Crazy, Crazy Week!

Last week was one of the craziest ones I've had in a long time.

Start with the good:

New Car - I finally got myself a new car: a Hyundai Sonata SE.

My New Sonata

So far I love it. My favorite feature: Bluetooth, which allows me to wirelessly stream music from my iPhone to my car stereo. In fact, I can stream Internet radio from my iPhone to the car. One day last week I was actually listening to a live news program from Israel while driving at 65MPH down 101 South. Sweet.

I paid cash for the car since I don't believe in financing consumer purchases. My philosophy: unless you are talking about a house, if you can't afford to pay for it with cash, you can't afford to own it.

Old Car Donated to NPR - after 11 years of faithful service, I donated my old friend, the Geo Prizm 1997, to our local NPR affiliate. According to Kelly Blue Book it was worth somewhere in the neighborhood of $800, but since I listen to NPR all the time and am not currently a member, I thought this would be the right thing to do. Besides, I get to take an income tax deduction at the actual price NPR gets for the car AND I didn't have to deal with the headache of selling it. The donation process took a single call and a 3 minute meeting with the tow truck driver who gave me the paperwork and took the car.

A bit nostalgic seeing my old car getting towed away, but hey, I GOT A NEW CAR.

John Mayer Show - Alpaca and I went to see John Mayer perform at Shoreline last Friday. Mayer is one of my favorite artists and he gave a great show. My only concern - which is not new - is that the food at Shoreline Amphitheater is slightly worse than the most horrible food you can imagine. I paid $6 for garlic fries that stayed with me until the next morning (my nickname for them: "disgusto-fries"), and another $6 for a tiny cheese pizza that tasted like someone had pre-digested it for me.

Shoreline @ Night

If you are going to go to any entertainment event in this country, you are going to get overcharged for food and drink. That is pretty much a given. However, my plea to entertainment venue managers everywhere is a simple one: if you are going to charge us an arm and a leg for snacks, could you at least make them half way decent? Is it really so difficult to make a semi-edible pizza?


Three Days Without the Kids - My in-laws took the kids for three whole days and nights last week. This means that Alpaca and I had three whole evenings to ourselves. We got to go out three nights in a row and get together with friends. If you don't have kids, you have no idea what a big deal that was.

Much fun was had by all.

So where's the bad stuff?

Trouble at Work - Well there was really only one bad thing, but it was a big one. My company laid-off 15 people. Now only 20 remain (down from about 50 only a few months ago). The company's survival is very much up for debate. It is entirely possible that the company will be shut down by the end of the week. Yes, that's pretty depressing. Going to the office these days is a really dismal undertaking.

The situation is currently beyond my control. In fact, it is beyond the control of anyone on our company's management. Some of our investors are trying to work out a deal under which they will continue to run the company. If that works out, I have been assured by reliable sources that I have a key position with the firm. If not, well, I guess my job search will need to move into higher gear...

On the job hunt front, I have a number of leads, none of which appear very appetizing at present, however, I am encouraged by the fact that there seem to be opportunities out there. The question, which is probably a big enough topic for another post, is whether I should hold out for the right opportunity or take the first semi-decent offer that comes my way. More on that dilemma in the future.

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Is It OK to Over Pay?

Jerusalem Bazaar Store

We are on family vacation to Israel where my brother got married last week. Yesterday we took the kids to visit the old city of Jerusalem (one of the most beautiful places on earth, in my opinion). During a walk through the amazingly colorful bazaar, we told the kids they could each pick a small present as a keepsake from our trip. Our oldest picked a wooden necklace, and I asked the store keeper for the price, which he told me was 20 NIS (about $5). I gave him the money and thanked him.

I think that my behavior came as a shock to the store keeper. If you've ever seen the movie Life of Brian, where in one scene a shopkeeper basically forces his customer to negotiate the price ("you've got to haggle"), our shopkeeper had a similar look on his face.

I probably overpaid for the necklace by 40% to 50%. Usually at these places you have to go through a whole process where you loudly complain about the price, start to walk away, give your best and final offer, and so forth. The fact that I just took money out of my wallet and paid the man his asking price is almost scandalous and  I have no doubt my mom would have given me an earful if I had told her the story. In fact, I bet the store keeper was disappointed he did not ask for twice his original price. But here's my thing - I came out with my kids to enjoy a day in old Jerusalem. Should I really waste the precious few hours we have there by haggling with a store keeper for a savings of $2 or so? I don't think so. This way the store keeper is happy. I am out 2 bucks, and I got an extra 15 minutes to enjoy this ancient and gorgeous city.

What do you think? Am I a sucker? Is it OK to knowingly be a sucker in these cases?

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Where Our Money Goes

Quicken Premier 2010 has many faults, but it does make it exceedingly easy to figure out how you spend your money, and that's what I did this evening. I ran a quick report that shows our expenses by category over the past 12 months.

