Thursday, January 31, 2008

Good-bye January; Onward to February

Everyone else seems to be making progress on their debt reduction while I feel like I'm barely keeping my head above water. In January, I reduced by total indebtedness by a whole $516.23. Goodness! At that rate, I'll be debt-free in, what? 16+ years?

I'm gonna have to do a lot better than this if I want a debt-free retirement. It's either that or retire when I'm 76!

And for many reasons, February isn't shaping up a lot better. Maybe Ed McMahon will come by and tell me I've won Publisher's Clearinghouse.

Or not.

Wednesday, January 30, 2008

Do You Know About This Deduction?

I only ask because until 2005, I had no idea it exsisted. If you have a child who attends a private school due to his or her severe learning disabilities or neurological disorders or behavioral/emotional/mental health issues, you can add the cost of tuition, transportation, and sometimes even books to your Medical claims on your Schedule A.

Until I learned of this option, I never had medical expenses that were more than 7.5% of my income. Add in the cost of one year of private school, and you'd be surprised how easily one is carried past that 7.5 % hurdle.

One caveat--a medical professional must "recommend" the private school for your child, and there must be a medical diagnosis regarding the child. For me, that was easy--I'd never heard of either the middle school nor the high school my youngest daughter wound up attending before her psychiatrist told me about them. But I don't think most pediatricians or therapists would mind a backwards recommendation once you tell them about the qualities of the school you've chosen for your impaired child.

If, like me, this deduction makes a significant difference on the Schedule A, then you also have the joy of filing amended returns and getting even more money back.

For more information check out this link, which, while written for last year's returns, is still good tax law, so far as I know.

Sunday, January 27, 2008

Dollar Store Bonanza

I went to the Dollar Store today. I have three grandchild birthdays coming up in the next four weeks. There is no better or cheaper place to buy greeting cards, wrapping paper, tissue or giftbags.

I have my personal rules when it comes to shopping at any dollar store:

First, it must actually be a dollar store--none of this "dollar or more" nonsense. Heck, I'm old enough to remember when these used to be "88 cent" stores!

Second, I will only buy items that I know to be a bargain. It is easy to lose sight of this second rule. As an easy example, VO5 shampoo/conditioner, which both my daughter and I like to use, is $1 here. But it is routinely 84 cents at Walmart, and often on sale at both Walgreen's and Kroger's for 50 cents a bottle.

Third, I recognize that there is an incredible amount of crap that threatens to overwhelm the genuine bargains. Off-brand beauty products, laundry detergents and toys tend to be worth what the dollar store charges. Ditto with paper towels, napkins and toilet paper. One can get much better quality and similar prices by watching local grocery ads carefully.

That said, certain items are worth a trip to the Dollar Store. In addition to wrapping materials, there are a wealth of scrapbooking do-dads, office items like paper clips, staples and notebooks, and plastic kitchen implements.

Then there's the "Yes, I know it's crap but it's still useful" catagory. This includes party supplies and a zillion items for the goody bags every young-child-birthday-party seems to require. It also includes holiday items like Christmas stockings, Easter baskets, and Halloween decor.

And finally, if you keep your eyes open, there is the occasional, genuine "Omigod" find. Today, it was a hardback copy of Julie Morgenstern's "Making Work Work," a guide to organizing one's office life that I have checked out from the library several times.

All in all, a good, money-saving trip to the Dollar Store.

Saturday, January 26, 2008

Random Thoughts on the "Rebate"

Unless you've been vacationing in Outer Slobovia for the past week, you now know that there is an economic stimulus package in the works for most US residents. In general, singles will get $600 and couples will get $1200 provided that their 2007 AGI was less than $75,000 and $150,000 respectively.

Given that this is money none of us expected to get (and therefore have not included in our budgets), the whining I see in so many personal finance blogs is disconcerting.

First of all, even though this is being sold as a tax cut, it is not clear that it really is. Depending on the legislation, it may be an advance on our 2008 refund or it may be free money or. . .who knows? Certainly not Grace. But by linking it to taxes, all those who would consign the poor to someone else's backyard, get to express their outrage that people who don't pay taxes could possibly be getting any of that money.

