Starting off the New Year

To kick off the New Year, I met with my Learnvest financial planner. I really like her and value her advice. This year I'm tackling the same problem as last year which is getting my cash surplus invested. It sounds ridiculous, but I haven't even gotten last year's increase invested and now I have a big chunk to invest again this year. I can't keep up. I get so nervous about dumping a lot into the market. But once I set up auto investment, I can truly set it and forget it. It's just that to get the cash invested in a timely manner I would have to be making large buys each month. Right now I'm only going in about 10K at a time, which is not doing much to make a dent in my stash.

I have also convinced my planner that I don't need to replace my full income in retirement or even 85% of it. I know the exact number that I spend each year, and what part of that is for housing (almost 40%!), so in today's dollars I need about 60K a year with a mortgage and 36K a year without one. Of course that # doesn't include inflation.  If I used the Mr. Money Mustache formula I would need to save 25x the amount I need each year, so either  $1.5 million or $900K.  I think to be safe I would only be comfortable with the higher #. The planner's target number is going to be more like $2 million, but that's better than the like $4 million she is currently targeting which is most likely never going to happen.

Happy saving!

Not much to report

Not the most exciting title for an update, but it's the truth! I could have sworn though that I posted in August. Anyway, the market is on fire, which is good and bad. I have a bunch of cash that I want to invest, but I don't want to invest now, for fear I will be investing at the high. I know October is usually a not very promising month for the market, so I'll be on the watch for any downturn, no matter how slight, to invest. I saw my Learnvest adviser (or talked to her) recently and we mostly talked about a strategy for investing the cash.  We'll see.  Overall, I"m about 40% in cash, which would be fine if I were 80, but since I am not, I need to put my money to work so it will grow.

The real estate market in my hood is also on fire. There's a place similar to mine on the market for $150K more than I bought mine for a little more than a year ago. So in theory if I could sell my place for that amount, I'd have to bring about 100K less to the closing to give to the bank to pay off the mortgage. Which is nice, but irrelevant because I have no plans to sell.

I've been pretty good on my expenses lately. I haven't bought a stitch of clothing, any electronics, any furnishings or any sporting goods this month, and there's only 10 days left. Would kind of like to keep it that way. My food budget is somewhat under control. Took lunch all but one day this week.

Yawn, sorry for the boring update! But I guess slow and steady wins the race.

Boring

I haven't posted in a bit because things have been moving along. Nothing spectacular, except the performance of the stock market. I held out investing my bonus in January, now I wish I had dumped it all into the market and ridden this high. I'm still waiting to see if there's any kind of dip and will invest then. 

I'm still spending too much money on food, but did cut down on lunch spending by going to the grocery store 1x a week and making lunch at work instead of buying it every day. I think that helped offset some food expenses.

I worked out I've been spending about $500 a month on healthcare expenses, in addition to the $200 I put aside in my flex spending. I don't really feel like there are ways to reduce this expense. I'd rather reduce in other areas if I need to.

To date this year I have barely spent anything on clothes. As a result, I feel a kind of pent up demand. I fully anticipate increasing spending in this area in the rest of the year. I had consciously held off on clothing purchases to try to offset my significant healthcare spending.

I'll do a mid-year budget update in early July, along with a networth update.

New Way of Looking at a Goal

So over the last week or so I've gotten really excited about a new strategy that I can use to reach my ultimate financial goal: to payoff the mortgage. When I first got my mortgage I thought I would pre-pay in order to shave years and interest off the mortgage. So I set up auto pre-pay of $500 a month, which essentially doubles my principal payment to about $1,000 a month. However, I also thought I would pre-pay a big lump sum each January post-bonus/end of year. The more I read and talked to my Learnvest adviser, the more I realized that pre-paying the mortgage is not actually the best strategy.  Instead, I should invest the money. I like this idea because it gives me liquidity in case of an emergency. That said, I hadn't found a way to track how much I would need to save over how long a time period to reach this goal. Then this week on Mint.com I was like "wow, what if I just create a mortgage-payoff goal" which I did. I input my mortgage balance as the amount of $ I want to save for the goal and then I linked all of my non-retirement savings accounts to the goal. I have a balance of about $200K in those accounts. I've got about $329K to payoff on the mortgage. Hence I need to save about $129 to pay this off. 

