Refinancing

My financial status remains relatively strong.

Looking an my change in net worth through 2008, I've seen a net gain of $38191.30. This does not account for any change in the value of my house, but does account for changes in my investments, including my 401(k) account, over that period - because that's tracked continously, and I never know what my house is worth on any given day - however I do know that its value has dropped dramatically over the past year, by somewhere between 20 and 30 percent.

What I notice is that my peak net worth was in August, and there was a trough, which bottomed out in October. At this very moment, my net worth is $30 more than it was at the peak last August. So, in effect, I had a setback of about 6 months, which came in the form of investment related losses. My net worth, excluding the equity I have in my house, is currently at its highest ever.

Last summer I strongly considered "trading up". I figured I might take advantage of selling my house and moving to a more desirable neighborhood. I actually went through the entire process up to the point of having my house listed on MLS. I bought a new oven (I call it my flat top) and a flat screen 46" TV and some new faucets. I painted just about every room, and packed away all my junk, so the house would look as clean and tidy as possible. Then I decided to back out.

The reason: houses seemed to be dropping in value more precipitously in my neighborhood than they were in the neighborhoods I considered moving too, which were already astronomically expensive. There was no way for me to justify taking such a "leap of faith" as the real estate agent referred to it, during times that were becoming more and more uncertain. So, I decided to stay put.

Then in late November I started receiving emails from a mortgage broker whom I'd contacted earlier, when I wanted to move. He told me about how rates had dropped to historically low levels. Not wanting to be bothered, I asked him what rate I could get. He told me 4.75%, and so I told him that if he could promise me 4.25% - with reasonable closing costs and no points, over the holidays, to give me a call - otherwise I'd get back with him in January or Feburary. I was pretty sure that would be impossible, but it gave me something to think about: how I could potentially benefit by refinancing.

I'll skip all the boring details. On Friday February 6th, I closed on my refinancing with my credit union. I voluntarily paid out an extra $50,000 against my mortgage. My interest rate on a 30 year fixed loan is now 4.625%, and my monthly payment is $1250 less.

The closing costs were $2600, altogether. So, in a couple months, the amount I save on my mortgage payment will just about pay for that. True, I was out the $50,000 up front. But that was a compromise on my part. See, I have been paying an extra $20,000 per year against the principal, for the past two or three years. I figured I'd just pay the $50k, get the nice low payments set in stone for myself, and then not pay extra for a couple years, while building back up that extra payment. Also, I have a hefty amount of cash savings that has just been sitting there collecting dust, since I sold the bulk of my investments in late 2007.

Here's what's funny: my total March 1 payment will be exactly $300 less than what I would have paid in interest, alone, if I had not refinanced.

I've looked at it from many different angles, and one day I'll look back at this as one of the smartest financial decisions I've ever made.

$100,000 @ 6.5%

I don't know what to do. I'm not ready to go back into the stock market, and the interest rates are so low, it's not worthwhile buying safe, short-term CDs.

I have a 6.5% mortgage which I plan to have paid off in about 6 1/2 years. There's this voice inside my head telling me to pay it off faster. If I pay an additional $100,000 on my house this year, I could manage to have the loan paid off in just 4 years.

I don't plan to live in this house forever, and if I do stay long enough to pay it off - which, in this climate, I do - I'll have to pay that amount anyway. And won't I have to pay an additional $26,000 in interest along with it? Of course I would write off about $6500 in taxes, but the loan is still costing me thousands.

The icing on the cake is that I will be only 44 years old, and own a paid-off house - at least for a little while. Ten years ago I would never have imagined having a house in San Francisco paid off by 44. I know it sounds funny, but I don't really need that $100,000 right now. I have enough additional rainy-day savings. It feels like the right thing to do.

Bad Times on Wall Street

$20000. That's how much less I would have, had I not sold all my stocks and mutual funds last November. I'm just going to leave it at that. This market is crazy. I bought a 5.2% 3 month CD today, that was an Ameritrade promotional.

My dishwasher broke, for good, yesterday, so I'm forced to replace it. I say 'for good' because I tend to patch up things, and get them to sort of work. My refrigerator has been quasi-broke for several years.

It couldn't have happened at a better time. I have an office chair I bought at the height of the dot-com bust. It cost me $80, at Staples. I went to Staples just before Christmas, and saw the same chair selling for about $250. Exactly the same chair.

Do you see where I'm going? It's surprising how much lower prices can go, when businesses have trouble moving their merchandise. I smell cheap appliances. I think this year will be a good one for replacing worn out appliances.

So, this may very well be the year that I catch up with the Joneses.

Rebalanced Portfolio

I dumped everything on November 13. I couldn't take the heat, and panicked. In retrospect, that wasn't such a bad decision, at least in the short term.

In less than 2 months, all but one of my holdings have fallen in value, some substantially.

Here's a breakdown:
XLE was 71.1/share, now it's at 76.85.
DNA was 74.18, now 70.11
DPCCX was 55.79, now 46.11
PRLAX was 57.01, now 51.93
JORNX was 12.83, now 12.16
CSCO was 28.28, now 26.24
INTC was 25.38, now 22.75
OIGAX was 32.35, now 29.72
MSIGX was 42.82, now 34.75

As you can see, my stocks were not terribly diversified, but still covered a number of sectors. In dollars, the net difference is $8087 in my favor. That's a lot of money, when you consider how little I had in the market. And what I keep asking myself is "why are people still buying stocks?" Are these people inexperienced or just forgetful? Whenever there's bad news like we keep hearing everyday, you don't supposed to buy stocks. When they use words like "Recession", "Inflation", "Meltdown", and "Sub-Prime" over and over again - the risk of buying stocks is more like the risk people take when they try to run across the train tracks in front of an oncoming train. You might make it, but if you don't, you stand to lose way more than you hoped to gain. But then again, I forget, people buy lotto tickets... I guess some of those guys dream big.

