Personal Monthly Cash-flow Update

About 2 months ago, I created a high-level "back-of-the-napkin" monthly cash-flow spreadsheet. I forget if I've ever published it here.

While revisiting it just now, I noticed that the May 2007 short-term asset amount on this cash-flow spreadsheet is actually significantly lower than my current short-term checking account balances. However, after adjusting for a one-time event occurred that gave my current short-term checking account balance a big boost, my gigantic tax refund, I am actually $5K *under* my target bank account balance at this point in time.

What happened?

- I dumped another $1K worth of work into my car that I'm hopefully selling this Sunday when a prospective buyer is flying into down from Sacramento. If a BMW from 1998 requires $4K worth of work since I bought it in December 2006, I can't imagine the maintenance cost on the ol' 2004 E46 silver M3 when its 8 year-old anniversary rolls around.

- Around $1500 was spent in Dallas when I went for training. I'll see the vast majority of that money come back to me as work-related expenses, though.

- Trip out to Chicago, Valentine's Day, and plenty of other people's farewell dinners contributed to a lot of eating out, going out, and burning lots of cash quickly. Total equals nearly $1500 as it is.

- I don't have a firm grasp of my new job's monthly take-home pay. Today, I just saw my April take-home pay.

I started the 2nd week of April, 2007. However, if they had paid me for the whole month of April, then the take-home pay is significantly less than even my most conservative estimates-- anywhere from $300-$700 less, per month.

If the April 2007 take-home pay reflects the 3 weeks I was employed in April, vs. a total of 4, then the full monthly take-home pay is significantly than I'd anticipated-- anywhere from $500-$1000 more. Believe me, I could really use the extra cash-- not necessarily to spend, but to create a budget cushion.

- This doesn't account for car maintenance or end-of-year flurry of holiday activities. Maybe I'll just stay put this year.

Additionally, another $800-$1000 of short-term obligations will need to be paid off. soon This was for trip expenses while visiting my college buddy down in San Diego, a few suits I bought on sale, along with some new computer hardware components to replace existing components. I haven't had a new suit since early college days, and the hardware components, I feel, are vital, considering it'd minimize exposure to extremely expensive and time-wasting data catastrophes, like the one that happened last year where I essentially lost around 50% of my vital data.

Most Recent "Money-Saving" Acts

In the past few days, I've purchased the following:

1. NEW COMPUTER HARDWARE - $130

I purchased a new, cutting-edge 500GB hard drive for my computer "server" at home. Those of you may remember my catastrophic data failure that occurred last year and which this month marks the one-year anniversary of that disaster. And, boy does time fly, or what! It seemed just like yesterday I was on the floor of my home office in my overpriced condo, breaking down the parts of my server, and about to break down myself from losing so much data. The event claimed the lives of 3 high-capacity hard drives.

Unfortunately, there wasn't a true identifiable cause, even if the timing of the failures was simply uncanny and coincidental. Not only did I lose my primary storage solution, but my secondary and even my tertiary backups failed.

To top of all off, my core processor fried, and ended up melting the motherboard away.

The cost of the failure, to lil ol' me, was immeasurable. The true casualty count will never be known. Countless logs, emails, contacts, pictures, legit media and software were forever lost. I even vainly attempted data recovery services which ran in the thousands of dollars. Only 1/2 of the multimedia was recovered-- the rest of the Outlook backups and anything else, gone.

Since that incident, I've sworn I will over-aggressively replaced significant portions of my computer storage on an annual basis.

Therefore, the brand new 500GB HD I bought for $130 is the first step for adopting this new mantra. I wanted to buy another 500GB'er, but that can wait a couple of months. (Strangely, that's what I kept saying to myself the months leading up to my computer failure last year.)


2. NEW AIR PURIFIER - $60

I capitalized on a deal for a very compact-sized well-rated DeLonghi HEPA purifier from newegg.com. $60 for the unit + something like 6 or 12 filters, regular price $100!

This is sorely needed as I moved the noisier HEPA purifier out into the living room but still need something smaller and quieter to suck up all this whitewall / post-construction dust that strangely keeps settling everywhere in my bedroom. Not only will it help my breathing, but it'd prevent that gunk from settling into my computer server.

Now, all I need to do is find a small cool-mist humidifier for myself.

