Dual Income No Kids

Back to the Basics of Shopping Savvy

2008-11-20T08:44:00.005-05:00

This post is about going back to the basics for spending less and saving more.

As the belt tightens a bit, keep these tips in mind to save money when shopping for groceries:

Write a list in advance of shopping. Stick to the list.
Don't just replace something because you are out of it, stop to think about if you need it right now.
Don't shop with scarcity in mind, one or two of an item will generally suffice.
Avoid the middle isles that tend to have more processed foods.
Consider making your own for items like salad dressing and pre-packaged items such as whip cream for that pumpkin pie next week.
Just because it is on sale... doesn't mean it is a better deal. Check the unit price to know for sure. It is never a better deal if you don't need it.
Limit trips to the store. While there is no need to stock up for more than a week, it is better to avoid temptation by shopping a week at a time if possible.
As always, make sure to eat before you shop.
If you really want to save money, shop with a calculator.

Helpful tips when shopping for other household or personal items.

Keep a tally of things larger items you might be considering. Writing it down helps to keep it out of your mind and lets you reflect on your need and research for the best price.
Avoid impulse shopping. This is one of the biggest areas where it is easy to overspend. If you haven't already identified a given item on your list for some time, then take a pass. This goes for holiday shopping as well!
If it doesn't match the criteria you've set, also pass. We often settle for something that isn't exactly what we need. Waiting might give you something that you will appreciate and treasure for longer and meet your needs better.
Look for deals. Deals abound in this economy, just look for them and you are likely to save on items you were already intending to purchase.
Chances are, you might see that you really don't need it after all. Reflection gives you time to think about your needs. For example, I might really want an iPhone, but do I really need one? Probably not. I've been using a free cell phone my whole life, so why do I really need more now? This doesn't mean I'll necessarily hold out forever, but it will mean that I'll hold off until I'm sure that it is what I really want.

Spend Less, Save More,

Miel

Arrr! Pirate Loot Leads to Somali Boomtowns

2008-11-19T18:34:00.003-05:00

Hi All,

Just saw this interesting news story from wirednews.com. Evidently the Somali piracy businesses is pumping a lot of money into some of the costal towns in Somali. The massive influxes of cash are improving the local Somali construction, retailing and food service industries.

Before you click over and have a read, please don't forget that piracy is a high crime. The impact of piracy on oil shipping lanes is obliging huge collateral costs in security and insurance. In addition, pirates have terrorized captured crews, assaulted innocent civilians and contributed to general lawlessness in the Gulf of Eden.

Here is the story.

Best,

James

Credit Cards: Pay Early - Pay Often

2008-11-19T09:01:00.005-05:00

Today's post is in response to a reader who is diligently paying down debt, and wanted to know: whether it makes a difference to pay one lump at the end of the month, or smaller payments weekly or bi-weekly.

The answer is yes! It does make a difference. Most financial experts will tell you there is a marginal benefit to paying by-weekly. However, my best advice is: pay as much as you can, as often as you can!

See, credit cards work on what they call "average daily balance." This means that you pay interest based on the average balance over the course of the month. This means that if you pay a day earlier, that is one less day of interest that you pay for. So in addition to saving money on stamps, instant online payment can also make a big difference in the long run.

Because of this, you should pay off as often as you can. Also, stretch yourself, if you have budgeted x amount of money per pay period, do whatever you can to add to that. Pay x + y and you'll be free from credit card debt even sooner. When I paid off mine, I lived as frugally as I could manage and threw absolutely everything else at my credit cards. Here is a piece that spells out clearly how to pay off cards faster.

You should also be aware, however, that credit card autopay doesn't always work as well as you think it does. If you make an extra payment, many cards will then stop the auto pay, so don't just assume you are covered. This depends per lender, so make a call to find out.

Here are a couple of other posts related to this subject that you might find helpful. How to get 20% returns by paying off your credit card, savvy credit card use, how to avoid fees, five tips to pay off your cards, and as always, live within your means!

If you need further encouragement to pay off your plastic, other than a looming economy, you can play around with these credit card calculators, credit card pay off, snowball calculator (paying off multiple cards), and the optimizer (shows difference in rate).

You can also take a look at how James paid off his cards, and what approach I took

Best,

Miel

Whats Up With Gold?

