Thursday, December 20, 2007
In Tahoe we are renting a huge "cabin" with 6 bedrooms, two hot-tubs and a pool table, into which we will pack 4 couples and god knows how many children. The weather has been very co-operative, with a foot of new snow falling in just the past 24 hours. This vacation will be an expensive one, but this is the sort of spending that I have absolutely no problem with. See, after my wife and I both maxed-out our 401k's for the year and even stashed away a little extra money for retirement, I think we are very entitled to splurge and make the most of our money.
Money should be enjoyed, so long as you don't rob your future self to spend in the present.
Tahoe here we come (in two days)!
Thursday, December 13, 2007
Amen to that. A well thought-out and well explained retirement plan AND from a sales guy no less (sorry, I couldn't resist the dig at sales folks, being a marketing guy myself). I don't yet have a target retirement date myself, but I do have a target "quota" of $4 million. This is a stretch goal but I think that my wife and I can achieve it by developing our careers and living modest and balanced lives.
"Retirement is like sales. You have to meet a certain quota, and that quota is the amount of money you will need to fund your retirement. Just like in sales, to meet your quota you have to shoot for a higher number than you really need and build some safety margins into your plan. I am shooting for retirement at 58, but I know that I want to retire by 63. As far as I am concerned, if you don't plan for a specific retirement date, you will have to continue working for the rest of your life. I have plan, but I have built some flexibility into it. At the end of the day, being able to retire doesn't mean that I will actually retire. As long as I enjoy my work, I will continue do it."
What about you? Do you have a target retirement age and "quota"? If so, are you on track to achieving those goals?
Tuesday, December 11, 2007
We are dumping our current plan with ING because of unsatisfactory returns, lack of transparency, high costs and a complete lack of index investing alternatives. Our new plan with ADP will offer very nice bells and whistles, including a wide range of index investment options, as well as highly rated actively managed funds (for those who insist on paying management fees without good reason); a ROTH 401(k) option and even a self managed 401(k) option for those employees that want more control of their financial futures. Even the good people at our finance department have something to grin about - ADP's 401(k) platform is integrated with their pay-roll management services, so there will be much less work for our accounting folks come pay-day.
For me, this day marks a personally satisfying milestone. I initiated the efforts to replace our 401(k) provider and led the search for a new provider, as well as most of the process to this point. So, if things don't work out as planned, my fellow employees are not going to like me very much. Of course, about $50K of my own money is in the plan, so I had a very strong financial incentive to make sure we got the best possible deal. I am just glad to see the train pull out of the station after such a long incubation period (I am also good at mixing metaphors, in case you haven't noticed).
The program only covers home buyers who live in their homes, thus shutting out speculators. Also, it is only applied to those borrowers whose loans are in good standing and who are able to continue to meet their mortgage obligations at their current levels. It could have been much worse. Government could have used tax-payer dollars for the bail-out, or they could have chosen to ignore the free markets completely and legislated the bail-out into existence. As it is, the bail-out is a voluntary program by lenders.
Seemingly, this is a free market solution. Lenders are freely choosing to amend their contracts with their borrowers. Nevertheless, I am still opposed to the bail-out. Why so? Lenders and borrowers completely misjudged the risk of sub-prime loans. If priced correctly, sub-prime loans would have been much more expensive, and hence fewer borrowers would have been able to take them. The excess lending caused real estate prices to appreciate to untenable levels. Now that the bubble has burst, mortgage defaults and foreclosures are driving down home prices to their true market value. By "subsidizing" sub-prime loans, the bail-out will provide artificial price support to home prices, and will not allow them to reach their realistic free-market levels. In this way, the bail-out is creating conditions equivalent to price fixing. Since the interest rate freeze is only temporary, the true effect will be a lengthening of the sub-prime crisis and a drag on home prices and on the economy for years to come.
Yes, the unwinding of the home price bubble is painful, but bail-out efforts will only lengthen and defer the pain, not avoid it. This reminds me of the story of the dog owner who needed to surgically remove his dog's tail for medical reasons. Because he felt sorry for the mutt, he decided rather than to cut the tail off with one fell swoop, to only cut a small piece of the dog's tail every day... Doesn't make a lot of sense? Neither does a sub-prime bail-out.
Friday, December 07, 2007
Something very interesting happened to me in my travels. For the past two weeks or so, I have spent about zero time thinking about our portfolio. I have read exactly zero personal finance blogs. I have checked our bank account exactly zero times. I discovered two things. The first is that our portfolio continues to do its job whether I watch it daily or not. That's not a big surprise given that our portfolio is index based and we do very little trading. Even though I did not check the value of our holdings for over two weeks, the world keeps turning. The second thing I discovered was that this break from my semi-obsessive interest in our financial well-being was a very enjoyable interlude. Who knew? You can completely forget about money, stocks, bills, credit cards and still have a blast. Wow.
As an interesting aside, while we were away, our landlord did some maintenance work on our house. He replaced the water heater, fixed a few minor things that were broken and was even good enough to bring-in two packages that arrived while we were away. The cost of all these nice changes: zero dollars. In fact, I think they could turn this into a MasterCard commercial: international airfare: $1096, two weeks of eating out in a foreign country: $500, coming home to a house that has been fixed up while you were away: priceless. Chalk one up for renting.