family time. And I fully support this, and will probably stay at home for awhile (1 year) with my kids. But I think you really need to understand the risks involved.

With the loss of your job skills getting another job could also be difficult. Actually it's more than 50% likely getting a job after years away from the job market will be tough.

But parents who stay at home would argue "why would I need another job? My job is watching the kids." True, but what if your spouse dies, or more likely is disabled? Can you live on 50-70% of their income? And you only get 50-70% of their income if you were prepared enough to buy disability insurance. Also it only lasts I think 5 years in many cases, and what if your spouse is permenantly disabled? Who will be the breadwinner? The disabled spouse in a new career? Or the stay at home spouse (SAHP)? There is a huge risk in staying at home if the primary breadwinner is hurt.

A second reason the primary breadwinner doesn't provide anymore. What? Well think about it, if 40% of US marriages end in divorce, then 2 out of every 5 couples don't make it. IF that is a true statistic, then there is a very large chance that a couple will get divorced. So if your spouse leaves you for another person they meet at work, then what?

Sure that spouse will still be earning money, but their money will now have to support two households. And you really believe they will be able to maintain the lifestyle you have become accustomed too? Some will argue I'm being negative. But realistically, if there are so many divorces, but everyone says they are happily married, then who the heck is getting divorced?

Where are all these problem marriages? Is everyone just lying on the internet? My cousin has already been divorced at 35, but without children. So it's possible that a good chunk of those divorced were DINKs, because people with children stick it out for purely financial reasons.

But realistically there is a great chance that at some point the SAHP will have to work again, and the biggest risk of staying at home is not having any marketable job skills.

I guess the choice is personal, but if it were me, I would really consider keeping up skills by volunteering, working part-time, taking classes to make sure that I could transition back to the workforce easily. Also I would have kept up with networking to assure I could get a job.

Thus a great many people start staying at home without a plan to transition back or thoughts about the future. Sort of like buying a home, you never buy a home without considering 3 steps out.

I am not writing this post to be negative about staying at home, because I personally think it's a full time job and honestly harder than just working 9-5. BUT I believe a lot of people don't carefully weigh the issues involved with staying at home more than just a loss of income.

Carnival of Personal Finance #95

This week the carnival of Personal Finance #95 is up at Accumalating Money. One post which entwines nicely with my entry about the risks of retiring early is a post by Broke Now, Rich Later. He writes about choosing a HDHP/HSA instead of a traditional health insurance plan. Excellent well write post, and something people who are paying a lot for insurance should think about. I advocate HDHP/HSA for people who are younger and don't get sick a lot. I do not reccomend them for older people necessarily. And what about those retiring before 65? That's a tough call.

There were many other great posts in the Carnival. One I liked is in line with my thoughts about CC usage, over at Grad Money he writes "Stop blaming CC". Ever notice how people who use CC always rail at those who don't?

A shout out to the weight of money blog for making their one year anniversary. Sounds like they made great progress this year.

Finally as homage to my DH and his ability to understand sunk costs...here's a post for you at Tight Fisted Miser about "Sunk Costs." You know it takes others years to learn this but my DH's always known it and preaches it to me constantly. Do I listen? Nah, I just sort of roll with the flow and can't let go. That's maybe why I married him.

CVS addiction

I have a CVS addition. I now have about 10 tubes of toothpaste for two people, about 10 bottles of bodywash. Most of which I got for free, so I'm not upset about it, but I need to stop. I also got 5 toothbrushes for free, and two shampoos, almost free. The problem is that I need to stop buying all this stuff. I bought this weekend Kotex hopefully for free, definitely got more toothbrushes for free, and possibly more toothbrushes today as well. The Kotex was a 2 for $5 with 2 x $1 coupons and hopefully $5.98 ECB. If it happens great, if not I'll be returning the Kotex.

I think that even though it's free I need to stop buying more stuff I am not going to use. Yes I will use it eventually, but I just don't need it right now. So I need to slow down, I am getting a lot of free stuff, but it's only great if I use it.

Thankfully theses are not perishable items. I have also been using coupons for groceries. On Friday I saved $17.50 at Costco using their personal coupons. All on food products so that was worth it. But typical week I don't save large amounts using coupons on food unfortunately. But I guess this is better than nothing. I should look back at my spending and see.

In Feburary I didn't buy anything for toiletries. In March I spent $50.72, and this april, well I think I'll spend maybe another $50? But it could be due to the fact that I'm segregating toiltetries out from groceries.

Condo Living Update

So turns out one of the neighbors couldn' t meet on Wednesday. So we only meet with the "coupled" neighbors. They were very nice, but couldn't help but complain about the downstairs unit. Complain about what? The noise mainly. This is the reason why we chose to live on this side of the house, because our unit is over their bedrooms/basement. The other townhouse is over the living room, dining room, and kitchen. They have their entrances on the same side.

Of course on Friday night as we were heading out to dinner, we were caught by the second set of neighbors. Also a nice set of brothers, but they were complaining about the upstairs neighbors. The were complaining about money and pickiness, etc.

So here we are the couple in the middle. We're more reasonable and tolerant for sure about the noise (we can't hear it at all). We're also more easy going about money (the couple are accountants). The brothers are very young and immature 22 and 25. So we have to play mediator.

My DH just wants to sell our place and move. Sometimes I do too. I wonder if it's worth all this headache?

Regular versus ethnic groceries

Okay, so yesterday I went to costco and spent $31.88 for this list of foods: 4 lbs tilapia, 4 vegetable lasangas, 1 brie, 2 bottles of 100% white grape juice, salad, and a 12 pack of breakfast sandwiches. Great deal and this should last us for about 2-3 weeks. My freezer is absolutely jam-packed full of stuff. I can easily manage now after spending this to spend probably for the rest of the month $50/week or less on groceries. Most of which will be for vegetables.

However last night we went out to eat Japanese food, which was great $23 for the two of us. Not a bad deal, not cheap but I'd rather eat that than a chain restaurant for the same price. That being said since we took the time to drive there, I decided to stop at Kotobukiya, a Japanese Market. One of two I believe in the entire state where I live. Unfortunately where I live there are very few Asian grocery stories. And they are all very small, and very pricy.

Because of this, it's been harder for us to eat like we used in SD. I admit to be really spoiled out there because probably once a week I would shop at Mitsuwa, Ranch 99, Marukai, etc. And the prices were usually better than a regular grocery store. Out here, the exact opposite is true. I'm paying a premium for Asian goods which are lower quality than I'm used to.

But anyway last night I spent $42.80 on groceries which included 4-6oz Frozen Eel (unagi) @ 4.95 each, 1 piece sashimi grade Tuna (maguro) @ $28.99/lb, 1 piece sashimi grade Salmon (sake) @ 28.99/lb, and 1 piece Yellowtail (hamachi) $29.99/lb, 1 bottle eel sauce, 2 packages Seaweed and this cost me $42. Plus the sashimi grade fish was not pretty, but we never eat sashimi anymore so I decided to splurge. And I might add I'm worried the pieces are not enough for a meal for the two of us. I also add this market didn't even have my favorite furikake (seaweed rice condiment).

If we go out to eat sushi we can easily spend $100 at a restaurant we sort of like out here for the two of us. Ridiculous, when you consider it's not grade A quality. This summer we spent $100 at Tsukiji Fish Market and it was worth it. Fresh caught fish in Tokyo where all the fish in the world is sent to be graded. So yes, a lot, but at least I felt better eating it. Plus Japan in general is expensive.