When you turn on the TV, and you watch some "expert" telling you you're in it for the long term. Remember that's what they're programmed to say. They've been saying it forever. Also remember that their livelihood, not yours, depends on you being in it for the long term. You better believe they won't do what they're telling you to do with their own money.

What happens now? My guess is right now is wait and see time, and that several months will have to pass before I will feel comfortable buying stocks again. I rebalanced my 401(k) so most of my retirement is in bonds and cash, and what money I don't have in a money market account, is in short term CDs. I feel better not having to worry about losing money, which I believe will happen to people who choose to invest in equities right now.

Oh, also, I'm considering refinancing, believe it or not!! But I think rates will go down, and we'll have more negotiating power in a, say, 4 to 9 months from now. Banks are gonna get desperate - for those of us who have solid credit. Right now I am able to get a 5.25% 15 year fixed rate loan - I'm still at 6.5% on my 30 year loan from 2001. I'm not happy with the $2200 'fees' and crap, however. The 15 year loan would cost $150 less per month than what I pay right now on my 30 year loan. That's what I'm waiting for to go way, way down. We'll see what happens with that.

New and Improved

I changed the name of my blog from "Financial Advice for Ordinary People" to "Freedom". And I also changed the description. I don't remember what it used to be, but now it's more representative of the way I think, for now.

I haven't liked the title "Financial Advice for Ordinary People" for a long time. When I came up with that name, my goal was to appeal to readers who weren't born rich, and to provide information I think helped me to be relatively well off.

Just now I understood why I never really like that title. It didn't reflect what it was intented for. It sounded like I was some know-it-all (financial advice) speaking to all you peasants (ordinary people).

So, I changed the name to "Freedom". The only complaint I have about that choice is that it's a bit too general. The description is also not as high-and-mighty sounding. So really all that's new and improved is the title and description of this blog. Everything else is pretty much the same old same old. Marketing and sales have never been my forte. So, I'm just gonna go with that for the time being.

I found out that after the feds dropped interest rates by half a point, my money-market account dropped the interest they were paying me by by more than 1%, to about 3.2%. I was disappointed, and took advantage of a promo- 3 mo 5.15% bond being offered through Ameritrade. I transferred about two-thirds of what was in my money-market account to invest in this promo-bond from 10/17/07 to 1/17/08. It's money I know I will not need for at least 3 months.

So, I'll be earning almost 2 whole percentage points more in interest over the next 3 months. It's not substantial - as if I could make a house payment with the difference. But it's money for me, and amounts to about $234 more than what I'd have, otherwise. So, let's say that's about $156 after taxes are paid. If I work about 20 to 25 days in a given month - that's easily free lunch for a month.

Recent Savings

It's been awhile since I wrote about some of my more recent basic money saving ideas. These are some of the things I've been doing to keep more of my hard earned money.

#1 - Car Insurance
My car insurance company increased my premium. I was under the impression it had been increased in the past, but looking at the chart, it wasn't. I bought my car in March 2005 and this is what I've paid over time, since:

9/05: $528.20
3/06: $528.20
9/06: $499.30
3/07: $499.30

I don't remember what the original amount was, for 9/07, except than it was over $500 - I just remember calling and complaining about it. I haven't had any accidents or made any claims. I drive th car rarely, and I don't see a reason to pay more when my car's worth less than it was in March.

So for 9/07 my bill was reduced to $454.40. Call your car insurance company the next time you get a bill and tell them you think it should be less. The worse that can happen is nothing.

#2 - Dish
I dumped cable at the end of last year. Comcast effectively doubled my payments over the past 7 years - without providing any additional features or services. I thought about dish for a while, but was afraid of reception. Comcast would always libelously slam DirecTV, in their commercials, by telling us we'd regret switching to dish, since the picture would be all fuzzy and distorted depending on the weather. Guess what: that's a lie. I live in San Francisco, and it's foggy half the time. My picture is as good as ever, and my service hasn't been interrupted any, since I first signed up. DirecTV cost about the same as what I paid for Comcast, except that I have way more channels. Some good, ones too.

I feel like I'm subsidizing Comcast's DSL customers. I think they can lower their price for their Internet customers, and remain competitive by charging their TV Cable customers more. At least that's my theory, and why I think they kept asking me to pay more. Evaluate your expenses, and make sure that if you're paying more, it not so that someone else can be paying less.

#3 No More Landline Long Distance
I cut out long distance from my AT&T bill. I have a cellphone I barely use. Skype isn't the greatest, but I do occasionally mess around with it. One day, I'm sure it'll be fantastic. But right now, people complain about not hearing me very well through Skype. Also I was getting disconnected every 5 minutes for some reason. I don't make that many long distance calls, in the first place.

Before last October, my AT&T bills ranged from $106 to $124, and now they are pretty much always about $90 per month, every month. Make sure you're not paying for something you aren't using.

#4 Commuter Checks
The company I now work for offers commuter checks. They deduct a specified amount of pre-tax money from my paycheck, and send me a voucher for the amount they deducted each month.

My Fast Pass costs $45 a month. And when I buy it using the $45 pre-tax voucher, it costs me $24.52. So my already cheap cost of trasportation is cut in half. Check out CBM to see if this might be available at the company you work for.

