The Impecunious Investor

$5,000

2009-04-14T10:48:00.004-04:00

I did it! I contributed the full $5,000 limit to my Roth IRA for 2008. I didn't think I would be able to pull it off after the disaster of my layoff, but I managed to scrimp and save and it all worked out. A priority for this year is to again max out my IRA for '09 - after this the limit will be increased by $500/year according to inflation, which is excellent.

I now have more assets, specifically retirement assets, than I've ever had before!

Back in Action

2009-04-14T10:36:00.003-04:00

I think I may have lost my 4 readers, but hi again folks!

I've been very busy with my other personal blog and I've been neglecting this one, although I've also been voraciously consuming financial and investing news and information over the last few months. I've discovered some excellent resources. I've thought a lot about this blog as well - what exactly do I want it to be? I think moving forward, while I will still track my finances as a measure of public accountability and because I like cool graphs, I think I will be concentrating more on investing and financial/economic news than personal finance. Over the past year and change I've learned a great deal, but I have the basics of my financial foundation down. Now my primary focus is to make my money work hard for me. I'll be talking about my experiences and what I learn along the way - and hopefully get some help from others once I get a few more eyeballs over here.

I'm still unemployed - my company closed back in January. So my immediate goal right now is to find new employment. So far things are ok, however, as my emergency fund, cutting way back on expenses, and the unemployment benefits have worked out well. Family and friends have offered to help but, while I certainly appreciate it, I'm glad I don't have to rely on them anymore.

10 from Buffett

2009-01-09T17:21:00.003-05:00

Michael Brush over at MSNBC has a nice short article containing 10 investing basics from Warren Buffett. Similar to Bogle's tips, they are eminently simple, logical, and achievable for any investor (save #8 to some degree. Buffett's "big, concentrated" position and yours are going to be very different. Although the concept still applies.)

Trust in American business, buy cheap, and hold forever - that's why this is a great time to invest in the entire stock market through index funds.

Six Lessons for Investors

2009-01-08T23:21:00.003-05:00

John Bogle has a great opinion piece in today's WSJ about six lessons for investors.

Fairly simple, straightforward, and logical - what good investing is all about.

Free Download: Suze Orman's 2009 Action Plan

2009-01-08T22:51:00.002-05:00

Financial guru Suze Orman is offering a free pdf download of her book here until January 15th. I haven't read it yet, but I recommend downloading it and then checking it out - why not?

The Year In Numbers: A 2008 Retrospective

2009-01-07T17:58:00.003-05:00

2008 was an incredible year for the United States, the world - and of course me personally. I achieved a lot in terms of improving my personal finances. I learned a great deal since I started this journey last January, and it's amazing to think how far I've come and how far I have yet to go. It's an exciting, difficult, but positive journey and I can't wait to see what the future brings.

And now, 2008 in numbers:

$0 - The amount I paid in bank fees this year. A key reason for this was switching most of my banking to ING, but I also didn't overspend my checking account as I had regularly in the past (to the tune of $2,633 in overdraft charges, late fees, and service fees, which also happens to be close to my current IRA balance).

3.598 - This is the amount of shares I automatically purchased through dividend reinvestment in my FFNOX fund. Even though this is a tiny amount - purchased around $19 per share - this represents the first real example to me of true passive income beyond piddling savings account interest. Simply by owning these equities, I earned dividend cash that gave me something of additional value (in this case more shares). This was a big moment for me conceptually as a beginning investor.

12 - In the last year - just 12 short months - I have increased my knowledge of investing, the economy, frugality, retirement planning, and everything having to do with personal finance infinitely from where I was back in December in 2007.

57 - The number of personal finance blogs and websites listed on my sidebar. You were all extremely helpful, positive, and informative, and I know that my journey would have been much, much more difficult without your daily advice filling my Google Reader. And this is not to ignore the innumerable members of the Snowflake Revolution, whose dedication to strategic debt reduction and saving is truly inspirational.

$1,000 - It's a nice round number to use as a first goal for everyone's emergency fund, which is a personal finance must. I built my EF up to $1,000 earlier in '08, emptied it for what I feel was a great reason, and am glad I currently have it sitting at $907.

$2,501.72 - This is the amount that I used to buy into my first-ever investment in the stock market, the FFNOX index fund in my Fidelity Roth IRA. A banner day.

$3,342.25 - This is the amount that I paid in debt reduction for the year.

