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Archive for April, 2008

10 Things I wish I'd known before I took time out of the workforce

April 23rd, 2008 at 06:40 pm

When I had my son, I quit my job as a software engineer. I considered it a sabbatical rather than a career change to permanent SAHM, and knew I would eventually go back to work. When DS was 20 months, I found a contracting company that enables me to work at home 20 hr/wk. I thought this contest entry might be useful to people who have a real choice about working or staying home, and realize that not everyone can afford to do so.

1. It's worth taking some time off.
I thoroughly enjoyed the two years completely focused on my boy and would recommend it to anyone. It's a short enough time to not completely set your career back to ground zero, but gives you time to watch and enjoy the day by day changes that your child goes through in the years when they're changing the fastest. I like to think of it this way -- if someone offered you a once in a lifetime chance to quit your job and travel around the world for a year, would you do it?

2. Join a playgroup ASAP.
I waited until my son was 3 months old before joining a playgroup. If I'd known what a lifesaver it is, I would've forced myself to get out there sooner. Just having the chance to get out of the house and chat with other moms is a lifesaver when you are a SAHM.

3. You can keep the cleaning lady.
Before I decided to stay home, my biggest dread was the drudgery of housework. I had this notion that a SAHM was REQUIRED to do the cooking and cleaning. It was the least appealing thing about the job description. I planned to keep our cleaning lady for the first 3 months and then take over these duties. As the deadline approached, it occurred to me that if I could find room elsewhere in the budget, it was really my choice as to whether to spend the money on cleaning or on other things. Don't let preconceived notions of what you "should" do box you into a corner.

4. Have faith in your ability to restart your career.
The scare-mongerers out there like to make a big deal about the number of elderly women in poverty, and what happens if you get divorced. I truly believe that if you keep your time out to just 2 or 3 years at a stretch, it's not such a big deal to find work again.

5. Network, Network, Network
The best thing I did was to continue to go out to lunch with old coworkers. It directly led me to the part-time job I now enjoy. (My mother was available to babysit, but if necessary, find another mom to trade time with.)

6. There will be regrets.
Another woman at my old job became pregnant a few months after I left. She decided to continue working, and is now director of software. There are days that I think with regret that that could've been me, and I doubt I will be the one to break any glass ceilings in the future. For every decision there is a trade-off -- something lost, something gained. Make peace with that beforehand.

7. Try harder for part-time or a job share before you leave. Now that I know how much I like working part time, I wish I'd pushed harder for staying at my last job, in a part-time capacity. I'll never know what would have happened if I'd found a job-share partner and really made a case for how it would work. On the other hand, I really loved having no other pull on my attention during the first year, so I guess what I really wanted was a LONG maternity leave and then a job share! Smile

8. 30 months is ideal developmentally. I started working when my son was about 22 months, but if I had to do it over, I'd wait until he was 30 months old. I just see such a difference in his interaction with other kids and lessening of separation anxiety at this stage that I would recommend it as a better age.

9. Nannies come from Craig's List. If you work part-time, a nanny that comes to your home costs about the same as part-time daycare and offers you a lot more flexibility. Craig's List is THE place for nannies/babysitters and families needing childcare to meet each other. You can post to find someone whose schedule suits yours. You can find college students, a SAHM who wants to care for a second child, or a nanny who works part-time for another family and wants to pick up more hours.

10. Working 5 half-days is better than 3 full days I work 5 half-days, where a coworker with two preschoolers works 3 full days. We put in the same number of hours each week(usually between 18-22), but it seems that I'm able to respond to emails and meetings a lot easier than she is. I also feel fresher working a shorter stretch at a time. It seems easier on my son to have more a more consistent schedule day-to-day as well. Of course, it does make a difference to be working from home, as commuting is not a factor.

Why so much international?

April 18th, 2008 at 01:55 pm

Broken Arrow expressed some concern about my 44% international exposure:

Yikes... perhaps you have higher tolerance than I have, but I feel like the international is actually... too high!