#5 ESPP
The company I now work for also offers an employee stock purchase plan, ESPP. I can elect to have up to 10% of my salary deducted, and in May and again in November the money that was deducted buys shares of the company I work for. The price is the 15% less than the lower of the value at the start of the 6 month period, or the value at the end of the 6 month period. If I sold the shares I bought in the last 6 month period today, I'd make a profit. If I sell those shares in May next year, I won't have to pay as much tax on that profit. It's like free money. And although I'm not guaranteed to make a profit, my chances are quite good.

#6 Flexible Spending Account
The company I now work for offers a cafeteria plan, or a Flexible Spending Account. This year I got two new crowns, which I knew my share of would be $1374. So last year I elected to contribute $1374 throughout this year. Of course it doesn't feel great having so much deducted from my check each pay period, about $57, but I needed to get those crowns anyway, and like my commuter check vouchers, the money is pre-taxed. I haven't done the math, but something tells me it's probably about half-price like with my commuter check vouchers.

What's also nice is that I got both crowns at the same time, in July, and have already been reimbursed for the $1374. That's how the plan works, and maybe something lots of people don't know about: I haven't even finished paying the $1374 to the flexible savings account, but have already been reimbursed the amount I elected to contribute throughout the year.

#7 Employee Match on 401(k)
If you've read some of my earlier posts, you know I'm not a hardcore retirement savings plan advocate. My philosophy is that they're safety nets for those of us who will fail in life - and they're pushed by banks who want to tie up our hard earned money for decades. But I do think they can be valuable, and maybe even life-savers for some of us. They also are good ways to save tax dollars.

I'm fortunate enough to work for, if I'm not mistaken, the first company I ever worked for that matches my 401(k) contribution by at least 50%. They do it for up to 6% of my earnings. So I contribute exactly 6%. So I'm not not taxed on that 6%, and really what's going into my account each pay period is 9%. Even though I can't spend any of it till I'm old, if I'm lucky enough - it's like making 3% more money.

If you're making a decent salary, can use a good tax write-off, don't see an absolute need the money in the foreseeable future, and your company matches your 401(k) contribution, contribute up to the amount they match.

Ok. That's my update for now. I'll see if I can think of any more for later.

The 'R' Word

I made some adjustments to my investment portfolio this month. I did three things:

1.) On 9/17 I bought a new mutual fund, JORNX.
2.) On 9/20 I reset my 401(k) existing and future elections.
3.) On 9/24 I converted my YHOO to XLE.

The effect of lowered interest rates, by 0.5%, had a huge positive impact on my current investments. It also affected my short-term confidence - which led up to those three adjustments I made.

I know the Fed is going to lower rates again before the end of the year. Not sure by how much, but at least 0.25% and I don't think 0.5% is completely out of the question - our economy is falling into a relatively small recession, and these guys are desperate. I have wanted a new mutual fund for a while, and since I have DPCCX and PRLAX, I needed one that focuses on something I believe in, and that isn't international. JORNX sounded perfect.

Another action I took to get as much out of the possibility of a short term run-up: I also swapped out all my conservative 401(k) investments for the riskiest ones I could find.

But after buying JORNX, I have so much in tech stocks... I needed an existing candidate to convert into something else. I needed to sell something so I can go ahead and pay my 20% on its gains, while I'm not desperate to take my profits. The end of the year is approaching, and I've only sold off part of one company, INTC, I can write off losses for.

I selected YHOO as my candidate. It has been pretty flat since 2003. I originally bought YHOO in 1998, and much more in 2003. I decided lately, it was having too many swings, up and down - and I don't really like the roller-coaster activity. I've been thinking about buying energy - since I have none, and it's been doing quite well for such a long time. I'm particularly interested in alternative energy. So when I started researching alternative energy funds, I learned about these things called exchange-traded funds, or ETFs. I also understand that it may still be a little early to invest in alternative energy. ETFs are similar to mutual funds, but trade like regular common stocks. They're relatively new, and there aren't very many.

When it comes to money and finances, you have to think with your head, and XLE sounded like a solid, safe, short-term investment. It's a relief to not have to worry about what's going to happen with YHOO anymore.

Here's my plan: At the end of this year, I'm selling the rest of my common stock and two of the mutual funds I've held for many years. I'm resetting my 401(k) so that everything is reasonably conservatively invested.

I'm going to pay a lot of attention to Christmas sales. Based on this, I'll decide at what point during the 1st half of 2008 I'll sell my remaining mutual funds and XLE.

I'm waiting for a downturn. I'm prepared to wait awhile, and things may actually go up for some time, but I can't count on that, because that may not be the case. But it will be obvious when the huge sell-offs start happening. And I'm so sure they will, and the extent will probably depend somewhat on how much the interest rate gets lowered, this next time around.

Then when it's all gone down sufficiently enough, I plan to step back in, and one of the first mutual funds I plan to buy is New Alternatives Fund, NALFX. I really, really like what I've read about it, and I don't care about the load, so much.

Anyway - that's my plan for now. I'll update on any changes of heart I experience over the next few months.

Manage Your Own Money

My house has lost some of its value over the past couple years. I called a real estate agent the other day with questions about selling my house and moving to a more desirable neighborhood. He recommended that I wait till April. His advice is that the worst time to sell is between June and December, and the best time is between January and June.

The agent said my neighborhood had been hit pretty hard with the mortgage fallout for two reasons: It attracts people who have been sub-prime borrowers and are now having a hard time getting approved for loans. It also houses many sub-prime borrowers who are having a hard time making their payments, and being forced to sell their houses. He thinks my house would have sold for more in the first half of 2005, because that was the last time demand was so high with respect to supply, in my neighborhood.

