Net Worth update: October 11, 2008

October 11, 2008                 May 31, 2008
Savings / Checking : $ 37,000    $ 51,000 -27%
Illiquid assets    : $  1,000    $  1,000 - 0%
Taxable Investments: $219,000    $275,000 -20%
Retirement Accounts: $162,000    $229,000 -29%
Credit card debts  : $ -4,000    $ -3,500 -12%

Combined Net worth : $415,000    $552,500 -25%

Wow, what a massive loss the past few months have brought. The taxable investment loss percentage is actually higher than 20%, because I've used cash to purchase more stock on the way down, with the wife's approval of course.

Since June, we spent money on a Vegas trip, a new bed, a new sofa, and a new dog, in that order. We definitely blew past my paycheck the past few months. But now it's time to reign in our spending again. It doesn't help that there's another Vegas trip at the end of October.

Our retirement accounts are where our money has been hit hardest. However, -29% since May 31 is still better than the S&P500 which has dropped 35% during the same timeframe. We're keeping steady our 401k contributions, and I'm confident we'll be in great shape 10 years from now.

If you've been frugal, you're going to weather this just fine. We have enough to keep us going for at least six months should either of us lose our jobs, and plan to aggressively save over the next two years in anticipation of owning our own home. But once again, who knows? It could be I'll continue using cash to buy more stocks over the next year...

My trades are tracked over at Cake Financial as BlackHammer. I've sort of stopped using Icarra because I'm lazy and it takes more manual input to keep track there...

Net worth update: May 31, 2008

Savings / Checking : $ 51,000     Last Month : $ 68,000
Illiquid assets    : $  1,000     Last Month : $      0
Taxable Investments: $275,000     Last Month : $252,000
Retirement Accounts: $229,000     Last Month : $219,000
Credit card debts  : $ -3,500     Last Month : $ -5,000
Combined Net Worth : $552,500     Last Month : $534,000  + 3.46%

We're still in the process of adjusting to living off only my paychecks. Her paycheck will go straight into our Down Payment fund. We'll eventually sell much of our ESPP as well to help with a down payment. I'm aiming for around $120,000 for the down payment, so with our combined ESPP we need $70,000 saved up to get where we want.

Perhaps in two years we'll be owning a home. My hope is that eventually as interest rates grow higher again, the selling prices of homes will drop. I'm still hoping that San Francisco home prices drop over the next two years as well... But who knows?

Credit crisis is not over

Warren Buffett warned yesterday that the credit crisis is far from over. I'll tend to believe him. American Express recently noted that late payments increased in April, while in past years it normally shrank. So more and more people are starting to rely on their credit cards. This isn't going to be an easy fall.

Yet, I'm still looking for bargain stocks that can weather the storm over the next 5-10 years. I'm holding, and I'm BUYING MORE in this market. American Express is now on my watchlist, since I missed the boat with Visa. I remember putting a limit order for $45 on Visa. It never got close.

We're going to try living on my paycheck, and my wife will simply sock her paychecks all into savings...or more investments. We'll see. With our rent going up, we're going to be stretched thin on my take-home money alone. I'm sure we'll be dipping into her paycheck once in a while, but I'll definitely try not to.

Gambling with market timing

There's definitely a thrill when cherry picking stocks near their lows and watching them climb back out of their holes. I got lucky on a number of stocks recently like CSE, NTGR, AMD, PAR, CCRT, AAPL.

Still, I definitely have some losers this year as well, such as VDSI, DBTK, OMTR, OXPS. These are Motley Fool stock picks, so I'm willing to hold at least another 12-18 months for signs that the companies will be able to turn around. I've continued to buy down on these so my price point is lower than what you see above, but have reached my limit and will not buy anymore.

Looks like May could be another downer month, so I'm adding cash into my Zecco account for more bottom fishing. StockTradingToGo and askStockGuru are recent technical analysis sites I've been reading. You'll be able to track my trades at ZeccoShare, Cake Financial, and Icarra.

Why ROTH doesn't make sense to me

Our AGI is above the Roth contribution phase-out limit, so we can't contribute to a Roth IRA anyway.

The Roth IRA allows you to contribute after-tax money into a retirement account, where future withdrawals after retirement age are income-tax free. The reasoning behind this is that one might expect to be in a higher tax-bracket come retirement age. That argument only holds water if you expect to SPEND as much as you do now.

Most people between the ages of 25-35 will have a rent/mortgage payment, a car loan payment, student loan payments, entertainment spending at bars/restaurants. Those really add up in terms of money being spent. By the time I retire, I don't expect to still be paying off any loans, which means the biggest reason for recurring income is nullified.