Here is the report for your perusing pleasure:

One of things that immediately strikes me when I look at this list of categories is the fact that slightly over 50% of our spending goes towards rent and childcare. Together our spending on fuel, groceries and utilities accounts for another 11% of spending. That's over 60% of our spending that we have very little control over. On the positive side, my twins are starting kindergarten in the fall, so childcare expenses are about to take a major reduction.

Our third largest category is our vacation spending. My family still lives in Israel and we go to visit them once a year. Taking a family of 5 across the ocean is not a cheap trick. In addition we also go on a real family vacation, usually somewhere in the States, but last December we went to Costa Rica for 8 days. It was a blast. We spend a lot of money on vacations, but I am very happy to spend that money. We love traveling and those memories will be there for the rest of our lives. This is exactly what we are saving our money for...

Recreation is less fun than it actually sounds - at least for the adults. Most of the amount involves all sorts of after school activities for the kids: swim lessons, soccer league and so forth, but some of it is our weekend activities - museums, mini golf, bowling, and the occasional book or visit to Chucky Cheese.

Under dining I have both Alpaca and my work-day lunches, and any family restaurant outings we have. This category used to bother me, because it seemed like an obvious place to cut expenses, but the actual numbers aren't that high and we can afford this level of spending. I also enjoy leaving the office mid-day with my work buddies to go to a restaurant. Breaks up the routine.

Under the "other" category, we have several categories that are too small to stand on their own, including insurance (which accounts for about 1%), clothing (which accounts for about 1.5%) and cash spending (which accounts for about 1.1%). Cash expenses are the only uncategorized portion of our spending, and it's tough to know where that money goes. It is such a small amount of overall expenditure, that I don't concern myself with those amounts.

What do you think?

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How I Doubled the Value of My Junk Car

It's been a few months since the last time my junker car fell apart on me, so I guess it was time for it to happen again. Last Friday when I got to the office in the morning and got out of my car I was greeted by a billowing cloud of white smoke. The car was smoking like the Marlboro Man.

That's got to be the end of that ol' junker, right? Not so quickly. After the smoke cleared and the car cooled down for a while, I drove it about half a mile to the local car shop, where the problem was diagnosed. Apparently break fluid was leaking from the rear axle, and started to burn when friction from breaking created heat.

The total cost of the adventure? About $400 in repair costs. The way I look at it, the repair cost me about as much as the car is worth (maybe I'm exaggerating a tiny bit. Maybe a lot). So what do you think? Did I double the value of my car? :-)

13 years and still going (not so) strong. But with no car payments and pretty impressive gas mileage (31 MPG), I am going to keep it for a little while longer.

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Retail Silliness

After our triumphant return from our Costa Rica vacation, it's time to edit all those pictures and HD video I took using my tiny new Flip MinoHD Camcorder. Unfortunately, our new computer did not come with editing software, and I am looking for something a bit more sophisticated than the free software you can find everywhere on the web. I have been using Adobe Photoshop (for pictures) and Adobe Premiere for video for years, so I decided to try the new versions of the software before going for a purchase.

I downloaded the trial versions of both software pieces from Adobe, played around with them for a couple of days last weekend, made sure that the video editing and DVD burning worked the way I needed them too, and decided that all was well. It was time to make a purchase.

Since I already had the trial versions of both software pieces on my computer, what could be simpler than unlocking them, i.e. turning the software from the time limited trial version to the full thing using a software key. A quick hop onto the Adobe website gave me the answer I was looking for. A bundle of Photoshop and Premier would cost me $119 after a $30 mail-in rebate. Sounds fair enough, right? Just to be sure, I went online to check the price for the same bundle on Amazon. Guess what?An Adobe Photoshop & Premiere Elements 8 bundle on Amazon cost me only $89 after the same mail-in rebate...

Strange, no? Adobe has already got me to download their software. The cost to them of letting me unlock the software is essentially zero. Every cent I pay would go directly to them, since I was proposing to buy online and directly from Adobe. When I buy the same bundle on Amazon, Adobe is getting a lower price for their software - since Amazon also has to profit from the transaction. On top of this, shipping is included in the Amazon price, where no shipping charges exist for Adobe. Insane, no? Rather than take a higher profit margin, Adobe is forcing me to buy from Amazon. Forget this nonsense about cutting out the middle-man. In this case the middle-man (i.e. Amazon), appears to be the good guy...

To make things even more appetizing from my perspective, I made my purchase on Amazon through my Squidoo page - meaning that I will get an additional couple of percentage points in cash back on my purchases. Actually, this Squidoo business is probably worth a separate post.

What could explain Adobe's seemingly illogical pricing strategy? I am not ruling out simple stupidity, but I am guessing that channel conflict is the issue. The manufacturer - i.e. Adobe - does not want to undercut its distribution channel - i.e. Amazon, for fear of losing it's "shelf space" with a large retailer. Just goes to show you, in retail you can't take common sense pricing for granted. Don't assume that just because you are buying from the manufacturer you are paying the best possible price.