The good news for me, is that other parts of San Francisco are keeping the value from sinking as low as it would have, had I bought in, say one of the outlying suburbs. Is that what they mean by "A rising tide lifts all ships"? I've decided to check back with the real estate agent in April.

Oh, if you happen to get a call from a representative from a financial services firm - someone who wants to plan your retirement for you - and you're just an ordinary person, like me. My advice is to be skeptical. I say that because that's exactly what happened to me a couple weeks ago. In a nutshell, here's how it went:

Step 1: They sent me a questionaire to fill out.

Step 2: A data entry person entered the information into a spreadsheet, and ran some standard application that generates a pie chart that breaks down how they think your assets should be allocated.

Step 3: The company has a relationship with several mutual funds, and mapped a mutual fund to each of the quadrants from the pie chart.

Step 4: If I would have enrolled, the company would collect 1.5% of the assets that are being managed through the mutual funds.

My question is "How does that little bit of work entitle these people to 1.5% of the money I put into their account for as long as it's there?"

So, say I tell them to manage $50000. They invest the money in their choice of mutual funds. Then each quarter, if each of the mutual funds maintains about the same value, I pay a managment fee of about (50,000 * .015) / 4 = $187.5, regardless. What's important to keep in mind, is that for each of the mutual funds, I'm already paying a management fee. So, I'm paying to have my money managed by people who are already managing it. That doesn't sit well with me. Do people actually go along with such a plan? I don't understand it at all. It just doesn't compute.

The kicker is that the mutual funds that were chosen by my "financial advisor" were these 'safe' mutual funds. 25% were fixed income (bonds) that returned about 2 to 3% per year for the past couple years. I don't know if that's enough to even keep up with inflation. So, what incentive do these financial service firms actually have? They protect themselves with all this legal jargon on the application you have to fill out when you enroll. They have no obligation to make you any money, or even do any work, and they get paid no matter what.

Are they really gonna work their asses off to double my $50000 so they can make $1500 a year? Seems much easier to just sit and do nothing for $750.

Now, my advice: You can log into any number of sites that provide information about mutual funds, including fees, performance, risks, ratings, etc. and within minutes, pick a handful that are likely to serve your purpose. The ones you pick don't have to be the ones the financial advisor has a relationship with. Once you decide to buy one, you don't even need to pay a management fee.

Mutual Funds Are Paying Off

Wow, I just read my last post, and I would be surprised if it made any sense to anybody. Sorry about that. It sounded sorta like I just finished off a bottle of wine before I started writing it.

Succinctly, what I was trying to say was this: "It seems like my money will work more for me if I take some out of the money market account and put it into a mutual fund."

And after I sobered up, I did exactly that.

So, here's the breakdown.

I have an Ameritrade account, and I took the 100 and 200 level courses. Anyone can do it. Here's how to get there: Navigate to http://www.ameritrade.com/ and click on the 'Research & Ideas' tab. Then click on the 'Mutual Funds' link and then on the left navbar, click on the 'Investing Classroom' option. Make sure you take all the courses in 100 and 200 level, and then you'll know as much as I did before I made my choice. It's actually very interesting, what you will learn.

Then I bought 2 new mutual funds. I'll go ahead and tell you what I bought - I used what I learned in those courses to help guide me in my decision. So, this is just information, and not advice.

On January 23, I took $5,000 out my money market, and "Bought 132.908 PRLAX @ 37.62". On February 22, I took $10,000 out of my money market, and "Bought 260.892 DPCCX @ 38.33".

A couple days after I bought the China mutual fund, (DPCCX), it took a nose-dive. It was depressing, and I hated myself very much. If you don't believe me, google 'DPCCX', and look on the chart at what happened on 2/23. It sucked. But look at what happened between then and now. While you have the chart open, type in 'PRLAX' to see how my Latin America mutual fund (PRLAX) perfomed.

Right now, the $15,000 I invested into those 2 mutual funds is worth $17,650. I weight-averaged it to $15,000 invested over 3 1/3 months, or 0.27778 yr.

And here goes the math: $ (17,650 - 15,000) / $15,000 = 0.176667, or 17.6667%. I'm not a financial analyst, but I think that means I've made 17.6667% / 0.27778 yr = 63.6APR. Am I right? That sounds like an awful lot - especially when you consider the initial loss I had to make up for, in the beginning. Maybe I made a mistake in my calculation. I'll go back over it again, later. But one thing's for sure: I made me some money.

So, there you have it. I made about as much with $15,000 over a 3 1/3 month period invested in 2 somewhat risky mutual funds, as I will with the approximately $70,000 I have in my very safe money market account, in about 9 months at 5% APR - (I'm actually getting more like 4 1/2 %):

$70,000 * 1.05 = $73,500. $(73,500 - 70,000) / (9/12) = $2,625.

Correct me if I'm wrong. But if I'm right, this seems like a risk worth taking. I'll follow up again on what's going on. But I do plan to buy some more mutual fund pretty soon.

Revisiting Mutual Funds

'2006 was a good year' was an update on how things have changed for me in a year. It wasn't really advice, so much as it was reinforcement that following my own advice paid off - at least last year.

Somewhere underneath all that explanation, you might have gathered that 'changing jobs' was some good advice. See, I was impacted by the dot-com boom / bust cycle in such a way that I had to crawl back out. Changing jobs twice last year was a strategy. For the most part, I sat still, and didn't make too many risky financial moves.

