personal Finance Story

Be Greedy when others are fearful and fearful when others are greedy.

Immortal words.

It may very well be that a day ago, when the market indecies dropped almost 10% in three days, when the VIX surged past 40, when everyone and their brother was contemplating getting out of the market altogether, was the very sign to jump into the market.

Blood was in the streets earlier this week.  Today, markets are set to surge for the second day in a row.

Is this the true bottom?  I have no idea.  I do no that today, just as it was yesterday and the day before had one thing in common.  It was a great time to invest.  Start today if you haven’t already.  Only history will be able to tell exactly when this bear market capitulates and dies out.  You can be sure that the next bull market is ahead of us.

Don’t be caught left out when it comes.

Be safe out there and god speed.

After all of the debt is paid off.  After all the proper frugal decisions are made.  What do you have left but to flick on the auto-pilot switch?

Honestly, that is just a little bit depressing.

There is no more exciting debt payoffs.  No more counting down the months to your debt free life.  When you have it finally in your hands, it may seem a bit anti-climactic.  What now?

Being debt free is a great accomplishment.  By doing so, you are free to pursue other methods of investment and personal gain.  Here are a few ideas to get the juices flowing.

Start Living

You’re debt free and have no bills?  How about you give yourself a well deserved financial pat on the back.  Go shopping.  Feel guilty about it?  Shop for gifts!  Either way you go about it, take those debt payments you’ve been throwing at VISA and Mastercard and apply it to some good old fashioned consumer spending.

You’ve been a good soul about money for so long that I doubt you would relapse like a drug addict.  Financial good sense, which I am assuming you have to be debt free, is not something that you are going to lose after a lone month of extravagance.

Setting extremes aside, you may also think to consider increasing your monthly budget for personal spending to get a bigger bite out every month.  This is a treat that is earned so why not enjoy a little more of the money you have today.  Tomorrow has been on your mind so long, today may be feeling a little neglected.

Start Investing More Aggressively

If you do not already have your own taxable stock trading account, get one.  Even if you lose the money you put into it you will still hopefully learn a thing or two about the stock market.

If you want to go a step further, there are other more creative ways to invest your money that can also be fun, such as Prosper.com.  There is something about digging through another person’s finances that is just enjoyable.  If you have some spare cash, Prosper may be a fun way to invest on the side.

Start a Business

Capitalism at work.  Let’s face it.  Even saving most of your money will not get you wildly rich.  To get to the top top percent of net worth, you have to earn more.  Here in the land of the free, there is not better way to do just that than to create your own business.

You are in the best position possible to make the leap to a business owner.  Failure may very well happen, but the chance of success is worth it.  Make it something you love and even failure may turn out to be a worthwhile experience.

Whatever course you do take, even if it is nothing at all, financial auto-pilot still means you are the minority.  You are well ahead of the game and should be proud of your accomplishement.

August was another bad month as far as finances went. Our assets went down while we shifted our priorities around, opting to pay off debt instead of building our cash supply. The good news is that by the first week or so of September, we will have paid off both of our cars. That is going to free up a combined $500 each and every month.

That comes not a moment too soon as I will be needing new tires before the winter. That is going to be somewhere between $400 and $500. It is a good feeling to not have to also make a car payment as well.

Final numbers show that our debt pay down more than made up for the drop in assets giving us a networth increase of $2,333.15. Not bad for a bad month. Kinda makes us both wonder what we can do when we behave…

Assets: $63,125.31

• My Checking, $537.83
• Her Checking, $382.45
• Her Savings, $7,528.58
• Emergency Fund, $1,131.35
• House Down-payment Fund, $5,060.27
• Corvette Fund, $2.18
• My 401K, $11,482.71
• Her 401K, $15,785.55
• Roth Startup Savings, $151.79
• My Taxable Stock Account, $2,924.17
• Her Taxable Stock Account, $1,490.88
• Prosper Loans, $414.05
• Family Loans, $1,780.00
• My Toyota Corolla, $8,000.00 (kbb.com value)
• Her Toyota Corolla, $5,000.00 (kbb.com value)
• Apartment Security Deposit, $1,453.50

Liabilities: $31,138.66

• My Student Loans, $18,654.89 (6.00%)
• Her Car Loan, $583.22 (6.99%)
• Her Student Loans, $11,900.55 (3.00%)

As far as spending went, this is the worst month of the year. There were several compounding factors which can ineloquently be summed up with the following phrase; I ended up having a good time.

