Zetta's Striving to Get Rich Slow

We've had a number of pet and medical emergencies in March and April that have depleted our smaller reserve funds (medical, dental, home repair, car repair, basic savings), as well as our clothing and free $$ catagories (which we normally let accrue from month to month), and may yet touch our emergency fund (see previous post).

We also spent about $200 more than our discretionary budget so far in April -- half on clothes and half on "Misc" -- could be as much as $250 if we're not careful the next few days. Normally it wouldn't be too big a deal but in light of all the other spending it's not good.

So our reserves are down quite a bit and will need to be built back up. DH's mother is coming from overseas for a 3 week visit around Memorial Day -- usually that entails a lot of eating out, shopping, and presents. It will be hard to stay on track.

I woke up in the middle of the night and couldn't get back to sleep due to thinking about all the red numbers in YNAB. For some reason the $200 discretionary overage bothers me a lot more than all the others. I can only imagine what people in serious debt must go through all the time.

And I'm not happy that there are a lot more big wants such as vacations this summer that we don't have money set aside for yet. We've done a poor job controlling the little wants each month so that we can afford more of the big wants. I was happy that we were able to purchase a laptop and an anniversary trip with money we set aside this year, but in hindsight wish we had budgeted for two more trips that we want to take this summer -- one to fly out to see the great-grandparents and the other an unspecified road trip. Then there are other big purchases such as updating the wills and our next big trip to visit DH's parents overseas that we need to be saving for. And the landscaping just isn't going to happen until we have two incomes again.

On the positive side, DH is starting a new job in two weeks. His commute drops from 25 minutes to 5, so fuel costs will be way down. Medical insurance costs drop from $200/mo to $0, and he gets 401k matching and a much better selection of funds.

Ideally, I'd like to be working 10-15 hours a week from home in my field (during naptime), to keep my skills sharp and resume up to date. The extra money would be a nice bonus but not the primary motivation. I'm planning on talking to someone I know that started his own consulting company whether this is really feasible -- I suspect it's more reasonable to think I would need to work 20-30 hours per week just to get jobs. That would require some sort of daycare or nanny-share, which I'm not sure I want to do quite yet (DS is 18 months). But we also want to have a 2nd child soon so this is kind of my window of opportunity to do something before I take time off again.

In a few years I would like to be working half-days while both kids are in pre-school, then 30-ish hours a week so that I can be home when they get home from elementary school. It would be really cool if I were my own boss, consulting for companies rather than being an employee. Not sure how to get from here to there, though...

March and April have been unusually expensive.

First, we were within $200 of the laptop saving goal, so when DH mentioned he really wanted to go ahead and get it, I said ok -- figuring we'd just take the extra $200 out of our "free" allowances ($100 each). So we ordered it and I was very happy that we'd made a savings goal and reached it.

Then one of my cats was run over -- he had a habit of walking just in front of the tire as I was slowly pulling into the garage. Neither DH nor I saw him. Since it was a Sunday, our regular vet was closed and we had to take him to an emergency animal hospital. They required a $500 pre-authorization just to attempt to stabilize him and take x-rays. It turned out his injuries were too severe and we had to put him to sleep. (Although they did give us the option of several days and thousands of dollars of ICU for "a chance" at recovery.) Total bill: $667. I really believe our regular vet would've reached the same conclusion for much less. I asked what were the low-cost options for taking care of his body, and was told that the cheapest was $85 (and that county wouldn't be any cheaper.) I grew suspicious when I read the details and discovered that this included scattering his ashes at sea! At this point I was considering burying him in the back yard, though I'm not sure it's legal. They said they would keep him for a few days at no charge until we were ready to make arrangements. I called my vet and found out they charged $37, then called the county and found out it was only $10! What a way to make money out of grieving pet owners! I was able to pull money out of our "basic savings", "clothing", and "free $$" catagories to cover it and so did not have to touch any of our reserve or emergency funds.

Then in early April I had to visit the ER to rule out appendicitis -- still no bill yet so I don't know how much my copay will be. I think it's either 10% or 20% for the visit and the procedures, up to a max of $2,000. There's $250 in the "medical" catagory, another $250 in "dental", and of course the emergency fund if the bill is really big.

