End of February Update

It’s official, the sky is falling and I think it hit the back of my head on the way down. We have moved way past the 8000 mark on the Dow and are fast approaching Dow 6000. I will admit that I pay way too much attention to the news and have almost become frozen into inaction. Well not completely.

I recently read an article about a few people that had seen the troubled markets brewing back in 2007/2008 and are now trying to figure out when to reenter the market. I have to admit that I was jealous of those people who sold at the top and are now trying to time the bottom. Now I’m thinking about putting a note under my pillow that says sell everything when the Dow Jones get’s back to 13000? Will that be in 2011 or 2020…tough to say at this point. The financial down turn is very disappointing to say the least. I am working towards a goal of a net worth of $1,000,000 by the time I’m 40 and It seems like a big deal to lose several years worth of gains along the way. I turned 32 in the month of February and was reminded that I only have 8 more years. Part of me also knows and thinks that as I buy shares at 1997 prices in 2009 I stand a chance of drastically increasing my net worth if the Dow Jones does get back to 13,000 within the next 5 years. Jim Cramer keeps saying 4.5 years.

Net worth update: $193,407.57, Which is a loss of $866.47

Recent moves include upping my 401K to 14%. With my company match of 6.5% this puts me close to $20,000 for the year. I have also changed where my future contributions will go into.

PIMCO PIMCO Total Return Instl Fund 40.00%
Fidelity Contra Fund 35.00%
Principal Global Investors MidCap Blend Separate Account15.00%
Principal Global Investors International Growth Separate Account 10.00%

I know it seems a little conservative by putting 40% into a PIMPCO bond fund but I feel like this is balancing the risk of 5% out of the 6.5% match from my company being in the form of company stock. Having said that, my company stock is only down about 13% for the year.

Other financial moves if you want to call it that is the purchase of a new car. My car was dying and needed about $4,500 worth of maintenance. I elected to purchase a used car, 2008 with 13K miles on it. I put $6,000 down and now have a payment of $218 a month for the next four years ($9,000 loan). This purchase won’t be reflected on this month’s balance sheet but next months. The reason for this is that I put the down payment on a credit card that does not need to get paid off until next month.

I must admit that this purchase has made me question my thoughts on counting personal property as part of my net worth. At a maximum I was thinking of giving myself a partial credit for personal property only up to the point of offsetting the loss of cash from my savings account. This to me seems to fall in the category of “funny accounting” but seems like the car and all our property is worth something. However, I really don’t want to play the game of how much is my car worth versus how much I owe on the loan. I am leaning towards not putting my car debt on my balance sheet and only reflecting it in terms of cash flow loss. This is totally cheating in some respects. However, my wife’s car is nearly paid for with only a few car payments left and I will not include the value of her car on our balance sheet. We also have furniture, TVs, and a painting worth thousands of dollars not included on our balance sheet. The painting is worth maybe $2-3K alone. I think this all get’s back to how I want to count personal property as part of my net worth. The bottom line is that I don’t think it fair to deduct $15,000 from my net worth just because I purchased a vehicle. I don’t think it tells the entire story of what is going on. At the same time I don’t want to play the game of “how much is my car worth” either. The car has a blue book value of 18K and I owe 9K on it.

I will continue to ponder my accounting over the next few weeks and months ahead.

Net worth update for Feb 2009

Just tallied up the net worth for the end of January. This is getting old. With the stock market declining 10% for the month I was not expecting any gain. Net worth is down to $194,274. That's a loss of $1,900 for the month...ahhh really a loss of much more if you include the $2K I put in. It was not a good saving month because of the excessive credit card bill. Mainly from the purchase of the new refrigerator. Next month I will start putting extra money into my cash account until I decide what to do with it.

Also, I started my taxes. I finally got all the forms and have done an initial upload of information into H&R Block. I have made the mistake of accidentally falling into the 28% tax bracket. Ugh...Turns out I will only get about $200 back on my Federal and maybe $1,200 back from my state. So much for the small windfall I was expecting. I believe that this occurred because my wife was not contributing to her 403b while she was on maternity leave. Also, she was getting paid by an insurance company (who covered her benefits while on maternity leave) who may not have been deducting all of the taxes they should have. This didn't impact the tax bracket rate we fell into but impacted the size of our refund. I have taken some quick action to ensure I will remain in the 25% tax bracket next year. I raised my 401K deduction from 8% to 14%. This is a big jump but I think I can do it. My first check with the new 14% deduction will occur in a few weeks. My only frustration with doing this is it limits the amount of money I will have access to in the short term for home improvements and building up my brokerage account/cash acccount. Having said that, putting more money into your retirement account is hardly a bad mistake to make. This bump will put us up to over $20K of contributions for the year into our 401K/B accounts. Not including the matches that we get at 6.5% and 9% each. I also plan on putting more money into one Roth IRA for us. All in all this is a lot of money going into retirment accounts for us.

Don't expect any reall good news in the next few months. I expect the Dow Jones to go up and down from 8000 to 8800 for the next 6 months. ugh.

