If you noticed, there have been a couple of additional slices introduced in order to further separate the costs. So now, instead of five slices there are a total of seven slices.

The actual monthly numbers for the chart are:

• Taxes: 1,240 – This consists mainly of FICA, state, and federal income taxes.
• Health: 333 – This consists of my health savings account contribution as well as health, dental, and vision insurance premiums.
• 401k: 1,273 – This consists of both me and my employer’s matching contributions.
• Savings: 1,655 – This is the budgeted monthly savings. This then gets funnelled into various investments/accounts such as ETFs, Roth IRA, currency exchanges, hard money loans, checking and savings accounts, or another downpayment for a real estate property.
• Debt Repay: 1,560 – This consists of repayment for my student loan, property #3 mortgage payment, and property #3 mortgage principal prepayment.
• Housing: 426 – This consists of the expenses for property #3 that does not reduce debt such as the HOA fees and property taxes.
• Life: 600 – This is the budgeted monthly discretionary expenses. It should encapsulate all other random expenses I accrue while I am enjoying life such as going out, buying stuff, dining at restaurants, etc…

Total Gross Income is 7,087

Overall, compared to the prior Gross Income Breakdown, there really have not been many changes. I am still chugging away at contributing for retirement, increasing savings, and paying down debts. Even though my gross income may have increased a tiny bit, it will not affect my discretionary expenses. I will continue to keep it at the same level as it was last year. Otherwise, I will fall into the trap of lifestyle inflation and running on the hedonistic treadmill.

Assets:

• Checking & Savings Accounts – 8,900
• Internet Savings Account – 16,300
• Foreign Currencies – 11,600
• Stock Market – 20,700
• Roth IRA – 19,600
• 401k (current employer) – 38,100
• 401k (previous employer) – 17,900
• Property #1 – 500,000
• Property #2 – 490,000 (50,000 equity I contributed)
• Property #3 – 147,000 (47,600 equity I contributed)

Total Assets: 1,270,100 (280,100 not including Properties #1 and #2)

Liabilities:

• Student Loans – 26,200
• Property #1 Mortgage – 134,000
• Property #2 Mortgage – 3,800 
• Property #3 Mortgage – 99,100

Total Liabilities: 263,100 (125,300 not including Properties #1 and #2)

Net Worth: 1,007,000 (154,800 not including Properties #1 and #2)

Change in Net Worth since last Status Update on July 1, 2010:  +21,000 (+16,800 not including Properties #1 and #2)

Notes:

• Much of Property #2 has been paid off, there is only around 4k left to be paid back. Hallelujah! Also, I realized that I previously reported Property #1’s mortgage wrong, as of 8/31/2010 it is 1k more. The correct amount is now reflected in the liabilities section.
• I’ve been stuffing more money into my stock market account, Roth IRA (I believe it is now maxed out!), and the current employer 401k. Besides that, there hasn’t been many other changes.
• The stock market has been brutal (resulting in lower than expected performance for my 401k), but the investments in long-term treasuries and gold ETF have been the saving grace for my permanent portfolio. Who knows where everything in the investment world will end up in a couple of months? I don’t, so I still strongly advocate following Harry Browne’s permanent portfolio strategy. It has definitely helped me sleep better at night in these past months.
• Still chugging along at prepaying Property #3’s mortgage. I definitely got an energy boost at seeing the mortgage outstanding drop below the 100k threshold.
• Overall, I am satisfied with the progress since my last update on July 1, 2010.

I believe this will give me valuable presentation experience (just like Toastmasters). Also, assuming I get selected, it doesn’t hurt getting a few extra promotion points when applying for any promotions!

Per the information that was provided in the email, people that are selected to be a guest instructor will first attend an Instructor Workshop prior to instructing and then they will help instruct three one-week classes in FY 2011.

Assets:

• Checking & Savings Accounts – 4,600
• Internet Savings Account – 16,200
• Foreign Currencies – 11,600
• Stock Market – 17,600
• Roth IRA – 16,300
• 401k (current employee) – 35,600
• 401k (previous employee) – 16,900
• Property #1 – 500,000
• Property #2 – 490,000 (49,500 equity I contributed)
• Property #3 – 147,000 (45,600 equity I contributed)

Total Assets: 1,255,800 (265,800 not including properties #1 and #2)

Liabilities:

• Student Loans – 26,400
• Property #1 Mortgage – 133,000
• Property #2 Mortgage – 9,000
• Property #3 Mortgage – 101,400

Total Liabilities: 269,800 (127,800 not including properties #1 and #2)

Net Worth: 986,000 (138,000 not including properties #1 and #2)

