What a long strange trip it's been...

Hi folks!  As the title suggests, the time since my last post (nearly 5 years!) has been one hell of a journey!  To recap, I retired from corporate America in late 2010 (at age 38) and promptly went into travel mode with my wife. We enjoyed our travel so much that we decided to become Ex-pats in Central America!  Wow! What an experience!! 

Between travel, new hobbies and engrossing ourselves in an entirely new culture, we've had our hands very, very full. 

True to form, however, the concept of financial freedom and active financial management has remained front and center.  Not only have I continued to be a very active stock market participant, but my wife and I have also (more recently) been working on a cash-flow generating small business. Truth be told, after all is said and done, you can only relax, socialize and pursue hobbies for so long. At some point, the mind just needs to be fed, and remaining active in the financial markets, as well as creating a small business are a few ways to keep the mind sharp.  It also helps keep you engaged in what's happening in the world, even if you live in a small Central American town.

I'm not sure how I remembered my long lost blog, but it just came to mind tonight and I was pleasantly surprised at the amount of people still reading through my posts - that's GREAT!  I also took the time to check up on a lot of my fellow finance bloggers and was VERY surprised that most of them are still at it, and have also reached what I consider to be a viable retirement nest egg.

Take it from me - you don't need NEARLY the amount of money you think you need to comfortable retire. $50k a year?  EASY.  Other parts of the world?  $40k?  $30k?  EASY.  The "system" has you believing you need a TON more money, and you don't. Period.

Until next time...  (perhaps soon!)

Hey there...

Much to my surprise, it looks like there is still a steady stream of folks coming to my old blog. I'm starting to wonder if it makes sense to start posting again. Anyone? Let me know...

August Net Worth Update (up 1.87% to $988,082)

It's been a few months since I've done a real monthly update here on the blog, so I thought I'd take the time to provide an update.

First off, I've been busy as all heck on all of my other projects and writing the blog has taken a bit of a second priority, but do expect me to chime in every now and then over the next few months.

On the surface, this month looks like a great month, but let's dig into the details a bit further. First off, this was an absolutely brutal, brutal month in the market with huge swings, hedge fund redemption selling, periods of low volume and economic stories.

All told, I lost nearly 9% of my portfolio value (or $51,000 if you're playing along) from mid-july to the low in mid-August. Paper money? Yes. Was I nervous? Heck yeah.

Thankfully, it wasn't worse because I was holding a fair bit of cash and even though I was starting to buy into the market as it was dropping, I never committed my full amount of sidelined cash. Also, from mid-August to now, the market has rebounded nicely, although it's still off the highs. With ongoing help from the Fed and now Bush on the sub-prime issue, I can see the market ending the year higher over the next four months and ultimately the correction and following consolidation was a good thing for a move higher.

Although it looks like the portfolio has come back almost entirely from the lows, it really has only regained about $26,000 of that $51,000 lost. The other gains that make August look like an "up" month, were due to a) three prior stock awards in the amount of about $15,600 after taxes, b) 401k and c) ESPP contributions.

Three other points about the current month:

1. Although I have bought a few equities during the correction, I continue to hold nearly $65,000 in cash. I'll continue to look for opportunities to put this cash to work and I think the time is pretty ripe right now.
   
2. I continue to pay down the mortgage and am on track with my mortgage goals for the year. As a reminder, the plan is to pay double mortgage payments for the next few years with the result being a fully paid off home. Double payments are being made possible by reducing expenses, not through savings withdrawals. The ending mortgage balance goal for this year is: $144,000 (stretch goal of $135,000), and I'm still on track.
   
3. On the Prosper.com front, I have $3000 principle invested into 22 loans, and this month, I had one loan go into default. The Proper collection agency was able to recover about 15% of the loss making my net loss only $80 after all was said and done. All other loans are current. Although I am still making over 16% on these loans, I stopped funding new loans in June. If sub-prime folks (same folks getting loans on Prosper) can't pay their mortgages and keep their homes, does anyone really believe they'll have enough money to pay back these loans? There's definitely much more risk for Prosper loans now and I'm not jumping out in front of that truck. There's nothing I can do about the current loans, but at least they are being paid back methodically and don't appear to be in trouble (yet).