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My Gadget Addiction

I am addicted to gadgets. It's time to admit it. They fill my life and I love it. You have about as much chance of spotting me without my iPhone as you have of spotting a sensible individual on Capitol Hill. Let's take our recent vacation to Costa Rica as a case in point:

First, there is the all important GPS. Never leave home without one. Yes, I am directionally challenged, and being directionally challenged in a foreign country without a GPS is an excellent way to get into trouble. Even in the US I never travel to a foreign city without making sure that I am satellite navigation ready. The day is fast approaching when I will purchase this functionality for my iPhone, and then there will be one fewer little box in my bag of tricks.

Second, but by no means less important is the iPhone. This little machine has served me phenomenally well on this trip, as it does everywhere else. I bought a $24.95 copy of a Spanish-English dictionary for iPhone as well as a 99 cent copy of Spanish for dummies. These were constantly open, and while I didn't truly need to use Spanish - since practically everyone we met in Costa Rica speaks some English - what's the point of traveling to a new country if you are not going to make an effort to learn and experience the local culture? Language is a key part of that.

But the iPhone is so much more than a glorified dictionary. It was my video game machine at night after the kids and Alpaca collapsed from exhaustion. It was also my connection to news and work e-mail (hey, I can't just not check email for 2 weeks), wherever WiFi was available. It was available everywhere. Also, did I mention that this marvelous device can make phone calls?

Next is my latest acquisition: a Flip MinoHD Camcorder. This world wonder takes 2 hours of high definition video and is literally small enough to fit in my jeans pocket. I was constantly using that thing and the video quality, sound and color are all excellent. I do have three complaints though: because this machine is so tiny, every movement of your hand shows up as a jerk in the video. You really have to be mindful of holding the camera steady. Battery life is far from spectacular, but I did charge up the camera every day and I was never close to running out of juice. Finally, the zoom on the camera is pretty pathetic. Overall though, as excellent purchase.

Next comes the iPod. But wait. Why would I carry both an iPhone and an iPod, you ask. Here we go. That's where the trouble with gadgets starts. They are just not made to play nice with each other. I have an FM transmitter for my iPod that I use to connect it to the car stereo. This same connector connects to the iPhone but then a screen comes up telling me that the accessory is not compatible with the phone... early on I tried to find some FM adapters for the iPhone but was never able to find one that actually worked. All I got was very noisy links full of static. So, an iPod and an iPhone it is.

I cannot neglect to mention our Digital SLR from Cannon. As gadgets go, this one is pretty ancient. Had it for probably five years or more. It's a 6 mega pixel jalopy for crying out loud. This one is definitely approaching the end of it's life and a new Digital SLR is in our future.

Last but not least is my trusty ol' ThinkPad laptop. It goes wherever I go. On this trip I was really not planning on doing any real work, but I carried it just in case. The ThinkPad was relegated to the undignified role of charging up my various gadgets from iPhone to Flip, and to acting as my data back-up and extra disk space. Our videos and pictures all got moved to the computer every day.

As you can probably tell, I love gadgets. Yes, I spend some money on gadgets, but to be honest, technology is just not that expensive these days. What can I tell you, gadgets make me happy.

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Thoughts & Impressions on Vacationing in Costa Rica

Wow. That was an awesome vacation. Costa Rica is wonderful. I highly recommend it.

Here are a few things I thought about, learned and saw during this journey:

1. Majesty - Erupting volcanoes are astonishingly beautiful and awe inspiring.

2. Kids - Three kids cooped up in a 4x4 traveling on gravel roads can be entertained for hours by telling them: "Level 1: let's see who's the first to spot a yellow flower." Repeat as necessary, increasing the level number and suggesting they look for ever less likely items. If all else fails, give the kids your iPhone and let them play monopoly on it...

3. GPS - a GPS will sometimes take you through a very narrow, steep and muddy road in which your 4x4 starts to slide, even though a perfectly good road exists that will take you to your destination faster and with considerably less stress. Trust me on this. Nevertheless, GPS devices are a god send. You get to a new country and you're not stressed about getting lost.

4. Ants - 4 year old kids can be hysterically frightened of ants once one of them gets an ant bite. On a related note, the sound made by a 4 year old screaming hysterically at the sight of an ant somewhere on the ground can clear out your sinuses and cure minor infections.

5. Rain - hiking in the rain is not as bad as you might think. Especially if it warm.

6. Blessings - I have traveled the world extensively and while abject poverty seems much lower in Costa Rica than in other places I have visited (e.g. Bolivia & Brazil), many people in the country live in crumbling shacks and in what seem to me like unfortunate conditions. I will try to remember that next time I bitch about a rough day at the office. Who am I kidding? Humans are incapable of living in a constant state of gratefulness. It might even be unhealthy.

