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June 2011 Financial Goals Update – Short Term, Mid-term, and Long Term
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Back in January of this year, I laid out my short term, mid-term, and long term goals for the 2011 year. I do this once every year as part of my goal to create what author David Bach calls a Purpose Focused Financial Plan. The goal of this system is to employ money in your life in a way that matches your life values and dreams.
You can read more about my journey to create this system at the following links – Creating a Purposed Focused Financial Plan & My Personal Finance Journey’s Investment Strategy.
As part of making this system work, I wanted to give an update on how I’m doing so far this year with the goals I established. Overall, I feel that I am doing a satisfactory job. I got semi-behind on these updates (had to give a bulk one for the months of January-April, but these past few months, I am much more on top of things! 🙂 Let’s keep our fingers crossed to keep this up!
Short Term (< 1 year) Goals:
- Contribute $5000 (or $420 per month) to my Roth IRA with Vanguard this year (maximum allowed) – Complete. Have now contributed $5,000 so far this year. Because my graduate school employment doesn’t include the perk of a 401k, my tax-deferred investing options for 2011 are now exhausted. Because of this, I will now begin pouring any extra money at the end of each month towards my condo home loan. Nice!
- Reach net worth target for this year (not displayed here) – Ongoing – getting closer and closer! Requires 20% increase in net worth. May not be possible to obtain, but will attempt.
- Maintain target 6-9 months of expenses in cash reserve fund in Dollar Savings Direct account – Currently, I have slightly too much cash on hand in my money market savings account due to being paid for the entire summer at the end of May. But, this should correct itself as we get towards the end of the summer.
- Rebalance mutual fund portfolio to meet asset allocation target %’s (75% equity, 25% fixed income overall) – Correct for now, but ongoing.
- Obtain 15% ownership / equity in condominium – Ongoing – currently have 11.4% ownership, so getting closer.
- Put together a will and have it reviewed by a lawyer – Will completed. Not yet reviewed by lawyer.
- Continue to save money for trip to Grand Canyon – Ongoing – need to figure out when to take this.
- Upgrade condominium with investment in stacked washer/dryer combo – $1000 for unit, $1000 for labor/installation – Currently saving $87.50 per month for home maintenance and upgrades – Ongoing, but on track. By September of this year, I will have accumulated 1% of my home value in my home maintenance savings account. After that, I will be able to begin accumulating the $2000 that it will cost to get the washer/dryer in my condo. I’ll probably just keep the auto-transfer of $87.50 from checking to savings to accumulate this money.
- Invest $500 in Microloans for Latin America in 2011 ($41.67 per month) –Ongoing – Have invested a total of $291.69 this year so far to working poor fund in Peru and Nicaragua. This comes with a pretty nice 3-3.5% interest rate. Note: I use Microplace.com to invest this money. It seems to work well and be dependable. I just logged in to my account, and it says that my money has been used to help 40 people down there! Pretty cool stuff if you ask me!
- Donate $1,300 to Multiple Sclerosis Foundation in 2011 (5% of income) – Done. So far, I have raised approximately $5575 to support finding a cure for this disease (with the help of company matches). My bike ride happened on June 11-12, but there is still time to get in additional donations. If you’re interested in making just a $10 donation to my ride, click here.
- Save 3% of take home pay each month (after taxes) for Dream Account.On target – Have an automatic transfer each month from my Bank of America checking account to my ING Direct high yield savings account.
- Save ~30% of blogging income (if any) in a high yield online savings account in preparation for 2010 taxes. I have been very bad at doing this so far. I have a pretty large cash reserve built up, but it is all earmarked as emergency fund money. Thus, I need to get started doing this so I am not surprised come tax time in April of 2011.
- Implement dollar value averaging for my 2012 Roth IRA contributions.
Mid-Term (3-5 years out) Goals:
- Continue contributing $5000 to Roth IRA each year and using dollar value averaging.
- Reach intermediate net worth target (not displayed here, but is 2X my current net worth)
- Own a rental property by 2016.
Long-Term (>5 years out) Goals:
- Obtain a net worth of $1,000,000
- Own a home free of mortgage payments
- Own a vacation home in the mountains somewhere remote
- Accumulate enough funds not have to work, but will probably anyways because I would get bored.