3. 2 OR POSSIBLY 3 NEW SUITS - $350-$500

These aren't your Downtown LA pimp-style $199-for-2-street-deal suits in canary yellow and playa-purple. I cinched these from the Macy's Semi-Annual sale that occurred this past weekend. The Perry Ellis suit, if it fits right (online order only), totals less than $100. The Alfani gray suit totaled less than $190. But the real *steal* was the Michael Kors complete suit for <$150, online, *and* in my actual size of 42L! I've always thought good men's suits cost a premium, >$500 per suit. To actually be able to own *3* suits for the price I've previously thought of buying 1 suit with is a huge eye-opener, without shirking on quality settling on those Downtown LA garment district suits.

ALSO:

Today, I was invited to some automotive, moderated survey panel to be held May 8th, 6-8pm, and paying *me* $100 (no tax withholding! :D) to attend! It'll be in Orange County, so I figure I'll just swing by there on my way to my folks'.

Apparently, they're targeting current or previous enthusiast or exotic car owners. They've asked me to spread the word to fellow BMW, Porsche, Italian cars, and even high-end Japanese rally / sport car colleagues and friends.

Renting vs. Owning-- My personal experience

Here lies a really quick spreadsheet that I whipped up today, just to show what I've been working on. It is by no means complete or even accurate.




And if your eyes need a rest from that eyesore, speculativebubble.com tongue-in-cheeked the current housing bubble by blending it with a bit of fun in this video-game rollercoaster representation of historical price appreciation. Click here to view (Whee!).

Weekly Update

-- not that I've been making good periodically posting weekly updates, but anyhow:

It seems like I made a friend for life when M.T. and I worked together for a total of *almost* 6 months. We truly came from similar upbringings and backgrounds, and shared similar visions and objectives. He was the first person to inspire me to explore real estate as an investment vehicle. And, based on the wise ol' teachings of M.T., my first big splash investing in real estate netted me largest tax refund checks I've ever seen by far-- nearly $14K worth!

Unfortunately, as it usually happens with anyone with any comparably significant sum of cash coming in, I may not have much of an opportunity to enjoy it.

First of all, as of two weeks ago, I finally accomplished what I'd set out to do as somewhat of an informal New Year's Resolution: to pay off nearly $30,000 of short-term debt. Nearly all of this were balances on various credit lines and accounts under my consulting S-corporation. So, I am officially SHORT-TERM DEBT FREE! (except for my auto loans)

However, I paid it off using the S-corp's gross receipts. What this means is, unfortunately, that $30K of money the S-corp earned and was ultimately used to pay off those credit cards need to have taxes paid on them. Keep in mind this isn't a W-2 situation, so no tax withholdings happened.

I'm guesstimating that the S-corp owes maybe somewhere around $10K in taxes up to this point in time, and likely no more than that. Why?

Since the end of March, all S-corp business has been terminated. Now, my source of income was through a W-2 job (but it's even questionable whether I actually do have this job-- long story...) that I accepted with which I'm taking a significant paycut of anywhere between 25% to 33%.

The amount I currently have in my S-corp bank account is something around $4K. Being conservative in guesstimating that I owe $10K in S-corp taxes, I'll need to grab $6K *somewhere* to cover the tax gap, which means I may end up covering it from my own personal assets.

Oh, well.

So, yeah, I got a new job. Paycut is big, yes. Was I nuts making this decision to take such a huge paycut? We'll see. I'm actually *slightly* changing my career path, somewhat, getting out of one industry hemorrhaging from stiff low-wage competition, leveraging my existing skillset and corporate experience, and getting into something else that, for all intents and purposes, can be regarded as in a growth state.

I'm still working on selling off my used '98 BMW M3 sedan (demand isn't as great as my previous BMW cars were when I sold them), and replacing it with something hopefully more reliable (e.g. Japanese), definitely more modern-- and yet still provide some edge in performance that I'll now permanently need to experience during daily driving, thanks to my race-track excursions.

My new boss and I talked about the prestige cars bring to their owners and remarked how generally people treated him nicer, with more respect, after he started scooting around in his new BMW. I agreed with him regarding my experiences when I had my own brand new BMW as well. But, I think I'm not so concerned with displays of vanity now. I just want something to reliably and cost-effectively transport me around, has ample pick-up, and above-average handling.

Regarding the Retiree Portfolio, it's not doing bad at all. Unfortunately, I scoped out the asset location only after the markets were well on their path to recovery from the February 2007 downturn, so I feel like I missed the boat on finalizing the equity portion of the portfolio. Even so, with the equity portion partway implemented, the retiree did capture gains as the market climbed back up to pre-downturn levels, if not higher.

The fixed-income portion of the portfolio was already implemented; to date, they've returned 0%.

I really need to figure out a way to automatically send portfolio updates in the form of charts or itemized breakdowns, or something similarly pretty, onto this blog.

