Archive for May, 2011

« Older Entries
Newer Entries »

Debt Reduction and the 3 Steps For Creating a Repayment Plan That Is Almost Fun

May 25th, 2011

Believe it or not, but “Debt Reduction” can almost be a fun process!  During the time that I was repaying my mortgage and two car (all at the same time), hitting certain milestones that I created was almost fun!  I thought I would share my process and how to get the most out of it.

Step 1

Use a spreadsheet to track your debt payments and the effects on the amount you owe!  What if you don’t want to spend money to buy a spreadsheet?  Consider the spreadsheet program in Open Office Calc or use Google Spreadsheets.

This step is my base, without this step I wouldn’t have been as motivated!  I took it a step further and made a what if page to calculate how changes in the amount I paid would affect the life of the debt and the total interest that banks would receive.

Step 2

For this step, I created financial milestones!  Once we crossed these financial milestones (really mortgage milestones, but the idea is similar), we would reward the crossing of the milestone by going out to eat at a decent, but not too expensive restaurant.

Note, we chose to make the milestones significant.  So we set our milestone at 20% intervals of the amount owed.  So if our debt was $100,000, we would celebrate at 80,000; 60,000;  40,000;  20,000 and obviously at zero!

Step 3

At this step, you’ve paid off your debt and how you have all of this extra money rolling in because your debt obligations are gone…  so what do you do?  Well, in my case I decided to use the extra money to buy stocks that provide a dividend.  Then my idea is to use the dividend to eventually pay for those fun expenses (like lunch, eating out, vacation, etc) while at the same time pumping my extra earned income into solid dividend stocks and other new investments.  That dividend could then serve double duty and cover hard expenses (food, utility, taxes and other non-fun expenses) in times of tightening.

What about retirement, 529s and other important expenses?

Do it all, or at least that is what I did.   During my repayment plan for my cars and house, I continued to fund my 401k and 529 plans for my kids.  I was even able to put a little bit in my Roth IRA.  It was tough, and instead of paying my mortgage off in 5 years, it took my a bit over 10 years to pay everything off.

I believe that a balance approach towards finances is the best approach.

The key is to make the best of your situation, and enjoy life!

Here wishing the best for your finances,

MR

30 comments »

Posted in debt

Tags:

Maximizing Your Lifestyle Responsibly

May 24th, 2011

The following article was originally post as a guest post at Cashflow Sherpas, to view it in it’s original form, click here.  The following article is an updated and slightly improved version of the article, but updated enough to make both stories significantly different!

During my college years, I had a fun time, but even so, I think I could have had more fun while at the same time optimizing my finances.

While I was very frugal and did have some investments, I did so by living a fairly frugal existence in college.  Often times, my college roommates would find clever activities for us to do because nobody had money make then.  While I participated in some of the cheaper activities, I missed out on the ones that others would charge to their credit cards.  Today I look back and I believe I could have had a better mix of frugality and spending.

Now don’t get me wrong, I’m not saying it’s okay to use credit cards and build up debt!  But if I had to do it over again, I definitely would have used some of the money from my investments.

In fact, if I had to do it all over again, I would have invested money that I made from working since I was sixteen into investment.  I would also invest all the money I got over the years from birthdays and Christmas, into investments that would yield dividends.

Next, I would have created a spreadsheet that tracks all my finances including the dividend stream from my dividend stocks.

The beauty of having such an income stream would be that I could have maximized the money to use to have more memorable experiences back then.  Many of these are age specific experiences that once you miss them, you really can’t go back!  So I would urge others to do such a thing, especially if you are too frugal like I was!

I was so frugal, that there was a point in my life where I wouldn’t even go on a date because I felt like I couldn’t afford it.  Luckily, I was still able to find a few girlfriends that I was able to go out with while staying on a frugal route!

The above is only part of the process though.  It’s the bean counting part that while crucial, in just part of the puzzle.  The other part is spending intelligently, and keeping your eyes open for opportunities to make money.  In fact, I think being aware is the most critical piece of the maximization puzzle.

While I don’t see any obvious, risk free opportunities that would have made me rich in college, there were definitely opportunities that may have made it happened if I tried!  If you don’t explore and try such things, you’ll never know.  You don’t have to start the next Microsoft, it could be a small money making venture, experiment!

