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Below are the 11 most recent journal entries recorded in Learning to Save and Invest Without the Hype's LiveJournal:

Friday, March 28th, 2008
7:00 pm
I have a stupid question
Let's say there are two CD's, both with a rate of 3% APY. One is a 6-month CD, the other is a 12-month CD. (I chose this APY for easy calculations.)

So, if you open a 6-month one but don't let it roll over you only get 1.5% of the APY, right? But if you let it roll over, at the end of a year you've earned interest not only on the principle but also on the interest you earned at 6-months.

Does this assumption make sense?

Current Mood: curious
Thursday, March 27th, 2008
9:45 am
Time for an Update and a Look to the Future
Well, the expected recession might not be official, yet, but an 0.6% GDP growth rate with top banks tanking is not exactly a rosy picture. I have done all right, but because of timidity, not nearly as well as I could have. I sold out of my gold far too soon; just as it went $660 an ounce. It bounced up above a $1000 recently. I didn't buy the ETF in Bolivia - BIG mistake, as that fund has had a 47% growth rate this year. I was too afraid of major companies being taken over by the government in the spur of nationalization down there.

However, I haven't done too badly, considering the woeful tumble of the stock market. I sold my WTR stock far too soon, realizing a small loss instead of any profit, and my LEH stock has (as have most financial stocks) tanked severely. However, ExxonMobil (XOM) had record profits and has risen enough to balance out the LEH losses, so my DRIP fund is now at $3231 despite being down some 21% today. I have reached the conclusion after a year of experimenting that it is likely better for someone of my level of discipline to simply save up a wad of dough and buy into a stock with a limit order set very low and just wait for the price to sag to meet rather than dollar-averaging drip investing. I'll be moving those stocks over to my Fidelity portfolio sometime later this year.

Speaking of it, I previously reported $50,900. Adding in the rollover from Former Employer brought that to $64,177. Some adventurous day-trading on Marathon Oil brought that up quite a bit... then the stock market lost over 2,000 points. I have however made some smaller but also profitable trades since, so now the Pre-tax 401k stands at $67,492. I also started a Roth IRA, currently at $4,185, and an After-tax IRA (for the year of No Employment) that is now at $4302. That gives me a new total of $76,079.

The Emergency Fund is healthier also; it has gone from $6,000 to $11,725. There are some signs of strain, however: my clothing needs some replacement, especially some more work shirts. I am getting really tired of how little there is on the basic cable for $13 a month. I don't know if Comcast will ever satisfy - they want to just charge you fees every time you sneeze. I'm seriously considering going to a dish if it would work from my apartment balcony at all. If not I may cancel cable and go Internet service only, taking up a Netflix subscription instead.

I also have the maximum 401k deduction being automatically taken out of my pay each month. That means there is very little free cash; my recent vacation was the result of saving up for several months to afford it. I will be so happy when I finally have my car paid off - 12 more payments to go. It needs two new tires within the next 3 months, also. And an inspection.

Well, that's the update. How is everyone else doing? Is anyone else finding this downturn particularly worrisome? Or am I just a worry-wart? 
Sunday, January 20th, 2008
6:39 pm
Favorite sources of information
I'm curious about what information sources the people in this community like and use for investing information. I've finally decided to move beyond just putting money into savings and work based retirement accounts. I'd like to take a few bucks and start investing. And while I have some ideas as to where to put it, I also want to do some research, maybe get some new ideas.

But there's a lot of information out there and it's not always easy to separate the good from the bad. So I'm turning to the community for advice. What sources (preferably online, and free though I don't mind registering) do you get the best information from?

Current Mood: curious
Friday, October 12th, 2007
7:03 pm
A question about CD ladders
A classic CD ladder (according to BankRate.com) involves opening five CD's at once with each one maturing a year apart. By rolling them over into five year CD's when they come due you end up with five five year CD's with one maturing every year.

That makes sense, I guess, but I started wondering - why not just put all the money in a one year CD and keep rolling it over every year? From what I could see interest rates are, on average, a little bit higher on a one year CD than on a five year.

So my question is, does the extra four years make that much of a difference? (Assuming, of course, that the one year CD is rolled over with all the interest earned.)

Current Mood: curious
Saturday, March 24th, 2007
5:29 am
CD Rates
Does anyone have a favorite web site for comparing national bank CD rates? I know there are a lot of them out there and I could just Google on "CD rates" but I'd like to know which ones you folks like.