A second retiree has expressed interest in the financial ways I've been helping out with the current retiree. Both have wondered if I'm interested in pursuing a career path in doing stuff like this for others. Unfortunately, I think there's more than plenty of "financial planners" and "financial advisors" out there, marketing their improperly allocated, unnecessarily risky portfolio offerings, making my method that I've adopted from others sound simply "second-rate" in comparison. Everyone wants to finish like a rockstar; no one cares for second-rate. Unfortunately, the majority of the people, including me before, don't realize we might unknowingly finish nowhere even near top- or even third-rate. Even so, their marketing muscle far outflexes mine. Who'd want to hire lil ol' me, especially with my unproven track record? Just because I've read more financial books than the average Joe doesn't make me a suitable advisor.

Back to the topic of me:

ETF's have been performing nicely. I believe Europe is up a whopping 10% since Feb. '07. The black sheep is the REIT, which black-eyes with -4%. All were purchased in late January '07. (Once again, a dynamically, real-time portfolio link here would would suit my lazy self right about now.) The following spreadsheet that I manually prepared will do for now:




MT and I discussed a possible scenario of me purchasing an equal-partner equity share in one of his other properties, on Pearblossom Ave. I think it's either in Euless or Denton. I don't remember-- we visited it very quickly when we were both in Dallas / Ft. Worth, months ago.

I think MT is pushing me to take more management duties for Winder Court and playing a more active liaison role with the management company. MT and I agreed to analyze rental rate increase feasibility for our Winder Court property. I feel as if he's leaving it up to me to be the decision-maker on rental rate increases, tenant feedback and concerns, and cash-flow planning and vacancy costs. Winder Court is MT's diamond in the rough: it's the only 100%-occupied property in his portfolio ever since he 1031-exchanged out to Dallas.

Winder Court rents have been well below comparable rental rates in the area, by as much as $100-$200 / unit, since purchased. Initially, we were interested in increasing rents upon purchasing it, but were concerned about not understanding renter's rights in TX. Well, it's been a year now. I plan on contacting the management company tomorrow to discuss courses of action.

I might either buy half of Pearblossom or completely buy out Winder Court pending further analysis. MT's lured into some property flipping activities and may wind up wanting to becoming liquid enough to have the capability to seize opportunities at a moment's notice. Between our joint efforts and his capital, along with the assistance of 2 attorneys and an assistant in Dallas, we're pilot-testing this scheme with one property whose outcome in June will define the feasibility, cost-effectiveness, and profitability potential of the plan.

Oh, yes, Dorothy, we're in for the ride of our lives...

From a housing blog's April 11th, 2007 entry:

In a conversation with a City Councilman from a city in Riverside County, I was told the following:

New home permits (and associated fees) are down by 64% this year.
Sales tax revenues are down 6% - 8% this year.
As a result, the City is going to slash its budget by 10% which will likely result in layoffs.
It’s different in Riverside County, you know. What is going on there?

IMO, the drop in new home permits is just a sign of the deepening crisis in the housing market. Where is the spring rally? What about all the foot traffic we have been hearing about? If the builders were anticipating renewed strength in the housing market, wouldn’t they be starting on new homes?

IMO, the 6%-8% decline in sales tax revenue is even more alarming. If unemployment is low and everyone is working, why would consumer spending fall off so dramatically? Were the builders and sub-contractors activities accounting for that much of they local economy? What role does the decline in mortgage equity withdrawal have in this decline? Is everyone tapped out? Many of the housing bears have stated the economy is too dependent on real estate and continued Ponzi Scheme borrowing and it is due for a crash. Are they right? A 10% drop in economic activity sounds like a pretty hard landing to me.

Lord Almighty.

A Rant about Pro-Rating

I think we all can agree at this point that individual health insurance in the United States feels like a scam, among other business practices and industries.

Well, check this out. Just now, I went ahead to cancel my Health Net PPO too add another chink to my recent big ol' "cancellation spree" that I'm on. The real reason, actually, is that I'm done with solo consulting, and have taken up a W2 job (with a slight paycut) with benefits, one of them being the usual medical coverage. Sidenote: I'm still a very single guy with no responsibilities, meaning no kids-- trust me, when consulting, I saw W2 as being that greener stretch of grass.

Anyway, back to topic, the one thing that operator said that just completely left-jabbed me: unlike all other cancellations I've been doing, and this being really the early part of April, and with me having already paid the April 01 to May 01 period in full to Health Net, Health Net will *NOT* issue a pro-rated refund to me.

My cancellation, at earliest, would be effective May 1, 2007.