The next day I realized my other cat had stopped eating. I took him to our vet, who wanted about $500 to do x-ray, blood work, urine test, and give fluids and appetite stimulants. Knowing that we weren't going to pay for any extreme measures such as chemotherapy, I really pressed the vet to ask how likely it was that the tests would reveal a treatable condition, as opposed to just going straight to pallative care. The vet hemmed and hawed, and finally said the minimum we should do was give fluids and take an x-ray for $270, then decide whether to do more tests. The x-ray revealed a massive abdominal tumor, so we went straight to pallative care (fluids and special food). The cat didn't seem to be in any pain, I think he enjoyed a few extra days sitting in the sun, so I'm glad we didn't put him to sleep immediately. About 5 days later he seemed to be distressed, so I was going to take him in to be put to sleep, but he died just before the vet opened. I tapped the "repair home" catagory (where we keep $500) for this, and will build it back up over the next couple of months.

Then we purchased airline tickets and reserved a room at a B&B -- a trip to celebrate our anniversary. My mother is keeping DS, so it will be our first big weekend alone in along time. Luckily we had budgeted and saved for this trip and so are still able go go. We don't have as much as I'd like in the catagory to cover dining out and other purchase while we're there, so we'll need to watch our other discretionary spending in May to stay on track.

Earlier this week DS stumbled and got a cut above his eye that required 3 stitches. Our pediatrician sent us to the Children's Hospital ER (she doesn't do stitches on the face in the office), so that will be another largish medical co-pay.

All in all a very expensive couple of months. We will have to work hard at building our reserves back up.

I've been wanting to make a list of vegetables and quick side-dishes featuring each that my husband will eat. With luck, 18-month old DS will eventually learn to eat most of them as well. It's not exactly financial, but why not keep it in my blog? This is definitely a work-in-progress, and I hope to come back and update it whenever I a new dish is a hit. I started with a list of vegetables from Wikipedia, and shortened it somewhat by deleting ones I didn't think I'd find in the local and ethnic grocery stores.

Western cabbage family
Broccoli -- steamed, add Lee Kum Kee stir fry sauce
Brussels sprout
Cabbage -- TBD, looking for a healthy cole slaw recipe
Cauliflower -- TBD, need something cheesy
Kale
Rapini (Broccoli Rabe) -- TBD, maybe wilted with oyster sauce
Red cabbage

Asian cabbage family
Kai-lan
Bok choy
Komatsuna
Mizuna greens
Oriental mustard

Leafy and salad vegetables
Arugula
Cress
Endive
Epazote
Iceplant -- It's all over the place as a groundcover in southern CA. I had no idea the fruits are edible!
Lettuce -- salad with balsalmic dressing
New Zealand Spinach
Orache (French Spinach)
Radicchio
Spinach
Swiss chard
Watercress
Water spinach


Fruiting and flowering vegetables
Armenian cucumber (Snake cucumber)
Eggplant
Avocado -- homemade guacomole
Bitter melon
Chayote (Choko)
Chile pepper
Cucumber
Globe Artichoke
Luffa (Chinese Okra)
Sweetcorn -- boiled corn-on-the-cob style
Sweet pepper (Bell pepper)
Summer squash -- see list below
Tomato -- bruschetta, homemade pasta sauce
Tomatillo
Winter melon (Fuzzy melon)
Winter squash -- see list below

Summer squashes
Button squash
Yellow crookneck squash
Zucchini -- Sesame Parmesean Zucchini (see recipe:

http://allrecipes.com/Recipe/Sesame-Parmesan-Zucchini/Detail...