Everybody is going international... and well, yes, that's understandable.... However, what exactly is international anyway? Is fund diversification really going to spread out the risk enough for us to simply invest in it and feel safe?

I currently use a full-service broker and the vast majority of my money is in American Funds. I was a bit concerned the first time I saw how high the international was, but my broker explained that with Amerian, most of the "international" companies are really big multi-nationals, which includes companies that were founded in the US, but register overseas. If you look at the breakdown by nation the majority is in US, Europe, or Japan. He felt that the international component was about right.

I wouldn't say that I'm a savvy investor. I've got a big portfolio because I stashed 10-15% in my 401k the first 12 years that I worked as a software engineer, and because I made a $150k profit on a townhouse I bought, and decided to invest it instead of rolling it into our second house. I've basically followed the advice of my broker, and the townhouse profit has almost doubled in 6 years time, so he's done pretty well by me so far.

I had a big wake-up call when I read The Complete Idiot's Guide to Getting Rich, and realized that I'm entering a growth phase where how I manage my investments is becoming more important than how much I contribute each year. For instance, last year my dividends and capital gains were about $30k, where maxing out 401k and ROTH would only be about $23k.

So I'm trying to get to the point where I actually understand what is going on rather than passively following the broker's advice. At the same time, I'm reluctant to change anything (and potentially screw it up) before I feel I have a deeper understanding.

My dad, who was an investment broker for many years, believes that American is one of the best at protecting your money -- losing less in the down years than the other families. I'm in no position to judge.

Asset Allocation

April 18th, 2008 at 01:12 am

Spud told me how to fix up the asset allocation in Quicken by manually entering the percentages. I figured them out the best I could from the morningstar datasheets, then looked at the result for our total portfolio:

Bonds: 5.5%
Large Cap: 29.6%
Small cap: 5.2%
International: 36.7%
Other: 3.5%
Cash 16.5%
No Asset Class: 2.7%

The international seemed low to me, so I gave in and typed all the fund names and balances into Morningstar's instant x-ray:
Cash 18.73
U.S. Stocks 30.78
Foreign Stocks 44.07
Bonds 5.73
Other 0.70
Not Classified 0.00

I guess it's not too much different, but it doesn't give me a warm fuzzy feeling, and I wouldn't want to be rebalancing based on the Quicken stats. I didn't realize until now that x-ray didn't give a breakdown between large and small caps.

Part of the cash position is our emergency fund. I'm considering increasing our bond position to 10%, based on what I learned from The Intelligent Asset Allocator. Given the size of our portfolio and the fact that we're still 20+ years away from retirement I don't feel the need to have any more than that in bonds. I'm also thinking about investing maybe 5-10% in a REIT after the banking mess is well and truly sorted out.

Accordian file method

April 16th, 2008 at 11:00 pm

I started a new method for organizing my short-term financial paperwork (utility bills, bank statements, cc statements, medical and insurance statements, etc.) a year ago, and I must say that I've been quite pleased with the result. Although I pay most of my bills through my bank, I'm not keen to go completely paperless with these statements because you have to keep track of so many websites, usernames, and passwords.

I like using an accordian file for these short-term statements that you only need to keep for a year or so. At one point my DH convinced me to try hanging folders, but it was inconvenient having the file cabinet upstairs in the office so the filing always stacked up until it was a real chore. My accordian file sits on a side table in our dining area.

Anyway, back when I used to file things completely by catagory, I never seemed to have enough tabs and there was always a lot of digging to find a particular bill I needed.