2008-11-18T11:26:00.004-05:00

Hi All,

Gold. Ah gold. Gold has been used as a store of value and a currency since humanity first started keeping historical records. More recently there has been a lot of demand for the yellow metal driven by increasing government debt and heightened economic uncertainty. Despite this, the price for gold on international trading exchanges has gone down, leading some to scratch their heads.

According to the NY Post -not exactly a journalistic powerhouse - the Feds are having a hard time making enough gold coins to keep up with demand (here). But at the same time, the price of gold appears to be going down. Why? Well there are a few reasons.

1) Inflation is relatively low. Prices are down 3% from where they were a year ago (1). Gold has often been used a hedge against inflation so with inflation pressures easing, there is less interest in the metal on the part of buyers.

2) The dollar is strengthening. In the past few months, the dollar has been strengthening against other currencies. When the dollar is strong, gold prices tend to decline.

3) Disconnect between the "paper market" and physical supply. There are a number of different ways to buy gold these days. Its possible to purchase exchange traded fund shares, dabble in futures and options, buy and sell leases on physical holdings of metal, etc etc. For understandable reasons, many of these are removed from the supply constraint of the actual metal itself. Thus, the diversity of ways to invest in gold suggests that its price may be at least partially divorced from the supply of the physical metal. Simple, put the big money boys who deal in paper aren't buying gold.

So, to quickly sum up, the price of gold is going down due a combination of weak inflation, a strengthening dollar and market sentiment regarding the value of the metal. The demand for physical gold simply doesn't have as much impact on prices as these other macro-economic forces.

Personally we DINKs have a couple of ounces of gold safely stashed. Some of artwork on the coins is rather fun and a bit of exposure to precious metals isn't a bad idea.

Best,

James

Finance Quote of the Day

2008-11-18T05:42:00.000-05:00

The missiles won't be launched. Blood isn't running in the streets. You owe some money, that's all. You're not going to be shot at dawn. There is no debtors prison.

- Jerrold Mundis, How to Get Out of Debt, Stay Out of Debt, and Live Prosperously

Yahoo's Yang To Step Down - Great!

2008-11-17T20:55:00.003-05:00

Well, it had to happen at some point. Jerry Yang, the head of Yahoo Inc. is stepping down from his role as chief executive.

This is probably a good move. Back in 1999 yahoo used to be a good company. But most recently Yang missed an opportunity to sell Yahoo to Microsoft for 33 dollars a share. Historically though, yang has failed to capitalize on a number of business opportunities. For example he tried to create his own advertising network to complete with google - which failed to pan out. Also, yahoo has thoroughly lost the search engine wars. Google is now by far the preferred method for finding things online - people use yahoo only very rarely.

Best,

James

Bailout Funds Being Spent Unwisely?

2008-11-17T09:50:00.001-05:00

One republican senator thinks so...

Focus on Less

2008-11-17T09:23:00.005-05:00

As we move deeper into a recession, perhaps it's time to focus on less instead of more.

It can be even more satisfying to purge that which with you no longer have a need for, as it might to go out and buy more stuff.

My advice for the day would be to try the later. Instead of heading to the mall, delve into your closet, hit your book shelf, reach into the recesses of your dresser. You will likely discover that you actually have abundantly more than what you really need.

You might just find that getting rid of what you no longer need, or cherish, will lead to more contentment than actually buying more stuff does.

Plus, taking the time to purge what does not bring value or function to your life will free up space to add what does.

Donate what you no longer have a need for to your local thrift store or shelter. There is no need to horde mini bottles of hotel shampoo when someone else is in need of a shower. Doing so will not only declutter your space, but also do good for others.

Try it, you might like it.

Readers: We'd love to hear what you've recently purged and how satisfying it was!

Best,

Miel

Goals Goals Goals

2008-11-16T14:23:00.004-05:00

Hi All,

One trait of successful people is they tend to have goals. That is they have clear objectives in their mind and a plan to achieve those objectives. The important thing about goal setting and planning is that it promotes long-term vision and short-term motivation. It also helps to focuses acquisition of knowledge and organize resources.

So, we sat down this weekend over Asian food and reviewed our own goals. They are:

Long Term (8 + years):

1) Retire with net worth of $4,000,000.

Medium Term (5-7 years):

1) Save $65,000 to resettle to Oregon. This will entail sufficient funds to do at least three things.