7. Breaks - I love my work, but I really needed this break. I didn't even know it. There is much to be said for completely switching the gears in your head every once in a while and just relaxing. I think it might work even better without kids in the background, but what are you gonna do?

8. Crappy Roads - Next time I run into a pot hole on 101 (which is pretty much next time I drive it), I'll try to remember some of the potholes and some of the roads we drove in Costa Rica.

9. Disposition - I have nothing but good things to say about the people of Costa Rica. Everyone we met was positive, helpful and seemed... happy. People did their best to understand my horribly mangled Spanish. To be honest, most people actually speak some level of English, so some of my teeth are still intact.

10. Money - traveling with a family of 5 is definitely not a cheap trick. During the 10 days of our trip we spent more money than I spent traveling the world on my own with a backpack for 6 months. But, what is money good for unless you spend it to create memories?At the final tally, the memories are all that matter...

A Happy 2010 all!

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Spending My Bonus: It's Tech Time!

I have made my big bonus decision. A few weeks ago I wrote about how I got an unexpected bonus and was trying to make up my mind about what to do with the windfall. The decision has been made: an upgrade to our computer and home theater system.

As a first step, we bought a fully loaded new PC: quad-core Intel processor, 9 GB of memory, a 1.5 TB disk, 2.7 inch monitor and a bunch of software. $2200 from Costco, all in. Really, really expensive, yes, but given that our previous computer lasted for 8 years, and that we hope to get the same mileage from this machine, that's not a completely reckless decision. This computer will also play an important part in the next phase of the plan: connecting our TV to the Internet.

For months I have been plotting a wireless assault combining TV, media server, computer & Netflix. Netflix now has a massive collection of movies and shows that can be instantly streamed over the Internet. The only problem: connecting the TV to the Internet has been a challenge. It turns out that this can be done in several different ways: certain TiVo machines, Blue Ray players and XBox consoles can be wireless connected to the Internet, and be used to stream content to the TV. That's the sole missing component in my scheme to upgrade our home entertainment system. I'll probably pick the TiVo or XBox and my master plan shall be complete! Muahhh-ha-ha-ha-ha..... Wow, that's almost as good as taking over the world...

One other nice thing about our new fancy computer is that it has a built-in TV tuner and DVR which I intend to connect to Comcast cable. That way our 1.5TB hard disk will become a massive new DVR.

A final note on the new computer: this is a Windows 7 machine and so far I like this new operating system. Some problems with software that's not yet compatible with the new operating system, but generally speaking, Microsoft did a good job making sure that accessories and most software install and operate smoothly. Very nice. Ironically, the only problem we experienced with migrating to the new machine has been with Apple... migrating my iTunes, iPod and iPhone to the new computer has involved days and days of work. Because the old computer crashed and we had no access to the old copy of iTunes, I had to recover my music from our home back-up. This process resulted in the loss of all my playlists, song ratings and customizations. As I said, it took me DAYS of work to recover, and all this while my iPhone retained a PERFECT record of all my data that could have been easily recovered and migrated to the new computer if Apple cared at all about it's customers. I love Apple's products, but abhor the company and it's philosophy. What a pointless nightmare.

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Outsourcing: What's Good for Your Business May be Good for You

Outsourcing. That's how businesses save money by focusing on what they do best, while letting others do work that is not core to their main line of business. Well, what is good for businesses is just as good for individuals. I have had a draft post about this topic queued up for a long time, but last weekend I saw this post from Lazy Man which gave me the push I needed to complete the post. The argument is a simple one: do what you do best and let others handle the rest for a fee. I completely agree.

If anything, I don't outsource enough. I use a tax advisor to do our taxes, I take my car to a shop to get the oil changed and to the cleaners to get washed, and I have no intention of ever trying to mess around with our house's electricity or plumbing. However, I deal with computer problems on my own, and we clean and garden (not very successfully) by ourselves.

Whenever we do things ourselves, the motive is financial, but you have to ask yourself whether that's smart. Unlike Lazy Man, I don't really have a job that pays me by the hour and it's not like I would work an hour more if somebody took over my chores. However, the rationale remains intact even if we use the extra time we save to simply relax. I think it makes sense to pay someone so you can have a bit more quality time to use as you wish (if you can afford to do so).

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Not All Money is the Same

If you have been following me on Twitter you’d know that I attended a Cold Play concert earlier this week – Monday night to be exact. There’s something really cool about going out on a weekday, especially because I had to take-off from work much earlier than I would normally have left and we had the in-laws baby sit the kids for us. However the topic of this post is not the fun that my wife and I had – although the show was a blast – the topic of this post is the fact that the value of money changes with context.