Update

It's been a while since I've posted so here is a quick update. We had an end of the year problem with bad luck. Our refrigerator went out on us, our computer got a virus and my car's transmission started to do weird things. It really began to feel like the world was working against us. We have seemed to come through the rough patch and are about to start a more steady state of affairs. At least so I hope. The fridge had to be replaced ASAP. I went out and got a mini fridge from Walmart for temporary supply and then later got a loaner from my boss. What a nice boss. I then later returned the Walmart fridge getting back my $89.00. We have since replaced the broken fridge with a new one from Lowes. Pretty standard side by side stainless steel (more grey than stainless) with water in the door. We did not previously have this feature and we are loving it. Nice to throw that Britta away also. The entire Fridge ordeal cost me about $1100. I have my $89.00 rebate in the mail for the "free" delivery from Lowes. I hate rebates by the way.
My computer virus was fixed by myself. I did some research and discovered the name of the virus that was on my computer. I did this by doing a google search for the constant advertisements that were popping up on my computer when I had a web browser open. I then did a search under the virus name which lead me to a website called, "bleepingcomputer.com" I posted my issue and a few days later I had a tech person respond with what to do. After several posts back and forth my computer was fixed. Most of what they had me do was download executable files and run scans of my computer. It took about a week but my computer is now fixed and all for free.
My car is a different matter. My transmission is making rough transitions between 1st and 2nd gear and I am almost ready to throw in the towel. I don't plan on replacing the transmission but will bite the bullet and get a used "new" car. I'm looking at Toyotas.
Net Worth Update- Last month was a small gain of about $3K. Nothing to get excited about because I am not sure this trend will continue. However, it is nice not to take another $10K hit. I am still below the $200K mark and standing at $193K. Very disappointing.
A few recent financial moves my wife and I have taken were to up her 403B from 5% to 12%. She also gets a 9% match bringing her to a total of 21% of her pay being put into retirement. I have left mine at 8% for now and will begin transferring money over to our ING savings account next month. My baseline of saving outside retirement accounts is at $1,600 a month. I think I can do more. I also changed my W4 tax form from zero to One. This didn't make a huge difference but will let me bring home roughly $800 more dollars a year.
We are excited to do our taxes this year. Maybe by next week I will have my W2 forms which might complete all of the tax forms required to begin the process. This should be a nice cash inflow for us. Most of it will go to savings although we may splurge on a new table for our dining room with some of the money.
Savings estimate for 2009.
At our current rate we will collectively put in $27K into our 401K/403b accounts. At $1600 a month we will be putting an additional $19,200 into taxable accounts. That is a total of just over $46K in annual savings. Not too shabby. I think I can put more money into savings on occasion. It is the unexpected expenditures that are tough to plan for. Some upcoming expenses that could mess things up are: new car and landscaping project this spring. Let's hope nothing else brakes on me in the next couple of months.

Net worth update for October 2008

YIKES...knew it was going to be bad but it hurts when you actually put it on paper. Net worth dropped down to $191,777. That's a drop of nearly 5% or just under $10,000. What is still hard to really compute in my head is the fact that I have also been putting money in. So really the $10,000 drop doesn't account for the $3,000-$4,000 dollars that I managed to add to my accounts. I try not to think about that one too much.
It is hard to stick with the plan during these times of economic sickness but I have managed to do just that. Expect to max out my Roth IRA by the end of December and both the wife and I are planning on putting more money into our 401Ks once we get our annual raises. I still don't know what mine will be. I keep telling myself that I am buying low now so it will pay off later. That's the point right. Buy low and sell high. The mental image that I use is the stretching of a rubber band. The more shares that I purchase at the lower prices will eventually cause my wealth to spring into action when the stock market corrects itself. But when will that be? How low will the stock market go? What happens if the auto industry collapses? Another Terrorist attack? Could there be a DOW 5,000 in the next 12 months? The list of questions goes on. It sort of makes buying shares of a mutual fund like throwing money down a black hole. Is there light at the end of the tunnel or does it just go on forever.

When I look at the nice and neat charts of monthly progression towards my million dollar goal I am shocked by how far off I am. The chart I look at assumes I save $3K a month with a 8% rate of return per year. By that chart I should have around $226K for a net worth in the month of October in order to hit the $1Million dollar mark by age 40. However, life never seems to be that simple. There is a part of me though that really knows that in a few years (maybe 4 or 5) I will look back and understand that this period of time was when a lot of my wealth was created. Buying low. I only hope that I will have the wisdom to not get greedy when things are really high. Be smart and re balance as the market corrects itself. Having said all of that what really scares me is the chart of the NASDAQ. Remember NASDQ 5000 in year 2000? It closed at around 1,600 on Friday. If you look at this chart from back during the .COM bubble it is clear that it hasn't even remotely corrected itself. Could this happen for the Dow Jones? Could it take more than 3-5 years to get out of this mess? YIKES.

I wish life was as neat as my spreadsheet that assumes an 8% return a year. In many, many, many ways.

Recent activities

As a result of the recent economic news I have taken a few actions.