Current Mood: curious
Wednesday, March 7th, 2007
8:50 pm
A question about mortgage companies and escrow accounts
Who regulates mortgage companies?

I think our previous mortgage company screwed us on our escrow account, but other than trying to take them to court I don't know what to do about it. So I'm trying to find out where I need to send a complaint because I want that money back.

So who regulates mortgage companies? Or who sets the rules for escrow accounts?

Does anyone know?

(x-posted to personal journal)
Friday, February 2nd, 2007
9:55 am
My DRIP Investing Portfolio - and a Question about ROTH IRAs
Basically, a DRIP plan is a way to buy stock - either directly from a company, or more commonly, through a service company hired by the company. Depending on that specific company's rules for their DRIP program, you usually have to either 1) promise to buy a small dollar amount (anywhere from $10 to $100) of stock every month for six months, ten months, or until you hit some cap, like $500. Yes, because the amounts are so small, you wind up purchasing fractional stock, say 0.9764 of a single stock - but these programs allow you to do so.

There is a more indepth explanation at the Motley Fool site:

However, they don't want to be nibbled to death by tiny little duck accounts, since there are fees associated with keeping track of your account, how much stock you own, and what dividend you are due. That is why you either make an upfront buy of some amount like $500-$1000, then set up automatic deduction from your checking account (or other place) for $75 a month or whatever smaller amount you can invest. The good thing about doing small, monthly investments is dollar cost averaging. When the stock's price per share is high, you get less stock automatically for your $75 monthly amount. When the stock's price has fallen somewhat, your $75 goes further - so you wind up buying at a lower, time-averaged out price usually.

Now a few DRIP programs from a few companies pay the fees for purchasing, the fees for tracking and the fees for selling. Not very many do all of that, but there are maybe a handful. Most will charge at least a modest (far more modest than a broker's comission) fee for selling your stock, when you eventually choose to get out of it. Some will charge a few pennies per stock overhead fees. It all depends on which company and what their program rules are. Some companies (Johnson and Johnson) require you to own a share in your own name (NOT through a broker) before you can enter their DRIP program. Since getting title to the stock transferred to your own name is such a hassle and so expensive, I've never bothered - despite the fact I'd love to invest in JNJ if they didn't make it so hard.

These are stocks, so all the usual caveats apply. You can lose value, if the company's stock price falls. You can lose it all if the company goes bankrupt.

After doing a fair bit of research to locate companies that paid most of the fees, I invested in Lehman (LEH), a water utility (WTR), and Exxon-Mobil (XOM). I would like to find two others, which is why I found out the catch in JNJ's DRIP. I'm still looking. I did initially place $1000 into the LEH - back when it was around $60 a share, so it has done REALLY well. I put $500 into WTR, which has shown slight profit - but gone sideways since, so it isn't producing much return - I'm in it primarily for the dividend accumulation and (hopefully) less volatility because it is a utility. After plunking down all that change (plus the additional $125 a month auto-buy in LEH, and $75 for WTR - which allowed me to pick which day the deduction was made from my checking), I didn't have a big chunk left to up-front buy on the Exxon-Mobil - so I went the purchase-small-and-long route, putting in $75 a month for at least 10 months, I think it was.

The hardest part about investing in DRIPS is that the dividends - even if reinvested (and they SHOULD be reinvested, that's the point!) - are taxable. So, you have to painstakingly keep track of all those little dollar amounts from each program every 3 months, to make sure you report your dividend income properly for your taxes. I'm tracking it by laborious data entry unto Yahoo's Finance Portfolio manager; there are better software packages available that track better and more detailed profit data. I'm just not 'big' enough yet to need to spend $50 or so to buy one.

So, here are the juicy and exact details:

LEH and WTR began in June, 2006. XOM began in July, 2006.

Currently, as of today, value $3738.16, gain of $554.30 over original monies invested for a non-annualized rate of return of 17.39%.

