Healthy, Wealthy and Wise III

Wise brings to mind either someone very old and very experienced, or someone very young and very well-learned. It implies that someone that can synthesize facts, situations and extenuating circumstances to come to the right decision. Because that, the right decision, is the crux of being wise. You can be as old and crotchety as the hills, but unless you can use that information effectively, you might just be a wise-ass instead.

The US school system prides itself on letting anyone become anything. While de facto “tracking” does occur, the principle of letting one choose their own course runs strong throughout all strands of US culture. However, to prepare children for anything, the education received must understandably be quite broad in scope and quite shallow in details. Specialization doesn’t really occur- thus, it is very hard to mold a truly well-learned person at such a young age. They know little about much, and much about little. It would be hard to find, I believe, more than a handful of “wise” young people who know enough about any one topic to start extrapolating that information into more information. Please understand, I’m not saying the capacity isn’t there or the seeds of knowledge are missing- The final leap from journeyman to master just is not normally taken while very young. Remember, the concept of adolescence is still relatively new, in terms of history.

And, of course, since most of us couldn’t be considered “very young” anymore, let’s focus on what is approaching- “very old.”

Time marches on with little heed to wants and desires, but experience is something that can be controlled. And in this instance, knowing little about much and much about a few things might be the best way to go, if wise is the goal.

I have always had the attention span of a two year old, but the focus of a mad Operation gamer, which translates into lots of fleeting, but intense hobbies. My current one is aquaponics, because who wants to grow veggies with clean water? I have played all of Twinkle, Twinkle, Little Star on the violin, researched my (apparently boring) family tree back 250 years, collected bouncy-balls, and built a model replica of Shakespeare’s’ Globe theater complete with 250 people. But that’s as far as I got. I am a self-defined generalist, for better (wise) or for worse (weird).

Much about little; little about much.

The Wealth in our Trio

My husband has argued, in a very Office Space dead pan, that being wealthy means he could do nothing. I would find a whole lot of “nothing” to be excruciatingly tedious. I even considered going in to work over my two week Christmas vacation, because I had more than enough “nothing” for a while.

So for many, wealth implies the luxury to do whatever you want. But, have you ever known someone who could do whatever they wanted, truly? If you have, they were probably 2 years old and accompanied by a harried, or uninvolved, parent. No one gets to do whatever they want, so perhaps it’s time to let stop wishing for wealth to get something you can’t really have.

And, of course, there’s the financial security knowing that if a problem arises, you can throw some money at it. Kid wrecks the car? Throw some money. House burns down? Throw some money. Need a new liver? Move to Memphis… and throw some money. But security implies permanence of wealth. Once you have wealth, you can’t use it up. Financial security can spiral into ruin in less than 3 years. Your kid won’t even been done with college in that amount of time. And take a look at the headline cases of Kenneth Lay and Bernard Madoff. Extreme wealth to pretty much nothing in way less than 3 years. So wealth can only make you feel secure.

And finally, because it’s post Valentine’s day, and because happiness doesn’t increase as income increases once you hit the median income level, wealth can be seen on a more spiritual level . We’ve all heard, “You can’t take it with you.” and “They won’t put ‘She worked a lot of hours’ on her tombstone.” We’ve probably heard them from people who didn’t have much to take with and from those who don’t work long hours, but we’ve heard them, and perhaps hoped for them.

How wealthy are you?

Healthy, Wealthy and Wise

Healthy, Wealthy, and Wise. Let’s give a round of applause for good ole Ben, and then look at the first tenet, Healthy.

How healthy are we, really? I took Blue Cross’s health assessment, and scored an 86. That’s up four points from August, when I scored an 82, so things are looking good. My job encourages fit time, so three days a week, I shut down my link to the world 30 minutes early and trek over to 24 Hour Fitness. I ride my bike. I read my book. I seethe slightly over how riding a bike forces your head down and the TVs are up. But, I read my book, like I said, and the fake wheels keep on turning.

Then I jump in the old car and head home to make supper. Following a heady bout with Food, Inc. I finally took the plunge to (mostly) local foods, including the ever so expensive, but surprisingly good, grass-fed meats. So the fridge is filled with random vegetables (bok choy, anyone?), and I am filled with indecision on what to cook with foods I’ve never eaten before. It’s usually a boring stir-fry, but last week I rolled my own dumplings. With a rolling pin. And a LOT of elbow grease. But very little unnatural grease.