How about you all? How have the months of May and June been for achieving your goals? What are your next milestones?
Share your experiences by commenting below!
***Photo courtesy of http://farm4.static.flickr.com/3023/3059374021_09b08f2a40.jpg
American Growth Fund of America – An Example of Things That UPSET Me!
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An interesting section included in each edition of Kiplinger’s is a listing of the 20 largest stock mutual funds, ranked by size (net asset value). The top 5 funds on the list are shown below:
Kiplinger’s List of Top 5 Mutual Funds by Asset Size
1. American Growth Fund of America – Symbol AGTHX = $165.2 billion
2. Vanguard Total Stock Market Index Fund – Symbol VTSMX = $164.0 billion
3. American Europacific Growth Fund – Symbol AEPGX = $113.3 billion
4. Vanguard 500 Index Fund – Symbol VFINX = $109.4 billion
5. American Capital World Growth and Income Fund – Symbol CWGIX = $82.2 billion.
In reading down the list, one thing that shocked me was how many American brand mutual funds had high rankings. In fact, as you can see, they have 3 out of the top 5 spots! Wow!
This surprised me because I would have thought that Vanguard and Fidelity would take the highest places. However, Fidelity didn’t rank on the list until the number 6 spot, with the Fidelity Contrafund, Symbol FCNTX = $79.4 billion.
After inspecting the entire list, I began to feel slightly embarrassed that I wasn’t at all familiar with American brand mutual funds. So naturally, I began to do some research on the company in general and specifically, on the highest net asset value mutual fund in the world, the American Growth Fund of America. In addition, I wanted to find out how it compares to a very logical (in my biased opinion) highly ranking pick on the list, the Vanguard Total Stock Market Index Fund.
In searching around the Internet and Google Finance, I was able to find the following information on the two top-ranked mutual funds by assets.
American Growth Fund of America
- Is an actively managed mutual fund (a big no-no in my book of passive investing).
- Has an expense ratio of 0.69% (not all that bad for an actively managed fund).
- Charges a front-end sales load of 5.75%. Wow!!! This is ridiculously high!
- This means that 5.75% of all money invested in this fund gets paid to brokers and/or American Mutual Funds. What a rip off! This upsets me.
- Just to give you all an idea of how much money this translates to, 5.75% of the fund’s asset value of $165.2 billion would be a whopping $9.5 billion! Wow!
- More information can be found at Google Finance – AGTHX or at American Funds.
Vanguard Total Stock Market Index Fund
- Is a passively managed mutual fund, that seeks to mimic the return/performance of the MSCI US Broad Market Index, so no individual stock selection is involved.
- Has an expense ratio of only 0.18%
- Charges no sales loads.
- More information can be found at Google Finance – VTSMX.
Why Do So Many People Invest in the American Growth Fund of America?
After examining the characteristics of each of the top two highest ranking funds, I began to wonder, “What makes SOOOO many people/investors place their money in to the American Growth Fund, knowing that it charges a 5.75% fee before they earn you any money at all?!”
The only two reasons I could come up with are shown below:
- American Mutual Funds earn investors more money over the long-term.
- This is sort of my optimistic side talking. I just hope that this is truly the case!
- A more likely explanation in this day and age is that American Mutual Funds simply spend more money/effort advertising their funds’ popularity to 401k providers and individual investors.
- This explanation seems to be supported by one article I found on the Internet at ToolsForMoney.com.
- Another related issue here is something I was reading in an investing book 4 years ago when I was just learning/beginning to save money. Essentially, the belief of the authors was that a sadly large amount of investors invest in a mutual fund solely because the name “sounds” good.
- It would be reasonable to think that a lot of Americans would choose American brand mutual funds because they identify with the name.
Performance Comparison – American Growth Fund of America vs. Vanguard Total Stock Market Index Fund
Overall, there’s not much to be studied or analyzed about too many people investing in the American Growth Fund because of the name or because of proactive advertising. However, I was very interested in the first bulleted reason above – do people invest in the American Growth Mutual Fund because it provides superior performance?
To find an answer to this question, let’s take a look at the fund price information/performance over the past ~15 years….
