Off to New York City!

It is time for my second mini-vacation of the year!

A friend and I will be going to New York City for a 3-day weekend. He has never been so I will show him around, have a nice meal at a good restaurant, and make sure we both have a good time. It will be a busy weekend but worth it and great fun.

Ever since I have been to New York for work I take every chance I can to visit on the cheap. I used my $300 voucher from Delta to get my flight for free, I landed a 3-star hotel in SoHo for $115 per night (a steal in Manhattan!), and already have my low-cost entertainment options picked out. We will also be taking advantage of my Platinum AMEX card for free lounge access at both airports (and free drinks!).

The flights and hotel are already paid for so all I have to worry about is my metrocard, meals, and entertainment. I am not worried about ATM fees since my Charles Schwab Investor Checking refunds any ATM fees I pay.

Have a great weekend!

Investment Allocation and Investment Location: Both are Important!

As my amount of money invested slowly grows I am paying more attention to where my money is invested and how I invest it. I believe the most important part of investing is diversifying your investments using mutual funds that track the market indices. For me I use a 90% Stock / 10% Fixed Income portfolio that I rebalance yearly. Doing this keeps my risk exposure where I like it and forces me to sell high and buy low.

I further split my stocks portion into 50% US Stock Market Index and 50% International non-US stocks (this goes between International Index and Emerging Markets Index). For now I have all of my fixed income money in US domestic bonds as I have not found an international fixed income fund that I like.

Now that I have a sizable sum invested in the market I am starting to evaluate the investment location. I have to also look at the tax implications of which types of investment I hold in which type of accounts. Currently I have a Roth IRA, SIMPLE IRA (like a 401(k)), and a taxable brokerage account (currently empty).

These are the 3 main choices for all of us in investing. My first choice is to get my employer's match on the SIMPLE IRA. It is also the easiest as it comes out of my pay directly. Second I put whatever I can in my Roth IRA as it is all tax free on the back end. That is as good as it gets! If I max out my limit on the Roth I will add to the taxable account.

With the tools in place I have to decide which investments fit in which account based on tax advantage. It is best to put high income producing assets in the Roth IRA as interest is taxed at your normal income tax rate. Inside the Roth you never pay any taxes ever. Make the most of it!

Next best is to have any low or no income producing asset in a taxable account (once you max out the Roth IRA). If the stock or fund pays a low or no dividend it is best held here because you don't pay tax until you sell the asset. You only pay tax on whatever dividends are paid out. The end gain at time of sale is taxed at a lower long term capital gains rate. If you have a loss you can also use that loss against other gains to avoid tax. An added benefit is that if someone inherits your assets the cost basis resets to the value at the time of your death.

The traditional IRA/401(k) is the worst option in my opinion. You do save a little income tax up front but every cent that comes out of the account later is taxed as ordinary income. You also lose the ability to recover losses from the assets if you have them. The one advantage is that you can possibly wait for a low income year to withdraw from this account to reduce the amount of taxes you pay. You can also convert assets to Roth if you meet the requirements but still have to pay the tax on the converted amount now.

Now that we fully understand the options available we can make decisions accordingly. In my case I put 5% of my income in the SIMPLE and add sporadically to my Roth IRA. As my situation improves I will start a monthly contribution to my Roth to start the habit. I hope as time goes by and I earn more I can max out my Roth IRA and start with my taxable account. I welcome to problem of tax on investment gains!

Prioritizing my goals and the money to fund them

I find that I work best when I have a handful of major goals that I am working on at one time. It keeps things less mundane by not working on the same thing day in and day out. Even still I have to pick which ones are the most important to me. At the moment those are increasing my income and fully funding my emergency fund.

I have reached a milestone in my emergency fund: I can now cover 3 months of basic expenses with no income at all! I am very happy as this definitely helps me sleep better at night. I am now debating on whether I should continue to fund this until I reach 6 months (my original goal) or if I should be saving more for retirement and travel instead. As of today I still don't have the answer.