What if we move to a Value Added Tax like in Europe? A lot could happen in 30 years. Sure, your Roth withdrawals won't get taxed as income, but what are you going to do with that money? Spend it on goods/services. That pretty much means you've gotten taxed twice -- in 2008 when you put your money into the Roth, and in 2040 after you've retired and you bought a new set of golf clubs + 15% VAT. I don't play golf by the way. I hope I don't do that when I retire either.

So take advantage of the tax savings in a 401k for the NOW especially if your company offers 401k matching contributions, or a traditional IRA if you qualify. The Roth IRA is betting that your life situation will be more income-tax heavy after retirement. Who can see that far into the future? Instant gratification in this case is a good thing.

This post assumes you follow the generally accepted best practices of personal finance which are: Spend less money than you earn. Save the remainder. Grow that savings in dividends, investments, or interest.

Afterthoughts: Roth could make sense for the teenager getting a first-time job. If you have kids, and you've educated them in the merits of saving money, living frugally, etc, then encourage them to put their earnings into a Roth account. A teenager's first-time job is probably going to be taxed minimally anyway, so the Roth is ideal in that situation. Plus, that gives the Roth an investment horizon of at least 40 years.

Goals for May 2008

Since rent is expected to increase, I'm going to take my 401k contributions to 15% pre-tax instead of the 10% pre / 5% after tax contributions I was making before. I'll check my paycheck in two weeks to see how much more money I net. PayCheckCity has an excellent calculator for this.

Mint.com has some recommendations on how to save more money, such as moving to an E*Trade Checking account (which I've already done), and let us know that Starbucks and Peets Coffee are our most frequented merchants. I'll have to talk to the wife about that again.

Cleaning up clutter. I have lots of stuff lying around the house that I could probably put up on Craigslist. I'm too lazy to pack stuff up to sell on E-Bay. I figure I could gain another $200 or so selling all this crap I haven't been utilizing. Better yet, I might be able to donate and take an itemized tax deduction... except I don't expect our itemized deductions to top the standard married filing jointly deduction this year.

Net worth update: April 30, 2008

Savings / Checking : $ 68,000     Last Month : $ 78,000
Illiquid assets    : $      0     Last Month : $      0
Taxable Investments: $252,000     Last Month : $226,000
Retirement Accounts: $219,000     Last Month : $218,000
Credit card debts  : $ -5,000     Last Month : $-11,000
Combined Net Worth : $534,000     Last Month : $511,000

Well it was a pretty good month. That big jump in our taxable investments was me adding another $10,000 in funds into Zecco combined with some great comebacks on a few of our stocks, and my wife's scheduled ESPP purchase. That ESPP money is basically in limbo until the purchase occurs. I suppose that could be listed in Illiquid assets, but I'm not going to check her paystub right? Hmmm... You can track my stock purchases on two portfolio sites I use: Cake Financial and Icarra.

Our rent is increasing by 8%. Our apartment in San Francisco is not eligible for rent control since it was built after 1979. That means a little less savings each month, but I think I can get around that by contributing to pre-tax 401k rather than after-tax Roth(k). I'll have to think about that. I'm currently contributing 10% to pre-tax, and 5% after-tax. By going to a full 15% pre-tax, I think I could regain the rent increase. Still, more to calculate.

The housing market is still looking pretty poor. Patrick.net is pretty much all doom and gloom. There's a web site trying to petition against the housing bailout at AngryRenter.com. It will be interesting to see whether that's successful or not.

On Vacation until May

On vacation in Europe until the end of April. If I find cheap wifi hotspots during my travels, I'll log on to possibly write about my spending experiences. Otherwise, see you in May!

Icarra.com down: Wednesday April 16 2008

Could not connect
Count not connect to db

These are the words I see when trying to connect to icarra.com, the portfolio/performance tracking site I recently moved over to. I had originally used Cake Financial but it didn't properly track my basis positions when I transferred stock between brokerages. I don't think there's any easy method to track brokerage transfers, so I've done it manually through Icarra.com.

Apparently Icarra.com has had outages before, just like Zecco.com. I guess I get what I pay for (nothing but my time).

E*Trade Max Checking: 3.25% APY

I opened up an E*Trade Max Checking account today. It has 3.25% APY if you maintain a balance of over $5000. They also reimburse ATM fees if the withdrawal doesn't put your balance below $5000 as well. The $15 monthly fee is waived if you maintain a balance above $5000 or set up direct deposit of $200 or more monthly.

We'll see how long this 3.25% rate lasts. My credit union has steadily decreased its savings account yields each time the Fed knocked down the interest rate. What's funny is that the E*Trade savings account yield is only 3.01%. I suppose if you don't have $5000 saved to put into the Max Checking account, the 3.01% Savings account is still a good deal.

So far, this is the highest APY checking account that Bankrate.com listed in a search today.