While I have missed some life experiences, for my kids I’ve already creating an investment portfolio that will contain a portion that will have stocks invested in dividends, They will be able to use that money from the dividends for their potentially fun college fun expenses in the future.  That way they will get to experiences more than I did while going the college thing!

In the end, it’s about developing a financial balance that would maximize your life.

Bests,

MR

12 comments »

Posted in lifestyle

Tags:

Dividend Stocks, Free Lunch Experiment #10

May 23rd, 2011

I thought my experiment would have a setback with the downturn in the market, but surprisingly, since my last update, it’s still up.

Dividend Experiment

Dividend Experiment Update

It’s been two months since my last update, and I after some passive thinking, I’ve come to the realization that my goal for the experiment has change on me.  I no longer want to spend much on lunch, and going out once a week would be just fine with me.  My lunches are now a production time where I work on blogging.

So the question is, should I continue to use the dividends on spending?

I’ve decided yes I should, but instead of lunches, I’m going to spend the money better foods for my family.  I will use the money to make more nutritional food at home.  I’ve been wanting to expand into this area for a long time, and this money will help both me and my family (at least at a nutritional level).

 

Dividend Stats.:

Dividend Stock’s Lunch Experiment
Stock Name Anworth EV Energy Chimera
Stock Ticket ANH EVEP CIM
# of Shares 260 45 600
Orig. Price $7.84 $23.25 $4.01
Curr. Price $7.20 $54.04 $3.94
Orig Cost $2,038.14 $1,046.25 $2,404.80
Curr Value $1,872.00 $2,431.80 $2,364.00
Annual Yield 12.22% 5.63% 17.26%
Act. Div/Qtr $57.20 $34.20 $102.00
Total Dividends $773.60
52 weeks 52
Dividend / week $14.88
Total Gain in
Stock Apprec. $1,178.61
% Change 21.47%
Amt Loaned to myself: $1,726
Amt paid back to date: $1,726
Amt Still Owned: $0
Totals
Cumulativie Stock Value: $6,667.80
Dividend Payout / Yr.: $773.60
Dividend Payout / Qtr: $193.40
Dividend Payout / Wk. $14.88

 

On with the Update:

  • Overall, the “Total Return” of my investments since investing in 2009 is up 21.47%.  Note, the change is not per year, but simply the percentage gain of what was originally invested vs the current value.
  • The ”Cumulative Value” of my investments equal $6,667.80!  This is money that would have went to the restaurant owner and to the waiter in tips.  But now it’s sitting in my brokerage account earning me a dividend!
  • With a dividend of $14.88 a week, it appears nice, but it’s based on dividends that may not be sustainable.

 

Since I’ve change the goal of this experiment, I don’t think I will need as much as I use to need on a weekly basis.  So, I’m thinking about shifting some (if not all) of my investments into less risky (from a dividend perspective) stocks.  I’ve had a great ride, so I’m not in a rush to do this, but since the goal is more serious, I think that my investments should be too.

As far as the experiment goes, it’s been a great success and exceeded my expectations.  The change in my lunch rituals was an unexpected surprise and one that will get me one step closer to a purer state of frugality.

Cheers,

MR

14 comments »

Posted in Experiment

Tags:

MR Cache: Lessons From Coaching

May 22nd, 2011

Weekly Thoughts:

I thought I was going to be different, in that I had it all figured out with an idea on how I was going to rotate the 7-year-old girl’s soccer team that I’m a coach of.  Reality didn’t match the logic in my head though!

The plan thumping variables were:

  • Not all of the girls came to the game on time, and one came after halftime
  • Some girls said they were tired and didn’t want to go out.
  • The girls are too young to do two 15 minutes sessions.
  • The field conditions where too wet and it was like running in sand.

So we started out the game stomping the other team, but after halftime, the tables reversed and we lost more points that we gained in the first half.

This was my first game though, and I was even struggling memorizing all of the girl’s names (I got them now though).