But what to do? Since moving out here I feel very lost and apart from my culture and heritage. Lack of ethnic things to see and do, lack of ethnic restaurants. When people ask why we're both so desperate to move back to the West Coast, I yesterday identified it. I can't imagine living my life out on the East Coast, constantly paying a premium for my "comfort" foods and not being able to even get some. Is this a reason to move back?

I think so. I miss eating my asian food, being near asian grocery stores and having great asian restaurants. I can't fathom the idea of driving one hour to send my kid to foreign language school every weekend. I don't want to. I don't want to have my children raised here without a concept of where they are from or heritage. I think having lived close to where my parents are from, like DH, we were able to visit family more often and be more aligned with our cultures.

So financially I'm glad to be living out here for now. And I'm even more thankful that I learned how much we're missing living out here now before we have kids. At least they don't have to live out here with us and suffer. Sigh. Thank god Costco sells rice.

CNBC Million Dollar Challenge Week 4 Update

Okay I've been slacking off on updating everyone on my portfolio for the million dollar challenge over at CNBC. I think I'm doing pretty well. I had money in New Century Financial which went bankrupt, but overall I believe that I am doing pretty well.

My total return has been 12.19%!

Rank: 50465

Percentile: Top 9%

Total Portfolio Value: $1, 121, 871.71

Not good enough to win, but I'm doing okay. My DH is going for broke this coming week. He's gone all in on one stock. I'm not naming names, but if it goes well he'll be coming out ahead and potentially winning the week. We shall see if he can pass me.

Facing Foreclosure?

There is a blog called "I am facing foreclosure" started in September of 2006 by Casey Serin. He is a 24 year old "would be real estate mogul". He bought 8 houses in 8 months in 4 different states. Unfortunately he bought at the peak of the market and has been unable to sell these homes.

This blog is following every single mistake and attempt to rectify his mistakes. He has currently had 4 homes foreclosed, sold 2 homes, and 2 are trying to sell. He is trying to even just "short sale" the homes for less money than he bought it for. He was $2.2 million in real estate debt.

This guy even if he sells everything will end up deeply in debt from this mishap. Is it a mishap? I don't know. Is he to blame? Yes. Is the mortgage company also to blame? Probably, he admits to using stated income loans, as he calls them liar loans, to try and finance the homes. This meant on his application he lied about his income.

I can't help but wonder how could he do this? Didn't he worry at all? Probably not, he really bought into the Kiyosaki mindset. That you make income by generating passive streams of income like RE. To be honest there probably are many more people out there in the same situation as Casey Serin.

Maybe not on the same scale, just one home they live in, but possibly there are a ton of other "flippers" in the same boat as him, just not blogging about it. The truth is I bet a lot of people bought into making easy money in RE. Which is not true.

If making money in RE was easy, everyone would do it. Also not true is that RE is a guaranteed investment. Um, guess Casey Serin is case and point that there is no "sure" investment, or else it wouldn't be an investment if there was no risk. Want no risk, buy a CD or money market. Don't touch RE or stocks.

I am not against using RE for investment purposes, but I really wonder if people fully understand the risks involved? Well this blog gives so many details about everything which can go wrong, that I am HIGHLY reccomending it to ANYONE thinking about investing in RE outside of their primary residence. If you are going to be a landlord or flip houses, you need to read this entire blog first.

Everyone should read it and understand his explanations for how he's losing money. There is money lost on closing costs, money on rehabbing homes, money lost on selling a home/staging, money lost on carrying a home for any length of time because of the mortgage involved. Thus RE is not a sure money maker, nor is it easy.

I think what he did is terrible, but I have to say it's one of the most insightful/truthful blogs about RE. He's laying it out on what the real issues and problems are with RE investing. So before you jump I'd read this blog.

Festival of Under 30 #20

This carnival of the Festival of under 30 was hosted by One Big Mortar Board. The theme of the carnival was how did your family help you learn personal finances.

I submitted my article "Learning my financial Skills". One of the best of the carnival is "should you quit school if your brilliant?" by digerati life. Excellent post talking about choosing further education or not. It was spawned by an interview with Casey Serin, who is facing mortgage fraud and foreclosure!

Enjoy!

Carnival of Homeowners #1

I participated at the very first carnival of Homeowners! It iup at the Homeowner's Insurance blog. There were only six entries, but hey it's a start. I included my article on "why I hate condo living." From earlier this week.

I also enjoyed reading "Why pets are better renters than kids" by Josh Dorkin. I can totally relate since I only have my fur babies. I hate renting and ended up buying our townhouse because it was impossible to find a rental that would take dogs! When we moved cross country we sent our boy to DH's parents in Canada to chill until we found a place. He was gone almost 3 months. It was sickening. And he's one of the best dogs ever, though I can't say the same about our new one.

Anyway I also enjoyed "Stuck in this housing market" by digerati life. Interesting read. I know the CA market is in trouble.

Anyway enjoy.

Customer Service Nightmare

Have you ever complained about a company? Well my rant for today is my experience shopping at Walgreens. They were absolutely horrific. The fact they were completely out of their sales stock was not a big deal. I would have dealt and been okay with it. But when I went to check out, it turned a bad experience into a nightmare.

I've worked before in customer service jobs like waiting tables, selling clothes, etc. So I know how difficult customers can be. I try and be pretty easygoing and cool because of it. But because I've worked these jobs, I am definitely more picky.

I tip 20% or better depending on the service. BUT I also walk out without tipping too. When that happens there is usually a reason and I talk to the manager or supervisor before leaving and explain why I am not leaving a tip. The service was poor, food was wrong, etc. They usually are very understanding, what happens to the poor waiter/waitress I'm not sure. But I don't care. Because when I worked those jobs I made sure I was nice, friendly and on top of things. I made a point of doing so because I lived on the tips.

Today at Walgreen's my experience was miserable. The main problem was the cashier. She was god-awful rude, obnoxious, etc. There aren't enough words to describe her behavior. She yelled at me for grabbing the wrong item I wanted to use with a coupon. Then she decided to yell more when I said I didn't want it. She yelled for the manager, said nasty words. She also said to me "I work in a grocery store, this is a great deal, just buy it." I said no thank you. She was so angry about having to void the transaction she kept complaining about my refusal to buy the canned Tuna.

I asked for a raincheck and she says, why bother, we normally don't carry that item. She then gets upset when I say please give me it, and then she gets out the raincheck pad and does it. But she's arguing with me the entire time, saying it's stupid and why bother. I didn't know what to make of her.

Then I bought a dog treat with a coupon but it didn't ring up the expected price. I was a bit miffed so I asked about it. She yelled at me it was right and tough luck. At this point I gave up and bought the damn item and left. I was so pissed though that it's still bothering me. That this woman could actually work there and have a job.

I can't believe the woman has such nerve. It was so aggrevating. I'm still seething over it. I can't decide what to do. I already called the survey and gave them a bad response. I also am debating taking the item back and demanding the right price. But I'm thinking I should call first? But I'd hate to get her on the phone, she's just so aggravating.

Is this how customer service is happening nowadays? What's going on?

Why I hate living in a condo...

Living in a condo/townhouse sucks. I'm glad for the anonymity of this blog because I can say what I really think. We bought this townhouse because we were tired of condo living and this was the next step up. We could not afford a single family home anywhere near the city, and this was a compromise.