Anyway, that's the update -- Things are still good and it looks like I'm only $12000 away from my first Mil mark. Hopefully I should be able to meet that milestone by the end of the year.

Tough market these days...

Ok, time for a portfolio and market update.

It has been a turbulent few weeks -- up $5000/day, down $8000/day, up $3000/day. Apply, rinse, repeat. I hung in there -- until Thursday.

I have started taking profits in a few areas (only a few) this week, and thankfully I was selling into the strength of the market on Thursday. I took my CLWR gains (up about 30% on a deal announcement with Sprint), and I also sold off AEDAX, a Euro growth mutual fund because I couldn't justify the expenses I was paying vs the EZU EFT. They were basically performing the same, so why pay the expense premium, even for such a consistent fund manager? I may re-evaluate paying those manager expenses when this wicked bull market slows down and finding good returns becomes more difficult. Since Europe is doing so well, I did move some of the proceeds directly over to EZU, but not all of them.

I was also pretty lucky on my CAT investment -- the run up over the past 5 months has been incredible. When it missed estimates and was downgraded, it fell over 8%, which was a ridiculous overreaction. What did I do? I bought more! The luck part of the story came when CAT closed only down 4% for the day, so I MADE 4% on CAT yesterday. Sometimes you just get lucky.

Those were some of the bright spots, but on the other hand, I have had some pretty challenging days with both GOOG and SHLD. In an earnings miss from GOOG and a 50 pt down day for them, I lost my 10% gain in the stock. Thankfully, it wound up closing only 30 pts down, so I'm even on the stock from where I bought it. I'm holding strong and expect good things from the stock going forward.

On the SHLD front, I firmly believe in the investing and asset mgmt talents of Eddie Lampert and I expect good things to happen over the next few months. Wall Street is rightfully becoming more interested in the retail side of Sears, which I (somewhat boldly) think is the least attractive asset that the company owns -- time will tell. I have added to my position on the slide down and hope to see a turnaround in the stock in the back-to-school time frame (when retail picks up again) or when Lampert announces another investment stake or an all around buyout of some company.

One other recent sore spot for me is with GS. The financials are getting killed right now, but I'm hanging in there. I may even buy more as GS nears the 200 level, which would be one heck of a fire sale.

Other than that, the rest of the portfolio is doing incredibly well -- at one point last week, my entire portfolio was up nearly 7% for the month of July alone! Of course, as you'd expect, I have given up some of those gains over the past week, but I'm ok with that given that it was a broad market sell-off.

How is this market treating you? Are you buying, selling or hanging tough?

Who has paid off their car?

JLP over at AllFinancialMatters reports that he finally paid off his car. It's great not owing money on a depreciating asset like that! Personally, our car loans are some of the first debts we paid off after the credit cards. We've been without car loans for over 4 years now, and it feels great.

Anyway, it got me wondering -- I wonder how many people own their cars outright? Anyone know the stat?

Another way CC arbitrage hurts you

I always knew credit scores figured into how much you pay for insurance, but I never mentally put these two together. The fact is, 0% balance transfer and credit card arbitrage schemes wind up costing you money on your insurance premiums because premiums are more expensive when your credit score is lower. ...And clearly, having $100,000 on the books as a 0% loan is going to lower your credit score. So how much more will you pay for insurance? Looks like we'll never know.

Saving more than your parents

I came to the realization the other day that I have more savings than my parents -- seems kind of obvious, but it never really sunk in. After all, how is it possible that someone in their mid-30's has saved more money than their parents in their mid-60's?! Looking at the numbers, it's shocking: I have 3x more saved than they do. Absolutely shocking to me.

Anyway, I've been worried about them and their finances for some time now. I hope they will eventually pull together a plan, formally retire, and hopefully not run out of money. It should be possible with their current savings and home equity, unless debt and rampant consumerism takes over.

Anyway, anyone else out there hit this point and realize that they now have more savings than their parents?

(photo courtesy of: Indigo Goat)

Countdown to retirement (or whatever!)

Ok, this is some admitedly geeky stuff, but you can't help but want to get some yourself once you see it (or maybe it's my inner geek just coming out). So, some of you know that I am running Windows Vista on my laptop and one thing that it lets you do it to pick amongst a number of "gadgets" that you can place on your desktop that provide you live updates over time. Things like clocks, weather, stock updates, etc.