We went to a wedding, I made a trip home to visit the parents, and I got to go on a trip that I had been dreaming about for years.

Going over budget on spending is not a horrible curse. I have the benefit of disposable income and going over just means that I can’t save as much as I would like. Our net worth results reflect this. September should see things quiet down I hope. I need to get things under control and make those numbers. There should be no excuses from here on out.

Spending Budget: $1,100.00

Spending Actual: $1,688.71

• Petty Cash: ($20.00) $64.00
• Gas: ($225.00) $213.81
• Eating Out: ($120.00) $306.88
• Entertainment: ($50.00) $0.00
• Hobbies: ($500.00) $655.16
• Fitness: ($20.00) $150.98
• Other: ($40.00) $262.88

(Budgeted) Actual

CNNMoney seems to love adding the personal touch to the economic downturn. After putting together at least two other segments just like it, the return to accepting user stories with a piece asking if readers are better or worse off since the last recession about seven years ago.

I began reading through them and the first story gave me some hope. The first family, the Krohns, consists of a graduate student and a teacher. They don’t have cable. They don’t have fancy cars. And yet their story is a very positive one. They are loving life and don’t care that they don’t have a big screen TV in the house. They are much better off today in their own words and I couldn’t agree more.

Here we have a young couple who is realistic about their lifestyle and spending. They have no other debt besides their house and their student loans. Honestly, I am just the slightest bit jealous.

Golden Years Turned to Lead

And then my hopes dropped as I read the next story, the DiGiovannis. This one reads like a hollywood sob story.

So much for financing our retirement.

I am willing to assume that they are kidding here. And yet, I am sure there is a certain truth to their statement wether or not they would be willing to admit it.

Was it the plan all along? How else would you be able to go from, looking forward to retirement and enjoying life, to eating up savings to pay the bills, in under two years?

Something is rotten in Denmark.

Normal people have adequate emergency funds.

Normal people have healthy retirement funds that are… for retirement only.

Normal people can survive a job loss without collapsing completely. This one is especially true when you have the advantage of a working partner.

Once things go bad the first thing that gets blamed is the economy. Like a toddler who lost his favorite toy cries at the top of his lungs they are irrationally placing blame on whatever is in the news.

Where did we go wrong? We trusted in the economy, and in our own strong work ethic, but it was all for nothing.

I’m not going to pretend that I know all of the details of their financial lives but my gut feeling is that there is more than they are willing to let on to CNN. My parents worked five jobs between them when times were tough. They worked hard to make ends meet and got the job done no matter what the economy was doing at the time.

Color me odd but if this is what the average American family is up to, I’ll take a rain check.

Everyone has a reason to want to make a difference in their lives.  When it comes to finances, motivation can make a huge difference in your approach to money.  Some people have it while others don’t.  Some people need a major financial event to incite them to make a change.  Others, such as myself, I believe have a constant drive born out of a perceived necessity.

Without motivation, you are never going to force yourself to make a budget let alone stick to one.

Without motivation you will never track your spending for any amount of time to finally see exactly where your money goes.

Without motivation you are never going to be able to force yourself to make a positive change in your life, financial or otherwise.

Family

Growing up, my family did not always have lots of money.  There were good times and there were bad times.  Even though my parents made a good attempt to shield my siblings and I from the reality of our situation, I always knew.

My family motivates me to work harder and make my life better.  My ultimate goal is to be in the best position possible to help them.  I want to make a difference in my family’s lives.  They deserve it.

Friends

There are several friends from either high school or college who are very close to me, despite that fact that I don’t get to see them as much as I would like. Some of them I know for a fact are in a very tough situation and to be able to help them in some way later on down the line would mean so much to me.

Helping others is a great goal.  But in order to do that I need to be able to take care of my closest family first.  That means my own life with my wife, and perhaps a family of my own, has to take precedence.  That is my motivation, to help others achieve the financial freedom I know they all deserve.

Find your motivation and the rest will follow.