That 17.39% is high because the market is up today; it has been as low as 9.64% over the months I've been tracking my portfolio. It has also been as high as 19% - though that was only for a few hours. However, even the 9.64% annualized is 19.28%. That is a far cry better than I am doing with a three-month CD right now, with an annualized return of only 5.25%

So why do I have not only one CD, but six, each at a $1000, with three due out in March and another three due out in April? Because that is my Emergency Fund money, so I can't take a chance that it might disappear in a stock market correction, or that I might have to sell out the stock at a bad, cheap price just because I had to have the Emergency money. Since I try to keep about $3000 in the checking account (overdraft padding), I have enough there to live on in Emergency mode (e.g. the job suddenly lays me off, which isn't likely right now, but...pays to be prepared) until March when the CD pops free to deliver more Emergency fundage - plus the interest. It's more work than just having a ING savings account - but that extra 5.25% - 4.70% = 0.55% is my pay for that time spent.

Now, a question out to anyone still reading. Should I fund up a ROTH IRA instead of doing CDs to handle the Emergency fundage monies this year? I've heard the original contributions can be taken out at any time, for any reason - only the interest earned has to stay in like a regular IRA. The idea I can have my money when I retire WITHOUT paying taxes on it - because they were already paid - is VERY appealing to me.

Current Mood: contemplative
Thursday, February 1st, 2007
7:18 pm
Where to start?
So let's say the debt is gone, or at least it's under control. Either way, it's not a problem. And let's also say that there's some "found money" floating around (like a little extra cash left over after refinancing the mortgage which is what took care of the debt). Let's say there's about $500 that needs a home.

So now what? It's not much, but it's a start. So where should I put it?

Thinking out loud hereCollapse )

Current Mood: curious
Friday, January 26th, 2007
9:37 am
Pre-Weekend Thought Provokers
I've decided to leap in with both feet and talk about wrestling with debt. I read a figure recently that 55% of the bankruptcies in America currently are caused by medical debts. Meanwhile, as much as one dollar in three paid to Health Care Insurers goes to pure profit, with only two dollars to doctors, nurses, medicine - you know, the stuff that hopefully makes you well again.

Most of the debt problems I have had relate to 1) the avid consumerism pushed down American throats every day, 2) becoming unemployed for an uncomfortably long period, or 3) buying frivolous things while not watching (or deliberately ignoring) the credit card money owed piling up like a volcano. At more than 5,000 advertisements a day (what most Americans are exposed to), it is extremely hard not to want things. Sometimes even things that after two seconds of reflection, I wonder why I ever wanted it in the first place.

Here are my Things that Helped me Spend Less Money:

1. Getting a DVR on the cable TV service has been immensely helpful. If I don't see the commercials, the movie trailers, and the sale-sale-SALE advertisements, I cannot desire going out to purchase these things or see those movies.

2. Eating out is the most incredible, fastest, and least-permanent way to burn through immense amounts of money I think exists. In fact, I'd go so far as to say the average American middle-class person (or lower-mid class, like me) wastes more money on eating out than she would ever spend on, say, a professional wardrobe of suits (not one suit, but a enough to wear for years). I'm personally offended if my grocery bill surmounts $100 a week to feed two people, but I can go out and spend $30 on ONE meal, for just myself in a sushi restaurant. Moreover, people usually eat out four or more times a week - which means they're spending more on those four meals than they spend on the next two WEEKS of groceries. I'm trying to eat a lot better at home - spending a shade more to do so - because it keeps me out of the restaurant. It's like using a list in a grocery store so you don't bring home WAY more than you really needed.

3. New clothes are particularly wasteful, especially the stylish crap they push onto women these days. After my divorce five years ago, I spent $1200 on a professional wardrobe of suits, shirts, skirts, and pants. It sounds like an immense amount, doesn't it? Well, I had nothing actually suitable to wear. So, those five suits and six shirts, two pants and two skirts are still in my closet, still in good to fair condition (one pair of polyester pants is starting to pill a little, because I have dared to wash it in the machine rather than always dry clean) now. It has been six years since I purchased them. All my regular clothing - cotton T-shirts, denim jeans, tennis shoes - have ALL worn out and been replaced TWICE in that time. So perhaps those AWFULLY expensive dress shirts at $65 per weren't so expensive... considering that my mid-range blouses, not as nice... wear out and lose buttons in a year.. and they cost a minium of $12 each. I like to supplement with thrift store clothing. Yes, I know there is awful-looking, worn out, why did someone EVER donate this articles of clothing there. I also know there are silk and angora sweaters for $2, a Banana Republic dark grey woolen sweater (original price $200) I bought for $4 - in my exact size. It requires immense amounts of time and patience and a little humility to shop thrift, but it can save and pay off very well once you get the hang of it.