But the crème de le crème is the garden. Or perhaps that’s carrot de le spinach. I bought a hoe, a rake, a spade, and a bunch of seeds, making it painfully obvious this was my first foray in the forage of food. The cashier even offered me tips, and tried to up-sell some other seed packets. Undaunted, I started to hoe my bare bed into two barely straight rows. I put the seeds in (way too close together). I cover them. I water them. I have blissful dreams of nurturing them to adulthood. But mostly I just wait. And wait. Two of the three packets have sprouted, and I’m pretty sure the other has 100s of seedlings just bursting right underneath the soil line. Hoon said only the tough will survive, and we’ll reward them by eating them!

Tomorrow we head out to the farmers market downtown in search of the elusive block of cheese. I’ve wishing and hoping and thinking and praying about fresh local cheese, and they’ve disappointed me more than once. But tomorrow is another day.

House Hunting

We went house hunting yesterday. I am absolutely determined that we keep it under a certain price point, so we can rent it later, and the Mueller development on the old airport in Austin had some in our range. We've always been a huge fan of mixed use areas, and Mueller is probably one of the most prominent examples in Austin.

So we headed out to Mueller Central to look at the grand plan, and grand indeed it is. Elementary school, parks, shopping, eventual grocery store (that's a biggie for us)- everything we need to give up our DINK-y life.

However, the houses that were in our price range are reserved for low-income families, which while sucks in itself, I am glad to say we don't qualify. We're there, however, so we checked out the next price point. The next cheapest is laid out really weird (I have to go to the kitchen to get to the master bedroom?), and for that price, I know we can find something a little closer to what we want. It may be my imagination as well, but we are also at the low end of their cost range, and not exactly getting stellar service. While I admit from the salesman's point of view, working the high-end customers first makes sense- I always think to myself, "Yes, I can buy only this now, but imagine what I'll buy in 10 years, or 20 years. Do you really want to piss me off?" I know, that may be very egotistical, etc, but it is true. And what is the Internet if not true?

Either way, we left eventually. We have a friend that lives out a little further on 51st Street, so we decided to look a little longer. We run across a billboard for Centex Homes near Decker Lane (cheap, of course) so we head out to take a look. It was almost too far from downtown, and during the short drive we even mentioned turning around, but we decided to forge ahead.

And, OMG, what a difference 5 miles makes. The staff on site welcomed us, and explained their price points. When we started drifting towards the posters at the top of their cost range, suddenly service got really good, and my eyes got really big.

We can afford ALL that? And still be well under our maximum? Really? We toured the model homes, and they were huge- about 2500 square feet. Now for those of you more established, or just more well-endowed in the housing area, that may not seem mansion-like. But we currently rent about 850 square feet and weren't really planning on being able to get more than about 1500 square feet.

They had one in inventory with an absolutely gorgeous lot. GORGEOUS. The lot was oversized, with three giant oak trees on it. The floor plan was the one I liked; it was in our price range, the house was, did I mention, huge!

Instead of a starter house, suddenly I was seeing years of our future rolling past. The kids could play here, the crib would work there. All of the bedrooms upstairs, including the master suite, opened to a common area that I imagined would be such a nice private family space secluded from the more public, more formal downstairs.

Basically, we went from DINKs to two-car, 2.5 kids, mortgage and a suburban in a matter of 8 minutes.

But there had, HAD, to be a catch right?

1. We were a little far from downtown. The commute would be 30 minutes, with no easy access to public transit. We like public transit. But it is in the middle of no where...

2. It is in Manor school district. I have always told myself that for elementary school, it doesn't really matter that much. Our future kids would be fine as long as they aren't going to die by a rampaging 6-year-old with a crayon. However, I apparently found my limits. Decker Elementary School has been academically UNacceptable for three years in a row. How do you get that type of rating??? I'm a big believer in public schools, but that was too much. I might also mention that the staff refused to mention much about the school rating, suggesting we go to The Texas Education Agency's website for more info. (To be fair, they didn't really talk about anything they didn't have specific control over, such as the neighboring property, etc)

3. The house was on the market because the people originally slated to buy it couldn't sell their other home, and couldn't afford to take on two house payments. While I know things happen, this might be an indicator that the development was accepting applications of people who couldn't really afford it. Being a new, lower-end development, I don't know for sure if everyone in the neighborhood will go belly-up on their mortgages in a couple of years, and I'll be stuck unable to sell.