Analysis Set-Up/Goal
As mentioned above, the goal of this analysis is to determine (on a after-fees basis) whether or not the American Growth Fund of America or the Vanguard Total Stock Market Index Fund performed better since 1996. In the analysis, we’ll examine the performance/growth of a $10,000 initial investment and $500 monthly follow-up investments in each fund.
Note: 1996 was chosen because that was the date of inception of the Vanguard Total Stock Market Index Fund. Historical price information was taken from Yahoo Finance.
Remember, 5.75% of all money contributed to the American Growth Fund will be taken out of the investor’s portfolio to pay the sales load. Nice right?!
Results
The complete results of my 15 year performance analysis can be found at the shared spreadsheet at the link below. Just download a copy to play around with the numbers if you want!
A quick summary of the results can be seen on the table below.
In examining the table above, it quickly becomes apparent that the more “popular” and “sexy” actively managed, American Growth Fund of America underperforms the Vanguard index fund by 8% over the time period analyzed.
Definitely, a large factor in the underperformance of the American Growth Fund stems from the 1) higher expense ratio (which is already factored in to the daily price of the fund) and 2) the high front-end sales charge! In fact, over the ~15 year period, you end up almost paying $6000 in fees to American Funds and other brokers.
Conclusions
From this analysis, we were able to conclude several valuable things. These are summarized below:
- Just because a fund is “popular,” doesn’t mean that it is necessarily going to provide superior performance/returns.
- Following the crowd isn’t always the smartest course of action.
- Shared Google Spreadsheets are the best invention ever!
- Expense ratios and especially sales loads can significantly eat in to investor returns.
And finally, at least in my mind, this once again reminds us why passive investing offers superior returns to active management!
How about you all? Are you familiar with American brand mutual funds? Why do you think they are so popular/widely invested in? Do they offer a superior product?
Have you ever invested in a mutual fund or stock just because you thought the name was “catchy?”
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/zachklein/54389823/sizes/o/in/photostream/
What’s Your Biggest Financial Pet Peeve?
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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The following is a guest post I wrote that was posted at Narrow Bridge Finance back in March of this year. The post was written as part of a “Yakezie blog swap” where members of the Yakezie Personal Finance Blogging Network pair up and exchange guest postings on a common topic. The topic of this blog swap was to discuss our biggest financial pet peeves.
Hello everyone! Thanks for stopping by today! When I started to think about what to write for the topic of this week’s Yakezie Blog Swap, I really came up with three things that are tied for qualifying as my biggest financial pet peeves. They are 1) financing furniture, 2) buying expensive drinks at bars/restaurants, and 3) active investing styles.
Each of these is discussed separately below! Enjoy!
Financial Pet Peeve # 1 – Financing Furniture Someone Cannot Afford
After moving in to my condo in August of last year, I began to receive the typical “new homeowner junk mail” – ads from local businesses, home insurance offers, and most of all furniture advertisements! It really was quite amazing how many I received!
One of the offers I received was a double coupon for 1) a free table lamp and 2) 10% any purchase of $100 or more. I thought to myself, “Wow, a free table lamp! Can’t beat that!” So, I ventured to the store to pick up my freebie. When I got to the store and was checking out, I was amazed at the shear number of staff they had committed to setting people up with furniture that they cannot afford, thanks to easy financing/loans options!
I’ll be the first to admit that yes, I am a pretty frugal person (and proud of it!). And, while I myself would not easily partake in taking out huge amounts of consumer debt on depreciating assets, I do understand why people have to do it in order to buy something essential for non-big-city living, such as an automobile.
However, I simply cannot tolerate the idea of people taking out a loan on a $5000 leather, jaguar/leopard Italian designer couch that they cannot afford. Why is this? Well, it’s because there are a plethora of perfectly acceptable couches on sites like Craigslist.org that people are basically giving you just to take it off their hands. Another good source for furniture is from family members! And, while the piece of furniture may not be the “perfect dream couch” you have wanted since childhood, it will do just fine until you can plan your finances to save for such a purchase. End rant.
Financial Pet Peeve # 2 – Buying a Drink For More Than $10
When you go out to dinner, it is incredibly nice to have a glass of wine or a mixed drink. However, it has always amazed me at the number of people willing to pay as much for one drink as they will for a plate full of food.