So, now I'm sitting here looking at how my investments paid off. The best seems to have been one of my 2 mutual funds. It's one that you would consider risky for a mutual fund, because it's an international fund. The other mutual fund I have is less risky, and didn't perform nearly as well.

Combined, these 2 mutual funds returned 17.4% between 1/1/06 and 1/1/07.

Aside from any dividends, I never have to pay any tax on these gains until I sell. I consider them a line of defense that I haven't had to cross. In fact my diversification is a set of buffers, where cash is on the outside, and the retirement accounts are on the inside.

At the beginning of the year, I had about $47,500 in my money market account, and throughout the year it has accrued and lost and accrued again, cash. The reason it lost cash at some point is that I pay an extra lump sum payment against my mortgage every year. The balance is now about $83,000. Last month, it drew about 4.75% interest. I earned $2,700 in interest from this account last year.

It seemed so sudden, how much cash I wound up with. And when you have what seems to be a lot, if you're like me, you are more afraid of taking risks that could mean losing large chunks of capital.

If in 2007 the interest rate remains constant at 4.75% and I start off with $83,000 and make no withdrawals or deposits (purely theoretical), then at the end of the year, the account will be worth just over $87,000. That sounds nice, and I'm not used to making so much money in interest every month. It's $330-$340 per month. If I follow this strategy, in 2008 I'll pay about $1,000 in taxes on the $4,000 I made. Right now isn't the best time for me to have to adjust my salary up before paying taxes.

What if I take $25,000 of that and buy into a (not super-duper risky) mutual fund like the ones I have - and haven't been afraid of holding on to? If it earns 15%, then its market value would be roughly $28,800 at the end of 12 months. And I don't have to cash it out.

If I lose my job sometime in the future, or retire, and am unemployed for several months. I wouldn't have to pay as much tax on that $3800:

In addition to the roughly $12,000 I'd make from unemplyment benefits, or whatever piddling amount I'd be getting from social security, I'd hardly be in a top tier tax bracket, but the $3,800 would sure help out. Remember that that the $3,800 is about $800 more than what I would walk away with, after paying taxes on the interest I would draw off my money market account.

Also, while neither is exactly chump change, recall that I stand to benefit less with $83,000 than with $25,000.

2006 was a good year

It's been more than a year since I posted my last article.

I want to give you an update on how my financial state has changed in only one year:

I have changed jobs twice. The company I worked for was a consulting company with about 30 software developers. I started working with a very small start-up company in March that had just received it's initial round of funding.

I relived some deja vu by working there, and grew skeptical. I decided to quit after working there for only 3 months.

I have been working for a new company - which coincidentally has financial institutions, namely portfolio managers, for customers. It has a lot in common with Arthur Andersen, in terms of my co-workers and level of job responsibility. More is expected of me, of course, because I was an entry level programmer back then. At Arthur Andersen, when I was in my late 20s this work environment bothered me. It seemed too slow paced. But now, I enjoy it either because I'm older or just have over a decade more work experience.

We'll refer to the original company I worked for a year ago "company A". We'll call the company I worked for after that "company B", and my current company, "company C".

Between company A and company B, I earned $11000 more in annual salary. I switched from a PPO with a $250 deductible (which I never used) to a High Deductible PPO with at $2400 deductible (also never used), and enrolled into a Health Savings Account (HSA) to which the company contributed $200 per month. I lost my dental insurance (they didn't tell me about this during the interview process, by the way, although it wouldn't have mattered because of the salary increase). My commute dropped in cost by about a third. I lost my 401(k) plan, but I wasn't contributing to very much since the company I worked for only matched 15% which didn't vest for 4 years. That was bunk that was offset by the shares I never expected to cash out.

Between company B and company C, I earned an additional $5000 in annual salary. I now have everything in terms of benefits - it's at least as much as I ever had in my life. I gained a week of vacation - 3 weeks now instead of the original 2 - which for me is better than additional money. I take public transportation and the cost is that of a $45 FastPass. The company offers commuter checks, which allow me to pay that $45 before taxes are accounted for. I enrolled into a Flexible Spending Account, which works for me now that I am not afraid of going to the hospital for a check up or to the dentist - and I have gone to both. Oh, remember that HSA? Free crown. I do have to pay a small portion for my benefits. But overall, it's worth it. I regained a 401(k) plan that matches 50% of the 1st 6% I contribute. I contribute exactly 6%. I enrolled into a Legal Plan which costs about $8.50 per half month. I'm using it for estate planning - something I've put off for a long time.

I'm looking at a Microsoft Money report on my "Net worth over time", customized from 1/1/2006 to 1/1/2007, and it shows a steady gain of $54,645. And it doesn't have any 'corrections' like a house re-assessment. It's a real increase in net worth over 1 year. I haven't analyzed where the greatest gains came from.

Remember the money market account I wrote about in my article titled 'Diversification'? It has grown to have quite a large amount of money in it. I contributed to it, gradually, over the past year. At some point, I moved cash that was in my Ameritrade account (earning less than 1% interest) to this account. I felt like a fool because I left more than $15000 - just sitting there. Interest rates had been rising over the year, and my money market account was already paying about 4%. I have a car loan that I won't pay off because the interest rate is lower than what I get from my mutual fund (regardless of having to pay tax on the interest). I have over $80,000 in my money market account.

My company had a laptop stolen that contained some personal information about employees. Someone broke in and stole a laptop in December. It had our social security numbers and addresses in a spreadsheet, or something like that. So, to make us feel better, we all got free accounts so we could see our credit.