• The first action was to do nothing. I sold no shares within my 401K or my wife's 403b. In my last post I describe how this drop in the market could really be the sole reason as to why we hit our goal. Buying low is really the key. My wife and I have also decided to put our yearly raises into our retirement accounts. This will give us a nice boost. My wife found out that she is going to receive a 7% raise. NICE!!!! I have not found out what I am going to get but I suspect it will be between 3-5%...


• I changed our future contributions to our retirement accounts. Both my wife and I now contribute 25% to bonds or some sort of fixed income investment for our retirement accounts. I just feel more comfortable with this for the long term.


• I also started watching the first 25 minutes of "Mad Money". I believe that Jim Cramer offers the best economic and market commentary around. I don't watch the entire show but just the first 25 minutes. The later part of the show gets into the quicker stock picking recommendations that are of no value to me.


• Today I did something out of the norm. I purchased a few shares of JNJ (Johnson & Johnson) , KBR and KO (Coke) stock. These companies were to good of a deal to pass up. I have regretted not buying after the last crash after 9/11 and didn't want to sit on the side line for this one. Only a small amount of shares each. I am also watching Apple, inc. It is my opinion that many good companies have been dragged down by the market but for no other good reason. Some of these are down over 50%. That's a lot of upside potential over the next year or two. These are long term positions.

Monthly Update for Sept 2008

Not much to say for this month. Net worth loss of about 2%. Down to $201,516. A loss of about $4K from last month. The hysteria of the news and what is going on with our economy is scary to say the least. I have resisted the temptation to change my plans so far. All I wish for the Govt to do is to give an honest, hardworking saver like myself a chance at making it. Thus far I plan on keeping to my current plan. To recap, the plan is to max out my Roth IRA and contribute about $450 a month to my brokerage account from now until December. We are also going to keep our contributions to our 401Ks. I set that plan prior to all of the market "crisis" news of late. I have so far decided to stick with it and am telling myself that I am buying low. For our 401K and 403B plans I am more easily able to go along with the long term investment plan. For my taxable brokerage account I am having hesitations. For now I am going with the buy low mentality. I am considering at least looking for a bond position for my taxable brokerage account. Maybe even adding to my cash position. Seems easier to add to cash with a 3% guaranteed return versus buying a bond fund. I am amazed at how many people I work with have sold all their retirement holding and moved them to a cash position. They did this mostly after the market had lost over 10%. And worse is that these people are more than 10 years away from retirement.


I have also had a thought that all this economic mess could be the very reason why I end up hitting my goal of $1Million in the next 9 years. If I can buy shares at a much reduced price for the next 12-18 months maybe that will help me catch up. If in 2010 the Dow Jones reaches 14,000 my portfolio would have essentially exploded upward. Maybe that's just me trying to be positive.



I have also run some numbers at paying down my mortgage versus contributing to a taxable brokerage account. $1200 a month to a brokerage account or to my mortgage. What to do. In theory if I earned 8% on the brokerage account the choice is obvious. If I paid down my mortgage for a few years and then tried to refinance I could lower my monthly mortgage bill. Right now it's about $2,000 a month. There is also an emotional aspect to paying down the mortgage. A certain comfort. However, it also ties up your money. These are the things that race through my mind at times.

Hanging on one week at a time...Thinking long term...trying to do the right thing...

Monthly Update for August 2008~Net Woth inrease of $3,370

Long time no blog...sorry for that. The past few months have been a Blurr. The addition of a new baby has made life very challenging. My wife and I are enjoying the new addition to the family but still trying to get a handle on all of the changes that have accured. There will be some added expenses for us to consider with the number one expense right now being child care. A new child is certainly not a good investment to the balance sheet but we will go ahead and keep the baby anyways. (ha ha). The day care will start in a few weeks once my wife goes back to work. I am still hoping to be able to save close to $2,000 a month outside of our 401K accounts. The nice thing is that my company matches me 5% and my wife's company matches her 9% (nice). This should help keep me on track to hit the 1million mark in the next 9 years. I will need to get close to 8% return from the stock market in order to get to the million dollar mark. That seems far fetched these days, but long term I think there is a chance. The longer I study the charts I feel that the more money in the stock market is the only way to go. Accruing at a higher rate of return will help me achieve my goals and that the risk of the stock market is worth taking.

August was a decent month. I am still being dragged down by the stock market but our ability to save cash is helping. We are continuing our move into the $200K territory by hitting $205, 633. That's a gain of just over 1.5% for the month. I have also hit the $45,000 mark for our cash holdings that will help me sleep better at night. This is part of our recovering from the purchase of our first home and lots of home renovations. All of our home renovations were paid with cash and we also put down a nice down payment when we purchased.
As a result of our cash holdings hitting this $45K mark, I have decided to move our money savings into a Roth IRA and our brokerage account. Right now my wife and I only have one Roth IRA. By the end of December we will max out this Roth IRA and also put money into a regular brokerage account we have with Fidelity. After December, I am not sure where we will focus on. I will either open up a Roth IRA in my wife's name or simply focus on putting money into the brokerage account.
PS..I finally broke down and purchased a big LCD tv...It had been years since I wanted one and was tired of watching TV on a very small tv from College.