I am guessing that this just comes down to personal preference. Personally, a stomach full of delicious food that I could not easily cook for myself at home is well worth the $10-$15 that I usually pay a decent restaurant.
However, I simply do not obtain any pleasure by drinking a $10 glass of wine at a restaurant when I know that I would be just as happy if I had a glass of a $15 bottle of the same Virginia wine 1) before I go to the restaurant and 2) when I get back.
Financial Pet Peeve # 3 – Investing in Individual Stocks or Actively Managed Funds
It is no secret to the readers of My Personal Finance Journey that I am an avid believer in employing a passive investing strategy. What does this mean exactly? I mean that I invest in low-cost mutual funds that simply track established world indices (S&P 500, Wilshire 5000, etc) instead of pouring money in to picking individual stocks.
I employ this type of investing style because numerous studies of investor performance have shown that 70-80% of investment “professionals” fail to outperform the market indices.
Even with this information available readily to investors, the majority of investors are still drawn to investing in individual stocks. I myself was even drawn to investing in individual stocks in the beginning of my investing days. Like many others, I wanted to use my intellect to do my research, select winning stocks, and get rich!!!
However, I found out that the stock market is not small enough to hope to be understood by one person. It’s not like some lab experiment where you control the variables and can obtain the result you want if you work hard enough.
Sure, in twenty years, we will be able to look back and pick out the 5 people that were able to consistently outperform the markets. But, I simply do not think that it is worth people’s time when focusing on an appropriate asset allocation with a passive investment strategy will more likely yield a better result.
How about you all? What financial moves do people make that really get your temperature to rise? Have you ever confronted any one that performs these actions to get them to stop? Did it have an effect on them?
Share your experiences by commenting below!
***Photo courtesy of http://www.sodahead.com/fun/strawberry-milk/question-1432985/?link=ibaf&imgurl=http://daveslife.files.wordpress.com/2009/03/upset-boss.jpg&q=upset
What Different Types of Credit Cards Are Available?
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The following is a guest post by Chris Philp. Enjoy!
What Different Types of Credit Cards Are Available?
There’s a vast array of credit cards available in the marketplace today. Searching for a ‘credit card’ online brings up a huge list of offers, each with a number of benefits and rewards. If you are searching online though, you should be sure to check the differences between each card to ensure you find the right card and type of benefits for you.
Standard Credit Cards
When applying for a standard credit card, the applicant and provider both determine the appropriate fixed credit card limit. The balance for the card can be paid as soon as you’ve used your card. In order to avoid any charges, balance repayments should be made within your interest free period (usually 30 days or so). You can however, if willing to incur the agreed interest fee charges, spread the payment over a period of time. The minimum repayments for the card must be paid in order to avoid penalties and further charges.
Travel Reward Cards
Rewards cards, such as travel rewards cards, include benefits specially designed to suit the spending needs of frequent flyers or travellers. Credit card providers often have relationships with other companies in order to provide the card holders with special benefits from membership reward programs. These benefits can allow you to earn rewards points as you spend. Points can be redeemed for cash, or go towards paying for flights with a number of different global airlines. Some cards are also linked to specific airlines and partnered companies, often giving the card holder other rewards to benefit from.
Charge Cards
As charge cards do not have pre-set spending limits, they are regarded as more flexible, allowing card holders to determine their limits based on their spending habits. Anything spent is expected to be repaid each month as agreed by the provider’s terms and the cardholder. If card holders have a remaining outstanding balance on their card, a fee is charged. This fee is typically a percentage of the overall remaining outstanding balance.
So, remember, if you’re searching online for credit cards, make sure you take the time for find the best and most appropriate type of card for you. Applying for credit cards online also affords applicants the flexibility of applying outside of the normal bricks and mortar bank opening and closing times.
Different credit cards offer a number of benefits and rewards, so why not see what’s available to you!
How about you all? What type of credit card do you use? What type of credit card is best suited for you? Have you ever used charge cards?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- Thanks for sharing this article, Chris! I enjoyed it, and credit cards are a very important component of the majority of consumers’ spending lives.
- When you’re just starting to look for a credit card, it can be very intimidating due to the copious number of options available. Every credit card provider seems to be desperately pushing for your business/debt these days!
- The most useful credit card comparison site I have found/use is Creditcards.com.