As I was browsing through some of the available "gadgets" that are available, I came across a gadget that lets you "count down" to any date of your choice. Naturally, I added the gadget, set my retirement date goal and promptly labled it "until FIRE", meaning "until [I'm] Financially Independent and Retiring Early". I set it to count down in weeks, but you can also set it to days, hours, minutes, or even seconds.

You can see some of the gadgets I have on my desktop to the left, including my retirement countdown timer on the bottom -- only 226 weeks to go! (Also, as you can tell, we're having a pretty nice day in Seattle today!)

If you're running Windows Vista, you can get your copy of the gadget here.

Getting what you deserve

Over the past 7 years that I've known my wife, she has worked at a number of different companies. She has a self-described "2 year itch", meaning after about 2 years, she wants a change of environment -- new employer, new colleagues, new surroundings, etc. Well, I'm not sure if it's just that it's spring time, but that time has arrived.

She likes her current situation, but isn't in love with it. She does have a LOT of perks, however. First, she works in the city in a nice, modern loft space, and it's only 8 blocks from home. As if getting to work was a problem, she also has the luxury of working from home at least one day a week! Extra vacation time isn't a problem. ...and the work? She has mastered the job and can do it in her sleep, and she's viewed as one heck of a value to her company. She's a go-to person -- the kind no one in their right mind would want to leave. So what's not to like?

Well, to be honest, she took a pay cut from her last job to take this one. Yep, the 2 year itch strikes again. Now, she's not making minimum wage by any stretch of the imagination, but there's just something about taking a pay cut. She has had 2 raises and a few bonuses over the past 1.5 yrs, but she's still not back to making what she was prior to taking this job.

So, to make a long story short, she had her annual review discussion with the owner of the business and the owner gave her a respectable 4% raise, but surprisingly, left the door open for discussion if she wasn't happy. 4% is not a bad raise these days, but for someone who took a pay cut to take a job, it looks downright minuscule!

Any time someone leaves the door open like that, it's a huge tell-tale sign that you're not getting what you are due. With that in mind, I strongly encouraged her to fire back and get a larger raise. Much to my surprise, she wasn't going to ask for another 2-3%, but she went for a full-on 10% raise! Holy cow, that's incredible!

So I helped her craft an email message and justification, and low and behold -- without hesitation -- it was approved within minutes (strange that you can negotiate these things completely over email!). I was so incredibly proud of her!

The lesson? Of course, it's easy to let the 2 year itch take over and jump ship to find a new role, but getting what you deserve can be as easy as just asking for it. And it goes without saying that significant raises get you to retirement much more quickly, so it's a boon on all fronts!

(Image courtesy of irinaslutsky)

Easy come, easy go.

Lottery winner sues a investment adviser and accounting firm over bad advice. It's partially another dot-com bust story, but it's also a story about the need to really understand what is happening with your money. Trust and money don't go together.

He won about $5.5M and decided to take an "immediate lump sum - in his case, about $2 million - that he could roll into investments. He'd just live off the earnings and interest." This is where the real trouble started:

He alleges that within a few months, the Smith-Barney advisers had 98 percent of his money invested in individual stocks, substantially technology companies.

The year was 2000, which would prove a spectacularly bad time to sink one's entire fortune into tech stocks. Cicero's lawyer has alleged the advisers were "breathtakingly irresponsible" to put a lottery winner's windfall wholly into individual stocks.

"Fifty to 80 percent of their income ought to be in bonds and other fixed-income investments," Stoltmann said.

The court and financial-arbitration filings tell the story in flat terms, claiming Cicero lost $600,000 or more in bad investments. And he ended up paying $240,000 more to the IRS for penalties and interest after he learned the hard way that a lump-sum lottery buyout doesn't count as capital-gains income. There was also a divorce.

"You want to talk about a sob story, he's it," Stoltmann said.

So, not only did he get screwed by Smith-Barney and an incompetent tax accountant, but he also wound up in divorce court? I really do feel sorry for this guy because my guess is that he thought he was trusting real professionals that knew what they were doing.

The lesson? Even so-called professionals need to be scrutinized and double-checked.

(Photo courtesy of: Lazy_Lightning)

Some really good stuff...