Dave Ramsey is an inspiring financial guru.  While I do not agree 100% with all of his work I recognize that he can have a positive impact on the financial lives of many people who hear his message and follow through with his baby steps.

So whats the endgame for the Dave Ramsey strategy?

If everyone stops buying lattes, Starbucks will close stores.  This one is true enough.  Starbucks is on the ropes and is making cutbacks to support future viability.  600 or so store have been shuttered so far and counting.

Without credit cards, many people tied to the manufacture and support of credit card transactions will be out of jobs.

Is frugal living going to bankrupt the country?  Is not spending money going to usher in the collapse of our capitalist system as a whole?

Well, no.  That would be silly.  Lets look at a scenario or two and examine it not within the convenient vacuum of fear.

No More Lattes is Bad News for Starbucks

Welcome to the new economy where there are many different options for people to purchase their morning coffee.  Even if everyone in the entire country stops going to Starbucks and the company tanks, the US economy will move on.  Starbucks is simply is not a large enough influence on our ecomony to materially matter.

Starbucks’ loss is the gain of Dunkin Donuts and McDonalds everywhere.  They have both moved in to fulfill a need for lower cost without sacrificing quality of product.  Increased competetion for low cost premium cup of joe is capitalism in action.  I will not shed a tear for Starbucks.

No Credit Cards Means Bad News for Plastics and Support Personnel

Dave Ramsey may view credit cards as a horrible financial tool but debit cards are fine.  So if everone uses them, the plastic manufacturers will have to make due.  Demand will drop and with it prices.  Once again capitalism in action.

How about all of those support people?  Someone has to answer the phones and manage the servers.  Well, debit cards need all of that too.  And last I had to call my credit card company, it seemed they were all to eager to fulfill my needs without any actual human being answering my call anyways.

When you follow the Dave Ramsey way, you are going to eventually be saving a whole lot more money than you ever put away while racking up your credit card balances.  That money doesn’t just get stuff under mattresses across the country.  It gets invested.  What would you think is needed to process and support all of those new investors?

You got it, lots of support personnel, fancy servers, computer administrators and more.

Whats in the Dave Ramsey endgame?  Certainly not financial calamity.  You have to look at the bigger picture to avoid missing the forest through all the trees.

Maybe Not…

The credit markets are still in turmoil.  The headlines just don’t seem to stop these days.  After all that we have gone through thus far it is odd to imagine that we are still not out of the woods yet.  And yet, that is our reality.

Just yesterday Target gave warnings about earning citing losses in their credit card revenues.  Apparently there are more than a few people out there who are unable to pay their exploding credit card debt.  Fannie and Freddie continue to be headline material as they struggle to raise capital to avoid being nationalized.

Sometimes, a headline is just a headline.  You would think that with the rest of the world in financial turmoil there would be a marked decline in the availability of credit.  This is after all, exactly what we would expect in our current situation.

Somehow, my mailbox is always full of credit card offers every day when I come home from work.  Without fail, each day I will have two or more special offers I don’t need.

But Then it Gets Worse

What would be worse than spam?  I’ll tell you.

I went to the bank yesterday during my lunch break in order to get quarters for laundry.  Pretty standard request at my local and seemingly standard bank.

I ask for my quarters and swipe my atm card and then out of the blue the person behind the counter asks me if I’d like a new credit card.

I am floored.  All I wanted was quarters.

She continues to tell me that her screen has notified her that I have quite a bit of credit available to me and at a very low introductory rate.

After an awkward moment or so while my brain registers what is happening, I politely decline the offer and continue on with my day.

Old Habits Die Hard

When you have gotten away with overextending your customers for so long, it must be hard to see any other solution to a credit crunch besides attempting to over extend more customers.  When you have a hammer, all you see are nails.

Perhaps it is time to get a new tool out of the bag.

The month of July was good to us. Not only did we pay off our wedding and honeymoon expenses, but we also managed to pay off my car loan. Not bad for having been married for only a month!

Our current net worth is at $29,653.50. Since this is the first month using this calculation, we don’t know exactly how well we did from last month. Still, all told, I think we are on the right track. Time will tell as the pieces fall into place.