Of all things I've cancelled, I was completely fine with, say, cancelling my GL & PL business insurance early even though I had a few more days to work because, frankly, I felt everything was even keel enough during my last few days at my last contract that nothing completely stupid and awry should occur. Sure, this was a risky move, in case I was sacked for something like a $2 million lawsuit for a database I accidentally dropped.

Now with health insurance, I was deliberately going out of my way *not* to have *any* insurance coverage gap *at all.* If I'd cancelled on the last day of March, I wouldn't have *any medical coverage* for 9 days, since my start date was April 9th. Anything could happen to me in 9 days. Meanwhile, it's silly to even think of asking my new employer to start my medical coverage early despite me officially not being part of their payroll for 9 days. But, I *want* to be covered for the 9-day gap.

How does Health Net reward me? By "stealing" $122 from me, that I have absolutely, positively no chance of using, at all.

Weekend Update

As of now, I am now only about $3000 away from being short-term consumer debt-free. "Freedom!"

Also, you cannot imagine how ecstatic I am about my hefty 2006 income tax refund-- and how old or outmoded I feel for being more excited spending Friday night deriving how my CPA (or, rather, her software) ended up fetching me such a handsome sum of >$10K! My mortgages' interest were the largest contributors. It took me 3 years to finally believe what M kept trying to tell me about his real estate investments...

(I'm eager to completely revise and recalculate my "rent vs. owning in Socal today" scenario, now that I finally have all relevant net costs and figures for ownership.)

Unfortunately, the flip side is I can just see the majority of it vanish into thin air. Although I'm patting myself on the back for being completely aggressive with paying down my consumer debt, somehow I have to figure out how and when to address catching up paying my 2007 S-corporation owed taxes. I figure there's roughly $10K I owe there.

Back to better news, we've been receiving solicitations for Winder Court with significant appreciation. M, my business partner, has decided he has sufficient trust in me that he's given me the authority to make the final decision in holding on or capitalizing our value appreciation.

Adam, my finance-guru ex-coworker, provided guidance by advising I should make the decision by comparing it to putting our down payment into a 5%/annum fixed-income asset or annuity.

Whether we sell it off and collect the gains, or hang onto it for a while, it's a win-win situation for us. In our first year of a 30-year fixed mortgage, the equity paid by our tenants added up to almost being equivalent to the hypothetical gains from our down payment sitting in the above fixed-income asset. This only increase in later years, provided we continue experiencing similar optimal rental levels.

M is convinced that we should 1031 any liquidated funds into a couple more SFR's in the Dallas area after my fact-finding mission was inspired by a seminar that we both attended in his neighbor's garage. Apparently, there are brokers out there who are willing to service the wealth of Californians into properties in Texas and eliminate the legwork we SoCalers would usually have to exert.

To wrap this entry up, of all things, I'm giving serious consideration to "legally move myself to Texas"-- meaning, buy an SFR there, execute address changes for all my accounts to this new SFR there, even change my driver license and car registration to be over there, yet have my employer subsidize my room/board/per diem expenses as I still spend the majority of my time physically located in SoCal.

BOO BOO ON IRA's

My colleague and his friend had asked me about IRA limits for our age and salary levels sometime last week, IIRC. They'd read that the maximum contribution limit between both a traditional and Roth IRA was $4000 annually. I'd read that it was $4000 for *each* type of IRA account.

Man, I was completely wrong! My colleague was right! This is how the IRA formula *should be*:

Annual Roth IRA contribution + Annual Traditional IRA contribution = $4000.

Also, it appears that only those making < $95,000 may legally contribute to Roth IRA's! I really need to read more about this, but what seems to hurt married couples is 1) AMT @ roughly ~$161,000 or so, and 2) apparently married couples can't Roth-IRA-contribute if joint income is around that $160,000 mark.

This whole IRA quagmire is becoming much more complicated than I originally imagined it to be.

Need major sleep. Hopefully, I'll have a better understanding of all this in the next few days.

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OK, one quick thought: How the heck is any average young worker in the US supposed to retire on the $4000 - $5000 / year retirement contribution, even over 30 years? That's only a total of $150K of principal! And, that's not even $150K that had 30 years' worth of investment growth opportunity, either-- only *after* 30 years, is one able to save away $150K.

If a ~10%-interest account was,say, opened with a ~$150K deposit, which then had ~30 years to grow, even so, that's only at most $650K total value after 30 years. This is the best case scenario.

Seldom will be the case that a complete working stiff has $150K to start with, with 30 years of asset appreciation ahead of them, and with the consistent fortitude of earning 10% / year.