4. Which leads me to another point. Nothing really indicates that the area will be developed anytime soon. Retail is very sparse in the area with no real plans for the future. Which makes me feel that the house value wasn't ready to boom anytime soon. That and the very nice saleswoman said they had just dropped all their prices $10k in the last month.

5. Did I say it was in the middle of nowhere? I may be ready to turn in my cool card, but Hoon is not. And I know that.

So did we make any progress yesterday? I suppose. But it left me saying what I always say: I want to find a good Realtor, give them a list, and they come back to me with four choices. I'll pick one of the four, and we'll be done. It should be that simple, right?



P.S. On a side note, we found that the Riggin's house (2604 Lehigh Dr) from Friday Night Lights is up for sale... Hoon really wants to go see that one!

FSA happy

Here's the coolest thing about flexible spending accounts:

Unless it is specifically stated in the plan, you don't have to pay your employer back for any money used, but not accumulated, if you leave the company.

Hoon and I signed up for the maximum allowable amount through his employer, $5,000, which is taken from Hoon's paycheck in equal increments over the year. He quit his job last week, but we maxed out the FSA in April. We essentially spent around $800 for which we didn't pay.

Another great thing about FSAs is that they serve as a temporary, no-interest loan. As stated above, we spent our entire $5,000 by April, but at that point Hoon had contributed less than $2,000. We were able to leverage over $3,000 at that point interest free. Try paying for braces, etc, and you'll agree how cool indeed this is. :)

My rainy day

I didn't even bother to update the asset chart. It went down! We're currently contributing each month about 5% of our total assets, and this month, the asset total was less than last month. How depressing. Our rainy day has come.

On a more positive note, we are currently buying shares of our mutual funds really cheap. When the financial market finally decides to let the cash flow, our shares will (hopefully) boom, and our assets will enjoy a nice windfall.

But still, it's depressing. I quit looking. Hoon was the one who called out one day last week, "You're not going to like this, but we dropped below $x this month." Really? REALLY?

I must remember- I'm buying shares, not money. I have 20 more shares this month than last month. Next month, all my shares might be worth more, but the ones I bought this month will have grown the most.

But next month might be worse. Really worse. What's safer than a money market?

Hoon-"A can in your backyard??"

I'm open to suggestions. My bank used to keep their money buried and never lost a dime-even to rusted holes. They staked the ground and when you wanted your money, they had to take the shovel out back. Haha. Not really. But you know which bank I'm talking about.... :) The odds of my money falling out of a hole in my can is smaller than my money market breaking the buck, right?

Haha again. Keep your money in the money market. If those really start to fail, we've got bigger problems than my measly assets.

Quickie

By the way, we bought the Sigg bottles. I then proceeded to drop Hoon's on the concrete and dent it about a week after we bought them

Hangover month

July was Lean Month. Hoon and I didn't spend anything. August was Fat Month. We spent a lot on all the stuff we didn't buy in July. But this month-

This month had to be Hangover Month.

I forgot about this part in the analogy. A period of fast is followed by a period of excess. I remembered that part. But I forgot about the period of recovery affectionately known as the hangover. Let's put it this way- we didn't spend much, and had no desire to really do so.

Normally, the eating-out budget gets blown in the first two weeks, and we spend the next two trying not to eat out. Like a real hangover, we apparently didn't feel too hungry. Also, my clothing budget, which has been spent 80% of the time over the past 2.5 years is still there. We went to Lakeline Mall today, and all I bought was a pair of free panties. Free. And, while we have made some really (relatively) big purchases like tickets to the premiere of Zack and Miri and The Dark Knight in IMAX, and some Christmas presents, there hasn't been a lot of activity in the family accounts.

My fast is over; my binge is over. When will the room stop spinning?

201k Plan Origins: What Counts? (2 of 3)

What exactly makes up the $201k in assets we want to have?

Of course, when you first write down, "We want to have $201,000 in assets in five years," it seems a lot easier than it probably will turn out to be. At one point, I was doing some basic math and figured that when you add up the maximum 401(k) and IRA contributions for two people ($39,000 in 2008), multiply that by five... DONE. But then, you still have to figure out how to save $40,000 a year.