1. Purchase a home large enough for a family - $50,000

2. Buy a car - $10,000

3. Outfit a nursery - $5,000

For this set of goals we like Portland and have decided to head out there when the time comes to raise a family. Washington, DC is wonderful, but unfortunately the schools and the social environment are not conductive to the sort of environment we'd like our potential children to have.

Short Term (6 months to 2 years) :

1) Achieve net worth of $300,000 by end of 2008. This is 100k less than our goal last year, but asset prices have taken a huge hit, so we want to stay where we are and trust that asset prices will improve.

2) Save $40,000 by May 2009. We are intending on buying a condo in Portland, Oregon. Based on our preliminary numbers, $40,000 should be enough to cover closing costs and give us a comfortable loan to value ratio. We have $17,000 stashed already.

3) Starting late summer/fall 2009 invest in income stock to achieve $1,000 per month in dividends. The rationale is that we want to increase our options and improve our financial security should we have another unexpected job loss. Also, we are planning on travel and relocating, both of which require money.

Immediate Goals

1) Keep a lid on spending, and not exceed $3,500 monthly as our combined spending.

2) Reach our entrepreneurial fund goal of $20k by the end of the year.

For more posts like this go here and here.

Best,

James&Miel

Will The Governments Credit Rating Get Cut?

2008-11-15T21:03:00.004-05:00

If you didn't catch this story from Reuters a while back, you might be interested to know that the rating agency Standard and Poors appears to be concerned about the viability of the federal governments AAA credit rating (here).

Is this likely to happen? In all likelihood, probably not. That said, with the schizophrenic behavior of financial markets, the ongoing federal deficit and the future unfunded liabilities for social security and medicaid, it would be sensible to keep an eye out for any statements from the rating agencies regarding the national credit rating.

Best,

James

Greed and the Decline of the Banking Sector

2008-11-14T08:23:00.005-05:00

Hi Folks,

Listening to Fresh Air on National Public Radio, I heard a great segment that went over Gretchen Morgenson's piece earlier this week in the New York Times on the fall of Merrill Lynch, The Reckoning: How the Thundering Herd Faltered and Fell. You can listen to the 38 minute piece here.

Overall it is one of the best reviews, and explanation in plain English, of how the banking sector fell on its face. The simple answer to how the decline of the banking sector occurred: Greed.

Basically folks didn't want the party to end, and kept finding new inventive ways of making more and more money. Now that the party has certainly come to an end, the tax payers are left holding the $700 Billion dollar bag. The Merrill Lynch senior executives of course, shared the spoils of $200 Million for their last year of efforts to plow the giant under.
Best,

Miel

Time is Money

2008-11-13T09:48:00.003-05:00

People's ideas around the value of their time differ greatly.

On the one side: Some believe in the principle that if you can pay someone else to take care of something for you, to free up time for yourself, then this is preferred. The idea is that your time is valuable, and this will free up time for you to deal with other pursuits.

While I can see some of the logic in this argument, I don't really buy into it for most cases. It only makes sense if you are doing something else that is more productive in that time you've freed up.

For instance, if you pay someone to clean your place and then work on making a small business succeed, this might make sense. But if you spend that freed up time relaxing or taking care of life, I think that the argument isn't quite right. In this case it would be to add to your overall quality of life, rather than a financial gain.

Another example is that folks won't deal with something (mileage programs, returns, etc.) because they say it isn't worth their time.

On the other side: You can work to maximize your time to make or save extra money. While theoretically I'd love to fall in the prior category, I simply don't. I figure I have a limited amount of time, and I might as well do as much as I can out of it.

I believe in spending my extra time in ways that can help get ahead in some way, including:

Deal Hunts. Spending extra time to get the best deals when booking flights, or the like. I generally spend at least 25% less than I would on an initial search.
Miles Management. I also spend the time to get the most out of miles and bonus programs, this has paid off a ton for me.
Returns. While I tend not to shop a great deal, I'm also not afraid to follow up on returns. Being lazy about returns not only means lots of money down the drain, but also random stuff in your life that you don't want.
Education. I also like to spend my extra time doing things that will continue my development in various ways. For instance, next week I've signed up for an etiquette dinner ($10 for a three course meal and class) and I'll be headed to a workshop ($29) for how to make more money blogging.
Maximize Time. I also like to manage my time well so I can free up time to play. This is one reason we don't have a TV and I spend my time walking for extra exercise rather than stuck in traffic. Not everyone has the option of ditching their car, but you do make choices as to how much time you spend in it or in front of a TV.

