Friday, January 30, 2009

Giant Ponzi Scheme!

This cartoon is what I have been saying for multiple blogs - Whenever we vote AGAINST raising taxes or cutting entitlements - we are really saying that the current retiring generation can blatantly steal from our future generations! The numbers as they stand today just don't add up!

Saturday, January 24, 2009

My Next Car?

I'm not sure if Porche has made a sedan before - but it speaks to me as I always want a somewhat practical car AND a somewhat sporty car in one.

Thursday, January 15, 2009

Topics I love!

I was listening to a caller on a radio show who was upset that a comedian was making fun of religion. And she reminded me of something you often hear: NEVER talk about money, politics or religion.

Only I think that is a bunch of BS. I agree that you should be aware of your audience and I try not to talk about these things in the formal work environment, though sometimes lunch conversations can get interesting.

BUT - As you can see from the blog labels for this blog - I love talking about these things! I just think you have to be sure to have the right audience.

I am so very thankful to have a group of friends who like to talk about money. I have learned so much about saving for retirement form this group of friends as we openly share our approaches and strategies. I think you should find people of similar economic levels because then you don't have to worry about people's feelings as specific dollars are talked. I for one now am much more comfortable talking about money and have no insecurities as I talk to folks who are quite wealthy or close to retirement and have millions of dollars saved. There are no hard feelings because I have spent a lot of time looking at my specific situation with the help of friends who like to offer advice or support and I am not insecure about our current situation - so I don't have any issues talking with people who are "better off". It's just real world - I don't believe we all have to be equal to have respect for one another and have intellectual conversations.

The same goes for religion. If I could pick one topic that I believe more people should discuss it would be spirituality. I think there are very few things in life that can be such a big part of your life that you had NO CONTROL OVER. Most people inherit their religious beliefs (and religion for that matter) from their parents. I believe at some point when we all grow up and become adults - that it is fair game to take a survey of what is offered globally by way of spiritual thinking and making a decision of what fits for you versus basically having that decision made for you when you are a child.

I think where this falls apart is where people are threatened or offended by other ways of thinking. To me I am all for everyone having their own ideas on religion - but the worst is when someone thinks their ideas should be adopted by others. I am happy to discuss the different views everyone has but at the end of the day I think it is about each person's individual connection to their spirituality.

So I am very thankful to have friends and family-in-law who are exploring different religious or spiritual ideas and discussing them or suggesting good books to read. I think 2009 will be a big year for me to do more meditating and reflect upon "me" more than other years where I have spent most of my energy externally (job, money, retirement, etc).

Politics is very fascinating to me because it combines religious and financial views into what people push for in public policy. The same warnings about money and religion apply but it gets even stickier. I am so thankful to have friends with various views who can openly talk about the trade-offs to all of our approaches.

I believe some of the best intellectual conversations include these 3 "taboo" topics and they encourage indivicual growth and acceptance of others. I would encourage everyone to completely ignore the advice to "never" talk about these topics - only find the right audience in your life to do so.

Sunday, January 11, 2009

Our Financial Review 2008

I just finished our 2008 finances. It was another good year - I feel blessed that we are able to do a decent job saving for retirement while spending some money on things like the Cats and some new appliances this year. In fact - I was shocked to see that with all of the variable expenses we have - we spent within $900 of what we spent total in 2007. Pretty remarkable! Exchange our 2007 couches and landscaping for cats, appliances, and painting the finished basement and it's a push!

So why do I have a bitter taste in my mouth financially from 2008? Well - like many I am pretty upset about the financial collapse of 2008. Really, for broad indexes to be down 40% in one year is ridiculous. I agree that our government over the past 8 years was asleep at the switch while the economy eroded from the inside out. By the time it hit main street - all the fat cats on wall street were gone with their golden parachutes. In fact - it brings up 32 major questions which couldn't possibly be covered in this blog:

1) Why would any well organized and well run company want to go public anymore? The trend of future companies (in my opinion) will be less public capital(and more private).
2) What does this mean 30+ years down the road for investing in public companies if the best companies have incentives NOT to go public?

Here's a graphic of my retirement model which I started for my financial review last year (updated for 2008).

As you can see I have 2 "constant savings" curves for retiring at 55 and 65 based on our projected standard of living over that time. This is also based upon a life expectancy of 95.

I was most excited after putting this together to see that we were ahead of the "retire at 55" line. But as you can see in 2008 we fell below even though we CONTINUED TO ADD MONEY! The NET is continued savings but the entire value of our retirement savings was down about 30%.

I am not going to be too sour grapes over this because we again are blessed to have a long time before we retire and hopefully this will be a blip in the long savings curve - however I also believe we will have to lower our expected returns going forward assuming that the fundamentals of the economy were somewhat over stated as evidenced by this huge correction. I am most concerned about those who are very close to retirement or those who just retired. The effects could be devastating if you need to withdraw from market exposed fund currently.

My take-aways from the financial "crisis":
1) Retirement planning is a LONG term plan. It is never to early to start - I started at saving for my retirement at the age of 23.
2) Save MORE than you think you need to retire because you never know
3) Don't put money in the market that you will need within 5-10 years. If you put money in the market - assume you can't touch it for a decade.
4) I will begin to factor in "more secure" savings as part of our retirement plan (like CDs and bonds). At our age I didn't think we would need to but some balance to a portfolio can help you spend money now even while waiting for market funds to recover.
5) Related to step #4 - by the time you retire you should have little no market exposure - and don't plan on needing market returns after retirement! If you need 7-10% returns on your money in retirement you probably should supplement your income for as long as you can work after retirement.

This last point is especially true today. I know many P&Gers who retire at 55 but that is just not realistic in most situations. Think about working until 65 even if you can "retire" from a Fortune 500 company and then make some money while you are young and healthy to help supplement retirement spending.

I am much more optimistic about 2009 and the new administration so I wish you all a happy and prosperous 2009 full of abundance!