Last night, I received my rebate check of 1,023.65! I'm surprised that, once I was on them pretty hard, that they issued me this rebate so quickly.
I should just sock it away somewhere where it'll grow enough to pay for the inevitable clutch job of ~$1,200 that'll come, one of these days...
After searching high and low for that ideal personal finance broadcasting tool which can seamlessly integrate to all asset, investment, and credit accounts, produce summary and detailed-level snapshots with intelligent aggregation, have web publishing capabilities topped off with relative ease-of-use, I've found the perfect tool-- for now. It's called the spreadsheet. Some surprise there.
I've discovered I really don't spend significantly much more time simply plopping account totals and updating it on a monthly basis.
So here it is, in all its glory-- my first ever actual Net Worth Summary Sheet:
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.
Just as the only things certain in life are death and taxes, investing also carries its own costs and consequences that are certain and inevitable with *any* investment strategy, albeit real estate, stocks, CD's, savings accounts, mutual funds, or an equity position in your friend's startup restaurant business.
There's simply no avoiding the following four investing costs, unless you commit fraud or achieve financial nirvana:
- Risk
- Fees
- Taxes
- Inflation (which could be lumped with "taxes", since inflation = currency tax)
Some people might say they're done with "investing" for what the term's popularly known for. They'd rather be conservative, and just "save." (To confuse you even more, by strict economic definition, almost all of us are really "saving", not "investing.")
No matter, because, really, any strategy or action with the intention of, at its minimum, equity preservation falls under investing.
However, what's traditionally considered conservative investment products and vehicles may in fact be hurt by any of the four cost aspects listed above and can even perform *more damage* than other investment vehicles traditionally *viewed and misunderstood* as riskier to your long-term financial goals.
Yes, you heard that right. Being conservative may be more hazardous to your financial well-being-- depending on a reasonable set of circumstances, which I'll delve into in the future.
As time goes by, I'll touch upon these 4 costs of investing. Hopefully you'll end up understanding why you should scrutinize every investment choice against these costs, and how I will use this knowledge as advantageously as possible.
Principle: Pay down all short-term consumer debt first, before even thinking about investing.
In fact, paying down consumer debt actually is "investing", in some sense, as we'll see later.
As guilty as I personally am of violating this particular principle, I can't stress it enough, even if my left hand is discplining my right hand for not behaving. That kind of deal.
What's short-term consumer debt? Basically, any account or balance whose interest is largely non-deductible, severely hinders equity growth or accumulation, and ultimately subtracts from your total asset is considered short-term debt.
The following are usually considered short-term consumer debt, in order of priority:
- Credit cards (which can be viewed as a "short-term loan")
- Personal loans
- Auto loans
Consumer debt encourages to borrow against your future earnings. You're short-term borrowing today, but you'll need to pay it back tomorrow. The later you pay back, the larger the interest penalty.
Obviously, the decision to draw these types of debt differs on a case-by-case basis. For example, if personal loans are secured to execute and start up a sound business plan, then the return (and its corresponding risk) of profits from that business more than offsets the risk incurred of accruing interest.
But, ultimately, think of paying off credit card debt as a way of earning indirect interest. If credit card interest is fixed at 15%, then paying off that credit card effectively yields a 15% interest *after-tax*, because you'd be using after-tax money to pay the balance. So, in a rather real and reasonable sense, paying down a credit card balance fixed at 15% interest is equivalent to the balance money actually earning *more* than 15% from stocks or mutual funds! That's impressive in its own right!
You may argue why car loans are considered short-term consumer debt. In many places in the world, a car serves pretty much as a necessity. However, it isn't *necessary* to buy the latest and greatest car that your bank account can stomach. Ideally, cars should be purchased in cash.
Additionally, there are many ways to trim the fat off your credit card balances, such as by balance transfers, or making mini aka micro aka partial-balance, intraperiod payments.
With balance transfers, however, do keep in mind the issuing bank's gotcha's such as promotional low or 0% APR's, transfer fees, balance transfer balance limits, overage fees, interest rate increase date, etc. Balance transfers only benefit if you discipline your financial house to pay off the balance transfer before the promotional APR's increase. Furthermore, if you find yourself sequentially conducting more than one balance transfer for a particular balance, take this as a red flag that perhaps your debt-to-income ratio, along with your spending habits, needs a good, hard look.
Regarding micro/mini/partial-balance payments, submitting multiple payments throughout the month to the credit card issuer before the monthly bill arrives reduces the finance charge / interest amount you would've ended up paying, even if the total amount of the micro-payments equals the one payment submitted at the end of a billing period. Since most credit cards nowadays allow you to either manually pay or set of periodic, scheduled payments online, micro-payments are one easy way to keep dollars in your wallet vs. giving them to a corporate bank.
That's it for Principle #1. Follow the included link to find out more ways to make your credit card debt more manageable, giving your better nights of sleep.
Please provide your comments and feedback on exactly how valuable, or how obvious and mundane, this post was for you.