But anyway, we need to repair the retaining wall holding up the parking pad of our townhouse. We don't park there, the neighbors do, but it's association business. The problem is that everyone has different financial situations and different ideas about how to handle this project. So tomorrow night we are meeting to discuss two different options and the costs. Also we need to decide when should people pay. This will not be a pretty discussion.

A second topic under discussion is the fact DH and I flooded the lower unit with a pipe burst in January. We were gone to my grandfather's funeral and though the heat was on, it got really cold and a pipe burst. So we submitted it to insurance and turns out instead of our personal insurance being charged, the master condo insurance is having to take the claim because of our condo by-laws. Yep it won't be on our record so when we move we'll be claim free. Also we only pay 40% of the deductible instead of the entire thing, not exactly fair, but I'm not sure what we'll end up doing. So another issue to argue about tomorrow.

Third we have to discuss the fees for our 3 home association. Part of the problem is one of the tenants hasn't paid his dues since August. This confrontation about paying it will again be horrible. Arm-twisting someone for money is never fun.

All these issues combined along with many other issues have caused us to hate living in our townhouse. This is the 5th year we've lived in a townhouse/condo and we're ready for a single family home. Of course that probably is another 3-5 years out from now so we'll have to deal until them.

My advice live somewhere cheap, such that you can afford a single family home. We have lived in 2 out of the 5 most expensive RE markets in the US and it's not fun. But hopefully we're on track to get into a single family because we're building equity by paying down the mortgage and slow appreciation.

Tax Carnival #15

This week the Tax Carnival #15 is up at Don't Mess with Taxes. My very old post about paying off the mortgage or not was included in this Carnival.

Some of the posts which I found really interesting was Tax breaks for expanding your family by Queercents. Also I enjoyed Phil from humanity's post about to Rent or own? Finally Quang at Poor Wealth discusses why Rich people love taxes.

Great carnival, only one I participated in this week. But next week look for Living at Festival under 30, Festival of Frugality, Carnival of Personal Finance and probably Homeowners.

Coupon Shopping Update III

I started examining the use of coupons as a money saving strategy in February arguing whether coupon savings is worth it? However I decided in March to move forward with a 13 week process of examining my savings using coupons. Why 13 weeks? Because that's how long I prepaid the delivery for my Sunday paper to get my coupons.

I started on 3/03/07 coupon shopping and my first try was disasterous, read about it here. Which I followed up a week later on 3/11/07 with another post about another disasterous coupon shopping experience where I spent more money because I had coupons! This caused my DH to chastisize me for spending more than I normally would have because of it, and trust me I felt bad already.

So anyway for the month of March we saved $75 using coupons for our purchases. However we spent $241.09 on groceries + $50.76 on toiletries. We also spent $324.65 on eating out. Which was all under budget. I usually budget $400 for groceries+toiletries and $400 for eating out.

Do I think my decreased spending from Feburary $454.56 for groceries was due to coupons? Not really, it was mainly due to the fact that I stockpiled a lot of meat in the freezer and 50 cases of soda. So my bill was higher than usual and I was able for the month of March to buy less meat and save a lot on my typical grocery bill.

Do I think couponing is worth it? Well most of the $75 of savings came in the form of toiletries like bodywash, shampoo, lotion, etc. And about $33 of it was from groceries. So about half and half. I saved a great percentage on toiletries, and a smaller percentage on groceries.

But I haven't given up yet and am going to continue on this journey another 10 weeks. I guess I should post more often about what I'm saving. But for now I think I'm pretty happy with our monthly spending and our savings. Maybe it'll become greater savings and smaller spending.

Learning my financial skills

Did I learn a lot from my parents financially? That's a loaded question. The truth is yes and no.

From my parents I learned the basic and most important skills of money management. Live below your means, don't buy anything on credit you cannot afford in cash, and save first for retirement and adjust your living accordingly. Fortunately I married someone whose parents taught him these identical values.

Anyway these values having been instilled since childhood have kept me in good stead these many years. Because of it, I've learned to not like debt, though I've found it to be necessary in the form of student loans, mortgages, and a starter car loan. I've also found that I am able to be happy with what I earn because I have never gotten used to not saving for retirement. With DH's first job retirement became a line item we included before the mortgage was even conceived. Since DH started contributing to his 401k in January 2006, he current has $31k in there from contributions, match and earning.

Thus our parents teachings have helped us. But at least my parents never explained what mutual funds are, stocks, or any types of investments. Truth is they themselves have never really been into investing, just saving and living within their means. So there were many financial skills I had to learn on my own, including retirement options, investing, and mortgages.

But since my parents laid a solid foundation I was able to read many articles and learn about mortgages, student and car loans, and investing while keeping a firm head on my shoulders.

Since this is for the festival of under 30, will I share this with my younger relatives? No, probably not. I don't tell others what to do with their money because it's personal. I will discuss with them what I do, but I do not judge not impose my views on others. That being said when asked an opinion I will give it.

My younger relatives and those close in age to me I think are doing okay. I don't think many are saving like DH and I am, just based on their statements, but I think they are trying their best. And that is all one can hope for is a person trying to learn to live within their means and saving. Every step foward is still progress even if it's small.

Mom's Retirement...amazing

Today was my Mom's offical last day of work 3/30/2007. She is 55 years old and has been a state employee for 33 years. She has stuck with her job because of the amazing medical and retirement benefits. Earlier this week I discussed early retirement, well here I'm going to examine her benefits in detail and determine if it was worth it.

First she has contributed to her pension plan 7.8% for the duration of her career. This money has gone into a community pot which will generate her pension. Her pension is determined as follows 2% x years of service x highest 3 years of salary. That means she will get at least 66% of her salary, but because she also accrued while working over 2 years of sick leave, she is able to add that to her years of service. Thus her final benefit is 70% of her salary, which is amazingly about $4200/month gross or $50,400 annually.

Now to have generated this pension my mom would have had to have saved $1.3-1.4 million dollars in retirement accounts. Which she didn't do. This benefit is guaranteed for life. But first she uses her contributed portion up, which you wonder is how much? Well only a measly $200k which will take my mom less than 5 years to use up before she is living off the state's generosity for the rest of her life. And in my family the women live a long, long time my great-grandmother is 97 years old, grandmother is almost 78, and then my mom is 55.

However the second retirement bonus is that she will have free medical premiums paid for her and my dad for life. What that means is that she is retiring at 55 with a primary medical plan in place. She does not need to depend upon Medicare nor buying her own medical insurance at 55. When she turns 65, Medicare will become her primary insurance and this state insurance will become secondary. So if anything happens to her, my mother is 100% insured and pays zero out of pocket costs. The same for my father. The cost of this benefit, well it includes prescription coverage, vision, and dental insurance as well. And is approximately $1000/month. So my mom has right there "earned" another $12k/year in income in retirement benefits.

So turns out my mom get quite a retirement deal. Of course incoming workers and even people who started working 10 years after my mom did not have this sort of pension available to them. This pension and benefits were as she calls it "last of the mohicans." The state has been trying to "downsize" her for about 5 years so they wouldn't have to give her such a generous payout. But they hadn't been successful until now.

Anyway happy retirement mom! Wowzah! Amazing goals. I can't believe she did it. My MIL is also considering retiring at 54. DH and I are nowhere near completing that goal, main reason we still don't have kids unlike our parents who already were done childbearing by our ages. There is something to having kids young.