Here's my little change in strategy that has made a big difference. Instead of having tabs for electricity, water, phone, etc., I have four tabs labelled, "Utilities Jan-Mar", "Utilities Apr-Jun", etc. When opening my mail, it's a lot quicker to open all the envelopes at once, throw out the junk, and put all the statements into the current slot at once. If I ever need to look for a past statement, I generally know which quarter I need to look in, and since the bills look different from each other, I can quickly find the month I'm looking for. I have a rolling year's worth of statements -- when April 2008 got here, I take all the old 2007 statements out of the old Apr-Jun slot and shred them.

It's worked so well for utilities that I'm now going to extend it to bank and credit card statements. So my 13 tabs will now be:

Util Jan-Mar
Util Apr-Jun
Util Jul-Sep
Util Oct-Dec
Bank/CC Jan-Mar
Bank/CC Apr-Jun
Bank/CC Jul-Sep
Bank/CC Oct-Dec
Taxes (for goodwill receipts, property tax statements, etc.)

For receipts, I throw the receipt for any big ticket item (say over $200) in a photo box. Not sure what I'll do when it gets full. I don't keep minor receipts from eating out, groceries, Target, etc., unless there is a big likelihood of needing to return something.

I've decided to start a second accordian file for paper statements for my investments. So far it's only got four tabs, and I'm not sure what else will go in there:
Trade Confirm
Brokerage 1
Social Security

Also a third file for business:
Receipts for deductable expenses
Business license, etc
Business checking statements

Less and less impressed with Quicken

April 16th, 2008 at 01:33 am

So I sat down to take a stab at doing my quarterly investment review, and quickly realized I didn't know what to look at and analyze! So I decided to start with asset allocation. I was expecting to see something similar to Morningstar's x-ray, but instead the pie chart shows the following:

4% Domestic bonds
22% Large Cap stocks
3% Small Cap stocks
24% International stocks
33% Other asset classes
9% Cash
4% No asset class

What the heck is this "other asset classes"? I drilled down to see the 6 mutual funds listed under this catagory, and of these, my largest holding is American Capital Income Builder (CAIBX). According to Morningstar, this fund is currently 65% stock, 20% bond, 13% cash, and only 1% other. So unless they're counting "giant" market capitalization as different from "large" cap stock, I don't know where Quicken is coming from. American Funds SmallCap World (SMCWX) lists very little "giant" but a lot of "medium" -- is this also counted in "other"?

Not very useful at all.

A raise and a bonus

April 16th, 2008 at 12:45 am

Great news! DH's company does semi-annual reviews, and he just got a 2% raise and an $8k bonus! Bonuses usually get 50% of the tax taken out upfront for some reason, and many companies then also take out 401k and ESPP contributions as well, so we'll probably only see about $3k of it immediately.

We originally started talking about what we should spend the bonus on, but then I suggested we just put it into DH's stock investing fund. Somehow it's not as satisfying as a splurge, but DH went along with the idea.

Then I suggested he increase his 401k by 2%. I think this will put him at a rate to max the 401k. We need the tax deduction, and his company matches all the way to $15,500, so it's a really good use of the money.

I sent off our estimated tax payments last week, and checked my YTD earnings. I was pleased to see that I've been projecting I'll make $60k this year, and for the first quarter I grossed $15,155, right on track.

I resolved this year to take a look at how our investments are doing quarterly, so since it's April 15, it's time to fire up Quicken and see where things stand.

A job, a career, or a business?

April 5th, 2008 at 10:31 pm

I've been doing software contracting since last August, 20 hours a week, for a small firm that in turn gets contracts from larger engineering companies in the area. I've been thinking about whether I should regard this as a job, a career, or a business.

Currently, I'd say it's really just a job. I've been on a single project the whole time, and it looks like it will last another 3-4 months. The company has 3 active contracts currently, and the president keeps us up to date on other possibilities that come and go. Hopefully when this project is done there will be another one they can use me on, but there are no guarantees.

I'm hoping to get pregnant and take a year or two off with our second child, but mother nature is taking her sweet time, so I'm kind of in a holding pattern. It makes it difficult to plan much beyond the immediate future.