The last time I checked, was when I re-financed my home loan in 2001, and my score was 791. Now it's 805. According to the service, that translates into having better credit than 99.97% of consumers.

Diversification

Some of us have more to diversify, and may be less susceptible to risky investments than others.

Diversifying our portfolios allows us to have something left if some of our investments fail, or don't pay off.

Over the years, I've made some money here and there, and have had time to make some mistakes. I started out with a savings account, a checking account, a bit of credit card debt, and a student loan. I wrote some checks that bounced, and I was sometimes late paying the minimum due on my one credit card that had a low line of credit and a high interest rate. My credit wasn't so great.

I changed jobs and started working with a state agency that had a credit union which was affiliated, somehow, with an institution that sold mutual funds. The credit union was a good idea, because they paid interest on my checking account. The mutual funds was a good idea, for me, at the time, because I could afford to buy $50 per month of a mutual fund that historically paid more than what I made off interest with my checking account. It wasn't so risky, because as the mutual fund fluctuated in value, I paid accordingly. And I paid amounts I could afford, that I'd otherwise blow on something I didn't need.

After a couple years investing in more conservative mutual funds, I decided to move that money into one that was less conservative, and start investing in one that was more risky. I felt that if I was gonna be conservative enough to use a mutual fund, I might as well be as risky as possible with it and invest in something global. I also started paying twice as much, since by this time my salary had doubled. I was young, and had lots of working years in front of me. I could afford to lose.

The mistake I may have made was choosing a mutual fund for which I paid a commission of 4.25%. So, every $50/$100 deposit I made was automatically worth $47.875/$95.75. But overall, because of the mutual funds' performances, I still made a hefty profit.

I stopped depositing money into those mutual funds - to avoid paying the commission, but still have two of the three I have deposited money into over the years. I wanted more than they could ever pay: Mutual Funds weren't risky enough for me.

I started buying stocks using an online trading company in 1998. Sort of a mistake, too - but something I learned from. By this time I was making enough money, that I wasn't afraid of risking losing. I've learned more by losing money than in most classroom lectures.

I invested in chunks of $1000 - and I managed to buy a couple IPOs. The worst investment, I eventually sold for $23. On certain days my stock portfolio went up in value over $3000 - and I'd only invested about $17000 in total by that time. Those were the crazy days when NASDAQ was insane. The way I looked at it was the most I could lose on a single investment was $1000. But there seemed to be no limit to how much I could gain.

I stopped looking at it that way in early 2000, when I sold my condo in Chicago and bought a house in San Francisco. Thankfully, I didn't lose too much, since a.) I didn't invest that much (and actually came out ahead in a couple cases), and b.) I had money in other places.

I went back to putting money in the stock market in 2001 after it dropped to a very low point, and have since regained all that was lost, and then some. 2003 was very good, and 2004 was pretty flat, as has been this year.

Now, I'm a little less interested in losing money or gambling. At least until I feel more secure in other areas. I haven't been investing more in stocks, but sometimes sell some I have and buy others with the proceeds. I feel like the allocation I have in the stock market is sufficient. I opened a money market account with my credit union - that I've been a loyal customer of for thirteen years.

Now I deposit rather large chunks of cash into the money market account in addition to contributing extra to the best investment I've made so far: my house.

I feel really good about how I've spread out my money, and all the layers of financial protection I have.

Taking calculated risks, and looking into different investment strategies has worked well for me.

Partnership

If you live alone, consider how much you can save by living with someone else, and splitting the cost. A significant other is ideal. A roommate is the next best thing.

One house payment. One property tax bill. One electric / gas bill. One water bill. One garbage bill. One phone / Internet / cable bill. One set of furnature. Maybe only one car payment / gas tank to fill / car to insure. More than one person needs to eat, but only 1 refrigerator needs to keep the food cold. Only 1 oven needs to be in use to cook dinner. More laundry, but not necessarily twice as many loads to be washed and dried.

Twice the income to pay for it all. More job security. It's less likely that two people will lose their jobs simultaneously, than one person at a time.

Overall, this presents a safety-net along with an increased ability to save / invest money that's left over. Money you might not be able to save, alone. After ten or twenty years, the savings can be substantial.

Carpooling

Transportation, for me, is a big ticket expense. I have to cross the Bay Bridge coming and going to work everyday. I drive 23 miles one way. This must be a big expense for lots of people, because I have to sit in traffic with so many others.

Those crossing the bridge with me have to pay a $3 toll (only going to the city). If I got 23 miles per gallon, which I don't - especially in backed up traffic, a two way trip would use 2 gallons of gas. So, say it costs about $3 / gallon. Therefore, I can expect to pay about $9 per day or $45 / week.

511.org and Craigslist are 2 popular Bay Area sites that have sections for people interested in carpooling. Craigslist is more expansive, you can go there and navigate to other metropolitan areas. Out of 7 months working here, I've carpooled probably about 3 to 4 of them with 2 to 4 persons. When there are 3 or more, we don't have to pay toll. The 2 non-drivers pay $2 each to the driver - which means that if I don't drive, I pay $2. If there are 2 people participating, we can't take the carpool lane, and we have to pay toll. On those days, the passenger pays the driver $3 to cover the toll - which is still about a third what it would otherwise cost.

If my math's right, carpooling for 30 weeks vs. driving myself would save me about $1000 and about 4,600 miles on my car, if I drive 1/3 the time. That's all on top of being eligible to use the carpool lane.

There are some downsides to carpooling. But like putting money into your retirement account, there's a point where you have to balance how comfortable you are with giving up a certain amount of independence to be more financially secure.