4. Big-ticket items - these are REALLY hard to reduce. Cutting down on eating out is so much easier. All the car insurers seem to have fixed their prices so there is very little difference. Housing costs are usually geographically set; if you want to live somewhere halfway safe, you have to pay through the nose at an uncomfortable level just to have a place to hang your hat. If you have an apartment, there are maintenance troubles, noisy neighbors, tons of dog poop, parking nightmares, increased crime of burglary or worse. Plus, you sink all that money into rent every month for nothing but 30 days of a place to live. If you try to buy a home, there is a huge chunk of down-payment money out, insurance, mortgage, maintenance, and something always breaking, property taxes, neighbor issues, HOAs, etc. Riding my bicycle instead of taking a car involves the risk of getting injured in traffic, which would make it not a saving very quickly. I have managed to find a roommate situation that works very well for this stage of my life, given I'm middle-aged and divorced. Sharing expenses with a good friend is a win-win for us both. I can see why people in other countries have flatmates so often.

5. Most important to saving - get the money out of sight. I have my DRIP purchases of stock, my Fidelty funds, and my insurance all automatically deducted from my checking account. Every month, I do NOT see that money in there, so I cannot think to spend it on anything else. Getting expenses down enough to have the income to skim off the top is hard, but it is the only way that ever worked for me.

Who has other ways of raising the bridges or lowering the rivers?
Tuesday, January 23rd, 2007
11:20 am
Wow, that was fast!
Thanks, Zia.

Okay, some of you know me, some don't. I'm just shy of 60, married, with a spouse who works part-time. So my investment goals may be more immediate and more oriented toward income than those of younger people who can afford to look 20 or 30 years down the road. Likewise, as a self-employed architect and writer, my work income tends toward . . . variable, shall we say. So I have to pay bills when we have no income, and squirrel the acorns away when a book advance or architectural commission pays us a chunk of change.

We have an investment account (at our age, we'd damned well _better_) with both stocks and a global mutual fund, but need to adjust the balance. I tend toward the conservative end of the investor spectrum, following a buy-and-hold strategy rather than trading, and looking for stocks or funds with a long, reliable record and regular dividends.
9:19 am
Introduction: Ziactrice
I am thirty-eight years old, about five years post-divorce. Last year I decided would be the year of Living Like a Grown Up, which to me meant getting my finances in order, investing more productively, and getting a Durable Power of Medical Attorney in place. I still have to get a Will written, but I have succeeded fairly well in recovering from a bout of severe under-employment two years ago.

I was able to cut my expenses by selling a house and instead living as a roommate sharing a house with a friend. I do pay rent, but sharing household expenses such as cable, groceries, and so on has been far frugal than even I expected going in. I am a chemical engineer, employed currently at somewhat under-the-market salary of $52,000 a year. When I began this job, after the under-employment had drained my finances fairly hard, I still had a Fidelity Traditional IRA (Individual Retirement Account) of about $44,000. I also had all of about $1800 in my checking account.

In the past year, without new contributions, that Fidelity account has hit $50,900. My goal was to struggle past $50,000 if possible, so I'm happy with that. I opened a 401k through my workplace, and contributed the maximum of 28% of my income. That account reached $10,700 in contributions before I stopped them, and has risen to $13,227 by end-of-2006 with a 31.9% rate of return. I gained momementary notoreity in the office by having the best return of anyone on with a retirement account here. I'm invested in the Oppenheimer Growth Fund and the JH Utilities fund 50/50 in that, which is very aggressive but with the high fees John Hancock charges, I thought it was my only good choice.

I stopped the contributions in October, because I needed to save up an Emergency Fund. That currently stands at $6000 - all in CDs with a rotating 3-month release. I have $4000 in my checking to get me through three months until a CD is released as part of the Emergency Funds - which also allowed me to purchase two tires when things got icy here a few weeks back without having to charge anything on a credit card.

I have approximately $3500 in three DRIP stocks, automatically investing each month in LEH ($100), WTR ($75), and XOM ($75), which has earned at about 11-14% since June, 2006.

I have one credit card, VISA, through Pulaski Bank at a fixed interest at 8.3% for a credit line of $3000 in case I need to travel for business. I have automatic draft to pay it $100 a month to avoid late fees. My gym membership at Bally's and my auto insurance to State Farm is also by automatic bank draft. Otherwise, I pay cash for everything, using checks only for my car payment, and phone bill.
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