Goals of retirement

Right now I have the goal in mind of retiring at 55 and DH 57. I think it's a really ambitious goal and one I doubt we'll be able to reach. But there is nothing wrong with dreaming.

As I stated in my previous post, my biggest concern is covering our medical costs associated with retiring early without group medical insurance. I think this could be circumvented by us saving a lot, or we could both work part-time jobs that offer group medical coverage. I'm not sure yet what the best option would be.

Right now we're on track I believe to replace 100% of our current income. However this is an unrealistic number because we're at 50% earning power, and starting out in our careers. So I'm really not sure how much we'll really need. But the best I can do is estimate what we'll need.

Somewhere I read that we should save 25 x our current salary in order to generate a nest egg large enough for a withdrawal rate of 4% without running out. That means we need to save about $3 million. I'm currently planning for double that. I think we will in reality end up close to the $4-5 million dollar range.

Another issue for us, is that retirement at 55 may not be feasible if we don't hurry and have our children. Our parents were done childbearing at this age, so we had left home by their 50th birthdays if not 45. So they were able to spend these past 10 years building their retirement kitty, while DH and I are trying to do it now in the earlier years of our careers. I'm not sure which is a better plan kids early and save more later, or save now and have kids later. I think it's a toss up, mainly because our parents were probably more mature than we are to have had children so early. So it's not just financial reasons that delay us from having children.

Anyway my current goals for retirement is retire with $6M at the age of 55, already have paid for college and the home, and travel and see the world.

Risks of retiring early

What define early retirement? I think that anyone retiring before 62 is retiring early. At 62 people are able to collect social security, which will supplement their retirement income. Another important age is 65, when Medicare kicks in and provide medical coverage for free. However what are the risks of retiring sooner?

People think the biggest risk of retiring early is running out of money. Which I think is a valid concern. However I think this risk can minimized by proper planning, correctly analysing spending, and learning to live within your means early in life.

The single biggest risk I see of retiring early is not having medical insurance. What you say? Well think about it, if you retire at 55, you will be responsible to cover yourself and your spouse as individual's, not through a group plan from work you no longer will have access too. This needs to be your major form of insurance until Medicare kicks in. Also you probably will forced to buy a high deductible health plan (HDHP) to save money because a regular medical health plan at 55 will be too expensive. What that means is you will pretty much pay all medical bills out of pocket, except for catastrophic illnesses.

I priced the average HDHP for a couple that's 55, in great health with a $5k deductible. They will be paying about $500-600/month for their medical premium. That means about $6-7k/year just for catastrophic coverage. This does not include dental, nor does it cover prescriptions. Plus before any insurance options kick in a $5k deductible must be meet annually, and the plan only cover 50% of expenses. If you were to want a more comprehensive plan that cover say 80% it would cost $800-1000/month or $10k-12k/year, again with a $5k deductible.

Thus I think the biggest risk in retirement is affording your medical needs. You not only have to buy catastrophic health insurance, but you must be prepared to cover your own preventative care annually out of pocket. You must be ready to pay for prescription drugs once a $20 co-pay instead $100 or $200/month. You must pay for vision or dental services entirely out of pocket.

So when planning, you must account that though a mortgage payment may be gone, it's possible that it will be replaced by a more expensive medical premium.

Another risk in retirement is the cost of long term care insurance. Buying a policy to ensure your care in a nursing home facility can run a few thousand a year. Also paying the property taxes on your house, which probably has increased substantially in value could put your retirement savings at risk.

All these factors should be considered when retiring early. However, many retirees today were able to enjoy early retirement because they were covered by employed paid health insurance and pensions for life.

Know your mortgage?

According to a recent article published by Bankrate, 34% of homeowners had no idea what sort of mortgage they were carrying. How is this possible? I find it very strange that about 1/3 of homeowners pay a mortgage, yet have no idea what sort of mortgage they have.

Does this mean that people are in over their head? Possibly, it definitely means that 1/3 of homeowners may have bought too much house. It also suggests they may be in very risky mortgage vehicles.

The article also discusses that those who have adjustable rate mortgages, almost 60% have no plan about what to do when their rate adjusts. That means they are just living in the now. I am an advocate for adjustable rate mortgages, I even understand getting an interest only mortgage. But I advocate such risk for people who are educated about these types of mortgages and are fully aware of the pros and cons.

I discussed this in November why i love my ARM. I realize that such risk not for everyone, nor should people enter into such mortgages who are not willing to take the risk. But I think it's worse to be so unknowledgable about your mortgage that you could have a fixed rate and not know it. These are probably the same people who haven't got a clue about the closing costs in buying a house or what their rates were.

The point? It doesn't matter so much what type of mortgage you have, so long as you know and understand the type of mortgage you have.

Carnival of Personal Finance #93

The #93 Carnival of Personal Finance is up at Tired but happy. This carnival was the first I made the editor's choice, with my article about children as a retirement vehicle.

Other top picks were "why you don't need an EF", which brings up good things to think about when establishing if you need an EF and how large.

Also a frugal Zietegeists discusses paying off the mortgage early, something heavily debated by PF bloggers. Good analysis, I love the fact he states that he's fully funding retirement before anything else, then the mortgage.

I have to say I enjoy reading the host blog tired but happy. It looks at life as a working parent and examine whethers it's better to be a stay at home parent or not.

Trusting Trust deeds?

What are trust deeds? They are deeds which are basically mortgages. However these deeds do not transfer the property to a buyer. Instead the trust deed transfers the title of a piece of property to a "trustee", usually a title company or trust. This deed is held as security for the loan by the borrower. When the loan is paid, the deed is transferred back to the borrower. However if the borrower defaults the trustee can sell the property.

Sounds great? And people who get these sort of loans often are paying you the "trustee" 10-15% interest for a specified amount of time say 5-10 years. This sounds like a good deal with minimal risks right?

Wrong. With every investment, there is not guaranteed return. Much less something not well advertised or publisized.

One major issue with these types of loans is that people who get these loans usually are unable to finance properties through a normal bank. They have bad credit, poor risk, etc. Also these loans are locked in for a set amount of time, and often these borrowers are more likely to default during this period. So the risk is that you won't be paid back.

Of course you'd respond but you have a property deed in security. But the property when sold is only worth what someone else is willing to pay you. If you sell the property, typically it's run down or raw land, and the borrower was using the money to develop the property. That means it can be very difficult to sell the property for what you "mortgaged" it for.

So even selling the property may not net you back what you loaned out. Is it a legitimate way to make money? Yes. Does it have high returns? Yes. Should it be in a person's portfolio? Maybe, afterall diversification is important. But should it be the only thing in a person's portfolio? No. This is just perhaps one component of the Real Estate portion of a person's portfolio.

My post though negative sounding is not meant to be. I'm considering trust deeds, but realize it will only happen after I have substantial assets and are able to should the loss of the money. And that it is only a small fraction of our overall net worth, and not a large portion of the basis.

mypoints gift cards

We have been doing mypoints for years now just clicking on ads. We do nothing fancy and we earn 5-10 point here and there. Strangely earning the points have been beneficial. We fortunately managed to trade in our points for 3 $25 gift cards to Olive Garden, Maggiano's group, and the California Pizza Kitchen. That's a freebie for doing nothing more than clicking on ads.