You know for a fact that everything you can buy at a concert is going to be overpriced to a ridiculous degree, however I did not bat an eye when I paid $13 for a diet coke and some garlic fries. A glass of beer? $9. Really, really crappy pizza? $8 please. No problem at all sir, here’s the cash. However, I sometimes take minutes to figure out whether I should spend 99 cents on a cool iPhone application or to buy a new song. Why is that? It’s all about the context in which I am asked to spend the money. This is not a rational thing, after all, money is money regardless of how you spend it. What changes is my mindset. When I go out, or go on vacation my mission is to have a good time – I come prepared to spend the money. I throw frugality to the wind and laugh in the face of waste. Stupid? Yeah, maybe, but it’s a fact.

But there is some good news – on the way out of the concert we each got a free Cold Play CD. Very cool. My wife gave hers to the in-laws as a thank you gift and then quickly adopted mine. Justice.

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Mail Fraud - a Colleague Foils an Attempt

All those scams that you read about online apparently actually happen to some people. Yeah, we all get those Nigerian scam e-mails, but I don't often come across folks that have first hand experience of attempted mail fraud. Well, last week my office manager (let's call her Helen) told me about the following dilemma:

She has been selling some baseball cards on eBay in recent months (I don't know if this is a temporary shtick or a real side business, apparently everyone has a side business these days, except for me), and one of her buyers sent her a cashier's check as payment for his purchases. The check was for a total of $1,200 while the purchase price was under $200. The purchaser asked Helen to cash the check, keep the full purchase price, plus a fee for inconvenience and to send the rest to a person he designated. This was accompanied by an elaborate apology and by a seemingly rational explanation about why this was necessary.

Most of you probably recognize this as a well known scam. The short version of it is this: the seller cashes the check, which appears to clear, and sends the extra money to the designated party. After a few days the seller's bank discovers that the check is fraudulent and claims the money back from the seller. The seller has a crappy day and learns to be more suspicious of strangers.

Helen, being a smart individual, figured that something was wrong here, but was trying to understand what that was exactly. She was also trying to decide what to do next. Here is what Craig's List suggests you do to avoid getting scammed and to report attempted fraud. Needless to say, that the cashier's check was never cashed and a formal complaint was filed with eBay (where it was promptly sucked into a black hole, probably never to be heard from again).

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Travel Protection Insurance - What a Scam...

It's summer and many of us are planning trips and vacations. As we are making our plans, and trying to find the best possible deals on those vacations, some of us may be tempted to purchase travel protection insurance. Such insurance is supposed to refund the cost of travel if you are unable to go on your vacation for a reason which is covered by the plan. Before you are tempted to purchase such insurance, check out this article in the NY Times describing one couple's experience in trying to claim the supposed benefit offered by their travel protection plan. Here is a brief excerpt:

"All told, my parents paid Vantage $9,688 for the trip and an additional $978 for the travel protection. One month before the planned departure, my father suffered a heart attack. My mother canceled the trip and requested a refund.

However, Vantage Travel responded by sending my parents vouchers for credit for future travel with Vantage. Apparently, in one of the many mailings there was fine print indicating that the “refund” would be in the form of credit."

I think that there are two issues here. First, the specific case being discussed in the article is borderline fraud - in fact, as described in the article the company was making an effort to mislead its customers without actually going on the record with anything that customers could use to sue them. The second issue is the value of travel protection. Even if it worked exactly as expected, why buy insurance for something which is not critical? In addition, the couple in the article paid an extra 10% of the total cost of the trip to cover the travel protection... that's simply preposterous in my opinion.

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Why I Want to Be Rich

I read a post on the Simple Dollar about the connection between money and power. Trent was making the point that many people want to be wealthy to gain respect and influence. That's obviously true, but my reasons are different. To me wealth equals freedom. It's not so much that I want to buy stuff, or own things or spend my money like a drunken sailor. There are certainly things that I would buy or do if I had the money to do so (buying a trip to the international space station is probably the most expensive of these), but my real drive to wealth comes from insecurity.

I am worried. I am worried that I will one day lose my job and won't be able to get another. I am worried that I will not be able to provide for my family. I am worried that my kids will have to support me in old age. I am worried that one of my family members will become chronically ill and that my medical insurance will not be sufficient to treat them. I am simply worried. Wealth would create security and remove these concerns.

It's not that I walk around constantly obsessing about these things. I consider myself a well adjusted human being. I am simply very cognizant of the fact that bad things happen to good people, and if bad things happen to me or to my family, I want to have the resources to deal with them. Wealth for me represents freedom from worry. Peace of mind.

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Financial Plan & Wishes: Birthday Edition

Yesterday was my 38th birthday, and that gives me a good opportunity to take stock of our financial position and to talk a bit about my birthday financial wish list. So where are we financially? Well, our financial position is sound. Nothing spectacular, but we are certainly on the right track:

Income: Our primary source of income is my job as an executive at a venture backed start-up. Until last week my wife had a part time marketing job with a different tech-company, but that is now over, and she is looking for the next opportunity. My job is secure for the most part, however my company is not itself a very stable organization. It will need to raise more money by the end of the year in order to survive. I am very optimistic that this will happen, but there are no guarantees.