- I like the layout of the site because it allows you to screen credit cards based on certain criteria, such as cash back cards, cards with balance transfer offers, travel rewards cards, and no annual fee cards.
- This screening feature is important to me because I have a very specific type of credit card that I like.
- For me personally, the two most important features of a credit card are 1) no annual fee and 2) cash-back rewards. The two cards that I’ve found best suited to my needs are two Chase cards.
- For general, everyday purchases, I use the Chase Freedom credit card. It has no annual fee, and provides 3-5% cash back in rotating categories throughout the year. Nice!
- For gas purchases, I use the BP Rewards Visa card. It provides 5% cash back for all purchases at BP gas stations, all for the price of FREE (no annual fee).
- In deciding which type of credit card to apply for, it’s important to consider your spending habits and financial tendencies. For example, if you have the tendency to accumulate a credit card balance, the most important factor in your credit card search is finding a low-interest rate (APR). If you like to participate in balance transfers, you will need to search for cards with low balance transfer interest rates and fees.
- However, the one universal trait that I would encourage all consumers to look for in their credit cards is that the card does not have an annual fee. I’m not convinced that cards with annual fees provide any added benefit in today’s competitive bank environment.
- @ Airline credit cards- Airline credit cards generally carry annual fees, so you’d need to examine if the rewards you accumulate through the use of an airline credit card will warrant the annual fee. Typically, if you are traveling all of the time (particularly on business where you’re being reimbursed for the plane tickets by your company), an airline card will be an effective purchase. However, if you only fly sporadically, I’d recommend a cash-back card.
- @ Charge cards – Charge cards, in my opinion, are a fairly dangerous thing for most consumers. This stems from the fact that you are obligated to pay back the entire balance each month, and if you don’t come through on this, you can be charged a large amount of fees and interest.
***Photo courtesy of flickr.com
To Donate or Not to Donate? Financial, Ethical, and Physical Concerns of Egg Donations
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This post was selected as the No. 7 top article of the week in the June 20th Edition of the Best of Money Carnival at MoneyCrashers. Quite an honor!
The following is a guest post by Becca with The Academic Wino, a blog dedicated to examining current research related to wine with a little fun thrown in to the mix. Be sure to stop by her site and say “hi”!
What Motivates Women to Donate Their Eggs?
Ethical Concerns and Criticisms of Egg Donation
Physical Risks
A gonadotropin-releasing hormone is injected in order to halt ovulation. Follicle-stimulating hormones are simultaneously injected in order to grow and mature several egg follicles at once, instead of the usual one per month. After 7-14 days of these injections, a “trigger shot” containing human chorionic gonadotropin, or hCG, triggers the release of the mature follicles and they are retrieved during an invasive surgical procedure.
Possible risks of egg donation include experiencing PMS-like symptoms, dehydration, pain at the injection site, increase risk of multiple-birth pregnancy, ovarian hyper-stimulation syndrome, and all the other risks involved in routine anesthetic-requiring surgical procedures. It is not clear what the long term risks are for egg donors, so most egg donation programs limit the number of times a woman may donate to 5-6 times.
To Donate or Not To Donate?
Egg donation also harbors psychological risks, as the donor must accept the idea that they are helping to create a human being that they will likely never be allowed to know or interact with. Egg donation isn’t for everyone, and even financial compensation can’t completely cover up the risks involved.
Why I Donate
Over time, I’ve received anonymous ‘Thank You’ cards from two of my recipient parents, which helped in my decision to donate multiple times. “We write to let you know that you have helped us to realize a singular dream that we started to pursue over nine years ago. While we don’t yet know that we’ll be successful, your commitment to us, two people whom you’ve never met, nor will ever meet, is so greatly appreciated.”
How about you all? Have you ever donated eggs or known anyone that donates eggs? What are your financial thoughts on the subject? Is $5000 too little, too much, or just the right amount of compensation for going through this process?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- It’s truly amazing to me how much more effort it takes for women to donate their eggs than it takes for men to donate their sexual cells. Weird right?!
- I really admire women who donate their eggs, as I’ve learned in the past few months that couples that are unable to have a child on their own are REALLY grateful for the help from the donors. However, I don’t think I would personally ever donate my sperm/egg cells unless I had to.