I have to say that this was one of the better freebies we've done in awhile. I would suggest people do it because you get emails which you can ignore and then click on for points. If a $25 gift card is 3500 points, and you get 5 pts an email you have to click on 700 emails. If you get 1 email a day, that means every two years you get a gift card. Which I think for clicking is pretty good. The company makes money by trying to get you to buy stuff by seeing emails, going to websites, and wanting to buy. We've never bought anything other than our free gift cards, so it actually works for us. However if you are a online shopping addict this might not be the freebie you are looking for.

Anyway last night we went to Olive Garden and it turns out that the food tasted better because it was free. We only spent $4 cash on a tip, but the meal was $25 for the two of us. Not a bad deal, we split a meal and appetizer and had breadsticks and salad. We still have to use the other two gift cards.

I'll keep you updated on our endevors.

USDA food expenditures

The USDA posts every month, January 2007, the average cost of food that should be spent per family or single based on 4 different spending levels. The levels are thrifty, low-cost, moderate, and liberal spending plans. The USDA assumes all food is purchased at the store and prepared at home.

A couple between 20-50 for the 4 different levels should be spending $318, $401, $495, $620. I'm glad to say that we are easily a the low-cost level. We probably this month will hit the thrifty level because we're eating out a bit and we're also eating a lot out of the pantry.

I've noticed that we probably spend between $300-$400/month on food at home, however this does not include eating out. I've also noticed like this month, we're currently at $120 thus far for groceries, $212 for eating out. Which is double what we spent last month and the month's not over. So I'm guessing that's part of the reason.

I am going to try tracking our eating habits and see if I can't consistently keep it under $400, which is hard because we include things like toiletries, cleaning supplies, pet supplies, in that number. Mainly because we shop at costco so segregating out the items is tough. Because of that I feel that we're doing a pretty good job.

I'm also trying to use coupons so we'll see how that works out.

CPA worth the price?

Well this year our CPA charged us quite a large amount, $585 to file our taxes. Last year we were charged $475 for 2 states and 1 federal return. And it was complicated without our moving situations. This year it was one state and one federal return.

I'm not exactly sure why he charged us more. Neither is DH. We can't figure it out. I don't think we'll be using him again next year because the costs were exorbitant.

Granted this year we learned a lot of things we didn't know before about the ESPP being income, so it's taxed differently. Also our stock grants are treated also as income. Also we learned about donating our timeshare and stuff. So I sort of feel that this year we paid to become educated about the finer details about the tax law.

But $585 is ridiculous. Sure we had a lot of stuff, but we didn't have a second state this year? What is going on?

continuing the saga of eating out with people

Okay so last week DH went out to eat with coworkers for a going away lunch for someone. Of course they split the check for the person leaving. No big deal. However they also split the bill for everyone's meal, and included beers for those who ordered it and did not segregate it out for those who didn't. DH usually doesn't drink during lunch and certainly wasn't expecting to spend $20 for a lunch meal. Especially when his meal was less than $10.

Now I expected him to pay about $15 bucks with tip, tax and chipping in for the guy leaving. But it was very unfair to just split the bill 10 ways. Yes I know I'm cheap. And yes I know that it's to be expected when you go out. But it doesn't mean that I can't blog about it and just complain a little.

I am glad DH went out and the $20 wasn't a huge deal in the budget. Actually it didn't break the budget at all. But it's the principal of the matter that DH and I rarely drink alcoholic beverages out solely because of price. We do enjoy eating out but dining out is rare.

Thus I feel that when going out to a lunch like this it's unfair to expect others to pick up your bar tab. I don't know if I am wrong for feeling this way but I just do.

Carnival of the Credit Card #6

This was my first time participating in the Sixth carnival of the Credit Card hosted by Credit Card Lowdown. I submitted by post on paying off the Home Depot 0% offer. Which was not a huge deal, but still it just made me feel better.

Two different posters Nickel and Golbguru wrote articles about 0% CC arbitage. Which are very informative and helpful. I am not sure I have the stomach for it, but I have been considering it for a long time. Which is strange considering I utilize 0% financing on a Best Buy and Home Depot CC for 1-2 years. These articles should be read before anyone considers 0% CC offers.

Finally another interesting article is the post by David Weliver about raising your FICO score fast at his site Money Under 30.

Enjoy a great carnival.

Houses cheaper than Cars?

An article published yesterday discussed the trouble Detroit real estate was in. Detroit's economy is in serious trouble with the loss of jobs in the automotive industry. Over 14% of the population are unemployed and one-third live in poverty. Added to those problems is the rising costs of mortgages because of sub-prime lending these past few years.

Because of this many homes are going for auction. This past weekend over 30 homes were sold for under $30k. That is less than many cars on the market. A 4 bd home near Motown sold for $7k on auction.

I have no idea what will happen. I had never thought that homes would be worth less than cars. But it appears that people are leaving Michigan in droves. And they are just walking away from homes. The opportunities outside the state are so much more appealing that people are deserting their homes. When will this exodus stop? Is this what will happen to other midwestern cities?

Frugal Superman

I think I married a Frugal Superman. Sounds crazy, but I think I acheived the impossible. DH works super hard full-time, goes to school part-time, while helping around the house. He cooks, cleans, and fixes stuff around the house to save money. He very rarely complains. Instead he enjoys the simpler things in life.

He's so great, everyday he takes a homemade brown bagged lunch. He's 29 years old, makes great money, and still is humble with great integrity. I cannot imagine marrying someone else. I can't believe sacrifices he has made to make our life work. He has never allowed himself to enjoy the 4x times increase in his salary. Instead he lives the same life we had less than 18 months ago!

I just wanted to write about my appreciation for my frugal superman. His work ethic, his integrity, and his monetary values are unmatched. He's making the sacrifice of trying to finish an MBA as quickly as possible so we can have kids sooner. Most people take 1 class, he takes 2 classes a term and is getting A/B+. He graduated college with a 3.8 and it appears the same wil happen now.

I hope to one day, be able to afford his $1600 watch. I know it's a crazy purchase, but I hope that one day our sacrifices now pay off later so I can surprise him with a present he really wants and would treasure forever. He's kept his $80 watch already for 7 years and repaired himself when it broke recently.

I know many people are pulling their spouses to frugality, however in this case, I am often the spendthrift spouse and need to be lead down the frugal path. Thus I appreciate his efforts on making our lives rich and fufilling.

Carnival of Personal Finance #92

This week the Carnival of Personal Finance #92 is hosted by Lazy Man and his money here. He has an excellent blog website about personal finance so check out his posts about making money work for you. Right now he's blogging about generating alternate streams of income.

However this week's carnival includes my post about reducing my property tax bill. There are also other excellent posts. One to consider is Flexo's cost of owning a home. Another is how to purchase your next car by mytwo dollars. Something which I need to consider in the next few years.

Great Carnival and tons of interesting posts. Check it out.

Payback of Pets

On a message board, people were debating the cost/value of pets. I guess it's pretty obvious which side of the debate I'm on. But I had to sit and reconsider many of the heartfelt posts by people on both sides of the issue.

Is it wise to spend $3k on treating your dog? Many said no way, others said of course. And some said depends on age and quality of life of the animal.

I took our dogs yesterday to the vet for some shots. Because of our "medical" plan it costs $61.90/month for 2 dogs. This includes all the shots for the year, teeth cleaning annually, blood tests annually, etc. That means we spend $742.80/year for two dogs on just vet treaments. We also spend $20/month on dog food, I bought another 30 lb bag of Eukanuba Senior diet because it was on sale for $30. However the previous bag purcashed 2/2/07 still hasn't run out yet. It typically lasts about 2 months a bag, and typically costs $40 a bag.