$4,684 - This is my current total assets. Considering I had literally $0 for years this is an infinitely fantastic improvement!

$28,076 - This is the total debt that I finished the year with, which is actually $873.25 more than a year ago. Though some of this can be attributed to the interest on my student loan, the majority of it represents additional debt incurred by me. This is one significant disappointment for the year and something I have to concentrate on further in '09 and beyond.

A Golden Opportunity at 20smoney.com

2009-01-07T17:40:00.004-05:00

Kevin over at 20smoney is having a contest in which he's giving away an account at GoldMoney.com worth $250! Kevin is a big advocate of investing in gold - something in which I've become increasingly interested - and he's using this contest as a way to help others get into the gold game. Go on over and check it out.

Could 2009 Be Better Than You Think?

2009-01-06T20:27:00.002-05:00

Five reasons from Alan Murray in the WSJ why it might very well be.

December 2008 Net Worth: Finishing Strong (Kind Of)

2009-01-06T19:35:00.005-05:00

Well. It's been some time since I blogged about my financial progress on here. I'm not entirely sure why; I think I got burned out a bit from taking in too much financial media, then the historic election, I was busy with various other things...at any rate I'm back to being focused on my personal finance and the economy in general.

I finished up the year with a great month on the face of it: a 2.22% increase in my net worth. This was due to a big increase in assets by way of a healthy dose of Xmas cash, other savings, and small FFNOX dividends. This is bloated a bit, as I have close to $400 earmarked for specific debt reduction this month. Still, a solid month for asset accumulation.

And then we come to my debts. Loans down as usual, cards down even more (representing reduced rotating monthly payments - I don't carry a balance aside from about $2600 in collections from years ago that I'm paying off at 0% interest), but that persnickety Other category is way, way up! +$771! Ugh. Part of this is that I haven't paid off NSTAR just yet (I'd rather hang onto the cash until the last possible moment. Psychological I suppose.) Part of it represents a few small family and friend debts that I seem to keep adding despite my commitment to not do so. And a big part of it - $430.53 to be exact - is from a Commonwealth of Massachusetts Tax Assessment from 2005! Perfect. Just what I need right now. Unfortuately I can't help but think this is accurate as back then I had no idea what I was doing with my taxes. I have some recourse to appeal; I will have to take a look at my records if I even have them lying around. Need to concentrate more on debt reduction in 2009.

Because I like graphs that tell a great deal of information, I added a net worth line to my asset & debt graph. Here I can visually track my increasing net worth until it hits the point where the assets and debt lines cross (in the far, far future) - positive net worth. Not sure yet if this is cool, helpful, or silly. As you can see even though I increased my debts this month my big asset increase still resulted in a net worth increase.

Because I like to pack as much info as possible into one graph, check out this new one! It's my FIP, or Financial Independence Progress, graph. A laughable concept right now to be sure, but I love tracking this stuff. I added a line that tracks my assets on here. The thing is even in those bad September and October months - and they certainly affected my equity positions - I was nevertheless able to build up my total cash assets. And the other excellent thing, and big reason for my asset jump this month, is that I was able to take that big income spike and turn it all into savings. I even decreased my overall expenses a bit. So the trend shown here is actually quite good.

Does Unemployment Count as an Emergency?

2009-01-06T19:17:00.004-05:00

Yes, that's a rhetorical question.

On December 30, 2008 I found out that I was getting laid off with the rest of my company (I work for a very small ad agency). We were simply hit by the perfect storm generated by our current economy: current clients cut way back on marketing budgets, dropping our projected billings for 2009 by over 80%; we weren't winning any new clients in the last quarter of 2008 as people were hesitating to take risks on new spending; we had a serious cash flow crunch for a few months as our receivables built up due to clients' inability to pay; we had to tap out our credit lines to make payroll and pay select vendors, who we had to string out just as our clients were doing to us; the nail in the coffin was Bank of America's refusal to extend our line of credit. Talk about feeling the effects of the recession directly.

It was disappointing but no big surprise, as we saw the writing on the wall for some time. I thought we had a few more weeks to try to get back to good cash flow, but apparently things were even worse than I thought.

The good thing is that I will be able to work on a part-time basis as my boss isn't filing bankruptcy just yet - we have ongoing projects, there is still work to be done albeit on a very limited basis, and we have opportunities still on the table. With a big new biz push and a little luck the company might be able to bounce back from the brink. So I will have enough coming in to live on as I look into other options for employment.