Hmm--did they not read the part about STIMULUS? Do they not know what that means--like spending the money? And just who will be the most likely to spend the money as soon as they get it, if not our poorest citizens who have the greatest immediate need? The truth is, if economists are correct about our economy needing stimulus right now, then ALL of the money should be given to the poor. Not that that idea would fly.

On a more personal level, it looks like I will be getting $600. I'm unclear as to whether I'll get an additional $300 for my daughter. She turns 18 this year, and was 17 at the end of 2007 which means I don't get the child credit for her in 2007, though, of course, I can still claim a dependency exemption for her.

Whether it is $900 or $600, I intend to do my part to stimulate the economy by applying all of the rebate toward my debt.

Monday, January 21, 2008

Later Retirement, Better Retirement?

USA Today's article on Boomers who retire early, posits that half of the Boomers will take retirement at age 62 and three quarters will have taken it prior to age 66.

Grace will NOT be among that number.

Financially, I cannot afford to leave my employment at age 62, so what would be the point? More importantly,I'm not willing to suffer the effects of Social Security's "earnings test" which cuts benefits for those who who apply for Social Security but continute to work by $1 for each $2 they earn over an annual limit. In 2008, that limit is $13,560. OUCH!

But there's also the fact that work structures my life. As I said in an earlier post, I love what I do. I can imagine slowing down. I can imagine working part time. But I cannot yet imagine not working at all. That's a good thing, because my personal financial calculations show me that I will need to work to at least age 69.

I have always thought that taking Social Security benefits at age 62 was the equivalent of betting that I would not live past 77. There are things in my medical history and that of my parents that give me pause. My father died of a stroke at age 68. My mother did not survive a heart attack at age 78. These are NOT good statistics. Nor is the fact that they both had Type II Diabetes and so do I. On the other hand, I treat my medical conditions aggressively and I am in better health at age 58 than either of them were at the same age.

The USA Today article disputes that age 77 is the break-even juncture, pointing out that retiring early may cost more than the simple calculation upon which my assumptions are based.

Which brings me to my question. Leaving aside those people who must retire due to health issues, why are boomers so eager to leave the work force? Do they really have a plan for their retirement? Have they figured it out financially, or do they just think it's the next logical step?

When I was in my thirties, 62 seemed ancient. Come to think of it, mine is the generation that coined "Never trust anyone over 30!" The years beyond that were some sort of emotional wilderness. Now that I'm barely three years away from the earliest retirement date, I still have trouble taking it seriously. Certainly, I'm not willing to run up to it nor to "take advantage" of it. For me at least, later is definitely better.

Friday, January 18, 2008

She's Kidding, Right?

I was wandering through Madam X's Blog, My Open Wallet this morning, which led me to this article: 401(k)s Are For suckers .

Please tell me this 26 year old writer is not an idiot and that she is writing satire!

Unfortunately, it appears she might be serious.

JW Plays Tag; Grace is It!

I don't like chain letters, and I don't like Blogger Tag. Nonetheless, JW at Need To Be Debt-Free has seen fit to tag me. Up to a point, I'm willing to play along. I'll put down seven little-known facts about Grace, but I am NOT going to tag anyone else.

OK--stuff you could probably have lived your entire life without knowning about moi:

(1) I love science fiction. I read it, write it, watch it and go to conventions about it. (I do NOT dress up in funny costumes and I do NOT speak Klingon!)

(2) I don't like babies. I want my children walking, talking and toilet trained--which is why I adopted all my kids at ages 8 or 11.

(3) I get antsy if I'm caught in a line or on the bus and I don't have something to read. If I'm desperate enough, I read the backs of cereal boxes.

(4) I have a huge cookbook collection, but I don't cook. If and when I retire, I'd like to explore international cuisines and how to make them.

(5) I have kept journals of my (mostly boring) life since fourth grade. Every New Year's Day, I go back 10, 20, 30, 40, (and this year for the first time) 50 years and read the entries for that year.

(6) I came of age in the late sixties--as a result, I have never used make-up.

(7) I have no math skills--OK, you probably could have guessed that from the state of my finances!

That's it. Enough about me. Back to your regularly scheduled programming.

Wednesday, January 16, 2008

Of Carnivals and Bookcases

I have posts in two carnivals this week.