Thus on food we spend $240/year. This does not include dog treats, which I guess runs another $10/month = $120/year. Realize we do have two dogs so these numbers are double what a single pet would cost.

But we also spend about $20 for 6 month supply of heartgard = $80/year for two dogs. Then we also pay $50 for 6 month supply of frontguard tick medicine = $300/year. So our overall basic cost of maintaining our dogs is $1482/year. I could have guessed we were easily into 4 figure dog ownership.

This does not include extra like eye surgury these past two years for S to the tune of $300/each surgery. Nor does it include things like kennels, leashes, pet beds, etc. Also not figured in is the cost of kenneling our dogs if we travel. And the medicines we buy if they are ill.

That being said, I guess we probably spend about twice what I've calculated so $3k/year on our dogs. Geez, seeing that hard number on paper sort of hurts. Granted we just got one dog a years ago, so it was half the cost previously.

But is it worth it? Every penny has been worth it. Both guys are our best friends. Especially for DH, I know he talks a lot to them, plays with them, enjoys their company. To him, they are equal in friendship level to real humans, but without the complications. To me they are steadfast, loyal, and loving.

I guess the truth is that I'd rather spend $3k/year on "the boys", than going out to eat with people every night of the week. The boys are our happy hour. Instead of going to happy hour with coworkers or out to lunch, "the boys" are our latte factor. And I know DH would agree that the payback of love they give us and the feeling of family we get is priceless.

As a side note, we both grew up with dogs and would definitely not be with a person who didn't love dogs as much. So I guess this would be a dealbreaker for any relationship we're in. Love our dogs or bye bye.

Saint Patricks Day!

Happy Saint Patricks Day! I'll keep this short because it's been a long day. Today instead of boozing about, we spent the day snowboarding in NH. It was awesome, the powder was like being back in the Rockies.

We had such a great time. The weather was awesome, the snow amazing, and not many people. I can't figure out if it was because it was Saint Pattie's day or because everywhere go so much snow that people didn't care which mountain they went to.

Anyway our tickets were a steal of a deal at $29 each. We bought boards, boots, and bindings last season so our investment in going boarding has dropped dramatically.

While our boards last year for everything cost $300/per person, I calculate that it has now cost us about $20 per use of our boards. Cheaper than renting, mainly because we went so often last year and a few times this year. Fortunately because we're not growing any, it's not a huge investment. It's a fun, healthy hobby, and keeps us active during the winter months.

So happy Saint Patrick's day!

Overtipping??

We went out to eat and paid by CC as usual. The server added an extra dollar to their tip, which I found odd. Why? I've waited tables in college and would never have tried to pull a fast one on a client. I'm stunned that someone would be so dishonest.

I caught it after the statement came, so I didn't feel like complaining. But now I'm a lot more careful and check every restaurant transaction immediately as it posts. That way the stores will keep the receipt handy.

I posted on another website and apparently this is can happen quite a bit. It happens with both Debit and CC. It appears as long as you tip on plastic of any sort this can happen. Also sometimes waitstaff accidentally double charges you as well.

So keep an eye on the receipts and check everything twice.

a new retirement plan

Out there a fellower blogger JW at his blog Need to be Debt Free. He's a 40-something guy on the journey of being debt free. He's trying very hard to follow a plan and still retire. Yet he worries about funding college and paying off the house, although he is far behind pace in retirement.

What to do? Well the answer is save for retirement because there are no loans for retirement. But there are loans for college. Also paying off the house faster isn't as important because the house will get paid off eventually. But when you retire, a person needs a pot of money to generate income to pay for repairs, property taxes, and general maintenance of a home. So retirement savings it is.

But what about new retirement plan of living off your kids? Sound nuts? Here is a website on the sandwich generation. Mostly it's boomers who are financially required to help their parents in retirement, while paying for college for their children.

The new retirement plan is to support your children so much that when you retire they take care of you. I don't advocate or think this is sound judgement. However many parents are making college and their children's lives such a huge priority that it leads me to question whether this is a new retirement strategy.

These parents not only moved cross country but are paying $50k/year for tuition at a private high school for their daughters. This is in hopes of going to a "good" college. They have no retirement, have sold their home to fund tuition, moved cross country and for what?

I imagine in 20 years they'll be struggling to retire, and perhaps expecting their daughters to help them out. They'll play the guilt card about all the sacrifices they have made to allow their daughters to become successes in life.

Of course the negative to this, is what if their daughters do not succeed in life? What if their daughters are unable to support them? What if they marry someone whose parents also need support? Or work in careers that are not lucrative?

These issues make the idea of basing a retirement plan on your children's support ridiculous. There are so many variables that cannot be accounted for. And yet parents are still struggling to pay massive college tuition bills and spend any amount to assure their child goes to Harvard.

Parents be wary of such a plan. A more viable plan would be to fully fund and secure your own retirement so you never need to ask for money. Then instead help your grandchildren's tuition, trust me your kids will thank you two-fold. For allowing them to not support you and the gratitude that they don't have to foot their own children's college.

Then they in turn can perhaps save for retirement and fund their own grandchildren's college account.

Grocery Bait and Switch

One of my pet peeves is going to a grocery store and having a bait and switch done. What is that? It's where the item, for example candy, is in a bin with a sign saying Buy One Get One Free and $1.50. So you think great deal, right?

Well DH thought awesome. He took the candy to the register but then it didn't ring up correctly. So he asked the cashier what was going on? The cashier said the sign was for another candy in the candy aisle, but the candy in the bin directly below the sign was not on sale. He knew this was a scam by the store to attempt to sell the more expensive candy mislabelled. He tells the cashier he doesn't want the candy. The cashier still trys to sell it to him. The idea is that the store is trying to make people buy something more expensive by pressuring you when you are in line and unable to return the candy. Also you have people behind you waiting to check out, and possibly you'd miss the cost of the candy period. Because you aren't watching every item scanned. These stores know every trick to get you to spend more money.

Same thing happened to me the other day. What do you say? I bought 4 ice creams and was supposed to get $4 coupon back for my next trip. Anyway, I purchase it on the add, and the coupon doesn't print. I go to the front desk and complain with my receipt. They give me one but only after I threaten to ask for a refund.

I can't believe that stores can get away with these business practices. They rush you through the checkout line so you feel pressured to not return an item you "thought" was on sale. Or are not paying attention to the price because of your kids. Or are just to lazy to go and change the item.

Anyway enough about my rant. I'm exceptionally careful now and look over not only my receipt but I carefully watch as every item is scanned if the price is what I expect.

Is this the experience others have had?

Small savings now...big savings later

Well we got back our notice from the city, and our assessed value of our home was abated $15,600! That only translates into a $145 tax abatement for this year. However it means that moving forward our tax basis for our house will be lower because of it.

When we bought our place, the cost basis was $x in 2006. We applied for an abatement last year and had it decreased by $10,500! This saved us only $100 last year. However this year our assessed value increased by $16,100 for 2007.

However by challenging our assessment this year in January it was lowered by $15,600, meaning our total increased assessed value for our home was only $500! Woohoo!