- If you’ve stopped by my site before, you know that I am a big fan (or maybe sucker would be a better word) for Time Value of Money analyses.
- As such, an interesting thought exercise is this scenario – a 21 year old girl decides to donate eggs once per year for five years until she is 25 years old.
- Each time she donates, she receives $5000.
- If we assume that she places this money in a Roth IRA invested in index mutual funds earning 10% per year, the magic of compound interest will present her with the sum of $2,022,744 by the time she retires at age 70. Quite amazing uh?!
- You can view the gory details of this calculation at the shared Google Spreadsheet I created at the following link – Egg Donation Time Value of Money Calculator.
- As you can see from this analysis, the monetary compensation provided by donating your eggs is quite enticing. However, Becca makes a very important point that you should have a reason aside from the money (at the end of the day) for why you want to donate eggs. Thanks for reading!
***Photo courtesy of http://www.flickr.com/photos/biologyflashcards/3438788255/sizes/m/in/photostream/
FREE Business Cards Giveaway from All Business Cards! Enter Today!
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free giveaway for 2 copies of H&R Block At Home Premium Edition
Good day readers! One of my higher priority blogging goals for the 2011 year is to offer several free giveaways on my site. As such, I’m always on the look out for cool offers that I can share with you all. I have a nice one today!
The giveaway is for 3 sets of 500 high-quality business cards from All Business Cards.com. I recently won a set of 500 business cards from an All Business Cards.com giveaway on MaximizingMoney.com, and they were gracious enough to agree to extend the same giveaway deal to My Personal Finance Journey!
How To Enter – Deadline to Enter is July 4th, 2011!
Follow the instructions below to accumulate points to qualify to win one of the three sets of 500 business cards! Due to shipping costs, this contest is only open to US and Canadian residents.
AND, if you leave a comment regarding how you plan on using the business cards – Worth 2
points
2) Refer a subscriber (send the email of the person you referred via my “Contact” tab above) – Worth 5
points
3) Follow me on Twitter – Worth 1
point
6) Review my website on Alexa.com – Worth 1 point
There is no limit to the amount of points you can earn. If you refer 10 subscribers – your name will have accumulated 50 points!
About The Cards
Remember, the deadline for entries will end on July 4th, 2011 at 11:59pm (3 weeks from today). Good luck to you all! Please contact me if you have any questions.
sy of http://desizntech.info/wp-content/uploads/2011/04/allbusinesscards_screenshot.jpg
Proud To Be A Yakezie Blackbelt!
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free giveaway for 2 copies of H&R Block At Home Premium Edition
Back in January of this year, I laid out several blogging goals I wanted to achieve in 2011.
One of these goals was to continue actively participating in the Yakezie Personal Finance Blog Network. The Yakezie Network, a group of the best personal finance websites, has played an integral part in my development as a blogger this year. I’ve met many amazing people, learned a lot about the mechanics of blog-building, and also learned numerous advertising negotiation tactics/strategies.
After 5 months of progress in to the year, I am excited to share with you a very proud milestone – achieving the Yakezie Blackbelt Belt of Honor.
To date, only 4 other Yakezie sites have made it to the Blackbelt level – Budgeting in the Fun Stuff, Financial Samurai, KNS Financial, and Buy Like Buffett.
Side note: Back when I was 6-8 years old, I tried taking karate lessons, but I only made it to the yellow belt level! haha If only those sensei’s could see me now! 🙂
Achieving the Blackbelt level takes a pretty significant level of involvement, but it has also been a really rewarding experience. Several key accomplishments My Personal Finance Journey has realized over the past 5-6 months include the following:
- 1214 comments on the Yakezie Forums.
- Participated in 7 of the 8 total Yakezie Blog Swaps, including hosting the 4th edition.
- Coordinated 7 advertising campaigns, bringing in over $5000 for Yakezie Network sites.
- Weekly participation in the Yakezie Blog Carnival.
Overall, it’s been a truly amazing ride over the past half year. I look forward with excitement to our continued participation in the Yakezie community during the remainder of 2011 and beyond!
For the site owners out there – how about you all? What has enabled you to grow most as a blogger or site developer?
Share your experiences by commenting below!