Assets: $63,324.58

• My Checking, $765.74
• Her Checking, $1,500.00
• Her Savings, $7,484.94
• Emergency Fund, $1,128.52
• House Down-payment Fund, $5,057.61
• Corvette Fund, $2.17
• My 401K, $10,731.41
• Her 401K, $15,165.92
• Roth Startup Savings, $76.26
• My Taxable Stock Account, $2,840.68
• Her Taxable Stock Account, $1,444.16
• Prosper Loans, $410.25
• Family Loans, $1,780.00
• My Toyota Corolla, $8,000.00 (kbb.com value)
• Her Toyota Corolla, $5,000.00 (kbb.com value)
• Apartment Security Deposit, $1,453.50

Liabilities: $33,671.08

• My Student Loans, $19,119.67 (6.00%)
• Her Car Loan, $2,849.85 (6.99%)
• Her Student Loans, $12,034.23 (3.00%)

Now then, on the spending front, I did not do so well. So much for my “Don’t Spend Crap in July” rant earlier. Lets see where I slipped up.

Petty cash was very high. And honestly, I can’t recall exactly what I did with the money. I know it got spent and thats all. I took the money out in anticipation of cash expenses while traveling, but when I did not end up using it, I was lazy and did not return that money to my checking. From there, the green trickled out of my wallet in small innocculous pieces at a time.

Entertainment was high because I got the opportunity to hang out with some distant friends more than once. Given the chance, I decided to have some fun.

Spending on hobbies was also high because I was weak while traveling with a friend. What can I say? At least my hobbies are only harmful to my wallet. And even then, not that much. Then again, just wait till next month!

Spending Budget: $805.00

Spending Actual: $882.84

• Petty Cash: ($20.00) $80.00
• Gas: ($225.00) $265.15
• Eating Out: ($120.00) $169.37
• Entertainment: ($50.00) $165.00
• Hobbies: ($60.00) $148.95
• Fitness: ($40.00) $0.00
• Other: ($140.00) $54.37

(Budgeted) Actual

Coming up this month will be my customary monthly review. With it this month will be a change in how I have been calculating and displaying net worth. In June of this year, I got married. Together with my wonderful new wife, we have been tackling financial goals using our combined financial strength.

Just this month I have been able to pay off my car using funds that would otherwise have been added to our pile of savings. Next month, I will be pouring that money towards paying off her car. Within two months of us getting married we will be free of car loans. Not bad.

I have been tracking our combined net worth since May of this year. From this information, we will have a baseline from which we can gauge our future successes or failures.

A Look at the Numbers

May - $15,309.44

• Assets $53,663.03
• Liabilities $38,353.59

June - $16,877.91

• Assets $54,513.81
• Liabilities $37,635.90

I am looking forward to June to be a great month despite some spending slip-ups. From May to June, which included our wedding and honeymoon, we only increased our net worth $1,568.47. We hope to easily beat that in July where for the first time we have been using our combined wealth building power.  I know for a fact that we just erased over $1,800 in car debt this month alone.

It is a good feeling. Goals seem a bit easier when you know you have someone working with you.

Lets look at the facts and just the facts.

The market is down. Down very close to 20% from the highs we saw around October of last year. That puts us right around a bear market. Another bad day or so and we will be firmly entrenched.

My wife and I have at least two years time before we need access to our housing savings. Maybe three depending on the circumstances.

From those bits of information, I was thinking and thinking very seriously about moving the bulk of our housing savings into a stock index fund and roll the dice on the market correcting itself with our two to three year time frame.

It is risky. Both my wife and I are reeling from individual stock investments. However, buying into a proper index fund should help to massage potential losses by virtue of instant diversification. In the event that the market takes a nastier turn for the worse, it will be one of the worst stock market drops in a while. The market is already down significantly.

I have somewhere around $5,000 that is available for this venture. I’ve already moved the money and am conscidering alternatives while talking it over with the wife.

I have always believed that in order to reap great reward, you need to step up to the plate and take risks. This in my opinion is just such a time. With a two year horizon, I think it is worth a shot and will provide a much better return than ING will ever give us.

All I am looking for is a quick and painless 5% to 10%. I think that the market has that to give. With a little bit more research I will be ready to make a decision. I’ll keep my blog updated with results.

Go big or go home. I don’t want to be stuck on autopilot for the rest of my life.