I realized defining the term "assets" was important in putting our goal in perspective. Since this was our plan and our rules, I got to define what this includes. Some obvious stuff counts:

• 401(k) plan accounts - I still have my 401(k) plan account with my previous employer, even though my personal rule that I tell everyone is: "When you leave a job, rollover your 401(k) plan account to an IRA. Always." Sure, there are a few exceptions, but most of them are lame: you want to take a loan from a current employer's 401(k) plan or the investments in the plan are better than what's available elsewhere. In my case, I get access to a couple of web tools that I'd have to pay for otherwise, and I would've kept my IRA at the same financial institution anyway, so I leave it be. But if you're reading this and have a 401(k) plan account with a former employer... ROLL IT OVER NOW!
  
• IRAs... love, love, LOVE the Roth IRA. Can't get enough of 'em.
  
• 529 plan accounts - We opened a 529 in North Carolina for the state income tax deduction, but that doesn't really help anymore. Now, I want to roll it over to Ohio's 529 plan, but NC's has a really annoying $50 rollover out fee. I figured we'd easily make up the $50 with state income tax deductions, but then we moved back to Texas right away. A future post, I'm sure.
  
• Taxable investment/brokerage accounts - We have none at the moment, but when we do, they of course count... unless you count the Prosper loan I bought.
  
• Savings bonds - Sarah bought a few in college, mainly because she knew she needed to be investing in something. Their interest is deductible if we use it for education later on, so we've kept them around. They're harmless.

A couple of others were more debatable:

• Emergency fund (currently in the worry-free Vanguard Prime Money Market Fund) - It's an emergency fund, so it's not really "available" for anything other than emergencies. But, it's money, as close to "cash" as it can get, so it counts. I didn't debate long.
  
• Home equity - Although I find most of what Robert Kiyosaki (the "Rich Dad, Poor Dad" guy) says ridiculous, one of the few of his precepts I appreciate is the rule: "Your house is not an asset." Assets, using the Kiyosaki doctrine, are things that put money in your pocket. Liabilities take money out. If you own a house and rent it out, it brings in money, so it's an asset. If you live in the house, it's taking money out. On the one hand, I can't just sell my house because I have to have someplace to live, so I can't count it. Then again, the equity can be tapped to buy a different asset, so I can count it. In the end, I counted it. Maybe I did it just to make $201k more realistic. I don't care. Besides, we rent now anyway (this fact will surely be a post in the near future).

Just for the record, there's no way I'm including cars, jewelry, furniture, baseball cards, computers or any other "stuff" other than my home's equity. If a bank won't loan me money against it and it doesn't appreciate (eventually), it doesn't count.

Part 3: Going from a $$ goal to making a lifestyle choice (but the $$ goal is still there).

201k Plan Origins (1 of 3)

The origin of the 201k Plan came from some calculations I did during some idle time in a training class at work. The trainer covered the Rule of 72, which I had known before. However, this time I had just played around with some retirement calculators to determine what our "retirement number" would be.

In the end, we aimed high: $100,000 in today's dollars a year. After inflation, this came out to about $350,000/year. Add in wanting this to last for 30 years, that came to a final account value of $4.5 million. Whether or not the $100k was pre-tax or after-tax didn't really matter. Trying to plan for something so many years down the road is such an inexact science, we kept it purposely vague.

With this number in mind, I started running some calculations. I came up with the following: if you start with $250,000 and get a rate of return of 8-9% per year, that doubles every 8-9 years. After about five years, we had time for our money to double four times (8.5 x 4 = 34 years... we would be 32 and 30 in five years, so that takes us right to age 65).

The numbers get big so fast:
$250,000 doubles once to $500,000
doubles twice to $1 million
doubles thrice to $2 million
doubles one more time to $4 million ... all without saving another cent.

The thing is, $250k seemed like a really, really big number. Somehow, in our eager, incredibly ambitious minds, we figured, 'Well, $250k is a lot... but $200k... sure, we can do that!' And with that, the 201k Plan was born.

Part 2: What exactly makes up the $201k in assets we want to have?
Part 3: Going from a $$ goal to making a lifestyle choice (but the $$ goal is still there).