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Monthly Archives: March 2008

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Getting our Net Worth Moving

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Hi All,

So, given that our net worth was flat the last time we measured it, I’ve been brainstorming ways to turn the situation around.

The idea I’m considering right now is accessing the equity in our investment property. As it stands we’re making $960 dollars in pre tax annual income. The cash is nice, but that’s a return on equity of around 1.3%. While we certainly aren’t experts, it seems that if we make an effort we should be able to do better than a 1.3 percent return.

At this point, a couple of options come to mind.

1) Selling the property and investing the difference in high yield canroy. We could probably do 9% before taxes in this asset class. That’s about $4,960 or about five times as much on an annual basis as the property is currently yielding. The disadvantage of this plan is that we’d get hit with the long term taxes on the capital gains, a sum of about $15,000.

2) Selling the property and doing a 1031 exchange for another rental property. This would take some shopping, but we might be able to parlay our single rental into a larger property with greater appreciation potential or cash flow. Since we are in DC, the market around here is still pretty robust and we should be able to get a reasonable price.

At this point, its unclear what decision, if any, we are going to take. One thing is clear, we can do better than 1.3% ROI, even in the current investment climate.

Best,

James

Priceline wins again

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I know I’ve raved about priceline in the past, but it has saved the day once again. Given my recent predicament of my flight not leaving Kabul, priceline was the answer.

I was able to get a room at the Intercontinental, with a very nice room, for $100 a night. Not bad considering that their normal prices are $350 a night. The location is great and I was able to find it quickly as I rescheduled my plans.

I was supposed to move over to another hotel for my conference this week, but in the end I decided to stay here since the room is about half the price. Even if I have to take a cab to the conference it still works out to be cheaper in the end. Plus I don’t have to deal with room changes and so forth.

Good luck with your travels!

Miel

Contingency Planning

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In the world of life, contingency planning is necessary.

In a place like Afghanistan, this becomes an integral part of life.

As I was headed out on my travels to the states my plans were thrown up in the air. The flight I was on simply didn’t go, after having spent 9 hours at the airport waiting. This meant that I missed the Personal Finance Leadership Conference that I was supposed to present at yesterday. The good news is that we were able to send James at the last minute and he was able to present on our behalf.

Initially I was told from American Airlines that I wouldn’t be able to make it until next Thursday, making me miss not only one conference, but two. Luckily I was able to wiggle things around and make it work.

The bad news is that this meant forking over the funds for an extra night in Dubai and three nights in Boston that weren’t anticipated. In all it will cost me about $600 extra as well as the $1,500 that is held up in plane tickets.

While life doesn’t always go anticipated, we can plan a bit ahead to make sure that there are extra funds somewhere to deal with situations as they come up.

The more important part in all of it is to go with the flow, one way or another. Fighting the realities of unexpected plans is not worth the stress of it all.

Cheers,

Miel

Stay Away from Russ Whitney

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Hello All,

Today is another travel day for us DINKs, but I wanted to get a quick posting up nevertheless.

I’m in San Francisco taking care of some business. I was flipping through the channels in my hotel rooms television when I came across an infomercial by Russ Whitney. Now, if you don’t know who Russ Whitney is, the guy is a marketer who sells products helping individuals buy real estate with no money down.

Of all the personal finance gurus out there, Whitney is one of the worst. Its my understand that his company has been under investigation by several state consumer protection offices and that he has falsified and exaggerated aspects of his biography. To be entirely fair, any marketing involves some degree of hyperbole, but in Whitney’s case he is peddling the equivalent of modern day snake oil.

For example, Whitney’s advertisement promises “big big dollars in a short period of time” and seems to suggest that much of the way this can be achieved is by unconventionally structuring real estate deals – e.g. no money down. Essentially Whitney is offering something for nothing. This is a tremendous disservice to his customers. Building real wealth involves hard work usually over long periods of time.

We don’t normally make recommendations on this blog, but I’m making this one to our readers.

Stay away from Russ Whitney and his products. Don’t waste your money on a pipe dream.

Best,

James

Couples Finance Round Up

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Hi All,

My latest trolling of the internet has yielded the following:

Caroline Overfield talks about balancing romance and money.

Ember talks about the changing landscape of sex tourism in Africa. Not exactly the kind of money and romance we usually discuss, but its salacious, so give it a click if you want to read something saucy.

Madam X discusses the cost of getting married in egypt. If you don’t have 21 grand, you’re out of luck.

The Ladies Home Journal has a number of good articles on balancing dollars and romance.