Spending: Every month we make more than we spend, although with my wife's part time contract coming to an end last week, that may be tough to stick to for the next few month, until she finds a new position. For the time being we are not going to cut down on our expenses, although if things really get bad, we can always pull our three kids out of day care. This will reduce our expenses by 30% at a stroke... we live a very modest lifestyle, living in a rented townhouse and driving modest (read: old) cars. Our spending level is sustainable.

Savings: our savings are in surprisingly good shape. The stock market meltdown hurt like a bitch, but as of last week our net worth was down only 13% or so from its peak. Put that down to a well diversified portfolio which did not exceed our risk tolerance. This allowed me to stand my ground in the face of market losses and to increase our stock positions again starting last summer. Many of these purchases are still under water, but some are already showing impressive gains. Over the long run, I think that the market positions we have taken over the last 12 months will be some of the best investments we will ever make.

Debt: we have none. Nor do we ever plan to have any, unless we decide to buy a house and need a mortgage. I believe in self-financing anything you want to buy. "If you can't pay for it, don't buy it" is my motto.

I think we are in good shape financially.

My birthday personal finance wishes:

Retirement: I hope to retire in about 20 years - that will make me 58 years young. I can see a couple of scenarios for achieving this goal, although I will be honest and say that these are not fully baked. The most likely option is that my wife and I both work for the next couple of decades, we diligently save as much money as we can, we invest our savings and at the end of that period have enough to at least semi retire - i.e. hopefully I will be able to work a couple of days a week in consulting or advisory roles. The other possibility is the "Lottery" option. My wife and I both work in the high-tech industry. All it would take is for one of the companies we work for to go public or to be acquired for a substantial amount, and our stock options would be worth a sizable amount of money. It's possible, but we're not counting on it.

Career: my career is by far our biggest financial asset right now. Since my wife has been working part time (6 months or so) my salary has accounted for about 75% of our gross income. Hopefully, this will come back into balance as my wife finds a full time job. Regardless, I am an ambitious guy - for me it's not just about the salary - it's about getting to the top and about being the best at what I do. One day, I would like to be CEO of a tech firm - call it 5 to 10 years from today.

Stability: as my 38th birthday comes to a close, one of my biggest financial wishes is for... boredom. I hope our financial lives move forward without too much drama. I hope I never have to report any major upheavals in our economic condition on this blog. Let there just be a slow, steady and diligent progression towards financial independence.

Happy birthday to me...

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Another Day, Another $280...

The old gal broke down on me again. Just two weeks after my check engine light came on, and I repaired the car to the tune of $400, it came back on last Friday. Last time I felt the car go THUNK. This time, the light came on but the car continued to drive fine. Since I was not in the mood for a visit to the shop just before a long holiday weekend, I decided to risk it and drove straight home rather than going to the mechanic.

This Tuesday I went back to the shop and within 5 minutes we had a diagnosis: a faulty oxygen sensor. The car's computer spat out the answer - I am actually amazed the old gal has a computer. A car that old should probably have an abacus. Be that as it may, the problem was completely different from the cylinder misfire issue I had last time. The mechanic told me that repairs would cost about $250 but that he could clear out the alarm and I could try driving the car for a while longer and maybe I could get a few more months out of the existing sensor.

I decided to bite the bullet and go with the repair, primarily because a faulty oxygen sensor could cause the car to create more pollution, and I don't think that I should inflict any more CO2 and smog forming emissions on the planet than is absolutely necessary. In the end this fun little episode cost me $280 or so.

The car is now fixed. However, after 12 years of faithful and trouble free service we've had a couple of breakdowns in just over two weeks. If this is just a coincidence, I'll keep this car on the road for another 2 or 3 years. However, if this turns into a regular occurrence, there may be no choice but to get a new steed. I am hoping for the former.

One more thing: I told one of my colleagues about this oxygen sensor incident and he told me that the exact same thing happened to his relatively new car last year. He took his car to the dealer and was charged $700 for the same repair... You just gotta love those dealers.

Check out these posts from other bloggers who are trying to live a frugal life:

The Dough Roller recommends some gadgets that can help reduce your energy bill. I am all in favor of both cutting energy bills and cutting emissions.

Wealth Builder offers some common sense advice about saving. The best piece - save BEFORE you buy something. Financing is expensive.

My Two Dollars reviews the Consumer Reports best cars. If I do end up buying a new car, it will be a hybrid. However, I hope to hold out for a few more years and buy a plug-in hybrid. 100 MPG, baby!