While I have not had a lot of time to blog myself, I have been really enjoying the posts of my fellow bloggers. Lately, blogging on the weekends is all I've had time for and I'm sure that will change in a bit, but for now, here are a few posts that I found interesting:

1. Lazyman on removing inflation to get the real rate of return.
2. Stealthbucks on being socially selective on where you spend your money and on why it's not a right to own a home -- you have to earn it. I've posted on that second one a few times myself and it's a great riff. Stealth is on a role with these -- check them out!
3. Madame X on acquiring and owning things that further isolate you.
   

Hope you enjoy them as much as I did.

On to something more fun...

Wow, that last post took a lot outta me, or perhaps is was the 116 comments I read. Anyway, I'm off to enjoy some free entertainment: a hike in the Cascades. Happy Sunday all.

Have's and Have-not's

Some of you saw it reported last week that King County, Washington (where I live) now has over 68,000 millionaire households (excluding primary residence), making it the 10th largest concentration of millionaires in the country. While I am not surprised by this given the companies located here (Microsoft, Amazon, Starbucks, Boeing, Nordstrom, etc), I am absolutely shocked by the fall-out of comments posted on the SeattlePI website. There must be 100+ comments on this story! ...and they're entertaining as heck!

While there is a LOT of commentary and heated discussion, following is a random selection that hopefully captures the spirit of the debate:

The immediate reaction was "Tax them all" to pay for all of our problems, like schools and our massive transportation issues. Since we have a higher sales tax in Washington to offset our lack of income tax, a renewed interest in a state income tax was being discussed.

Then there was talk of the "obligation" to give back. I firmly believe in giving back, but as I've discussed in the past, I don't buy into the fact that I need to give back financially, especially not right now as I'm on a push to hit financial freedom. I give back with my time, and that's my choice. The "obligation" word bothers me because it implies that someone else is "entitled" to it.

And then someone chimed in with an IRS stat about "45% of wage earners paying no tax at all" -- suggesting that, perhaps low-income folks were getting a pretty good deal already (that stat is pretty shocking if it's true). And then, finally, several people posted about "The Millionaire Next Door", claiming that more people should be living below their means, instead of making questionable lifestyle choices, choosing jobs knowing they don't pay well, and keeping up with the Joneses.

Of course, then the conversation moved on to the topic of native Seattlites being pushed out of their homes (real estate prices have been high for a long time). Someone even made the comment that all of these "nouveau riche", who moved to Washington, should move back to where they came from. These are real comments from some pretty passionate sounding folks. I was starting to wonder if I'm part of the problem here -- really. To be fair, I'm not one of the 68,000 households because my liquid assets are well below $1M.

Then, the conversation shifted back to: "HARD work got me to where I am -- stop complaining and do something productive." "Why do you think you're entitled to my hard earned money?", one guy wrote. Another one chimed in with a "you're not entitled to anything" argument. If you want it, you need to work for it, which is an attitude that has driven me all my life. I really hate that entitlement attitude.

...and then finally, someone chimed in, saying that a million dollars is not worth nearly as much as it was in the 70's and 80's, where one was really, really rich with a million dollars. One word: inflation. His point was: these people are well off, but they are not rich -- and clearly some of the less than financially savvy folks out there don't understand the concept of inflation and decreased buying power, given their comments.

Bottom line: It's clear that having money and showing that you have money is a recipe for pretty harsh criticism in this town (and probably most places). I had no idea there were such deep feelings and also mis-understandings about money, simple things like tax percentages, and how wealth is created. It's scary because people like this have the potential to drive important public policy (votes on state income taxes, etc), some of which will negatively impact even lower income households! We really need to start financial education in schools and possibly even requiring students to read books like "The Millionaire Next Door" so people understand this stuff. Hard work (not just working hard at your job) and LBYM really can make all the difference in creating wealth.

(Image courtesy of 4x4jeepchick)

Tag, I'm it.