------------------------------------
Next week will be a momentous one in my recent history: my credit card debt will finally decrease from 5 digits to 4! I'm so excited. Two weeks after that, I should witness nearly zero credit card debt for the first time in a year!
Sometimes I overanalyze, and spend so much time researching and shopping for something, I feel as though I should be paid for my spent efforts.
Here's an example: I've changed hands with 4 cars, just in the past 6 months alone. Not that my intention was to be a private car dealer or anything-- but with the good number of pink slips I've seen lately, I sure as heck appear to be one.
This huge car dance will (hopefully) soon see its end, though. I'm finalizing paperwork in purchasing yet another car, for the folks. So now, I'll technically be burdened with 2 cars' worth of debt.
For this last and final car (a 2004 Lexus RX330 w/ 22K miles), I'm taking advantage of 2 significant discounts:
- The vehicle is a used vehicle. It was the first-year model of the current RX model design, so I get a discount for a car that looks almost brand-new. I would give the interior an 8/10 score, accounting for 2 years' worth of wear.
- Being previously driven as an internal company vehicle, I avoid paying any middleman and take advantage of any discounts that go along with this. I can rest assure all maintenance was duly performed (and maybe over-aggressively so), and that the car was washed weekly (this is mandatory for internal cars lest the driver is assessed fines).
Hopped with options, including the Premium Plus package, the KBB low / high retail value ranged from $30K to $35K, according to my financier. My contract purchase price: $26,667.18. I don't take into account other used-car pricing guides because KBB is my financier's guide of choice.
If the vehicle is appraised midway between its KBB estimated range, I'm saving $5800, which translates to an 18% discount. Not mind-blowing, but you won't see me complaining about saving nearly $6,000. Unfortunately, I'm forced to finance this vehicle for now. There's no sense in temporarily depleting short-term reserves without any regard for cash flow disruptions.
It's all about finding the right balance when push comes to shove, to make things happen.
There are many ways to gauge one’s life. Two of the most popular ways to assess the quality of one’s life is usually either by the amount of happiness, or the amount of money—or both.
A good majority of us yearns to become as rich as possible, as quickly as possible. I’m certain that’s why some of you stumbled here—looking for how you can be rich like those guys on late-night infomercials who guarantees it in 30 days, or your money back.
Since I’m nowhere near being qualified as a psychiatrist or a self-esteem coach, I’m of no use there, so therefore—well, no, I’m not nearly as qualified being a financial adviser or a CFA either, really. But, I wasn’t intending this blog to be a psychological / emotional advice column. Well, alright, I'll help out if I can.
Meanwhile, I’ve been “investing” for the last 15 years in one form or another. The majority of my investing can be considered pop or voodoo investing, really. Call it gambling. Seriously, some experts go so far to actually call it “pornographic.” Investing = pornography?
A little investing / finance background of me:
I opened my first mutual fund account at Coast Federal Bank roughly 15 years ago. Later on, Coast Federal was bought out by Home Savings who was ultimately purchased by Washington Mutual. I remembered we bought B-class shares of-- whatever fund it was. The "broker agent" just seemed like such a nice fellow, indeed. He exhibited *much* more skill and knowledge than anyone in my family-- how could we simpletons know any better than a full-time money-managin’ dude?
Since savings account rates were barely 2% back in those days, I started socking money away into what I thought was the safest investment vehicle at the time, CD's (certificate of deposit). They returned about 2.1% or so. To diversify by intending to experience dramatic capital growth, I subsequently discovered "growth" mutual funds. MANY years later would I realize there was almost no "growth" in "growth" funds-- that account balance only grew because of the one right thing I did: DCA (dollar cost averaging). From mutual funds, I tried my chops, well very little of it really, in the ridiculous dotcom tech-wreck (after I got out of college). Once the glamour of that turned into gloom, back into mutual funds I went, still with Washington Mutual.
Let’s pause for a moment: did I know what I was doing? No, my gut feeling told me I didn’t. My brain agreed with my gut: I *knew* I didn’t. My problem was I didn’t know *how to invest correctly short of working on Wall Street.* OK, let’s proceed.
Getting slightly desperate as I was turning into a thirty-something, I scammed myself into some investment newsletter promising at least 25% CAGR, whose subscription was one of the most regretful big-purchase mistakes I've ever made. Yes, there were some other stupid big-$$$ screw-ups I made, which I’ll disclose maybe some other time. It’s truly depressing to think of how I actually *could* be halfway to being a millionaire by now. Would’ve, should’ve, could’ve. I digress.
As I was contemplating subscribing, my gut feeling told me the newsletter was a sham. However, let’s deny gut feeling even though, well, more often than not, Mr. Gut Feeling was totally on the dot.
Boy, did the newsletter-owners take me to the-- brokerage account! Not only did I lose the $300+ in purchasing the subscription, I lost significant money on the investments themselves. Good thing the authors let me know about the foreign tax withholding on dividends, too. Their answer: a one-line description of an easy-to-complete federal tax form. I'm sure it'd come as no surprise to you that this easy-to-complete form turned out to be, well, not really that simple.
