I consider myself to be a smart bloke.  How is it, then, that I am not good at predicting how much money I should have left over at the end of the month?


It seems that no matter how frugal I feel I am, I did not save as much as I thought I would.  I've thought about this one for a few years and think I have it within reach.  It's not that I don't have enough money but I'm just not serious with myself about how I spend it.


To illuminate the issue I created three reports.


·         Total Inflows versus Outflows by Category

·         Inflows versus Outflows except for Retirement

·         Inflows versus Outflows sans Taxes and Retirement and Housing


The first report will tell me what I have left over at the end of the month to manually deposit into a savings account.  I have a goal amount each month and I'm just not making it.  


The second report really allows me to see the huge tax burden (that's the name they give it, not me) I face.  This report also removes the psychological 'happy' feelings of having some non expense items on an expense report, which allows me to say while that number is large, some of it is actually going to savings.


Report number three is the one that allows me to, in a healthy and positive way, get hold of all of my discretionary spending and tighten down the screws on those categories I wish to make sacrifices in 


I know what you may be thinking.  It is possible to reduce housing and tax expenditures.  You could re-finance, get a better tax adviser, lie to the IRS, etc.  Sure - but my point here is that the (possibly) easiest thing you can control is your discretionary spending.  You are also pointing out to me that the majority of my outflow is in housing and taxes.  You are absolutely correct!  I can't help you, however, in this economy deal with you having bought too big of a house.  Also, for us starting out on this financial journey, looking at these three reports may be the first time we realized that taxes/housing are such a huge component of our outflow.


I'll admit - I'm already pretty cheap.  I could spend less on groceries but not much.  Using these three reports I've clearly seen that my problem is larger electronics purchases throughout the year during moment's of weakness.


Today I vowed no extraneous pending that hasn't already been planned (vacation expenditures in my case) between now and mid May.  With this, I will hopefully be able to make good on savings outside of retirement funds for a down payment on a house.



A nightmare is what I'm trying to avoid.  Look on the internet and you see a great deal of people with credit cards charging 'unknown' fees and exchange rates.  I'd like to not have to pay money to spend money.  I've heard of spending money to make money, but this just seems backwards!

Visa charges a 1% fee on every transaction to exchange the currency.  This is not a bad deal comparatively.  This will serve to all but wash out the 1.25% cash back I am receiving.  This all assumes, however that Visa does in fact give the appropriate exchange rates and does not utilize, as others have reported some companies doing, their computer systems finding their most profitable conversion rate out of the few days surrounding the transaction date.

Converting cash seems to have much much higher fees - up to 10% based on my findings.  Then you have to convert back what you don't spend.  I found a nifty summary of some ATM and Credit card considerations at FlyerGuide.  I will be utilizing my E-Trade ATM card for acquiring cash while overseas.

Prosper Update

I was really getting into prosper, as I had almost the amount needed for it to become self sustaining.  Then it went and filed for the ability to list some loans on a secondary market and wouldn't take any more applicants on until they hear back from the application board.  At any rate, I had 21 loans at prosper when it went on hiatus.

With the economy the way it is, I of course expected the possibility of loans defaulting.  I have been prepared for that and can handle one or two failing before my returns become negative to date.  Of my 21 active loans, 1 is late and 1 is 2 months late.  The thing I'd like to point out is that of all my loans, these two have the best 'credentials' of funding.  I believe, however, I got caught up in the qualitative analysis and ignored the fact that they were borrowing a lot for their age/situation.  My loss.  

My average interest rate is still about 13% and, again, while I'm still profitable and the income stream is nice (about 40 bucks a month), the real returns and gains come from the reinvestment I cannot do due to Prosper being closed.  

On a side note, I finally figured out an 'ok' way to record my prosper lending activity into Quicken - all you have to do is set it up as a security which you buy and sell, always at a dollar a share, and receive dividends from.  
As the year comes to a close, I can say this has been a real eye-opener of a year for me.  Being in my mid 20's, this is the first year of negative returns I have had.  Here are the top mistakes I made this year in terms of personal finance that I will not be making next year.

Ignoring Benefit of Dollar Cost Averaging for Roth IRA

I front loaded all of my Roth IRA contributions in the first two months of this year.  I thought that the market was already as far as it would go and it was a good buy.  Only time will tell whether or not those purchases were a good buy.  Next year, dollar cost averaging is the way for me.  I will purchase only no transaction fee mutual funds and will do them every month at the least.  The actual time frame will depend on minimum transaction amount per fund.  

Ignoring Budget

I had sufficient money and got careless.  New budget already created and being monitored.

Ignoring Diversification in 401(k)

Presently, I think that my play this year in having at some point all of my money go into a defensive play in March was a good one.  The fund remained steady while everything else declined.  It somewhat fell in the last quarter of 2008, but I think overall it would have been more prudent to do some balancing throughout.  I'm not committed to re-balancing yet but will be shortly.