***Photo courtesy of http://cdn2.yakezie.com/badges/300-yakezie-03.png
If We Could Have One Financial Do-Over…
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free giveaway for 2 copies of H&R Block At Home Premium Edition
You can view my swapped post over at Broke Professionals today at the following link – eBay Financial Scam Do-Over Wish.
If you had one financial do-over, what would it be and why? When I saw this topic, the first thought that went through my head was, “Wow, that’s going to be difficult!”, not because I couldn’t think of any, but because there are so many financial mistakes that I would like to do over. On further reflection, one mistake stands out above the others. It’s not something I want to do over because of the magnitude of the error but because it hurt me at a time when I was financially very shaky. So here goes –
Buying My First Car – A New Honda Civic Hybrid
I had just completed grad school, and by working while studying and living off Ramen noodles, I graduated with about $5000 in the bank. I got a job that I liked, moved to a beautiful place, and was generally feeling on top of the world.
At that point, I decided I needed a car. I shopped around a little (mistake 1) and decided that I would go for a new Honda because they depreciated very slowly. In addition, I planned to travel quite a bit, so I decided to go for a Hybrid to get the better gas mileage.
So, I went down to the Honda dealership and started the haggling over a new Honda Civic Hybrid. After many trips and conversations with the dealer, I managed to whittle him down from $25000 to $22000 and congratulated myself on my excellent (in my own eyes, of course) negotiation skills.
In order to reduce the amount of money I had to borrow, I decided to put down most of my $5K savings. I brought the car home and a couple of days later while looking through the glove compartment, came across a sheet of paper that shipped with the car from the manufacturer. Across the top of the page in big, bold, black text were the words – “Recommended MSRP = $21000”. There I came crashing down from the cloud 9 I was floating on thinking I had made this great steal. Things just got worse from there. I didn’t understand the terms of my loan agreement properly (big big mistake). I assumed that any money I paid over the monthly requirement would be used toward reducing the principal. Nope. The loan said that I had to pay a certain amount of interest, period. So paying more than necessary each month just brought in the end date but didn’t reduce the amount I had to fork over.
In addition, I was stupid enough not to regularly check my statement to see if the principal was being reduced over time. I just kept paying as much as I could toward the loan every month. At the end of 3 years, I had paid off the 7 year loan, but I had next to nothing in savings. Would I have been better off paying the monthly amount and investing the remaining money elsewhere. You betcha!
Honda Civic Hybrid Break-Even Analysis
Now let’s look at the car itself. The difference in price between the Civic Hybrid I bought and a regular Civic, at the time, was $4500. I was betting that I would drive so much that the extra mileage from the Hybrid would save me money.
Now let’s look at the facts. I get on average 43 mpg. Friends of mine who own a regular Civic, bought at approximately the same time, get about 35 mpg. So that’s an average of 8 more mpg that I get. Over a tank of gas therefore, I get 80 miles more than a regular Civic. Over the 6 and a half years I have owned the car I have driven 100,000 miles. At 43 mpg, that works out to 2326 gallons approximately. At 35 mpg, I would have filled in 2857 gallons instead. A difference of 531 gallons over 6 and a half years.
How much did that save me? Given that I live in Southern California, I pay more for gas than the rest of the country. To keep the math simple, lets assume that over this period gas has on average been selling at $4 per gallon, which is higher than reality. Applying that number, owning a Hybrid has so far saved me $2124. But wait a minute, I put down $4500 extra to start with. So I’m still in a hole for $2376.
In addition, we have to add the money I would have earned if I had invested that $4500. But, I look bad enough as it is. I don’t have to make things worse. You might say that well, I haven’t got rid of the car, so as gas prices rise, I will continue to save. That’s true, but keep in mind that the Hybrid has a battery pack that doesn’t last forever. Let’s say I replace it in 10 years. At my current rate of driving, over 10 years I would have saved $3271 (still assuming an average of $4 a gallon). So, without having broken even, I now have to shell out money for the battery pack. Oops!
When I went through these numbers a year or so ago, I felt really depressed. By my own stupidity, I had wiped out money I had struggled to save, then gone on to pay a loan off early thinking I was saving interest when I wasn’t, and gambled on a car that wasn’t going to save me money at all. Pretty depressing. I guess the only silver lining in the cloud is that when gas prices go up, I actually feel a little better :)!