Best,

James

Retirement Maxed Out, Now What?

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Hello All,

Today’s posting is on the topic of what to do when you’ve maxed out your retirement saving options.

This question comes up a lot because its largely uncharted territory. Most of the personal finance literature is silent on this point. So, if you are in this situation, congratulations. You’re in good shape.

Since you’ve probably maxed out the obvious 401k/403b and IRA options, you might consider the following less well known points.

1) If you’ve contributed the maximum to a traditional IRA, you might still be eligible to contribute a little bit to a Roth IRA. Also if you’re married you might consider looking into funding your spouses accounts. After all, you’re both in it together.

2) If you are self employed or can organize a SEP-IRA you might be able to get around the contribution limits by making “employer” contributions. We don’t have any direct experience with this, but I understand its successfully been done before.

3) SIMPLE IRA’s are meant for small corporations. If you are eligible for one of these, consider checking it out. The contribution limits for SIMPLEs are higher than for traditional and ROTH IRAs.

If none of these work and you’ve exhaustively researched your options, you could always consider a plain old taxable investment account. If this is the case, my short list of funds to check out are:

1) Vanguard’s S & P 5oo Index Fund, ticker symbol VFINX
2) Ken Heebner’s CMG Focus Fund, ticker symbol CGMFX
3) Dodge and Cox Balanced Fund, ticker symbol DODBX

My knowledge of CGMFX and DODBX is limited, but if I were buying, these funds would be at the top of my research list.

Good luck!

Best,

James

Why Blacks and Hispanics Are Poorer

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Hello All,

Todays posting tackles a difficult topic – the role of race in attaining wealth.

Race is the classic American problem. In many ways the reality of race differentials in American society illustrate an ongoing discrepancy between our enlightenment ideals and socioeconomic reality. From the civil rights era to current debates surrounding the Obama candidacy and immigration policy, racial differences have demonstrated that they still matter.

More importantly, race matters for wealth building. Generally speaking African Americans and Hispanic families have lower overall levels of net-worth. Relative to other groups, they are less likely to inherit, own homes or stocks. Its an uncomfortable fact, but nonetheless a fact.

Why might this be? There are a number of explanations. Among these are discrimination and culture. The discrimination hypothesis argues that people don’t like minorities and therefore choose not to employ them or let them into prestigeous univerisities, etc. The culture argument says that normative standards in minority communities discourage wealth accumulation via reciprocal ethics – e.g. when anyone has any money they are expected to give it away, therefore nobody can get rich.

The alternatives are more compelling. According to Lisa A Keister, three major factors impact patterns of wealth building among minority families. These are education, family disruption and fertility. Consider this, if families don’t have educated parents, then lifetime wages are lower. As anyone who has been divorced can tell you, family disruption interrupts processes of child’s learning and dilutes resources. And finally, families with more children have fewer resources to go around. All of these are more prevalent in minority families.

So, it seems that lower wealth in African-American and Hispanic families has less to do with discrimination and culture, and more to do with family dynamics and educational attainment.

Best,

James

It pays to follow up!

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Not everyone has to deal with reimbursements from the office, but in many positions where travel is required it is a regular part of work.

After finally having a troublesome reimbursement issued I thought it was a good time to remind folks about how important it is to double check your reimbursements and keep good track of these sorts of things. Otherwise it can be very easy to loose money that you’ve already paid out on behalf of your employer.

In this case, it was actually a reimbursement for $94.64 from booze and drinks at our center’s 2006 holiday season. Though approved in advance, the person checking the reimbursement disallowed the cost because it was alcohol (even though a special charge code was used). I noticed this at the time of reimbursement, checking against what I had submitted, and the fun and games began.

It has now been over a year of follow up with finance, on and off, but in the end it is simply against my principles to pay for work expenses that are legitimate.

While it’s been quite a bit of work to get all of this sorted out, I’ll now be rewarded by a hundred bucks closer towards our goals.

Lesson of the Day: Always double-check what expenses you’ve submitted against the payment received.

Cheers,

Miel

Finance Tips For Seniors and Military Personnel

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Hi All,

We DINKs are snowed under with work today, so we wanted to quickly make you aware of a website designed specifically for older investors and military personnel. The webpage is maintained by the FINRA, or the Financial Industry Regulatory Authority. The FINRA is the securitie’s industry regulatory body which is supposed to keep an eye on stockbrokers so the government doesn’t have to.

Evidently one of their missions is education. They’ve got a website specifically for people who are over 50 or are in the military. Surprisingly, some of the content is pretty good.

Check it out here.

Best,

James

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