Check out Plonkee Money's Photo Quiz Edition of the Carnival of Personal Finance, which includes my post on bonds, and a bunch of other good posts. This carnival is huge, but it is also a great introduction to bloggers one might otherwise never find.

I'm also in the Festival of Frugality this week, outlining my search for the perfect but free bookcase. Frugal for Life is the host and there's a lot of good information in this carnival.

Just so you know, the bookcase search has now ended.

I found one on the free side of Craig's List. It cost me $5 to persuade my son-in-law to help me move it (the previous owner having "forgotten to mention" that the bookcase was down two flights of stairs!). It's not as good-looking as it was in the picture on Craig's List, but it is a fine addition to my dining room. In fact, it's already almost full of books.

Sorry to say, I may have to start looking for another one soon.

Sunday, January 13, 2008

Do I Have to Love My Job?

As a matter of fact, I DO love my job. There are things about it, I would fix--like, say, my salary. And of course, there is the occasional supervisor that both I and the universe could do without. But overall, I get a lot of satisfaction from my career. If I haven't exactly saved the world, I do believe I have made my little corner of it better for a number of people.

My father, who was passionate about many things--building boats in his backyard workshop, developing photographs in his darkroom, collecting stamps--would probably have disagreed that one's work need be one's passion. He was a longshoreman. He didn't love it, but neither did he hate it. The work was mindless, he could read on the job and he liked the guys in his crew. In addition, the pay was satisfactory, the benefits excellent, and he didn't mind getting up every day and going to work on the docks. He had no expectation that work was for anything other than making money. It was the rest of his life, everything outside of his work, that mattered.

JD at Get Rich Slowly started this discussion. See his post on How to Find Work that You Love.

Meg from World of Wealth replied, in a guest post on JLP's All Financial Matters, that Loving Your Job is Overrated.

(Are you confused, now? Take a look at all three blogs involved--there's some great financial advice lurking there.)

The thing is, JD, JLP and Meg are all fairly young and all three can afford to make some career mistakes before settling in. I sit higher above that particular fray. I've been employed for 40 years. Counting the restaurant job in high school, and my employment with the telephone company throughout vacations from college, I have had six employers, four of them in my career field. I've been at my current position for seventeen years. I fully intend to retire from this same employer in another ten years.

I consider fiction writing to be one of my passions. If I had to live my life over, I would put a higher premium on my writing. But I am not sorry I did not try to make a living at it. I hang around people who did that, and while I do admit to pangs of regret (not to mention, jealousy!) when I read their books, short stories and websites, I do not think I could have exercised some of my other passions, such as adopting children (little money-sucking darlings that they are!) if I had chosen to be a full-time writer.

So I made a choice.

I put away my liberal arts degree and headed off to graduate school in a field well-known for being remunerative.

But once I got out, I made some more choices that limited the financial value of that degree. I was passionate about saving the world--hey, it was the seventies and we still thought we could do that. So I headed into the world of non-profits serving low-income clients. It did not pay as well as many other positions in my field, but it certainly paid more (and more regularly) than if I'd become a full-time writer.

What I have discovered over the years is that I do have to have passion for my work. I cannot imagine plugging away for all these years at a job that I hated, or a job that bored me. I cannot imagine being my father, and seeing my job solely as a means to a different end.

But neither does my career have involve all of the passions of my life, or even the most passionate thing in my life. Dad got that part right after all--the rest of one's life matters, too.

Wednesday, January 9, 2008

Chasing Craig

I want a bookcase.

A tall bookcase.

More to the point, I want a tall, FREE bookcase.

So I'm spending all my extra computer time hanging out on Freecycle or on the free side of Craig's List, trying to be first in snagging the perfect piece of furniture.

In general, Freecycle doesn't work as well for large items like furniture or appliances. For whatever reason, people seem to use it for smaller give-aways, like a article of clothing, or a set of knick-knacks. When I accidentally got three large-print mystery novels in the mail, I quickly turned them over to someone's mother in a nursing home, courtesy of Freecycle. I think the largest items I ever got on Freecycle were two twin-bed mattresses--they were the thin cheap ones, but had never been used. I was thrilled to get them, and they are still in use as extra beds on the floor when my grandkids visit.