Great Reads from Other Financial Bloggers:

  • Momvesting.com:  Invest in Your Health: Multitasking – Multitasking is near and dear to my hearts, so I found this article very refreshing and something I wholeheartedly agree with.
  • Budgeting in the Fun Stuff: My Blogging Empire Update- I love to see Crystal run, in some ways she reminds me of my 7-year-old daughter with her endless energy and the quality and quantity that she produces.  My daughter who is in first grade tested in the third grade class reading level (and I think this was being conservative).  Crystal’s a few step ahead of the typical blogger too.  Truly, amazing!!!
  • Everyday Tips and Thoughts: Target Or Walmart? Does Perception Affect Where Or How You Shop? – Target has lower prices for comparable good than Walmart, hmmm interesting.  I usually shop at Target, but only because they are the closest shop to where I live.
  • Wealthinformatics: ROTH IRA for an emergency fund- I love this idea and even blogged out this in the past : Roth IRA Emergency Fund, I also use my Roth IRA – The Dividend Shield.  I think people need to see the value of Roth IRA beyond something used just for retirement purpose.  To not be creative and only think of a Roth IRA as a tool for retirement is too limiting.
  • First Gen American: Wow..Debt Really is a Motivator- I understand exactly where Sandy is coming from on this topic!  When I had a mortgage to pay off life was so simple and the gains in net worth were easy to calculate… unlike now…

Moneyreasons.com Worthy Second Read Links of the Week:

 

Like Minded Bloggers:

Much like the results of the test that Everyday Tips and Thoughts posted about a while back, many of us are very similar in thought!  I’ve noticed some very similar articles at different points in time and it’s kind of refreshing really.  After all, personal finance is a narrow niche so overlap and similar conclusions are only natural.  The only true scorecards is net worth and memories of money well spent.

 

Hope your weekend was rewarding!

MR

5 comments »

Posted in Weekly Review

Tags:

Is Technology A Job Killer?

May 21st, 2011

Unemployment remains on the high side, and while offshore has taken its toll, I believe that technology has contributed more than people realize too.

We all know friends (and maybe we do this ourselves too), that will go to a walk-in store, evaluate a product, talking to a sale person for an hour, the go home and order the product at a discount via amazon, ebay or similar online sites.  But have we even thought about the long-term effects of such tactics? 

By wasting the salesperson’s time, this has effectively wasted the time of the salesperson and cost the company.  Afterall, they don’t pay the salesperson to teach you about the merchandise they are selling so you can buy it at home.

How about technology like the Kindle or the iPad?  The Kindle (and iPad) may be a future killer of the entire book industry.  When people buy the electronic form of a novel, it hurts the book industry.  Think about it, the lumber companies, the transportation industry, and the retail book sales companies are taking a big hit or going out of business.

Something so innocent has the potential of killing the paper book industry entirely.  Look at Borders as an example, finding one of there stores is becoming more rare than seeing an albino tiger.

As technology and the offshore trend kills more and more domestic jobs, this affects other programs too, like Social Security.  The less jobs people have to work, the less money goes into Social Security.  Perhaps it will go busted before the 2030s hit…

What I’m really afraid of though, is how tight the future job markets might become for the future workers of tomorrow.  Where is my son and daughter going to work if the available jobs become few and far between?  How will they compete with foreign workers (who though technology can work from their country) who make 1/5 and in some cases 1/10 of what the typical american worker makes?

Did I mention that it’s technology that is killing the service areas that once held such great promise of the American and European countries?  We gave up on the manufacturing industry while singing the praised of the service industry and how that is the area that is the future of the developed countries.  But now that too is being done in by drastically cheaper labor pools in foreign countries.  Technology is what is making this shift possible.  Have you ever called customer support and had problems communicating with the customer support representative? 

Thanks technology industry, after all, eating and wealth are overrated anyway…  It’s kind of ironic that we thought that technology was our big advantage, when in reality it’s what is killing our job markets.  Who would have thought…

I wonder why the government is still scratching their heads about why employment is not picking up as they expected…  Isn’t it pretty obvious?

Thanks for listening to explain my take on such matters.

MR

18 comments »

Posted in Problems

Tags:

pfblogs.org logo

Disclaimer: This site is for informational and entertainment purposes only, and the content herein should not be mistaken for professional financial advice. It is highly recommended that you seek advice from a professional for serious financial matters. This site and its author may be compensated for expressing personal opinions regarding featured products and services.