Readers: We'd love you to share any ways that you spend your extra time to add to your bottom line or quality of life. If folks are in favor of outsourcing for extra time, we are also interested to hear your thoughts on that.

Best,

Miel

Financial Crisis Continues to Worsen

2008-11-12T10:39:00.003-05:00

Is our financial system really falling to pieces?

Ironically now that I'm back in the states and unemployed, I find myself listening to an endless stream of pieces from National Public Radio about the financial crisis. Aside from Obama having been elected, you'd think that nothing else was happening in the world.

In case you haven't been up on the latest of the crisis, these seem to be the big issues happening at the moment:

China Fiscal Stimulus Package. At a whopping 4 Trillion Yuan (586 Billion USD) to be invested in China's infrastructure by 2010, this is pretty huge. At the same time, it seems that the reflection has been that the announcement didn't do as much to prop up the US and Asian markets as much as one would have hoped for. In the long term we'll see how much of this trickles to the US. Check out this piece from China View if you are interested in learning more.
Bailout of American Auto Makers. Now it appears that the auto makers are lining up for their piece of the $700 Billion dollar bailout. The basic jest is that many people are saying that America can't afford to see the auto makers go under, as it would tip off a downward spiral of more job losses and further decline of the financial situation. Now the question is whether or not Bush take any action during the next lame duck session, or if this will ride out until Obama is sworn in. The pundits are saying that while Bush is against a bailout, he also can't afford to have the end of a major auto maker mark his last contribution as President. In addition to avoiding the financial implications of letting the auto makers fail, Obama is also interested in looking to the auto makers to play their role in decreasing our reliance on fossil fuels. Here is an interesting Wall Street interactive graph of what events have taken place against the background of GM's falling stock price.
Foreclosure Rent Backs. As rates of foreclosures continue to rise, real solutions seem hard to come by. Some are proposing rent back situations where the previous owners rent back from the bank for a period of time. While this keeps folks in their houses, there are plenty of pitfalls to this proposal. In my humble opinion, chances are that being faced with foreclosure is a signal that these families would be better off downsizing their lives to live within their means.
Unemployment Hits 6.5% - a 14 Year High. With 1.2 Million jobs lost this year, it looks like folks like the L.A. Times are pointing to the likelihood of things getting worse before they get better. They point out that if you include discouraged workers who are no longer actively looking for work, this figure really goes up to 11.8% for October.

Overall it doesn't look pretty.

Miel

Cut Backs

2008-11-11T09:08:00.003-05:00

With only a few days in the ranks of the unemployed, I'm reminded of what things are financially essential. Financial set backs can actually be very valuable in terms of the lessons they teach us.

The reality is that what we have in cash alone would sustain us for at least six months without severance or unemployment (which has already been approved). However, we have chosen to go on a spending freeze of sorts until I have secured employment.

We certainly won't be helping the overall economy with our spending. Some of the main things we are working on cutting back on include:

Eating in More. Eating out Less.
Bringing lunch rather than buying it out.
Only buying essential clothes - i.e. I had to buy a new suit after returning from Kabul.
Skipping the coffee out - at least more often than not.
Waiting for household purchases - like a couple of chairs we need.
Less presents at the holidays.
Being conscious of spending.

Of course these are all things that can be practiced even in more prosperous times. It's a good reminder of what is important to spend on. Despite cut backs, we are doing our best not to be in a deficit mindset. We are lucky that we have planned and have enough.

Best,

Miel

Evaporation of Employment

2008-11-10T08:56:00.004-05:00

I have now recently joined the estimated 1 Million American who have faced a job loss in the last year, according to the New York Post. Yes, you heard me right, I'm now unemployed.

I should have been landing into Kabul today. Instead I'm back in DC looking for a job. Just like that, there was an issue with approvals for my position - note that I already had a signed contract - and I'm out of a job.

As you would imagine, the country's unemployment figures suddenly hit a whole lot closer to home right about now.