If I could go back in time, I would have bought a used car and saved myself a lot of money.
If you had one financial do-over, what would it be and why?
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- Sorry to hear that you paid $1000 over the MSRP price! Did you check around on any online resources to see what these cars were retailing for before buying?
- Thanks so much for sharing your experiences with this. I really like how you performed/included the break-even analysis.
- I performed a similar analysis on this site last year, comparing “green” hybrid cars to regular cars to determine which is more economically sensible. Turns out that I concluded pretty much the same as you did here – that owning a “green” car isn’t the most economically justified course of action.
- This really is unfortunate because it’d be nice if the economics of “saving-thy-planet” worked out in the consumers favor.
- Personally, I wouldn’t beat myself up too much for making a mistake like you did, provided that you learn how to improve for the next time you buy a car. You bought a reliable, fairly inexpensive car that will most likely save you money compared to a lot of vehicles on the market (for example, if you bought a $40,000 Suburban right out of college).
Carnival of Passive Investing # 6 – May 2011 Edition With Author Rick Ferri Now Live!
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free giveaway for 2 copies of H&R Block At Home Premium Edition
“Better late than never” is my favorite phrase this afternoon! I apologize for being a week late reporting this, but the latest (May 2011) edition of the Carnival of Passive Investing is now live over at The College Investor at the link below.
Carnival of Passive Investing # 6 – Passive Investing Do’s and Don’ts May 2011 Edition with Passive Investing Author Rick Ferri
Congrats to Wealth Informatics, Boomer and Echo, and Little House in the Valley for being selected as the top 3 articles this month by Rick and Robert @ The College Investor.
We were honored this past month to have Rick Ferri, author of numerous passive investing books helping to judge/rank the top 5 passive investing articles. Great job Rick!
This month (June), another one of my favorite passive investing authors, Larry Swedroe, will be helping to rank the final selection, with the help of our host, Jon Elder @ Free Money Wisdom.
Be sure to get your best passive investing articles submitted this month for Larry to review. You can submit your articles by clicking here.
How about you all? Have you written any good passive investing posts lately?
Who is your favorite financial author?
Share your experiences by commenting below!
***Photo courtesy of http://www.flickr.com/photos/vegaseddie/3309218023/sizes/z/in/photostream/
Why Do Balance Transfers Make Sense?
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Welcome to My Personal Finance Journey! If you are new here, please read the “About” or “First-Time Visitor” pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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Click here to enter my free giveaway for 2 copies of H&R Block At Home Premium Edition
The following is a guest post. Enjoy!
Why Do Balance Transfers Make Sense?
It’s Not As Good As It May Appear
Other Considerations On Balance Transfers
Don’t Miss This Date
How about you all? Have you ever used a balance transfer to help pay off credit card debt? Was it effective? Did you pay down the balance before the 0% balance transfer period ended? How did you use the card after the 0% balance transfer period ended?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- I have been very fortunate so far in life to avoid student or credit card debt (let’s keep our fingers crossed that it stays this way), so I have never personally had to use one of these 0% balance transfer offers/deals.
- However, I do think that they can be a very useful strategy for reducing your debt, as long as you are disciplined and follow the advice given in this article.
- One other utility of these 0% balance transfer offers is that they can be used as bargaining chips when talking with your credit card company to negotiate a lower interest rate over the phone. This can be done by telling your current credit card company that you will transfer your balance to a 0% balance transfer offer if they don’t give you a lower rate. Nice right?!
- This article is definitely correct regarding the advice that before using a 0% balance transfer offer, you need to read through the details very closely to determine what fees will be charged.
- The normal type of fee that is charged with balance transfers is an up-front fee of 3-5% of the balance being transferred.
- Even though this may seem like quite a bit at first, it will most likely be less than paying 10-20% APR on a balance that compounds daily! Yikes!
- Jonathan @ My Money Blog provides a good list of 0% balance transfer offers with fairly low fees at the following link – Best Pre-Screened 0% Balance Transfer Credit Cards. This list would be a good place to start if you are thinking about embarking on the 0% balance transfer journey.
***Photo courtesy of http://farm4.static.flickr.com/3276/3027534098_f568868b9e.jpg