So our savings is going to compound annually because we'll be able to slow the "assessed value" of our home. Where we live the property taxes cannot increase by more than 2.5%. Meaning that people who have lived here for 15 years pay less taxes than we do because the assessed value of their homes have gone up very slowly. And because of the size of the city, the assessor's office only reassesses newly purchased homes.

Thus the taxes are extremely disproportionate for new versus long term homeowners. To take advantage of this, we decided to challenge the assessement annually. DH thought it was stupid at first, but now that our assessed value is going up very slowly and more in line with people who have owned for 10 years, he's happy.

Sure it's a $100 now, but in say 3 more years, when our neighbors with the identical unit are paying more it'll be worth it. Right now because our neighbors did not file an abatement, their assessed value is $31,600 more than our unit. We have idential townhouses, except we have the original stairs, fireplace, but brand-new storm windows! They pay $295/year extra in property taxes this year with a $31,600 difference in assessed value.

But because of our lower value, next year our assessed value can only be increased off the smaller number. So though our units are identical, by taking a bit of time to research assessed values, we're going to save more money in the long run. Because every year it compounds the amount the city can raise our taxes!

So small savings now...big savings later.

A guide to Boglehead investing

Excellent book. It really starts out well and finishes strong. There are many different aspects of this book. The books is 5 stars because it's easy, fun, and informative reading. I borrowed it from the library, but it's probably worth buying used.

It starts with talking about successful investing. Some of the steps are having an EF, investing early, maxing out all retirement options. It then moves to discussing stocks, mutual funds, and bonds. I found the bond chapters very informative. because it discusses both individual bonds and bond mutual funds.

Another informative part of what you're buying is annuities and Exchange Traded Funds (ETFs). The information is well written and easy to understand. Also it discusses buying TIPS or inflation protected bonds. I love the fact they discuss the two parts of TIPS (Fixed and variable components). Which really explains how I-bonds works.

Chapter 6 moves into determing how much you really need to save. Within this chapter there are many different tables and figures to use to gauge how much you really need to be saving. Chapter 7 discusses keeping it simple by investing in index funds, which is obviously a huge cornerstone of this book considering it's written by Bogleheads (Bogle followers). Chapter 8 goes over proper asset allocation. It discusses risk tolerance, personal situations, and guidelines for age allocation. Chapter 9 looks at keeping costs low, a very important principal/value to a boglehead. Chapters 10-11 look at taxes and how to efficiently manage your taxes while investing. These chapters focus on tax harvesting in taxable accounts, why you should focus investing in retirement accounts (401k, IRAs), and how important fund placement in either a taxable or non-taxable account is.

Chapter 12 focuses on Diversification, parallels asset allocation but a bit more in depth. Chapter 13 looks at market timing and chasing returns, a huge no-no in a boglehead's rulebook. Chapter 14 looks at investing for college examining the different accounts available like Coverdells, IRAs, 529s, etc.

Chapters 15 and 16 look at inheriting money and needing an advisor. Very short chapters.

The second half of the book looks at following through on your investment strategies. Chapter 17 discusses the importance of rebalancing your portfolio. Chapter 18 tells you to not chase returns. Chapter 19 is about mastering emotions when investing. The idea is that you have to not become emotionally attached or invested, use logic. You need to invest and avoid emotional traps. I think this is one of the most important chapters of the book because a lot of people get attached to investments (myself included), hoping it will come back. Or just other stupid things.

Chapter 20 is about discussing how to guarantee your money will last. It talks more about annuities and withdrawing less in early retirement years. Chapter 21 discusses insurance to protect your assets. Chapter 22 is about dying/wills.

And chapter 23 is just a wrap up and encouragement. There are forums for bogleheads. They is a diehard boglehead forum at morningstar where people discuss investing.I really enjoyed this book, it was fun and easy to read. Definitely worth the time to read.

Carnival of Personal Finance #91

The carnival of personal finance #91 is up at the Sun's Financial Diary. There are a lot of great posts including my post on whether it's worth stockpiling.

I suggest people read about 529 versus Coverdall IRAs at Financial Dad. It was an excellent read.

Also on another note people should check out Freemoneyfinance for the March madness blog contest. It looks like a great tournament is finishing fast.

Hope you enjoy blogs this week.

Coupons = spending more money

Okay today I purchased the Sunday paper, it was $2.50. I've decided I'm going to start ordering the paper because I'm going to get serious about couponing. I looked through the sales and coupons, and decided I'm going to buy Irish Spring body wash ($1 coupon) from CVS + $4 bonus bucks, Garnier Fructis Shampoo $2.99 sale - $1 coupon, and $1 coupon on Shady brook turkey.

So that's $7 savings, which is great, I may also use another coupon later if something else goes on sale. Most of the stuff is for preprocessed food and for once I'm tempted. For example there is a $1 coupon on Margaritaville Shrimp (frozen), and it looks good. I'm really tempted to buy it.

Which leads me back to my previous couponing point that couponing leads to spending more money. How so? If not for the coupons I would not be buying any of the three items, not even the turkey. But with the coupons I can justify it because it's less than $2. But still the point is that I am spending money on stuff I could live without.

$1600 Watch Followup

Timbo being my DH is laughing right now. So we went to check out the fossil store but they couldn't repair the band nor did they have any watch bands to replace the broken band.

So I said just get something you like. We walk all day looking at watches and there is nothing he really loves. We've both seen the combo watches by Timex, in fact he still has his old expedition combo watch. So he decides he'll just come home and replace a watch he's had since high school. Fossil does not have combo watches anymore, at least not the combo watch I bought him or else we would have gotten the identical watch. Personally thinking back I should have bought two.

Anyway though, low and behold when he goes looking for his Timex, it's in his fossil box, he finds a couple of old links. So last night he spends some time fixing his watch and replaces the broken link with a new link. It's not easy because it's a non removable link, so he still has to solder the links into place. But wow. My DH is a savings guru. I am very impressed I wonder if he can get another 7 years out of this watch?

I guess that's my goal is to be wealthy enough one day to be able to purchase that $1600 watch. Not saying that I will, but to be able to think about it would probably mean that I've accomplished other savings goals which were more important.

I think it's relative to being able to always buying a new car or luxury trip. Great if you can afford it and even laudable. Because it means you've been able to save and live within your means!

The $1600 watch....

DH's watch I bought him in 2001 for V-day broke finally. It's a fossil watch, so it's wasn't expensive, although at the time spending $80 on watch seemed like a lot. Because of his requirements in a watch there is basically only one watch that he wants. He wants this expensive Tag Heuer Kirium watch see here.

I have no idea why a watch would be so expensive. Is it built better? Is it worth the money to buy an expensive watch? We're not getting it because well $1600 is a lot of money to spend on a watch. However I wonder at what point are you able to afford a watch like this?

Is it just a very nice accessory that you wear all the time so it's worth it? Or is it pure luxury? And you can't afford it until you make $200k? Also is it possible negotiate for a watch this expensive?

Because DH wants a combo watch, we're going this weekend to a fossil store to see if we can't just replace the band on his watch. And he can keep on using it. If we do this, then perhaps he'll be able to reach his goal of wearing no more than 25 cents worth of clothing a day.

Sub-prime lenders

It appears that two subprimer lenders New Century Financial (NEW) and Novastar Financial (NFI) have dropped about 90% since their 1 year highs. These drops have occur precipitiously within the last month.