I wasn't quick enough to dodge the tag that Madame X put on me a week or two ago (while I was on vacation, nonetheless!) Ok, so here they are -- 5 obsessions of mine:

1. I'm a HUGE outdoors fan -- especially if it involves mountains, I'm in. Things like hiking, biking, snowboarding, rock climbing, running, or any combination of these will do.
2. As much as I try to deny it, I cannot lie: I like technology stuff. Gadgets, software, home automation junk, etc. I really like taking "some of this" and "some of that" and making them work together in a way that makes people go "wow, that's really cool!". I am somewhat limited to what I can do these days because I'm no longer a software developer, but you would be amazed by what you can do with a little tinkering. For instance, I can control the lights, thermostat, web-cam and security system from a web browser anywhere in the world, including from my cellphone. Controlling your house from a cellphone is GEEKY stuff, but you have to admit, it's pretty interesting that it can be done.
3. Ok, on to #3: As you can probably glean from this blog, I am obsessed with all things that lead to financial freedom. I don't particularly like money for what it can buy, but for the freedom it brings. There isn't a day that goes by without me having thoughts about getting there sooner. As I've said before, freedom means working because I want to, not because I have to. It's that simple.
4. Don't take this one the wrong way, but I am also obsessed with great food. I LOVE great coffee. I LOVE great wine. I LOVE great beer. I LOVE great cheese. I LOVE fresh organic vegetables. I LOVE interesting new food preparations -- crazy things like blue-cheese stuffed dates. We treat ourselves every now and then to restaurants that serve this kind of stuff, but in general, it's too expensive. With that in mind, and given all of the natural food, unbelievable markets and overall variety of food you can get in Washington state, it's quite easy to enjoy this stuff without emptying your wallet. The other challenge on this front is balancing a food obsession with fitness. :)
5. ... and finally, I really, really love to travel. With my first overseas trip for work in 1997, I've been on countless other overseas trips for both work and pleasure. I've done everything from 4-star hotels in Tokyo, to backpacking through third-world countries, and everything in between. I'm by nature a curious guy, so putting me in places and cultures that hold mysteries and an infinite amount of things to explore is incredible. Traveling has truly expanded my mind and sense of compassion.
   

Ok, my turn: How about hearing the same from: Stealthbucks, Finance Girl, PFblog, Naked Networth, and Sitting Pretty.

Mixed bag: More young savers and shaking moochers

Well, I'm finally back from vacation and very refreshed. I'll probably write a quick post about vacation tomorrow, but today, I came across an article with a few interesting takeaways:

Although the article is titled "Young strivers see slacker friends as costly", the article has a few interesting takeaways other than how to lose your loser friends when you are raking in the dough. First, from a Scottrade survey, it seems as if younger folks may be thinking more about saving earlier:

Scottrade’s recent 2007 American Retirement Study found an astonishing level of financial maturity for its youngest adult respondents."While 59 percent of 18-24 year-olds said they saved for retirement in 2006, that number jumped to 89 percent for those who said they planned to save in 2007. Of 25-to-34-year olds, 70 percent saved in 2006 while 85 percent indicated they will save in 2007," says Chris Moloney, chief marketing officer for the St. Louis-based broker. "Previously, people waited for assets to accumulate before they began thinking about their financial futures and retirement. With the Internet and the wealth of information available to them, many are starting younger," he adds.

Pretty good to see this data. Whether they actually follow through on actually saving is another matter, but it's a start. The other quote of interest is the following one that touches on being social with friends who have a lot more or a lot less money than you do. It's usually a tricky situation to navigate, and I tend to "go humble" when faced with these situations (i.e., if you're having dinner with a friend who makes $40,000/yr, pick a low-priced restaurant, not the latest restaurant where you'll easily spend $80/person):

"When a teacher and a stockbroker are old college friends, for instance, you find their dramatically different financial resources often create tension," says Draut. "The stockbroker may resent the teacher expecting her to treat her to dinner, but the teacher may be equally resentful her friend chose such an expensive restaurant."

Such inequities create social awkwardness, yet little conversation, observes Draut. "It is hard to be the friend who says, 'I can’t come along because the restaurant is too expensive for me.' But we need to make it OK to start having these conversations; to start saying, ‘I cannot afford it.’ "

And conversely: "I cannot keep floating you."

You have to love that last quote. I've certainly been guilty of treating less fortunate friends in the past, but I've learned that lesson. Interesting discussion -- just imagine what happens between a handful of retired 80 year olds after indulging in the surf-and-turf early-bird special. :)