Giving Into Heavily Beat Down Stock Prices

Just like Forest Gump always said, "I'm not a smart man."  I bought the bad ones - E-Trade (ETFC) and even worse, Fannie Mae (FNM).  Please Rinse and Repeat - Past performance (or price) does not indicate future performance (or price).


Just because I have a nice website and tracking software doesn't mean I should be looking daily at performance percentages - it's not healthy and doesn't make my portfolio better off.  

Next year may not be better, but I have been forewarned.

Quicken versus Money

The girl and I are attempting to combine finances so that we can effectively budget on a more global scale. With my penchant for all things surrounding financial management, she's having to endure a period of dual maintenance for Intuit's Quicken Premier and Microsoft Money Plus Deluxe.

I have to confess  I am somewhat biased towards Money and used Money more on than off since 1997.  I have found Money switching more towards less and less functionality upgrades as the years have gone by recently and decided to try Quicken.  

After about a week, I'm somewhat enthused but not impressed.  What I still fail to understand is the difficulty in synchronizing transactions through the internet.  Being in systems integration business, I understand the issues with interoperability, but Yodlee Moneycenter has far surpassed Money's abilities to attain transactions for the past couple years since I've been using it.  *Money Plus now utilized Yodlee to retrieve transactions.

If anyone reading out there has enough clout at a 401(k) service provider to 'force' them to become friendly with automatic login through Money / Quicken, it would be appreciated to apply some force.  If this ends up being 'gun to the head' type force, please don't reference this blog post when you are arrested, but I do thank you.


Bought some GE today at the same price it was 12 years ago.  Got a nice 10.5% yield (they re-stated today that they were keeping their payouts for 2009 at the same levels as previously announced).


I partially did it because I think it'll go up, but also because I want to try to figure out this DRIP (divident reinvestment plan) enrollment process for a taxable account at E-Trade.  I've easly signed up for quite a few differen't securities into the DRIP plans in my tax sheltered Roth IRA account, but failt to see the same ease of use in a general trading account. 

With as much time as I spend on planes and in hotels, you'd think that I was attempting to avoid something like police or the IRS (shh, they may be reading!)  In actuality, I do this for my job and all the travel does have some good benifits.  I've earned well over half a million American Airline miles and close to three quarters of a million Marriott points.  My recent redemption of these points was one of the best 'savings' I've accomplised using points.  My recent post about using my Amex points was for gift cards at the standard value of a penny a point.  The redemtion I'm talking about now was a much more lucritive valuation at over double that valuation.

The Prize

Two roundtrip tickets on a direct flight from Chicago to Paris, France on an Amerian Airlines 767, departing on Valentine's day 2009 for 8 days 7 nights with Lodging in what will be at that time one of the top 15 Marriot Hotels in the world, the Paris Rennaisance Vendome

The Dollar Cost

The actual cost for the flight in US dollars was $1,935.00.

The actual cost for the hotel $3,390.00

Total actual cost $ 5,325

The Point Cost

Total American Airlines points needed 80,000.

Total Marriot Points needed 150,000

Total points needed 230,000


Amerian Airlines point valuation 2.24 pennies per point*

Marriott point valuation 2.26 pennies per point

Total point valuation 2.25 pennies per point*


These are not the best valuations I've attained, but the same tricks I used can be used by anyone in securing a good point valuation for airline or hotel rewards:

    1. Book insanely early, for hotel points especially.  They usually (check to make sure) don't charge anything for cancelling  if it's a hotel reservation.  Come January 15th, for example, i'm booking a couple nights for new years eve 2009 at the Marriot Marquis at Times Squre on the chance that I end up going, knowing that I may cancel.
    2. Travel during off-peak seasons.  Paris isn't at it's peak in February, but you really can't beat a trip to Paris for Valentine's day.
    3. Be open to travel destinations and alternate airports.  I two hour drive may save you 50,000 points by flying to a different city.
    4. Be flexible with hotel choices.  For July 4th this year, I had a 3.2 pennies per point valuation by staying at a hotel a few blocks away from where I wanted in DC (JW on Pennsylvania Avenue).  The hotel was not quite as good obviously, but it was half the 'cost'.
    5. Know the system.  Marriott, for example, 'rewards' you by booking in seven night incriments.  If you book 1,2,3,4,5,6,8,9,10,11,12, or 13 nights, you are paying more points per night than 7 or 14.  American Airlines, for example, will open up more award travel to the top tier of their frequent flyer program, allowing you to book at 'shorter notice'. 


Happy Travels!


*International Airline taxes of approximatly $140 charged in addition to point redemption taken out of valuation calculation

**Starting January 15th at 12:01 Zulu time, it will cost the same amount of points per night for stays in length of 1,2,3, or 4 nights.  You get the 5th night free, and the points per night increases all the way up to and including 9 nights.  Once you do the 10th night, it's free as well.

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