Winter squashes
Acorn
Butternut -- soup
Delicata -- soup
Hubbard
Kobacha
Spaghetti squash -- microwave and serve with marinara sauce from TJ's
Pumpkin

Podded vegetables
Black-eyed pea
Black lentil (Urad bean)
Chickpea -- store-bought hummus
Fava bean
Green bean -- steamed in microwave and tossed with balsalmic vinegarette
Guar
Lentil
Lima bean
Moth bean
Mung dal
Navy bean
Okra
Pea
Peanut
Runner bean
Soybean
Yardlong bean (snake bean)

Bulb and stem vegetables
Asparagus -- steamed in microwave and tossed with balsalmic vinegarette
Celeriac
Celery
Florence fennel
Garlic
Leek -- soup
Onion
Rhubarb
Shallot
Wild leek

Root and tuberous vegetables
Bamboo shoot
Beetroot
Carrot
Cassava
Chinese artichoke
Daikon radish
Ginger
Jerusalem artichoke
Jícama
Parsnip
Radish
Rutabaga
Taro
Turnip
Water chestnut
Yacón
Yam (sweet potato) -- buy sliced "fries", bake, season with BBQ or cajun spice

I've been reading up on nutrition lately, and am working on improving my family's eating habits. This post is my attempt to get a plan down in writing.

Here are a couple of the books I've read and would recommend: What to Eat (excellent book by a nutritionist but LONG!), The Healtiest Kid in the Neighborhood (good info although a little preachy), and YOU: On a Diet (good background on how the body works, the actual chapter on the healthy diet is good for breakfast, lunch, and snacks, but flimsy on dinner).

I'd say our diet is currently better than average, but there's definitely room for improvement in regards to eating more fruits and vegetables. I eat a high-fiber, high-protein ceral with berries and fat free milk for breakfast. We make dinner at home most nights, usually using a lean meat (turkey, chicken, or pork), and cook with olive oil. We cut out most bread, pasta, rice, and chips during a stint on South Beach, although we still eat tortillas quite a bit. DH does eat lunch at a restaurant most days, while I do once or twice a week and have leftovers on other days.

Here are the areas I'm going to concentrate on:

1. Eating mostly from the "perimeter" of the grocery store -- fruits, vegetables, meats, and dairy -- and minimizing packaged foods such as crackers and chips.
2. Read labels on all pre-packaged food. Avoid foods with "enriched flour", "high fructose corn syrup", "sugar" (and its synonyms), or "hydrogenated oil" in the first 5 ingredents. Avoid foods high in saturated fat or with any trans fat.
3. Eating more whole grains. When we do buy breads, cereals, etc., choose ones with "whole wheat" or "whole grain" as the first ingredient.
4. Concentrate on getting 5 servings a day of fruits and vegetables.
5. Eat fish at least once a week.
6. Eat more nuts, beans, and lentils.
7. Cut down on artificial sweeteners.
8. Enjoy a glass of red wine a few nights a week.

So far, the reading labels part is going pretty well. I wanted some bread to make toast for my toddler, and I was really disappointed to find that my favorite whole wheat bread contains high fructose corn syrup. It seems like it's in EVERYTHING! I finally found a loaf made by Miltons that I like ok. I'm not sure whether to make an exception for the BBQ and Asian sauces my husband likes to cook with -- they all seem to have corn syrup and sugar in them.

Eating more fruit, veggies, and beans/lentils seems to be the toughest change to make. My husband is actively resisting the veggie campaign, so I'm trying to come up with a list of sauces, etc., to make them more appealing.

For drinks, I'm planning to switch to homemade lemonade and sun tea. (Currently we drink a lot of diet soda.)

Here's my plan to eat 5 a day:
1. Banana or berries on my cereal.
2. Apple, pear, orange, or plum, etc with lunch.
3. Crunchy vegetable (carrot, bell pepper, or sugar snap peas) with dip (hummus or homemade guacomole) and a handful of nuts for my afternoon snack.
4. Salad with dinner.
5. Side vegetable with dinner.

I'd love to hear your suggestions on how to make specific vegetables taste good even to a veggie hater!

The good news was that my husband made an extra $15k in recruiting bonuses this year (it's quite common in our industry for the company to pay you a bonus if you convince your friends to take a job that open.) The bad news was that this extra income plus our stock profits and dividends pushed our income into the range where you can't contribute the full $4k to a ROTH. The good news is that we decided to put $2200 each into our ROTHs and the remaining $1800 each into our traditional IRAs. What I hadn't realized was that a spousal IRA is deductible -- the contribution lowered our tax bill from $2200 to $1600! Perhaps I should've put the full $4k into the traditional IRA to really reduce the bill, but on the other hand I want to contribute as much to the ROTH as possible now because we won't be eligible when I start working again in a couple of years.