Today the NEW CEO stepped down and the company is considering entering chapter 11 bankruptcy. But foreclosures haven't really spiked up in January to push these mortgage companies into the red. I wonder what is going on? The housing market has supposedly been in the dumps for months now. Yet the number of foreclosures does not seem terribly high. I also think that these foreclosures are localized more on the coasts where risky loans had become the norm.

Yet in the middle of the country and southern states, the price of homes did not skyrocket these past 6 years. So is there a lot of danger in assuming that the only potential pitfalls in home lending is in very few, high COL cities?

I bought NEW for my CNBC portfolio today. We'll see how it goes.

Pellet Stove or Gas Fireplace?

We're trying to heat the bottom floor of our house more efficiently. I'm not sure which is a better way to go. Initially I thought a gas fireplace, however it was suggested to me on a frugal forum to go with a pellet stove. A family mentioned buying 4 tons of pellets for $1k and it lasting all winter.

Now that sounds like a great deal, however I'm not sure about the feasiblity of either. DH thinks the gas fireplace would be easier to install since we have a gas line for the stove. I concur. He also thinks a pellet stove might not work because it needs air to run so it would deplete the oxygen in our house and would need to vent somewhere, preferably outside. If not it would potentially lead to increased carbon monoxide in the house.

I haven't done much research but the pellet stove and a gas fireplace appear to run about the same price, especially if we get a pellet stove insert for the fireplace. However energy is required to run the pellet stove.

I also am debating between a gas log and a gas fireplace or fireplace insert. The running costs of logs is about $1000, but for a fireplace/insert it is $2500. Pellet stoves start from $1200-$3000 depending also on installation. I guess we'll do more research, but any input would be appreciated.

Best Money savings deal..

I read a blog today asking about your best money deal. Thinking back there for sure was a deal that we ended up stealing the store with.

We used to go to IKEA and shop the as-is department, put things together, fix it up and sell it. Anyway I was going through the rummage when I saw three wardrobes taped together with boxes half attached priced for $1. I stood there motioned to DH and off we went with 3 $1 wardrobes. We sold two of them immediately for $40. Then we kept one for ourself. Now what we do when we buy and sell these things is we look and make sure all the parts are there. Then we go back to IKEA and ask for any missing screws, parts and explain with our receipt (yeah $1 receipt) and ask for the missing parts. Then we "restore" it.

The greatest thing about our wardrobe is when we moved from SD to NEwe sold it for $40. It was really nice wardrobe too. Guess that was our best deal for a $1.

That day we picked up the wardrobes we bought a desk for BIL for $40, that is regular price $200. He still has it and loves its. So we had more than one win that trip.

Do you really save by stockpiling?

I've been contemplating stockpiling more non-perishable stuff I could get cheap or "free" from coupon usage. I wonder however if it is worth it? I mean is it worth stockpiling stuff if you need to live in a bigger home to stockpile?

How do you justify the expense of purchasing or renting a large home/apartment? I ask because if you are stockpiling an entire garage and two spare bedrooms, wouldn't it be cheaper to sell a huge home and just downsize?

Does it not cost more to maintain, heat/cool, other utilities for a larger home than a smaller one? I understand if you have children you need more space than a couple of DINKS, but I wonder if our consumerism isn't driving us to stockpile more than necessary?

I wonder if the meat is good after sitting for 1 year? Is it worth an extra 500 sq ft to save on non-perishables, when you could a house 1 room smaller?

Where do you draw the line between being frugal with stockpiling and being foolish? Remember the saying "penny-wise and pound-foolish?" If it costs more to heat a 2000 sq ft home when you only need 1000 sq ft but would have to shop more and stockpile less who comes out ahead? The person with the smaller mortgage or the couponer?

Carnival of Personal Finance #90

This week it's hosted by mapgirl, it looks like a great carnival. I don't like her website however because it's so frustrating with a little overlapping map on it. I didn't participate this time, but there were many interesting posts.

February 2007 Spending Wrap Up

February we spent on discretionary items such as entertainment, food, eating out, gas, etc. This is not our mortgage or fixed utility bills. We spent $818.06 on everything.

For the month we spent $431.36 on groceries with $88.85 being spent only on soda, thus putting us over the $400 budget. But overall I think we did great on groceries. We also ate out for $153.21/month, way below our $400/month budget amount. I guess we were just trying to be conservative. But honestly $550 is a lot for DINKS to be spending on food to be honest. I guess we should be eating more out of the freezer.

We spent $88.81 on gas for the cars, under our $150/month budgeted amount. I guess this was a great experiement, that I'll be continuing the trend this month to see our spending.

I should be really embarrassed because we spend so much on food.

Coupon shopping part II Update

I keep reading on MSN and other places people saving huge amounts with coupons. Which I can't seem to do. They never pay for shampoo, deoderant, soap, etc.

I'll use a coupon when it's something I buy, but honestly with two people I've written dates on stuff I buy like shampoo, soap, etc and we just don't use a lot. I bought 1 container of laundry detergent 2 years ago and it's still not gone. I bought 1 huge bottle costco electrosol tablets (85) $6 and it lasts 85 weeks, once a week dishwasher runs. I have a bottle of dish liquid soap when we moved 2 years ago and still have the same bottle it's $4.99 at costco. Stuff like that I guess I could save $5 but I mean for 2 years worth of not shopping. Toilet paper, paper towels last us a year or more the giant pack from Costco and it's $15 so I could save $15. But then if I shopped 1 hour every week with coupons, it would cost us far in how much we could be earning than $15. DH could be studying or we could be having fun together. So should we bother looking for coupons and then going to stores for it?

But the problem is I don't think I am the type of person to buy 270 boxes of pasta or 40 cans of beans. How do you store that much stuff? I buy and use till the end. We live with limited space for housing. How do you calculate the extra space needed to store buying a ton of non-perishables? Is that how people got into debt just buying stuff?

I mean part why we didn't get into debt before was 550 sq ft of living for two people made buying stuff hard. And we never overbought or overloaded the fridge/pantry. I mean 270 boxes of free pasta sounds great but where would we put it? Or 40 cans of beans? Or 10 tubes of toothpaste? It would cost us more to have to live in a bigger home than living simply and buying what fits in the smallest space possible. We saved more by living in a 1 bd than moving up into a 2 bd to fit more stuff. And we already lived with stuff like books under the bed, clothes in a dresser, etc. We stored everything we could including built in shelves in the closet and in our outdoor patio closet above the washer and dryer.

So where do you draw the line? Is it really money saving or are you buying and having to store more stuff? And do you buy things you wouldn't normally buy because of a coupon?

February 2007 Net Worth Update

Okay our net worth has been declining since December. Not that it was unexpected because we owed a lot of tuition which I had saved up in cash for and we had to paid. How much tuition? $10k worth and it's been paid for in cash. Yes this is on top of the $8500 in loans we took out this year.

Anyway though our networth this month unfortunately. But part of it was due to the 400 point drop in the stock market earlier this week. I can't say that I'm sold off anything, if anything I am hoping to invest more. Right now in our net worth I probably should be tracking the 0% CC we have with best buy which has $1k due in August. I am considering however just paying it off this coming March to free up cash flow.

Also DH is considering taking classes as at a public school this summer.

CNBC $1 million challenge

Okay readers and friends, let's do this challenge. On March 5th, CNBC is going to launch this build a dream portfolio. I'm going to do it and challenge my DH (if he decides to do it). We're going to go head to head with everyone here and elsewhere. Wanna join?

Send in results in my weekly commentary.