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.

2010 Spending Analysis

I'm home sick all weekend with a cold, so it's a perfect time to play around with numbers to fend off boredom. Yesterday I sliced & diced my gross income last year to see where it went. It's roughly what I've always thought it is: 1/3 to taxes, 1/3 to savings and 1/3 to spending. This made me feel happy because I live on such a small part of my salary, that if i ever have to get a lower paying job, I can still survive. I could easily cut my spending probably almost in half too, just by moving in with a roommate. Anyway, I made this nice little pie graph to visually represent where all my money went last year:

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!

Good Fortune

I don't have much to report, except that as the year comes to a close, I am grateful for the good fortune I've had this year. I almost hate to even write about it, because I don't want to jinx myself. I do have to take a moment to say I think I will be very excited to do my networth update Jan 1. At the same time, I watched A Christmas Carol last night, as I did last year as well. And while having savings is important, it is a good reminder to live too.

Changing Expenses for Next Year

So just as I was feeling all smug about keeping my ongoing expenses down, my benefits changed at work (or will change as of Jan 1). Overall, the new benefits are much better than the old. I am truly grateful to my company, as they are adding long-term disability as a benefit! Something I pay $1400 for a year right now. Of course I'll have to buy a small supplemental policy, but it should shave like $100 off my monthly costs. So that's great.

The insurance is also a much stronger plan, except of course in my case because my therapist is out of network. If she were in-network, this plan would be a dream. But since she's not there is a HIGH (2K) deductible and the worst part is that the initial plan year is only 5 months. So to continue seeing my same therapist I am going to have to bite the bullet. It's going to cost me $2300 for the first five months of the year, and that's for only 3 visits a month.

That said, I can still afford it, and to me, it's worth it, although it is a steep price. I am going to use that time to really work hard and hopefully not need as much therapy, but also to find an in-network therapist that I can switch to in June.

I will take advantage of the FSA, so at least I will be paying this big bill in pre-tax dollars.

I will have a ton of deductions from my paycheck:
401K
Transit Reimbursement
FSA

That will over all help to lower my tax bill, and hopefully I will barely pay anything for health expenses in post-tax dollars.

One Time Versus Ongoing Expenses

So I've been talking about how all year I've been spending a lot of money. Or what for me feels like a lot. But I realized, as I contemplated buying another pricey item, there is one thing that saves me from overspending. And that is that these expenses (except for my health care expenses) are one-time expenses. So my friends who pay $600 more a month than I do in rent pay that every month. That's a total of $7,200 a year. That's two sets of furniture, or a whole lot of clothes. Or two vacations. The good thing about one time expenses is you pay up front and then get to use the items/service. So you don't have to continue paying, even though you might continue consuming them. Like with clothing. Or furniture. So while these items depreciate, at least you only have to pay for them once.

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.