While this is obviously a blow in a variety of ways, there are certainly lessons learned already:

Cash is King. Having cash on hand is a relief when the unexpected arises. I'm lucky that I had also built up more of a reserve to pay for three months of rent up front in Kabul. This means that I have a chunk of change that should last me much longer than it will take me to find a job.
Emergency Funds. In addition to my own funds we also have a fall back fund that feels good to have right about now.
Resume. They can take your job but you still have your experience. This gives just one more reason to build up your resume for times when you will need it.
Practice makes Perfect. Having recently gone through the process of submitting resumes and interviewing, I feel that I have a bit more recent experience in the job search realm that will help ease the transition.
Don't take Anything for Granted. The biggest lesson of the day is that you too are not exempt from the possibility of job loss. No matter how secure you think you are, just know that you aren't.
Pursuing Opportunities. As they say, when a door closes, a window opens. This is certainly the case for me. Despite how much I wanted to return to Kabul, the security situation has notably deteriorated in the last several weeks since I've been in the states. This is an opportunity to find something that has more stability overall, as well as enjoying being back with James and our two fabulous cats.

We'll keep you posted as things move forward. I should also note the actions that I'm taking now to get myself back on track:

Assessing Finances. This is a first key step to making sure that we can make ends meet while not having an income. Luckily our saving has meant that we are in a good position.
Applying for Unemployment. Next I submitted my paperwork to receive unemployment. Given what I've contributed to the system, I'm eligible to receive $359 a week, or $1,436 a month. Even with my portion of the mortgage, this should actually cover most of my expenses without dipping into savings.
Getting a Settlement from my Employer. I'm still working on this step, which may involve legal counsel as well. I'm requesting shipment of belongings from Kabul, my return ticket to DC (as I was on the West Coast for work), payment of my lease in Kabul, and severance. I'm still sorting through the legality aspects of the situation and would love any tips for employment lawyers out there.
Revising my Resume. I'm also updating my resume and attending a networking and job hunting workshop from my alma mater tomorrow.
Communicating with Contacts. I will also be sending out notes to professional and personal contacts to get any leads on positions and so forth. In my field jobs are certainly about who you know to help connect you.
Reflecting. I'm also reflecting on where I want to be so I state my intentions clearly to myself and others. Given my background, I have a great many options I could explore. Reflecting helps to ensure that I'm pursuing what I want.

Wish me luck as I get through this set back.

Miel

Eight Signs of A Tax Cheat

2008-11-09T10:51:00.007-05:00

Hi All,

Nobody likes taxes. However, there are right ways and wrong ways to reduce your tax burden. The right way to cut your taxes is to take all legally allowable deductions, the wrong way to do it is to engage in fraud. Here eight signs that indicate someone might be cheating on their taxes.

1) Understating income by denying its receipt and then not being able to offer a satisfactory explanation for the omission.

2) Concealing accounts with banks, brokerage firms or hiding ownership of property.

3) Repeatedly failing to make deposit receipts into business accounts.

4) Manipulating personal expenses to appear as business expenses.

5) Taking excessive religious and charitable donations.

6) Showing substantial unexplained increases in net worth over a period of years.

7) Showing a large excess of personal expenditures over available resources.

8) Failing to file a return, especially over several years , while receiving substantial amounts of taxable income.

Tax evasion is a serious crime. Billionaire Leona Helmsley the "Queen of Mean" spent 19 months in federal prison for claiming personal expenses as business expenses (here). Mobster Al-Capone was sent to Alcatraz Island, as he could not account for the source of his $100 million dollars in illicit income- that's 1.2 Billion in today's money with inflation factored in (here).

Best,

James

Proposal to Abolish 401(k) Tax Breaks

2008-11-08T06:58:00.002-05:00

We got wind of a proposal that is currently being looked by Congress to abolish the tax breaks currently offered for contributing to 401 (k)s.

Just to get it out there up front: we DINKs are firmly against this proposal.

Their reasoning behind the proposal are several fold:

1) They are arguing that the loss of funds in the recent stock market collapse, a whopping $2 Trillion over the last fifteen months, are evidence of the risk that individuals face on the open market.

2) Investors face relatively high fees on managing 401(k)s.

3) Changes that have been proposed would cover everyone, not just those who choose to save.

4) They also have a beef with investment advisers giving advice to folks about their retirement.