But even before I had worked out this retainer deal with my boss, I felt a strange sense of calm. The reason? My savings. Even though I have a relatively small amount tucked away (about $1,600 including emergency and other savings), it would be enough to get me through the next couple months after January assuming other work and/or unemployment was delayed or hard to come by. (I also have my Roth, which can technically function as an emergency fund to a certain degree from what I understand, but I'd like to consider that untouchable for now). I know I would have been panicking otherwise if this had happened back when I had $0 in savings.

So, in case you haven't yet taken it to heart: establish an emergency fund now for that unexpected emergency!

(Hopefully I won't have to tap into my savings anyway: I plan on cutting spending to the bare minimum while I use my minimal income to cover expenses during this transition period.)

NEW $25 ING Direct Referral Bonus Links!

2008-12-14T22:00:00.001-05:00

Earn up to $525 in bonuses from ING Direct!

ING offers a $25 bonus if you open either a Savings or Checking account and you can refer up to 50 friends for $10 bonuses each - that totals $525, a fantastic return on your money!

I have plenty of referrals left for both ING Direct Savings and Checking Accounts. ING is super easy to set up and use, with the ability to set up auto-deposits, sub-accounts for specific savings goals, and a fantastic referral program allowing the effective initial interest rate off your money to be significantly higher than the 3.00% they offer. They have tremendous customer service as well. I have been using them since December 2007 and I love them. If you'd like to open an account, you can use one of the links below to open either a savings or checking account (only one bonus per customer). You will only receive $25 if you deposit at least $250 to open the account, and I will receive $10. Then you can spread the word and earn even more $!

Thanks to those who clicked on my links! More links are below. I will continue to add them as they get used up:

~~ING Orange Savings #1~~
~~ING Orange Savings #2~~
~~ING Orange Savings #3~~
ING Orange Savings #4
ING Orange Savings #5
ING Orange Savings #6

~~ING Electric Orange Checking #1~~
~~ING Electric Orange Checking #2~~
ING Electric Orange Checking #3
ING Electric Orange Checking #4
ING Electric Orange Checking #5

(If you get a message saying the link has expired that means someone has used it. Either leave a comment or email me at Impecunious.Investor@gmail.com and I will send you a referral email or post more links.)

Another Way to Look at Net Worth

2008-08-08T10:45:00.006-04:00

I've been using NetworthIQ to calculate my net worth on a monthly basis, and it's an excellent tool: free, easy, and helps me see my progress (stumbles and all) visually. You can see my graph on the sidebar. Here is the most recent version when you click into my profile:

This graph shows how my net worth is generally increasing over time, but it doesn't tell the entire story. I decided to plot a "crossover" graph with my assets and debt amounts plotted monthly:

This tells the same story, but from a slightly different perspective. As you can see, my assets jumped up from $0 to close to $3,000 fairly quickly, then dropped a bit and have recently started gaining slowly. My debts have reduced slowly, then increased, then decreased slowly, then increased again, and now are decreasing again, slowly.

Here I can see quite clearly the "flattening" of both my asset and debt lines. This is bad! My net worth won't be positive until the lines intersect - when I have more total assets than total debt. I need to work on increasing the slope of that green line while causing that red line to fall precipitously.

Hard work, as always. But eminently doable. Simply a matter of discipline.

Economics

2008-08-06T20:21:00.002-04:00

Guy Sorman has an excellent article in the City Journal about the importance of economics as a credible science. A big part of turning my finances around was self-education, and I've been learning a ton over the last 8 months. Not just about personal finance, either - economics as a whole I find both interesting and quite obviously important to learn about.

Portfolio Analysis: July Roth IRA Snapshot

2008-08-04T12:08:00.005-04:00

Fidelity, where I have my Roth IRA, has some excellent tools for portfolio research and analysis. I like this snapshot of my current asset allocation (everything save a few dollars in cash reserves is invested in the Four-in-one Index Fund, FFNOX):

This chart shows the hypothetical performance of an asset allocation that resembles my current one. Of course I take this with a grain of salt, being that it's pretty short term (10 years) and historical returns are no guarantee of future performance:

No guarantee, but still nice to see a big upside on this type of asset allocation. As I mentioned previously I plan on sticking with this fund until I've built up enough to buy into more attractive total stock market index funds - I won't want to stick with this type of bond & short term allocation for the long term. Actually I'm still trying to figure out what kind of allocation would work for me, but I'm pretty confident that I want nearly all equities, at least in the IRA portion of my portfolio (which represents the entirety of my portfolio at the moment).