Change in Net Worth since last Status Update on May 1, 2010: +21,800 (+8,100 not including properties #1 and #2)

Notes:

• My parents decided that they only need me to lend them the $5k instead of the $10k to pay off the mortgage for Property #2. Thus, my parents applied their own savings of $4k, my savings of $5k (I added that 5k temporary to the amount of total equity I have contributed to Property #2), and two monthly mortgage payments… resulting in a final mortgage of $9k as of July 1, 2010. I’m getting excited just like my parents that the mortgage is about to be paid off.
• I’ve been contributing steadily to my Roth IRA, stocks, and Foreign Currency (RMB) positions; and thus they are increasing.
• Checking and Savings have been somewhat depleted due to lending parents $5k; however, the emergency fund (Internet Savings Account) has stayed relatively steady.
• Both 401ks have dropped over these last two months since the previous update in May. And the current employee 401k has dropped more than my prior employee 401k considering I have been contributing around 1.2k every month… and yet it has only gone up 300 total for the last two months.
• I am continuing to prepay Property #3’s mortgage so it has dropped 2k in the last two months.
• Overall I am satisfied with the progress since my last update on May 1, 2010.

Always spent every dime that came in.

Let’s pretend that I never put money in my 401k or Roth IRA.

Let’s pretend that I never put 20% down to buy a house, nevermind even prepay the mortgage.

Let’s pretend that I never read any books on personal finance or economics.

Every chance I got I pushed the liberal agenda and looked for a handout and further government regulations.

Pretend that I have never thought of any goals and just drifted like a leaf in the wind.

Pretend that I would be satisfied with working forty years hating forty hours a week.

Pretend that my life would be stuck at a dead end job with ten years at the end, kicking it on a hospital bed cause of cardiac arrest from the stress.

Pretend that buying materialistic objects would fill the hole in my heart.

Pretend that keeping up with the Joneses is the point of staying on the hamster wheel.

Pretend that I couldn’t retire by 35 cause I can’t break away from the crowd and take a risk.

Pretend that I can’t accomplish what I set my mind to cause my life is crap.

Pretend I am always envious of someone else’s new Benz, iPad, and McMansion.

Pretend I want to buy all that shit so I can fill my house up to the brim, only to spend money to store it, maintain it, insure it, secure it.

Let’s pretend I never educated myself, instead ended up deep in debt and having to file Chapter 7 bankruptcy.

Pretend that I could never end up with hundreds of G’s in my bank account, saving for catastrophes, playing with foreign currencies.

I could never have a couple of homes along with a rock solid retirement.

I could never kick back by 35 at the beach, never needing to work another day in my life.

Let’s pretend I never did shit and just wished things would work out on their own, that I would win the lottery.

Wished that people would just give me money, that everybody just looked out for my interests and not their own.

Wished money grew on trees and gold rained from the skies.

I just pretend that airplanes in the night sky are like shooting stars.

I could really use a wish right now.

* This was inspired by the song Airplanes Part 2 by B.o.B feat Eminem and Hayley Williams. Yea, my version is kinda crappy but I like the overall idea of the song. People don’t get handed chances, they need to go out there and take chances. Things don’t just work out on their own, if you have a goal you need to work towards it and make it happen.

Income:

• Salary (after tax) – 6,000
• Rental Income (no tax since negative cashflow) – 700

Total Income: 6,700

Expenses:

• Rental Costs (HOA of 276, mortgage loan of 870, property tax of 150) – 1,296
• Student Loans – 190
• Prepayment of Rental – 500
• Savings – 4,414
• Discretionary Expenses – 300

Total Expenses: 6,700

Compared to the November 2009 Budget Breakdown, it can be seen that the main differences lie in lower discretionary expenses (600 to 300, down 50%) and higher savings (1,460 to 4,414, up 202%) due to a higher salary (3,400 to 6,000, up 76%). I gotta admit that I do like this new salary and being able to stash away a lot of money for investments, too bad the gravy train is ending in a month. But I am even more happy that I’m heading home away from this 120+ degree sweltering heat! Ain’t no amount of money worth living here.