Let’s not forget that one reassuring sales-pitch popular among newsletter-authors: “I’m invested in the same stocks that I’m picking for you, so you’ll be assured that we’re in this together!” The problem is, how credible is the proof? A webpage with dollar figures divvied up among stocks—with pretty pie charts, lots of commas and digits? Hold on tight, because I’ll make myself a millionaire in 5 minutes, too!
So while I’m being dumped gruel onto my dish for my main investment vehicles, all along my side appetizers of stock gambling was a total wash as well.
The final chapter of my pornographic investment history was when I opened up my own business. My CPA helped establish my SEP IRA and steered me towards the American Funds family. A remarkable event, indeed: it was the first time I witnessed considerable equity growth. Only then, did I know for sure my calculator was working, because my calculations equaled to what the statements were showing. Maybe my CPA is onto something…
I almost forgot about my real estate antics.
True to my former self of "buying high, selling low, and ditch any great opportunity", I jumped onto the real estate bandwagon very recently. I eschewed a Rowland Heights rental property in 2002-2003 for a mere sum of $90,000, which I'm confident is now worth north of $500,000 today. But later on, I purchased my own condo in downtown Long Beach, CA back in the latter-half of 2005, right when word of the housing bubble peaking began gathering steam. See what I mean? You'd think by now I'd learned my lesson about "buying low, selling high." Then, halfway through 2006, I entered my first foray in income properties with a four-plex in Texas.
Since then, I sold off my condo in late 2006 with a surprising gain (it was a surprise since I didn’t expect *any* gain at all), and the four-plex is treating me quite well. I guess the condo sale was one relieving outcome, and a highly motivated one, after looking around me and noticing listings being active and revised downwards for 6 months or even longer for comparable properties.
So, that's my wobbly road to non-riches in a nutshell. For those of us whose main job or career doesn't have anything to do with finances or investing, we tend to think of finance and investments as the stuff of weird-math nerds and multi-trillion-dollar big-money firms, or something equivalent to black magic. There's too much static out there, and we could care less, as long as our savings comes out ahead tomorrow vs. today. So, why don't we just “set and forget” our investments: toss the keys to our retirement to a skilled CFA or broker?
I’d say this is a good point to stop and draw the line in the sand. I’m done with investing blindly. I’ll stick with regular pornography for now. And now, a cliché: a new leaf is being turned.
Only within the last year or so have I stumbled upon some ideas that, although the returns seem meager at face value, may ultimately end up be a worthy lifelong strategy.
Before creating this blog, I've spent some time scouring the Web for other people’s personal experiences and anecdotes applying investment principles. Sure, I've seen some "projected portfolios", and some over-the-top macroeconomic analysis and websites. Other websites I've seen contain seldom-updated, extremely vague personal diaries written by other confused people trying to find the ultimate investing solution, or displaying their account balances but leaving the audience to wonder precisely how it was executed, what their positions are. And yet others simply RSS a quote ticker. Greeeaaat.
Of all the research I’ve done, only one website displayed a real-time, running counter of that person’s asset portfolio by simply multiplying asset units with unit value. Neat.
Confused about finance and investing, like I’ll admit I have been? I'll attempt to simplify and demystify it. Here is where you’ll find epic tales of missed opportunities, lessons learned, some projects and ideas, strategies, and true dollar figures—both mine and the people in my life.
I like to think of myself as always being a humble student of the infinite wisdom of finance and investing. Even more so, I have absolutely no interest to be condescending or arrogantly presumptuous to fellow investors, conveying any notion that *you* need a course from *me* because I know just slightly, but not thoroughly, more than you do. My approach is to explain strategies, execution steps, my reasonings, and engage in conversation with you (or maybe just myself, I guess) about what I've done. I'll leave the "courses" to the "experts."
I cater to no special interest (except to retire sooner myself), and am only funded by myself in this venture. Other than the funds my parents used to raise me from infant to teenager (such as bailing out of jail), I never freely took a monetary obligation without paying it back. I think. Eh, well, if any friends of mine are reading this and I haven’t paid you back, let me know. Pronto.
The strategies I'll employ require no exorbitant minimum starting balance, or options exclusively for the privileged or truly loaded. I'm as average Joe as they come: I was born with a plastic-vs.-a-silver spoon from a Gerber's bottle, I laugh at any possibility of an inheritance or becoming an estate recipient, and, at least for this lifetime, I can never claim TFB status.
I'm starting small, so if you follow my progress and mistakes, you'll be able to see how I'm rewarded and punished, what challenges I face. Stats and numbers I’ll post serve not only to feed my selfish exhibitionist qualities, but also to backtrack past projections and outlook.
Lastly, some of you readers are my friends. You may find me anonymously referring to past experiences which I may tie together with my own knowledge and experience. I’m sure I already have everyone’s consent in doing so.