At any rate, these graphs are very cool and make me feel like Warren Buffett.

July Snowflakes

2008-08-04T11:56:00.001-04:00

3 ING referral bonuses @ $10.00 each = $30.00

Put into my Emergency Fund to help rebuild it.

What Happened to Keep the Change?

2008-08-03T21:04:00.002-04:00

A lot of people have been asking what ever happened to my Keep the Change program. (Ok, nobody's been asking, but I'm going to address its absence anyway).

Basically I had gotten to the point where any extra money at the end of the month was stuck into savings, so an end of month "tax" on spending was pretty much a moot point, since I was putting 100% of extra $ into savings/investing anyway.

I've been thinking of ways to modify this and make it make sense for me. Ideally a Keep the Change program should save money from each purchase. I'm tracking all expenditures so this should be easy enough. Perhaps if I do a weekly tally and put that amount into savings? That would make the administrative overhead not too difficult and get the benefit of saving along the way, avoiding spending myself out of possible savings by month's end. I could easily track the KTC "tax" amounts for each expense in the spreadsheet I already use.

I think I will implement this this month.

7 Index Fund Myths

2008-08-03T20:36:00.004-04:00

A great post over at The Dough Roller about index funds and some common myths. Some stuff I didn't know - worth taking a look if you are a beginning investor or even if you think you know everything there is to know about index funds.

Even the simplicity of index fund investing, which appeals to be as a novice investor, is more complicated than I thought.

Financial Independence Progress (FIP) Graph

2008-08-01T15:51:00.005-04:00

Here's the second installment of my new favorite way to evaluate my financial situation - the Financial Independence Progress Graph. This is a simple but elegant graph that actually provides quite a bit of information, but directly and indirectly. The blue line tracks my income month-to-month, the red line tracks my monthly living expenses (all spending minus savings and investments), and the green line tracks my investment income. The key is to try to maximize blue, minimize red, and increase green until it crosses or surpasses red - this is the point at which financial independence (FI) is achieved.

As you can see things are at least trending in the right direction after a horrid June, expense-wise. I picked up a little bit of extra income in referral bonuses and brought spending back down, although not nearly as low as I'd like. Although it's barely noticeable here, that green line is beginning to rise as well coming off a tiny gain in my IRA.

The real key to increasing the green is to maximize my monthly savings and investments. The key to doing that is to maximize the area between the blue and red lines. It's a simple formula: income - expenses = cash flow. That cash has to be used as investment capital in order to have any hope of accelerating my journey toward FI. As you can see from the graph I had a couple great months in this regard, which helped me get my assets to where they are now, and a few so-so and bad months that have brought my efforts to a crawl. I need to work much harder than I have been on this.

It's a long road to be sure, and a tough one, but by starting early and focusing now it will make it easier as the power of compounding works for me.

July 2008 Financial Report: Back on Track

2008-08-01T15:21:00.005-04:00

July was an important month for me. I actually became an investor for the first time and saw a very modest increase in my IRA over the closing week of July. My raise at work kicked in, although due to accounting errors this won't have an effect until this month (starting with paycheck #1 for August). Overall the month was far better than June, as I got back to increasing my net worth.

Assets increased but by far too little. I need to focus more on saving. I started rebuilding my emergency fund this month with some snowflakes as well as the monthly $100 deposit from my checking, but I borrowed that $100 to pay for other stuff. I really cannot do this if I hope to rebuild my emergency fund specifically and my assets in general. I'm hoping to pay this back to myself this month.

Debt reduction is continuing apace. I can't say I'm necessarily pleased with the progress, but it's ok as I'm trying to maximize my savings at the same time.

I'm heading in the right direction, although I'm getting somewhat frustrated by a lack of discipline, and also pressure by way of various social obligations that inevitably cost money. Tack onto that my obligation and desire to eliminate a lot of personal debt and things aren't going as well as I'd like. I need to ramp this program up significantly. This end-of-month accounting is great though, as it exposes everything - the holes, the guilt, but also a few bright spots. Due to my taking on more debt last month, I still haven't hit my highest net worth. It'll be a good day when I surpass that.

This Whole Stock Market Thing Is a Wild Ride!