But Freecycle doesn't do pictures. When it comes to furniture, I want to have some idea of what I might get before I make the trek to take a look. Besides, it seems really tacky to go to someone's home to collect a freebie, and then reject it.

I've been on a bookcase hunt in the past, and successfully took one home last summer that had been left on the sidewalk for the first taker. But it's in my bedroom. Now I need one for my dining room. The plan is to have a place for all of my extra cookbooks. (Yes, I have a lot of cookbooks. No, I don't cook. What can I say--I really enjoy reading cookbooks!)

I have two basic complaints about those who post items on Craig's List. First, they often don't respond. How much time would it take to hit the "reply" button on their e-mail and say "Sorry, it's been taken?" Second, some posters won't accept the first response, preferring to give their freebie to the first person who can actually get to their home and remove it. This doesn't work so well for those of us who work nine to five. I do understand not wanting to keep an item for someone who fails to show up. But why is holding it a few more hours such a problem?

A friend of mine showed me a neat trick--checking out the Bookcase-for-sale ads on Craig's List, and if they are cheap to begin with (say, $10 or $20) and if they are posted more than once, e-mailing and offering to take it off their hands. For free, of course.

I haven't tried that yet, but one way or another, I AM going to get myself a bookcase!

Monday, January 7, 2008

Grace, Vindicated

I don't like bonds. I never have.

While I am not much of a risk-taker, I just don't understand why I should settle for the low returns of a bond fund when, by waiting awhile, I can ensure a greater return sticking with stock funds. Jonathan, at My Money Blog attempts to show me why. He uses plenty of eyecatching charts and graphs, which I can almost understand.

But then, along comes Consumer Reports, one of the more reliable sources of information. Consumer Reports does not allow access to its site without a subscription, but issues are widely available at the public library. Check out February.

One article talks about common money mistakes made in retirement. And there, as # 1, is putting too much (not to mention, any) retirement money into bonds or bond funds.

Consumer Reports analyzed a range of stock-and-bond portfolios to see how they would have performed from 1940 through 2006. In one hypothetical, they assumed a 65 year old retiree would have $500,000 to invest; in the other scenario, they reduced the retirement funds to $250,000. They also assumed a withdrawal rate of 3% per year, and adjusted returns for inflation. Finally they assumed both a 20 year and a 35 year retirement.

What they found was that an all-stock portfolio provided $750,000 more than an all-bond one over the course of retirement. For the retiree who had saved less, the all-stock portfolio returned about $360,000 more.

Their final recommendation was to weight one's asset mix as heavily toward stocks as one's comfort level allows, certainly no more than 30% in bonds ever.

While I recognize that there will always be periods when my stock funds lose money (like, say, NOW!)it still makes sense to me to avoid bonds.

Saturday, January 5, 2008

There's More to Life Than Money

Easy to read that title and say "I know that." Harder to really KNOW that. And hardest of all to have to figure it out on a downhill slide.

Welcome to the life of Michael Gates Gill, author of How Starbucks Saved My Life. The book is subtitled "A Son of Privilege Learns to Live Like Everyone Else."

Michael, reared in New York City with summers abroad or at estates in upstate New York, is the son of celebrated New Yorker writer, Brendan Gill. His mother, who also came from wealth, was so determined to put an optimistic spin on everything that she didn't bother to tell her son that his father had died until Michael called her, and then she spent the first part of the conversation telling him what a wonderful Christmas the family had just had.

On the strength of his family connections, Michael went to Yale, almost graduated, then went straight into advertising with J. Walter Thompson, a topflight New York advertising agency. When we talk about life being handed to someone on a silver platter, Michael is the epitome of that largesse. He spent the next 25+ years as the quintessential Corporate Man , earning good money, competing compulsively to outperform his colleagues, ignoring his wife and three children (to the point of leaving his family on Christmas Day to fly to Detroit to massage the ego of an automobile manufacturer), and generally assuming that his life was all mapped out ahead of him.

Michael was neither a good nor a bad person. Yes, he dismissively sabotaged the career of a young black woman who wanted to be a copywriter, but he also championed a female account executive in what was a male-dominated industry. Ironically, it was this same woman who, many years later, fired him. By then he was 53, an expensive employee, and easily replaced by someone faster, younger and a whole lot cheaper.