Retirement Planning

I notice a lot of people, younger than me, like to plan for their retirement. I think it's great to start planning early, because we all know the government's not likely to take responsibility for us when we're old.

I've had a retirement plan since I was 25. The company I worked for put my money into a pension plan, which I rolled over into a 401(k) plan after leaving that company at 28. When I was 28, all I heard was stories about how you need to start young because that way, when you retire, you'll have loads of money you never paid tax on, waiting for you. They'd show charts comparing someone who started at 16 with someone who waited till he was 50. Oh my! I waited till I was 25!

I can't say whether or not the amount I've deposited into my 401(k) or IRA accounts over the years has been enough or too little. But I can say that the older I get, the more I feel like retirement plans are most useful for those of us who will fail in life. Something just doesn't seem natural to spend your life saving money, and maxing out on your 401(k) so that if and when you get really old, you can suddenly become a millionaire. What are you supposed to do with a million dollars when you turn 69 1/2? How much do you supposed to withdraw per year? The only way that would make sense to me is if I had been a millionaire all along.

The older I get, the more it sounds like banks are taking small amounts of money (lots for you and me) from a massive number of working class people. Then they loan it back to us in the form of credit cards, mortgages, and other types of loans - charging us interest. And penalizing those of us who decide to interfere with their plan by withdrawing some of it before retirment age. I know, I must sound like a conspiracy theorist, again.

Nevertheless, it does bother me to know there are so many twenty-somethings who make barely enough to get by, loading down their 401(k) plans - because they've been brainwashed into thinking one day they'll get rich off of it. How's it invested? Most of us don't really think too much about that sort of thing. They even classify investments with terms like 'Growth' and 'Income'. Sounds good. Mine have been invested in more 'Growth' stocks, for example. So, out of every paycheck, a chunk of my money makes Microsoft's value go up just a really small amount - so someone rich can sell and make a profit - not when I'm an old millionaire, but right now!

It seems like most of the advise about financial planning comes from banks. Of course banks think it's a good idea for you to give them money you can't use till you're seventy years old. And it's especially good if you start doing it early - because they get to keep it for longer - and there seems to be a greater chance you'll never live to see it: It's less likely that a 25 year old will live to be 70 than it is for a 69 year old... Also, they keep moving the target up, so that the 25 year old won't get to claim any of that money he lent the government for decades, until he's in his 80s. Why should any of us live long enough to enjoy some of what we've saved up?

I'm not saying 401(k) plans are a bad thing. Most people probably don't think about retirement at all, and they should. Those plans are especially beneficial when your company matches your contributions, which none of mine ever have, and when the market is performing well, which it hasn't been. They also knock off a chunk of what you will otherwise spend on taxes - which means they work better for those in higher tax brackets. But you know what? Sometimes you can do more with $9,800 you can use for anything you want, today than $14,000 Uncle Sam can use for anything he wants over the next forty years.

When you plan your retirement, keep a little money on hand to invest in some of the things you believe in - and that you, not the government, can decide when it's best to liquidate. When you listen to one of the 'experts' on planning for your retirement - keep in mind most of them are working for banks.

Quality and Value

Look for quality and value when you shop. All of us have different spending habits - but sometimes, it's easy to identify a better value. If you need a toaster, go online and research toasters. People from all over give honest reviews. If someone says that they bought toaster brand 'x', because it was cheap - but unfortunately it got just as hot on the outside as it did on the inside, brand 'y' that cost just $5 more, might have been a better value.

I've looked for values and good quality for almost as long as I've been old enough to buy my own things. I've slipped up a few times, and it reminded me to pay more attention.

I'm not an economist, and I know there must be thousands of reasons some items cost more or less than other items that seem to serve similar purposes.

For certain things, it still seems like you get what you pay for. This seems to apply mostly when you're comparing items that haven't been imported - because some things can't be made somewhere else, or it's not cost effective to ship them.

If you buy over-the-counter medicine, sometimes the cheaper ones have the same active ingredients as the ones that cost a lot. I don't know why people would buy the more expensive brands. That doesn't make any sense to me. But people must be buying them, since they're on the shelves. Same with shampoo. You go to the store and there are three-thousand types. About a third of them do exactly the same thing, but the cheapest one cost way less than the most expensive one.

Some of us aren't as careful as others. Don't spend a lot of money on something you know you can't take care of. Some things that are high quality are easily broken, and you're just gonna break it. Ask someone else what time it is. Don't buy expensive wine glasses if you're always knocking over your glass of wine. Don't buy expensive sun glasses if you're always sitting on them.

It's your hard-earned money that you've already had taxes taken out of. When you go out and spend it on something you need, pay attention!

Work Smart

Call me a conspiracy theorist. But those who work hardest aren't the ones most handsomely rewarded.

I've worked at 15 companies since I was 16 years old - that's over a 22 year period. I haven't worked consistently throughout the past 22 years. My duration at any given job has ranged from 5 1/2 weeks to 3 years 2 months. The mean has been 1.3 years per company. The mode has been 6 months. For the most part, I left because I found something I thought would be better.

The companies have ranged from being ultra-conservative to anything goes. The sizes (#employees) have ranged from 9 to thousands. 2 of these companies had unions.

There's always been a balance-of-power. Employers give stuff to their employees when they think they may need to. They also take away, when they think they don't need to, or shouldn't have to. If they take away too much from too many, then they lose productive employees - which costs them in other ways. If they give us too much, we get lazy, and start expecting too much.

When your boss improves your standard of living, it's because he recognizes your value, to a certain degree. It's your job to determine whether or not it's enough of a degree. There's no other sure measure. It's nice to make friends at work, but remember those friends are used by your employer to measure your performance against. To believe otherwise is naive.