Under this plan individuals would receive a $600 subsidy from the government, but then would be required to invest 5% of their salary into a social security managed fund that would be guaranteed.

Here is an article from Investment News for those who are interested in learning more.

As for our thoughts on the proposal to abolish tax subsidies for 401(k)s:

1) We think that the tax breaks currently offered for investing in 401(k)s does a lot to encourage saving.

2) Arguing that investment advisers are any worse than whoever would be managing funds from the government side of things is ridiculous. It just means that the fed would guarantee your money, not that it would actually go further. If you look at the current social security structure they've managed to set up a system that doesn't even benefit from the wonder of compound interest - so how could we expect a better system to manage a mandatory contribution.

3) Speaking of which, the mandatory aspect of this proposal just kills us. Certainly we are for investing. But let's face it, we are all adults and we can make our own choices. With social security itself already eating at our pay checks we think there should be a balance between individual choice and government mandates.

We differ a bit on social policies, but overall agree that financial matters should be left more up to the individual. If the government really wanted to do something, they would help by providing financial education from grade school through retirement.

Readers: We'd love to hear your two cents on the subject, since we know that opinions differ greatly in this area.

Regards,

Miel&James

Jerry Yang, the Underwhelming CEO

2008-11-06T22:56:00.005-05:00

Hi All,

Check this out. Evidently the CEO of Yahoo Inc. - Jerry Yang, is now effectively begging for Microsoft Corporation to buy Yahoo. If you remember, Yahoo and Microsoft were in buyout negotiations a few months ago, but the talks fell through due to Yang's intransigence.

At this point, I have to say that I'm not impressed with Yang, it feels like the guy had the opportunity to sell his company for $33 dollars a share, now its worth $14. Lame.
Click here for the story.

Best,

James

Bankruptcy Filings Peaking

2008-11-06T16:13:00.004-05:00

Hi All,

Well, it looks like the nation isn't out of the woods yet. According to new data from the National Bankruptcy Research Center nearly 40% more consumers have gone belly up than last year - for a grand total of 106,266 filings in 2007 (here). This is a very high number. There is some speculation that legislation passed in 2005 may have backfired by allowing credit card companies to increase junk fees, thereby fueling the number of bankruptcy filers (here).

Awesome. This why special interest should not interfere in free markets.

Best,

James

Getting Started

2008-11-06T11:51:00.003-05:00

We had a commenter recently who wanted to know how we got started. I'll focus on my own process, but James has done relatively the same process as well.

1) Pay down Debt. Perhaps the best motivation for getting ahead is the experience of getting behind. I didn't have a dollar of credit card debt until I was 26. In a year racked up debt for the first time by being unemployed and spending above my means. I spent the next year throwing money at my debt and getting it paid off for good.

2) Save for Goals. The next motivator was saving for various goals. I continued to save as much as I had been while paying of my credit card debt, but instead put this towards saving for buying a place together and then getting married. Having been accustomed to saving so much, this was relatively easy.

3) Save for Retirement. While I had been plugging away smaller amounts towards my retirement, my next big accomplishment was maxing our my ROTH IRA and then my 401(k). I just kept putting a little more in at a time until I was all maxed out. This felt good.

4) Raises. Another big thing to my success has been focusing on my career and getting frequent raises and promotions over the last five years. Even without my additional allowances for being overseas, my base pay has doubled in five years. Including my allowances my salary is now over four times what my salary was at that time.

5) Live within Means. A big one as well is that my expenses haven't really increased much, while my salary has. Living within your means as your means increases just means spending more money. A key to acquiring wealth is to keep your expenses low as your income increases.

6) Take Risks. Another key has been taking risks, since we have the benefit of relative youth. We have taken several large risks while as a couple and they have paid off well. The first was flipping a place during the height of the real estate boom in DC, as well as putting a large chunk of change into Hansen's stock. Being willing to take risks contributes to possible gains.

Those are the basics for what I've done to get established financially. They might be simple steps, but there is no need to make it complicated.

Best,

Miel

Obama And Your Pocketbook

2008-11-05T08:17:00.006-05:00

In case you haven't heard the news, Democrat Barack Obama won the presidency last night. Democrats also picked up several seats in the House of Representatives and the Senate. For those interested in personal finance, this outcome may raise questions. Specifically, you may be wondering: how will an Obama presidency impact your pocketbook?