Then today I started thinking about the power of compounding, because this money is invested. Some in CDs, but some in my brokerage account. Sooooo this Mint goal isn't taking into account investment gains/interest. So with my planned monthly contributions and any investment gains/interest, I should be able to reach my goal a lot more quickly. I have a goal of 10 years right now, but when I play with savings calculators, I can possibly reach this goal in 5 years if I earn returns of 5%. Which is a little aggressive because some of this money is in CDs paying 2%.
Anyway, I just feel much more energized about my savings outside of retirement now, because I am saving for a purpose and each month I'll be able to see, thanks to Mint.com, exactly how much closer I am to reaching my goal.

Financial Advisor

I am finally checking off a big to do on my financial housekeeping list: I hired a financial planner. I am actually working with LearnVest, which seems like a great value and I love that it's aimed at women.  I am speaking to my adviser for the first time tomorrow and can't wait to get started! I really want help trying to figure out if I should tackle the mortgage or invest, although my mom helpfully pointed out that I can do both at the same time. Again, everything in moderation. It's a hard lesson to learn, as I find I want to do something whole hog or not at all.

More Ugh

My taxable account has reached an unpleasant low today. The balance hasn't been this low since October of 2010. So almost a year of growth wiped out in a week or so. This market really requires a stomach of iron.

One thing that hasn't crashed and seems to be moving along nicely is my Lending Club account. Making me think I should invest more in there and lower my stock positions even more. I'm already like 60/40 investments/cash. Maybe I'll start taking more of the investment money and put it into loans. I like the idea of investing in people.

O-M-G

Everything was moving along nicely. My balances kept increasing. My savings were paying off. We all know what happened to that story this week. Ugh. I've lost on paper about 20K. Which is better than the start of the week when it was more like 30K. Of course, I'll just be patient and wait it out and hope that my balances reach what they were in July again at some point. I'm just getting tired of waiting. My taxable account is filled with index funds that I bought in 2003. I'm starting to doubt the buy and hold strategy. It's been 8 years, and I don't feel like there's any consistent growth. There are some points when the market is high, but I don't have a lot of confidence that this money will consistently keep growing. I'm tiring of hearing the financial advisers dole out advice to buy and hold. I am a disciplined, patient investor. I would never sell when low. But I'm starting to think of putting parameters in place. Stop losses and gains. So that my shares automatically sell when they've risen a certain amount. 10%? 15% Of course that incurs transaction fees and then there is the challenge of trying to find places to put the money once I sell. We'll see.

I had such confidence that I would finish the year (pre-bonus) with a net worth of 400K. I got complacent, forgetting the market can nose dive at any minute and wipe out months if not longer of growth.

First Visit With a Financial Planner

Last month I took advantage of the library's free session with a financial planner. It was valuable, but did not go exactly as I had planned. I had prepared (of course) in advance an overview of my investments. I thought it was very organized. I arranged all my investments by category (small cap, large cap, etc.) and calculated the % of my portfolio in each. Well when the adviser saw my spreadsheet, his eyes glazed over and he told me it was too hard to understand. He thought I had too many accounts and too many investments. So we spent the whole time talking about how I could consolidate accounts. To me this seems like just an organizational thing, not really something that's going to affect my return. I had hoped we could talk about asset allocation. But we never really got around to that.

I have followed his advice and consolidated some accounts. I combined an old SEP IRA into a rollover IRA. I also rolled over my old 401K into my existing Rollover IRA prior to the meeting. Finally, I moved a small taxable account from one brokerage into the larger taxable account at my other brokerage. I closed a savings account too. As a result, I have 4 fewer accounts than before.

I am contemplating whether I want to pay for some time with this or another adviser.

The one piece of advice that he did give me was that he thought there would be some volatility soon, so I don't feel guilty about having a large cash position. I'll probably invest it on the next dip.

Where to Invest?

I think this question is on a lot of people's minds. It is definitely on mine. Between my bonus and then a CD that comes due in March, I have to find a place to park a decent amount of money. I am not sure where to put it. I don't want to earn minimal returns that most of the no-risk places like CDs are throwing off right now, but at the same time I don't think I want to dump the money into the market. Stocks are so volatile right now, and I keep hearing that interest rates are going to rise and bond prices go down.