In the meantime I am putting the money that I have not decided which way it will go into a savings account. This way I am not tempted to just spend it and know that I have to decide what to do with it. I did increase the amount of my emergency fund monthly transfer form $50 to $100 but still have some leftover cashflow to allocate. I suspect my answer will be somewhere in the middle.

My other top priority, increasing income, I went over yesterday. I am reserving a bit of my monthly cash flow to go towards that (such as I did when I paid tuition for the class) and in the future will need to pay for the Microsoft exam, Notary application fees, and anything else I deem necessary to get ahead. The more I can earn the more I save each month!

By prioritizing my goals I pretty much know where my money is going each month after expenses are paid. In the case of increasing income I am unsure what the exact costs will be so I have a general savings account with money earmarked for it. If I have some leftover then I can divide it among other goals in order of priority. In my case retirement/travel are the next in line. Even if you are unsure what the saved money will be used for having it in a savings account is much better than simply spending it!

2011 Goal Progress: Increase Income

I have a major goal this year of increasing my income. I am now working multiple channels to make this happen. So far:

• Being more aggressive in finding side IT work -- paid off!
• Taking a course to complete my technical school IT degree -- in progress
• I am going to renew my notary registration to make myself stick out in job applications
• After I am done with the above course I plan to study and take a Microsoft Exam
• I am giving more thought on how I am investing my savings (more aggressive portfolio)
• Meeting new people and networking more (I am REALLY lacking here)

As I move forward I hope all of these things will bring me more opportunities to increase my income. I am certainly below where I feel I should be at the moment and the down economy is making it that much more difficult to get ahead. I am also considering a job change to get the pay increase I want (and benefits would be great too).

More Upcoming Travel: New York, DC, Myrtle Beach!

All of the sudden I have some road time coming up!

This Friday thru Sunday I will be in New York City on a mini-vacation with a friend who has never been there. I am looking forward to great food, great times, and a great city! 2 days after I get back I will be in DC for 2 days for work. It should be a relatively easy trip this time around.

I also just booked a very cheap flight (using a $300 voucher) for Memorial Day Weekend in Myrtle Beach. I got a rental car for $21 per day and am looking at some very reasonable beach condos to stay in. I definitely feel the need for some beach time so this will help tide me over until Thailand in November!

It is nice to be back on the road to more interesting places!

April 2011 Net Worth Update

It is the 1st of the month again and it is time for my net worth report card. I had a great month due to a tax refund and extra side work this month. I am also waiting on a few rebates that will boost later numbers.

As of today my current net worth is $11,909.00. That is an increase of $1,547.95 over last month. The major contributing factors: side income, a large tax refund, increase in investment values, and selling some stuff on ebay!

I expect next month to be good a little slower. I have a vacation to New York and less pending income but am expecting a work bonus!

Alternative Income this past month:

IT Consulting: $185.21
Focus Groups: $0
Rebates: $33.58
eBay: $174.10

Fighting burn out with mini vacations

Living in the USA vacation time from work is a premium. Most people get 2 weeks off. I am one of the lucky who gets 3. I also negotiate with my boss a little, toss in Thanksgiving holiday, and I can make that a month. I try to do this each year.

That said it leaves me with a long slog from November to November where I get very little or no time off. I have looked at my pattern of travel and realized that I jam in a couple 2-3 trips when possible. I realize that this is because I have to save my sanity somehow!

I realize now that these trips I take are to maintain sanity and keep me from getting too bored and spending on other things such as more gadgets or a new computer. If I am going to spend the money anyway I want to be sure it is spent on experiences and not stuff. I am at a constant war with stuff!

Examples of my mini vacations over the past couple of years:

• Weekend in New York City
• Memorial Day Weekend in New Orleans
• 2-day Bahamas cruise
• Weekend in Vegas for a friend's birthday

The list goes on for a bit. The point is that I take trips so I can keep going and save the majority of my time off for November. So far I have focused on Asia and don't see that changing for a while. I really love that area of the world with it's diverse people, food, and awesome sites to see. As a result of these long trips November has become my favorite time of the year! (for obvious reasons!)