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How to Have a Fun, Cheap Weekend

The family and I got a good deal this long holiday weekend. A friend from my office let us use his mountain cabin for three days, absolutely free. The cabin, located in Gold Country - about a three hour drive east from San Francisco - is bigger and nicer than our house, and is located in the middle of a pine forest. The good life.

We spent the weekend hiking, playing in the snow (there is still some of that on the mountain tops), taking some scenic drives and visiting historic gold rush towns. We ate in, and only spent small amounts of money on park entrance fees and on the odd ice-cream cone. The weather cooperated with sunny skies and temperatures in the mid seventies. It's good to live in California.

All in, the whole three day trip probably cost us no more than about $150 for a family of five. That tally does not include the cost of gas for the trip and the wine and chocolate gifts we left for our gracious hosts.

It's good to have friends with vacation cabins in fun places. Anyone got a cabin in Lake Tahoe or San Diego they want to lend me for a weekend? I promise to write a nice post about you in return...

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Things to Do at the End of a Recession

I am not saying we are at the end of this recession quite yet, but I think we are getting close - maybe three months away? I can feel it when I talk to fellow executives and business partners. I also hear it in the news and read it in the business papers. And did you notice that the sun was shining and that snow is not falling anymore? Oh wait, I think that has something to do with spring... Anyway, the end of a recession is a particularly tricky time when economic signals are mixed, and while you may be able to find some attractive opportunities, you can also land yourself in some serious trouble by making the wrong move. Here is my list of things to do and to avoid at the end of a recession:

Keep Your Job - while the economy may have bottomed, most economists agree that the job market will continue to get worse for many months to come. It's only natural. Business leaders everywhere still feel like they are treading on thin ice and will delay increasing their spending on labor for as long as possible. There is also the chance that firms that have been able to survive thus far by eating into their reserves will finally be forced into major cost cuts or even fold. So, even if the recession is indeed about to end, the "all clear" has not yet sounded for most employees. My advice on how to keep your job is as valid today as it was a few months ago.

On the flip side, if you own your own business or have the ability to influence hiring decisions in your firm, now may be a great time to do some hiring. Last year my firm struggled to recruit even B players. This year A players are throwing themselves at us. We are taking the opportunity to weed-out under-performers and to substantially strengthen our team. Be on the look-out for signs that this is happening in your own organization.

Make Big Purchases - if you think you will want to make a big purchase in the next few years, say a house or a car, now may be the perfect time to make your move. Demand is still depressed, prices are low and interest rates at rock bottom levels (if you have excellent credit) - talk about a winning combination. Once the economy picks up, and given the accommodating fiscal policy and incredible deficits, I wouldn't be surprised to see inflation rear its ugly head or a more dramatic devaluation of the dollar. 

Since the stock market has rebounded 30% from its lows and our portfolio with it, and since the economic environment as a whole seems somewhat more stable, I have even begun entertaining the idea of buying our own house. It's not a good investment (I can't believe I wrote this post in early 2007), but it is your very own place to live. Problem is - prices in our area are still too high for us to seriously consider. 

Start a Business - they say that the best time to start a new business is the last day of a recession. You can get everything you need (employees, office space, equipment etc.) for bargain prices, while your potential customers are getting ready to start buying again, i.e. they will be looking for new vendors. If you are thinking about starting a business you may never find a better time to do so.

Rebalance Your Portfolio - stare fear straight in the eye and buy some stocks! OK, maybe that was overstating the case, but after the drubbing we have all taken over the past couple of years, it's probably safe to assume that your asset allocation has shifted dramatically in the direction of more conservative investment. Maybe it's because you fled the market when things got bad or, if you are like me, you kept your positions but your stocks got decimated while your bonds did their thing and mostly held up. Anyway, if there was ever a time that shouts "rebalance your portfolio!" this is it. Of course, there's the next point...

Be Honest About Investing - you have to look yourself in the mirror and tell yourself the truth. Are you really cut-out for risky assets? Were you able to sleep at night when the stock markets melted? Did you require a coronary bypass when the markets hit their bottoms in March? Did you raise a white flag and flee stocks when it seemed like the bottom was simply not there? If so, maybe you shouldn't rebalance. Maybe being conservative is the right choice for you. In spite of what others would have you believe, this is a very valid and legitimate choice.

Here are a couple of other personal finance posts that discuss the economy:

Really funny comics about the economy from Spilling Buckets.

Weakonomics interprets the results of the bank stress tests and their connection to... family guy.

Also check out the Carnival of Personal Finance at Earn What You Spend for as many PF posts as you can handle.

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Car Trouble, Still Worth it

If you have been following my Twitter posts - and why on earth would you want to do that? - you may know that last Friday, on my rushed way to the Supermarket to get my lunch between two meetings, my good ol' Geo Prizm 1997 decided to die on me. Well, die is a little bit of an over statement, as you will see, but as I was standing at a light I felt a sudden "THUNK" (yes, it really was a "THUNK") and the check engine light came on.