For the next ten years, he tried to maintain his lifestyle, while acting as a consultant. It worked initially but over time his client base evaporated. To massage his own ego, he had an affair that resulted in a fourth child. His long-suffering wife decided NOT to suffer through this indignity so he wound up divorced.

Just when things could not get any worse, he was diagnosed with a slow-growing brain tumor. This was the author's first encounter with real life--getting older, looking for a job, having no health insurance.

Enter Starbucks.

It's not quite accurate to say that Starbucks saved his life, but certainly a number of Starbucks' employees jointly acted to save Michael, mostly by acting graciously while this now 63 year old boy grew up.

The book is not a finance book, but it is a good look at how one's financial class colors one's outlook on other people.

Michael is not necessarily a fast learner, either in the coffee business or regarding his own finances. His accountant has to tell him that earning $10.50 an hour, he can no longer afford to charge dinners at the Oyster Bar.

But learn he does--about co-workers, about teamwork, about the absolute necessity of health insurance, and most of all, about his own hubris.

The book is a fast read. The author's copywriting roots show--great literature, this is not. But it is an interesting account of a man who is not brought down by drugs, alcohol or mental illness. Rather, the simple act of growing older made him a less valued employee. His upbringing closed his eyes to the necessity of paying attention to his finances during his prime working years.

By the end, the author has regained his equilibrium, and as this NY Times article shows, is still happily working at Starbucks. It bothered me that he lost most of his prior friends from his more high-flying days, but then, why not? When he WAS them, he never noticed the person pulling his espresso, either.

Wednesday, January 2, 2008

Retirement? On Track. Current Bills? Not So Much.

I compulsively read articles about women approximately my age (give or take a decade) to see how my finances compare. The Kansas City Star ran an interesting one on Mary Petrosky, a 51 year old Kansas production worker, part-time supermarket clerk and single mom to college age kids.

Mary has $256,385 in retirement funds. That's good.

But she grosses only $34,100 a year while she spends more like $41,000 over the same period. She owes, among other debts, nearly $76,000 in parental loans for her oldest son in college.

I'm assuming she was awarded some of those retirement funds in her divorce. If not, she's done a terrific job of saving for her own future. But $76,000 for her son's undergraduate degree? Didn't he take out any student loans in his own name? Apparently, he is going to help her pay them off, but personally, and much as I do want my children and grandchildren to attend college, I would have to think long and hard before I would go into that kind of debt for them.

And what of her two younger sons? From the article, it appears that they have enlisted in the military, intending to use GI benefeits for college afterwards. I don't begrudge anyone who chooses a military life, but I don't think I'd want my sons (if I had any) facing death in Iraq or Afghanistan just to get a subsidized college education.

I also wonder about some of the advice she's being given, particularly when the financial planners suggest boosting her bond portfolio to more than 30% of her 401 (k). I just have never seen the point of bonds. I understand that they are intended to soften the blow if stocks lose their luster, but stocks always come back around, something bonds never really do. I may change my mind on this as retirement looms but at Mary's age, I would never have considered that advice. Come to think of it, at Grace's more advanced age, I still don't.

Tuesday, January 1, 2008

2007 Wrap-up, Quarterly Net Worth & 2008 goals

OK, the wall-street meltdown notwithstanding, my quarterly worth is up more than $24,000 from September. This is due entirely to increased equity and value in my home and the house I own on the coast (no, NOT a beach house--a 900 square foot, two bedroom home in a dying mill town). Despite everything I hear about the real estate market, it is holding its own in the Pacific NW, particularly for homes worth less than $500,000.

My 401(k) funds are down $9,000 for the quarter, but up $17,000 for the year.

My total indebtedness has actually increased by $56 over the course of 2007. What the figures don't show is that I spent some $7,000 on repairs to my rental house which then became part of my HELOCC, which is now counted as part of my debt. So I did a lot of running in place during 2007.

My net worth at the beginning of 2007 was $536,825. It is now $584,097.

My goals for 2008 are as follows:

1. Reduce non-mortgage debt by $6000;

2. Do not increase credit card or loan debt;

3. Add at least $12,300 to 401(k).

Happy New Year and best wishes for a financially sound future to one and all.