One "alternative" investment that I have begun is Lending Club. So far only a few thousand dollars, but I like what I've seen. The one thing I don't like is that the terms are so long. I think like 3-5 years. Would probably be better for a 401K investment.

The other thing that I've really been meaning to do is diversify by currency. I've checked out Everbank products, but they seem kind of risky.

This will be an ongoing question I try to answer over the next few months.

Portfolio Analyzer Fidelity Full View

I finally found a good tool to analyze all of my holdings across different accounts. And it was totally automatic, which was nice. It's the Fidelity Full View tool. It added my investment accounts automatically and now I can see my holdings across all accounts. I was surprised, I have less than 50% American stocks. When I add one other investment account, it will be even less, because those are LatAm bonds & stocks. I just read an article in Fortune saying that most people probably need even more foreign stocks than they have, so I guess this is okay. I'm just not feeling very bullish about the US market, even though I have nothing to complain about with the market's performance this year!

General Update

So I usually only update my NetworthIQ on a quarterly basis. I just did Q3 at the end of September. That said, I just updated it again. I can't believe how much the market has gone up this month. So much for sell in May and go away. I'm just so glad that I never took any money (barely) out of the market after September 2008. I've been fully in (while also building my cash position) the whole time, which has allowed me to recover A LOT of the value that I lost two years ago (on paper). I also wanted to update my NetworthIQ so (I am ashamed to admit this) I could resume the top position on the page that ranks networth in NY (I'm on the top of the 5th page). I am really motivated by moving up the list. I do not know why. I wish those other people success, but I guess it's just nice to have a visual way to be rewarded for saving more. Since it's not like anything really changes in my life when I save more money.

I'm also excited to try some new investing strategies. I'm going to open up a Lending Club account. I have also meant to buy some foreign currencies (being all-in on the dollar scares me) and maybe some gold. I'd like to buy shares in a REIT, but that's a little more complicated. I also think about buying some GLD. The last time I thought about this it was at 1K and today I saw it's at 1,300. Insane.

Morningstar X-Ray

Earlier in the summer I spent a lot of time trying to analyze my holdings across all of my accounts (I have 2 401Ks, 3 IRAs and two taxable accounts). I complained that I couldn't find a good tool and a reader recommended the Morningstar tools. Today I signed up for the free trial of the Morningstar X-Ray.

The analysis was a good confirmation that I have balanced portfolio. It also confirmed that I have a higher weighting of mid and small cap value and growth funds than the Wilshire 5000 at least.

For next steps, I'm thinking of buying some GLD and some more bonds -- I only have 9% of my holdings in bonds.

Organizing My Portfolio: Part I

Like many people, I have the securities portion of my vast wealth (haha) spread across several different accounts with different institutions. These include the following:

• My current 401K
• An as-of-yet-unrolled-over 401K
• An IRA, SEP-IRA and a securities account at one institution
• A just for fun online brokerage account

For those keeping count that is 6 accounts with 4 institutions.

Most financial planners or finance-types would probably be horrified by this list. I'm less concerned about all of the different accounts and more so about finding out what I own across my portfolio so I can analyze it as a whole. That's an informal goal for this year. My curiosity about my portfolio was piqued in October when it came crashing down by about 50%.

I did this manually in an Excel grid, tallying all of the positions in each account and then analyzing my overall portfolio by type. This is the graph I created based on that info:


These are my own categories which I am sure are slightly unorthodox. As for the balance or lack of balance in my portfolio, analyzing that is my next step.

After reading an article in the Wall Street Journal, I was excited to learn I could possibly get some help with this task. I'm currently trying out some of the interactive portfolio trackers discussed in the story and will post an update soon. I had previously searched for a tool to do this and hadn't come up with much. I used the Markewatch Portfolio Analyzer but could not for the life of me figure out where to find the "analyzer" part of the tool that the site claims gives you a portfolio asset allocation analysis.

While this probably seems like a basic thing to do for most personal finance gurus, for me it is the top of the pyramid. I've got the budgeting, saving, credit card, checking account part of the equation down. Now it's time to take my investing to the next level. I'll share aspects of all of these as I go.