Two things:

1) Energy Policy and Costs: Obama supports a cap and trade system on coal emissions as well as movement towards alternative energy. This suggests that companies producing or using coal or other fossil fuels will be at a regulatory disadvantage for the next few years. So, if you've got investments in these energy sources you might consider diversifying into solar or wind energy firms. Keep an eye on headlines for these industries and do your due diligence.

2) Tax Increases: The president elects statements have been consistent regarding the need to increase taxes on high net worth individuals and corporations (1). There has also been talk of increasing the marginal tax rate on capital gains and dividends, raising them from their current rate of 15% to 28% (1). So, what this suggests is that an Obama administration will increase taxes, especially on mechanisms used by high net worth individuals.

However, it may be too early to tell how your wallet will be effected. Many of Obama's staff appointments have not finalized and there isn't any legislation yet proposed. Given the contentious nature of the policy processes, it's also possible your personal finance may not be impacted at all by the change in administrations.

Update: CNN Money has a very good posting on the president-elects stand on major economic issues, here.

Best,

James

Its Election Day

2008-11-04T12:32:00.002-05:00

People - go vote.

Thats is all.

A New Bretton Woods Agreement?

2008-11-04T00:34:00.003-05:00

NakedCapitalism is a blog that I occasionally visit. They've got a good posting on the international financial meeting that's being held on the 15th of this month. Representatives from the major world economies are going to meet to discuss a number of things, including:

1) The International Monetary Fund (IMF) and the role of emerging economies. Right now European and Western countries have disproportionate influence on the IMF, but countries like Brazil and China are coming up, so they may want to push for a change in presentation.

2) IMF country rescue programs. With meltdowns in places like Iceland, there may be discussion of mechanism and procedures for bailing out whole economies.

3) Regulations. Possibly also on the agenda will be international regulations regarding bank deposit insurance and rules about how much money financial institutions need to keep on hand.

What does all this mean for you? Well, not much, but it is interesting to see how the global economy is regulated.

Click here for the posting on Naked Capitalism.

Best,

James

Free Coffee on Election Day?

2008-11-03T19:59:00.002-05:00

A rumor is flying around the internet that Starbucks will be giving away free coffee on election day! Evidently there is no proof required that you voted, you just have to ask for the coffee.

However, ever vigilant of the public interest, the government of Washington State has contacted Starbucks to inform them that the giveaway might be illegal.

Despite the party poopers at Washington State, it might be worth swinging by Starbucks if its on the way to the polling station, free coffee is certainly better than paying 5 bucks.

Best,

James

Three Steps To Wealth

2008-11-03T16:17:00.004-05:00

The thing about personal finance bloggers is that we get caught up in the day to day trivialities of running a blog and sometimes forget about good content. In my view the purpose of blogging should partly be about communicating the best way to build wealth. While we DINKS are certainly not experts when it comes to making money, there are three things we have done which have improved our bottom line.

1) Saved money. Its a little old fashioned, but the processes of wealth creation is driven by saving and investing. In our case, we've been able to scrape together a house downpayment of approximately $30,000 and paid off a second trust of $32,000. The end result of the saving processes is affordable payments and less debt.

2) Bought and held high quality stocks. For example, we bought shares in Starbucks (SBUX) and Exxon Mobil (XOM). Holding onto both of our positions in these companies brought us gains in excess of 20%. In the case of XOM, we've seen a 40% appreciation in the value of our shares. We hit it big with Hansen's Natural Corp (HANS), and made healthy pre-tax. Of course, we've seen plenty of looses, especially now after the stock market meltdown, but overall the buy-and-hold strategy has worked for us.

3) Started a small business. My wife and I have an efficiency condo unit that we rent out. Real estate has been a love hate experience with us. We tried to expand into a multi-family building two years ago, but sold the property. On the other hand, our condo unit has added thousands of dollars to our networth. The final point here is that the rental unit is basically a small business, we have one customer to whom we provide housing and utilities in return for rental payments. It works. The business puts money into our pockets.

To conclude, if you are really serious about becoming financially secure, you'll take some time to find out what works. For us this has been three things: 1) Saving, 2) investing in good stocks using a buy-and-hold strategy and 3) starting a small business.

Best,

James