It may sound strange to some, but at some point I realized I was too driven, and worked too hard. My perception was that the harder I worked, the more I would be recognized. If I wasn't recognized, I'd get bent out of shape and, eventually, quit.

I've always had a decent work ethic. I like to think I still do. But I worked at companies with smart people who weren't used to working so many hours, and had lots of social activities at home. Their paychecks were bigger than mine was. Being capable of working hard is more valuable than actually working hard. To not be viewed by my coworkers as a sycophant, I slowed down my pace. Life improved.

To have worked at the same company 30 years without calling in sick once, is no more spectacular than having the longest toenails in the world. It's just sad. People who do that sort of thing lose out. Anyone who tells them they should be proud of themselves is either as misguided, or a bald-faced liar!

Step Up

If you feel so-so about where you are in life, make a goal to move up a level.

Some of us start off with fewer resources than others. I started off with relatively few. I think I started weighing my options about the time I understood what poor meant. I grew up in an environment that neither encouraged nor rewarded poor people. The place I grew up, in the seventies, seemed to have a special way of making us feel ashamed of ourselves for being poor.

It's easy to take risks when you have little to lose. I had nothing to lose. I felt I deserved better. I joined the Navy. Perfect decision? No. Good decision? Under the circumstances, it was one of the best decisions I've ever made in my life.

Unfortunately, I ask too many questions. Certain organizations just don't ever seem to pan out for people like me. Fortunately, the question "Can I do better?" has come up quite often. And the answer's always been "Yes".

If you're not satisfied with your current station in life, challenge yourself to find a more rewarding alternative.

Think Big

It's important to pay attention to detail. For example, I've been using online bill payment for quite awhile now. It cost me $5.95 per month, which was about the cost of stamps. The reason I chose online bill payment was its convenience. I also hate the taste of glue on envelopes. A couple months ago, my credit union started offering their own version of online bill payment.

I changed over to them, not only because it saves me about $2 per month. This way I'm not giving all my credit card numbers to a 3rd party bill paying service, even though I did trust them. Besides, it's just as convenient. The savings after an entire year will cover about a 1/2 tank of gas.

You do yourself more justice by concentrating more on big ticket expenses - think of how it can be used to offset some of your other costs. For example, I was paying about $450 every 6 months for auto insurance. I decided to buy one of 3 cars, so I called my insurance company, and asked for a quote on each make and model.

The car I ended up buying, I was told could be insured for roughly $550 every 6 months. I was pretty pleased that it wouldn't cost much more to insure a brand new car than it cost to insure my hooptie.

A couple weeks later, I was sitting in my brand new car in the garage, and called the insurance company to inform them of the change. The woman I spoke with told me it would cost over $900 per six months. I felt like they were holding me hostage. I had to choice, since I needed the insurance. So, I agreed to their terms.

Then I went through those flyers we all get in the mail, and which I save for times like these. A different insurance company offered the same coverage for about $650. So I switched to them, and cancelled with the original company. So they re-imbursed me (pro-rated) for about 5 1/2 months. Almost 6 months passed. Guess who came crawling back to me with their new and improved $528 / 6 months rate?

I saved over $600 in a year - just on car insurance, and all it cost was a couple phone calls. I've saved about that much on homeowners insurance, as well. And that savings carries forward: If I allowed that insurance company to gouge $900 out of me, it would cost me about $1800 for this year, $1800 for next year, and so on... of AFTER-TAX dollars. That's like free gas and electricity! Well, at least it used to be.

It's nice to save a couple dollars here and there, but don't sweat the small stuff until after you've taken care of some of your biggest expenses.

Employment

To save money, most of us need to make money.

Most of those of us who need to make money, do so by working for someone else.

Corollary: Since it's better to save more money, it's better to work for someone who pays more money.

Don't take that literally - use good judgment! What I mean is that if you love what you do and where you work, it may not be a good idea to take a chance by changing jobs for fifty-cents more per hour.

Are you making as much as you should? I don't mean as much as you want, but as much as you should. If the answer is truly "no", you need to work out a plan to make more money - even if it means changing jobs. You shouldn't allow yourself to be short-changed any more than you expect your employer has allowed himself to be short-changed by his customers. You're a business person just like he is, and should be paid a fair salary.

I've got an interesting story. Once upon a time, I started working as a programmer, and was paid a meager entry-level salary. When I was up for a raise, I was told the same old story: "You've done a fantastic job, we'd like to pay you more... But unfortunately, this is all we could afford". I changed jobs. At the next company, I heard the same thing after about a year. I changed jobs, again: Only 18 months after I started working at the first company, I was paid double that meager salary. I admit, mine is a special case, and it's because of the quickly approaching dot-com boom.

Now, let's fast forward to 2001 - I was paid a decent salary, and had a substantial bit more experience. But guess what happened? Supply and demand shifted. The company I worked for went out of business. I was suddenly not worth as much, anymore. Remember when I told you how important saving money was?

But the moral of the story is supply-and-demand: If you know your value has increased, don't expect your employer to tell you "John, you're much more valuable now than you were a year ago. We just can't find anybody like you. We've looked and looked, and.. we're gonna double your salary, because you're one of a kind." Unfortunately, your employer will acknowledge when your value has decreased. Sometimes, it's key to remind your boss, professionally and diplomatically, that you know your worth.

Do the best you can. Enjoy your job. Understand your value and contribution. But always remember that we work for a paycheck, and the goal is to make the most money in the shortest period of time.