2008-07-25T15:42:00.002-04:00

I've only been invested in the market since Tuesday and I'm already experiencing the ups and downs of being an investor, albeit on a micro scale. The first couple days saw the market bounce back from previous lows and I saw my balance magically increase by about $32. Not a bad deal, I thought. Then yesterday the S&P had a big drop and my balance actually dropped below my principal. I'm obsessively checking the market fluctuations even though I keep telling myself not to. Hopefully the novelty will wear off soon.

I'm actually happy about this and I sincerely hope the market continues to decline over the next few months. A bear market is a great thing for a young investor, and since I plan on putting a lot of my money in over the next few months I want to get as much as I can for my dollar.

So, here's to plummeting prices!

Who Profits from Big Oil?

2008-07-22T11:43:00.003-04:00

Tired of rising gas prices? If you have a 401k plan, IRA, or invest in broad market stock funds, chances are that you, like millions of American investors, are reaping the benefits of gigantic oil company profits.

I Am an Investor

2008-07-22T10:19:00.004-04:00

As of this morning I am the proud owner of 92.034 shares of Fidelity's Four-in-one Index (FFNOX) purchased at $27.18 per share. I finally reached the $2,500 minimum necessary for a retirement account to buy into this fund, which I decided upon after some lengthy research. I wanted to go after an index fund that tracked the S&P but unfortunately the one I really want, the Spartan 500 Index Fund (FSMKX), has a minimum buy-in of $10,000 (with a gorgeous 0.10% expense ratio!).

So I put my $2,501.72 into FFNOX for now, and I plan on this being my sole IRA investment vehicle until I can sell out and buy into FSMKX. The cool thing about FFNOX is that it is comprised of four funds: FSMKX, the Spartan Extended Market Index Fund (FSEMX - with at least 80% of assets in the Dow Jones Wilshire 4500 Completion Index), the Spartan International Index Fund (FSIIX - tracks the performance of foreign stock market indices), and the U.S. Bond Index Fund (FBIDX - tracks a mix of U.S. bonds).

FFNOX has a nice expense ratio of 0.23%, which works for me for now. It's also got me diversified within a single fund, with 70.30% of the fund in U.S. equities, 15.40% in international equities, and 14.30% in investment grade bonds. While I don't think these asset allocations are exactly right for me at this point (too heavy on bonds, which should be minimal considering my age and investment horizon) they are fairly diverse within this fund, and should help temper the volatility of the fund over time - right?

The main thing is that now is the first time I can actually say: I am an investor! An impecunious one, for sure, but an investor nonetheless. I own a piece of American (and international) business! This is very exciting for me.

Now...the boring part. Keep investing every month for the next 30 years, don't touch my investments aside from tweaking asset allocations and watch my retirement nest egg grow (hopefully).

$8

2008-07-17T15:43:00.003-04:00

That's what I deposited in change at Citizens Bank yesterday (handled by an extremely cute teller I might add).

Ridiculous? A waste of time? Many might say so. But I took a look at that change sitting there and had the itch to get it deposited and then moved to my ING Emergency Fund to start earning interest. I'm eager to rebuild my fund, depleted from contributing to my IRA for 2007. A tiny amount, but a little here and a little there and soon enough I'll be back up to $1,000 in the fund. It's also about the psychology of the action more than the action itself. Building on that saving mentality.

It's been over six months since I last rolled up my spare change and I was curious as to how much I had accumulated (as it turns out I was just a few dimes and nickels away from another roll of each!). I don't make too many cash transactions so it takes a while for me to accumulate much in the way of change. I spend all my quarters on laundry, so that cuts out a huge contributor. Every six months is probably a good target for regular coin rolling.

A few bucks is better working for me than just sitting in my coin jar, right?

Aaargh

2008-07-15T21:20:00.003-04:00

My recent raise was supposed to be effective July 1st, and thus appear on today's paycheck.

But it didn't, because of a snafu on ADP's part.

Very annoying. I was counting on that extra money to help me get back on track this month. Oh well - it was going to be far more than I expected anyway. Good things to come!

iPhone Owner or Millionaire?

2008-07-14T15:45:00.002-04:00

Which would you rather be?

A great post from J.D. over at Get Rich Slowly about this comic. Here's the math behind the point of the strip. It's amusing, but also illuminating.

Of course this isn't just about the iPhone per se but about a certain mentality. Personally I'm going to skip the iPhone. How about you?