Could I turn this job into a career with this company? Possibly. I like working from home and setting my own hours, and I can see this would be a good situation when the kid(s) are in elementary school. The downside is that the work itself isn't the most interesting -- mostly telecommunications and defense. I'm currently adding a new extension to a 10 year old protocol, on a piece of legacy equipment that is getting a new board to extend its life. Not exactly cutting-edge stuff.

For this to truly be my own business, I'd need to be like the president of the company -- going out and finding the contracts. He's been in the industry here for probably 20 or 25 years, and seems to know a lot of people. My contacts are more limited -- I can count maybe 7 or 8 companies where my old coworkers have landed. Perhaps once I got a couple of contracts I could make a name for myself and widen that circle, but it does seem that might be difficult to do on a part-time basis.

If I were to go back to full-time work a few years from now, I don't think I'd be happy to stay a programmer. I was pretty sick of coding before, and was trying to figure out how to become a project manager, a software group manager, or a software architect. (I actually did land a job as a project lead/software manager a month before I became pregnant the first time, but chose to become a SAHM because the software director said that doing it part-time was not an option. I decided I'd rather not work than do coding part time or have the stress of a 50 hr/wk job while caring for a newborn.) It's still a puzzle to me how to make that transition happen -- and an even greater difficulty (perhaps impossible) to do it while working on a part-time basis.

Sometimes I toy with the idea of going back for a PhD, just to get into more interesting work, but I am reluctant to ask my DH to support me for 4-6 years of school when I could be bringing a substantial income into the family. (A PhD in software would be unlikely to boost my earning capacity much beyond current levels.) Perhaps the answer is to find a job or contract with a company making a product I find more appealing. It would be cool to work on assistive devices for the handicapped, for instance.

It's a bit frustrating, having these long-range thoughts, but watching time ticking away as I wait for shorter-term plans to come to fruition. The time I want to devote to my children definitely has priority for me.

Working together by separating control of our investments

April 2nd, 2008 at 12:20 am

I'm happy to report another item checked off the TO DO list! DH has invested his IRA rollover money!

Between us, DH and I have worked for 9 different companies in the last 5 years -- that's a lot even considering the high-tech field we're in! I've been pretty good about making sure our 401k's were rolled over into IRA's but not so good about investing the money afterward. Part of the problem was that for a long time DH and I couldn't seem to talk about investing strategy without getting into an argument.

Finally I came to my senses and proposed to DH that he invest his IRA as he saw fit. With the stock market tanking the last few months it seemed a really good time to move money out of cash and into some mutual funds. Things got rolling when I proposed we sit down side by side one Saturday afternoon, separately researching mutual funds on our individual laptops.

I was mainly going through the exercise of using Morningstar to analyze and actually pick a fund on my own. (I think I detailed what a miserable failure that was in an earlier post.) DH, on the other hand, successfully managed to pick out 5 funds he wanted to invest in. He had about $75k to work with, and put about $15k into each.

He's gone a lot more aggressive and international than I would have -- Vanguard International Value, T. Rowe Price funds for Latin American, Southeast Asia, and Africa & Middle East, and Fidelity Southeast Asia. It's a lot of foreign exposure, but should be balanced out by the large amount of American large-cap and balanced funds that I hold in my accounts. Although my portfolio is 50% international, I've been told it's primarily made up of multi-national companies that are really American in nature.

We still have about $15k in my accounts that need investing. I'm considering waiting for the subprime mess to be straightened out, then buying a REIT that specializes in commercial property. I like the idea of having a stake in another asset class. The downside is that I don't know much about REIT's and so will need to get some education on them.

I also gave DH the green light to invest $10k in a stock he thought was a good buy. The purchase was made from his taxable stock account, which has been doubling as our emergency fund. He sold it a couple of weeks later and made a $1k profit. He also sold his employee stock-purchase shares for another $1k profit.

So all in all we're making good progress.