Of course, I immediately thought the gal was finally dead, and pulled over to the side. I called one of my colleagues who knows about these things and he recommended I drive the car a few hundred yards to his mechanic. While I waited for him to come pick me up and show me the way, I called my wife and immediately threatened that if this was a big bill fix-up I was going to donate the thing to NPR (I have been meaning to pledge forever and one of these days I am sure to get a call from Ira Glass). Being the voice of reason that she is, she basically told me to shut up and see what the mechanic had to say.

Ten minutes later I was in the shop, and 20 minutes after that I had the diagnosis. Basically, I needed a big tune-up. One of the cylinders was misfiring. That and a few other fixes for a grand total of $400 (it's California) and by the end of the day the junker was running as good as old again. I have no complaints. I drive exactly 12 miles a day. Seems like a waste to buy a new car for that. That doesn't mean I am not going to complain about my jalopy every once in a while. As the owner of a crappy old car, I feel that this is my god given right!

Moolanomy recently wrote a post about preparing for and dealing with a car breakdown. For me, it's all about having a cell phone and the number for AAA. And if you car really sucks, the number for AA.

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Why Reducing My Lunch Money Really Wouldn't Matter

For some people, saving small amounts of money on a daily basis can mean the difference between making ends meet and getting into financial trouble. My wife and I are lucky enough not to fall into that category. We lead a pretty modest life style, but I am not the type take a bagged lunch to work with me to try to save some cash. For one thing, lunch is my chance to get out of the office and actually see the sun - doesn't happen a lot these days. For another, spending social time with my friends and colleagues is both fun and productive for me.

But never mind all that - trying to cut out small amounts of money out of the budget simply doesn't make a lot of financial sense for us. Take for example the month of February: during the past month slightly over 90% of our spending was non-discretionary. About 50% of our non-discretionary spending went to childcare, 20% went to rent, and the rest was spent on utilities, medical expenses, groceries, fuel for the car - you get the picture. If we needed to drastically slash spending the only way for us to do so would be to rethink our childcare situation and to move to a less pricey neighborhood. Short of that, any changes we made would be cosmetic. Apparently, I am not the only one in this kind of situation. 

There are those who subscribe to the latte factor theory, believing that saving small amounts regularly eventually yields a big pile of cash. Maybe so. The theory is certainly tempting, and I too am fascinated by the prospect of riches with minimal effort - I have even created this nifty little latte factor calculator a while back to demonstrate the impact of such a saving strategy. However, I have now come to believe that small amounts have a way weaseling their way out of your wallet and never get to pile up and compound over time. Yes, it's probably possible to take some aggressive measures to eliminate such spending leakage, but for folks with our spending characteristics and income level, this hardly seems like the wise thing to do. I think we are better off holding off on buying a new car or buying a mcmansion if meaningful savings are our goal.

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Planning for Unexpected Money

Everyone comes into some unexpected money from time to time.  Think about the times when you've received a birthday card in the mail with money; when you've receive a tax refund or rebate; or an unexpected inheritance.  Maybe you purchased something with a rebate offer, and the check finally arrives in the mail (long after you forgot you even had a rebate coming!)  Any money you receive that is outside your regular income is considered “unexpected”.  What do you usually do with unexpected money?  Deposit it into your every day bank account?  Buy yourself something? 

If unplanned, the majority of unexpected income simply gets absorbed into everyday spending.  If it's deposited into the account you use to pay your bills and withdraw money for entertainment purposes, chances are you use a little here and there and couldn't even say within a week's time where the money was spent!

Instead of letting unexpected income trickle through your budget almost unnoticed, you could create a plan to help you deal with unexpected money.  I know, you're probably thinking if it's “unexpected” how can you plan for it, but the answer is actually pretty simple:

Decide how you will use all unexpected income before you receive it.   You don't have to know when the income will come in or how much it will be if you set up a plan using percentages.  For example:

• 10% in your pocket for extra spending money
• 50% in long term savings
• 35% toward your highest interest debt

With categories and percentages decided upon before the money arrives, you'll know exactly how much of all unexpected income will go to savings, debt repayments, and spending money.  Your only other decision is to determine how much you have to receive before you follow these rules – some people will do the same with all unexpected income whether it's $5 or $500; while others choose to follow their plan only if the unexpected income is of a specified minimum amount.

The trick to making a “plan for unexpected income” work to your benefit is to create it – and then stick with it!  Consider it an extension of your budgeting (if you have a budget you’re committed to) and don't let the temptation of extra money lead you to an extra purchase or to a night on the town that you haven't financially planned for.

Trisha Wagner is a freelance writer for DepositAccounts.com, where you can compare rates from dozens of banks in one place. Trisha writes regularly on the topics of personal finance and saving money.

If you are interested in having your original article published as a guest post on Money and Such, please contact me at the e-mail address provided on the left column of this page.

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