Taxable Accounts:

• Index funds – very low turnover stock funds
• Tax-managed mutual funds – usually avoids dividend paying stocks, holds securities for a long time, and sells losing stocks to reduce taxable gain
• Municipal bonds – tax free bonds
• ETF – as long as not dividend paying ones
• Variable annuities
• Individual stocks – as long as not dividend paying ones

 Tax Deferred/Tax Free Accounts:

• Taxable bonds – zero coupon or deep discount bonds
• Dividend producing stocks
• High turnover mutual funds
• Any investment that generates frequent cashflow or distributions through interest, dividends, and capital gains

 Based on the information, I believe my situation can be considered tax efficient. I hold cash for emergencies, which is taxed very little since I don’t hold that much cash. I hold gold through the ETF GLD in a taxable account that I don’t receive dividends and will not churn often. My short-term and long-term bonds and stocks are held in tax deferred and tax free accounts. My foreign currencies are held in non-taxable safety deposit boxes and offshore bank accounts. And my real estate can be taxed, but only if the gain is beyond the 250k tax exemption. Furthermore, the income from real estate is offset by depreciation, mortgage interest, etc… expenses. So overall, based on current circumstances and tax laws, I don’t need to worry about my investments paying a lot of taxes. Of course this can change as new tax laws are enacted.

What does this mean? If the countries can’t settle their debts and instead they spiral even more out of control by printing more of the fiat currencies then all signs point to strong inflation, screwing the average Joe (I’m hesitant to state hyperinflation cause that just leads me to think of Zimbabwe and that seems like an impossible exaggeration).

On the other hand, if they don’t let the printing presses run wild and unemployment, credit freezes, collapsing commercial real estate, looming option-ARM/Alt-A loans explode in 2010-2012, etc… become rampant then we are all in a world of hurt, resulting in deflation.

On a third hand, it is obvious that China and Canada are immersed in property bubbles about to pop… so their economies might be following the United State’s lead in the near future.

On a fourth hand, people have be postulating that gold is in a ginormous bubble all of its own and dozens of soothsayers have predicted the last 50+ pops over the last five years (unfortunately for them, none of them have come to fruition).

Where does that leave us? Don’t know. Like all things economics, it is unpredictable in the short-term and there is only a statistical 78.5% of being right in the long-term (did you know that 86.9% of all statistics are made up on the spot?). With so many factors into play, I premise that nobody can predict what will happen in the future with a high degree of certainty.

As much fun as all this hypothesizing of the macroeconomy is, it does get tired after a while of seeing extreme volatity with no obvious cause. My posit that there is no order, everything in the markets is random with occasional black swan swarms arbitrary attacking us (and pecking us half to death every few years like the chickens do in Zelda when you hack them with your shiny sword) and flipping the world upside down seems to be more and more likely.

So now, my with brain on a backburner and emotions thrown in the kitchen freezer, I will just diversify according to the Permanent Portfolio. The key of diversification through stocks, long-term bonds, cash, and gold seems more relevant today than ever before. I’m done stressing out about whether we are out of the recession, still in recession, sliding into deflation or rising to inflation. I’ll probably be wrong anyways.

The latest genius idea to come from the Assembly Democrats in California is to [drum roll please] Borrow Cash to Save Welfare! What a novel idea! We haven’t heard that before. No, of course borrowing/taxing and spending beyond our means wasn’t what got us in trouble in the first place… was it? You know what they say right?

The definition of insanity is doing the same thing over and over and expecting different results.

- Benjamin Franklin

Yes, I do concede, the Assembly Democrats (as well as the Senate Democrats that want to raise taxes) are off their rockers. Instead of agreeing with Arnold Schwarzenegger and doing the sensible thing by cutting out the fat from overpaid union workers, steep pensions, and unsustainable welfare costs; the Assembly Democrats want to borrow billions more in bonds and raise new taxes on the oil companies. In a nutshell, increase borrowing/taxing and no budget cuts.

The absolute lunacy in this is they want to borrow $8.7 billion from Wall Street against the California Beverage Recycling Fund to be repaid over the next twenty(!) years. Basically, we are borrowing money that is stretched to be paid back with interest over a period of twenty years so we can keep welfare and government jobs running just a bit longer. What about next year? Are they going to pick up another twenty year loan? This is completely unsustainable in the long run and not a solution!

When you know you can’t balance your books, you’re spending beyond your means, it’s time to hunker down and cut the fat. You’re not suppose to, figuratively speaking, go out and sign up for more credit cards to pay off your home mortgage loan. You don’t add more burdens to your already over-stretched citizens by hiking up the taxes (incidentally California already has some of the highest income and sales taxes in the United States).

Of course, there is a good reason why the Democrats are doing this, they are pandering for the welfare and union workers’ votes. But seriously? You were voted in this office to help the state, not move it more swiftly into bankruptcy. Don’t throw the rest of the citizens down the river just so you can increase your paycheck by another 10k next year. How hard is it to get this message through your thick skulls: There. Is. No. More. Money.

And to think I consider myself a Democrat… what a world we live in today.