My advice to those who want to travel is to plan one "big trip" each year that you save for and plan for well ahead of time. As great deals or opportunities for short trips arise do them too! I found that mixing these two is a great balance to work life (at least for me). It makes the year between trips seem a little shorter and less bleak and mundane.

The Grocery Game: Stage 2 Reached!

Today I have realized that I have hit "Stage 2" of the grocery game. I subscribe to a weekly database that finds the best deals each week in my local grocery store. It combines that with the current coupons available in the Sunday newspaper and I get lots of great "Double-whammy" deals.

I have reached the point where my freezer and pantry are mostly full. My grocery shopping has shrunk a lot and now I just replenish what I run out of and stock up on great deals that I know will get used. For example I like Powerade and stock up on it or Gatorade when they go on a great sale. I usually buy enough to last me 2 weeks as that seems to be the sale cycle on that item.

I am now mostly looking for good deals on my favorite meats, produce, and staple items. These are things that I constantly need. For produce specifically I find that the prices are lower and the quality is better at my local farmer's market. I am usually there every week to pick up what I need (its mostly natural stuff and spoils quickly).

It is nice to be able to cook form a full pantry as I have plenty of options to choose from. I do still buy specialized items if I am experimenting with a new recipe or agree to cook a specific dish for a group of friends. Other than that my grocery shopping has become less deal finding and more maintenance. As a result I save a lot of money on food!

Travel Planning! Time for the fun stuff!

I love travel planning. This week I am doing a bit of it for my planned vacations coming up.

With my recent Delta voucher wins I am going to New York City in less than 2 weeks for a weekend. I still have some vouchers left and am looking at the free beach house I have access too in Myrtle Beach or possibly New Orleans for Memorial Day weekend. I love both places!

I am also doing a little more research for my Asia trip in November (another month!) since I will be booking business class tickets using miles and using multiple airlines. It takes a lot more learning on my part. I have to figure out routing options, lounges I can go to, etc. It is all part of the fun for me! This is my big trip I look forward too all year long.

As of now I have New York done, narrowing down Memorial Day weekend and Thailand is probably around 30-40%. I am also waiting on some credit card bonuses to post so I can book the flights for Thailand and lock in my dates. I also have to figure out my itinerary for Asia so I can narrow down my flight options.

Emergency Fund: More than just a target number!

I have decided that a target dollar amount for my emergency fund wasn't enough. For most people it is ok but I like to be a little more detailed about it for my own life. I have come up with a list of sub-funds that the big number covers. I am assuring myself that multiple categories, in order of importance, are covered in the even of a financial emergency.

This idea spawned from the fact that I have multiple savings accounts. I originally got the accounts because of interest rate offers and other various reasons. I now have am using this to my advantage to repurpose them for specific parts of my emergency fund. The numbers happen to fall into place where I feel they needed to be.

Here is a break down of my target $10,000 emergency fund (in order of importance):

• $5,000: Job loss/pay the bills general fund
• $500: Medical co-pay and misc fund
• $500: Car repairs
• $1000: House Repairs
• $3,000: additional job loss fund for more extended unemployment and misc. emergencies

I have the first 3 covered as of today. This brings me now to the extra $3,000 to add to my general fund. I am comfortable with a $5,000 general fund but would feel much better with $8,000. I am now adding $100 per month to the general fund and any extra income/savings will go to that as well. I calculate that I could live for 4-5 months off that $8,000 if I had too. The peace of mind I get is priceless!

Another "tiny" emergency fund that is built into my monthly budget. I have a $100 misc category that I will use up first before tapping into any fund. This keeps me from having to do $5-20 transfers for little stuff that would throw my budget off. It just makes my life easier to manage financially! I do track it and roll it over or transfer to savings if there is some left.