After finishing a long walk pushing the jogging stroller a week ago Monday I had sudden sharp pain on the right side of my abdomen. My first thought was ectopic pregnancy, my second was ovarian cyst, and my third was appendicitis. Then I thought, no, it's probably just cramps because I was on my period, so I decided to wait and see instead of going to the doctor. The pain was fairly intense, about a 5 or 6 on this scale:

http://shsskip.swan.ac.uk/Information/Mankoski%20Pain%20Scal..., and made me want to double over when I walked across the room. I don't usually get cramps so I called my mom to ask how bad they should be.

On Tuesday the pain was less, maybe a 4, but radiating across my abdomen. Still no other symptoms, so I decided it was probably constipation. My mother saw me double over when I got up from a chair and gently suggested maybe I really should go see a doctor. Tuesday night I noticed that if I pushed on just the right spot, there was a tender spot about the size of my fingertip that was the focus of the pain. I decided I would get it looked at on Wednesday.

So then the internal debate was whether to go see my OB/GYN since my gut feeling told me it was in that area, my primary care doctor because he's a generalist, or urgent care because it could be appendicitis. (An internet search revealed that 50% of the time there are no other symptoms than abdominal pain.) My insurance is PPO and the copay is the same for all three. I finally settled on the primary care doctor.

Wednesday morning I called my primary care, but he was completely booked until late Thursday afternoon. The nurse on the phone was too rushed to give me any advice on whether to wait or not. The pain was down to about a 2, so I was hesitant to go to urgent care. But this was the 3rd day and I'd ruled out the simple explanations. At this point my husband and mother were both urging me to go get this checked out ASAP. My mother said, "you have good insurance that covers this, so just go."

I pulled up my insurance website, and the most convenient urgent care in their network was located at a nearby hospital. When I got there, it turned out that the urgent care and ER were basically the same department -- I wouldn't have gone there if I'd known it was an ER, because I don't want to be one of those people who clog up the ER unnecessarily. There was only one other person in the waiting area, though, so I decided to stay. I only waited about 15 minutes to see the triage nurse, and maybe another 15 to see a doctor. I told him I felt a little silly being there given the level of pain, and that I'd come because I couldn't get into the primary care doc that day. The doctor said the primary care doc would've sent me to urgent care anyway to check for appendicitis, so I had done the right thing.

It turns out that the current standard of care for even a possibility of appendicitis is an abdominal cat scan, so that was the next order of business. Appearantly due to the cat scans they are now catching it so early that the surgeons have a hard time deciding whether or not to operate, or to give antibiotics a try. The cat scan would also check for ovarian cysts and kidney stones -- 3 diagnosis for the price of one, so to speak. The doctor also performed a pelvic exam, and I had a pregnancy test just to triple confirm I wasn't pregnant before the cat scan.

The cat scan ruled out appendicitis, but showed an ovarian cyst, so I was then sent for an ultrasound. The final diagnosis was a hemorragic (ie bleeding) ovarian cyst. It appeared to be in the process of healing itself, so I was told to go for a followup with my OB/GYN in two weeks.

I received excellent care throughout, but am curious to find out what the final bill will be, both what is billed to the insurance and what will be my out-of-pocket. We pay $200/month for insurance through my husband's employer. I think it is an 80/20 plan, with maximum out of pocket either $3,000 or $5,000. It's a lot of money but our emergency fund will cover it with no problem.

As a health care consumer, it really shows some of the difficulties with how to contain health care spending costs. I'm an educated person who enjoys reading about medical stuff, but couldn't easily determine whether I should be going to urgent care or not. Once there, I have to rely on the doctor to tell me whether I really need a cat scan, or an ultrasound, or whether just a physical examination will do. The doctor and hospital have to worry about malpractice, and so will tend to do more tests rather than less. There's no way to shop around and compare the quality and cost of different doctors, urgent care centers, or cat scan facilities. Because insurance is obtained through an employer who offers limited options, the insurance company won't lose me as a customer if I'm not happy with their handling of my claims. If I were in a HSA plan, who's to say I wouldn't drain it with this visit and then get in a car accident before I'd had time to build the savings back up?

Anyone who has been following my posts about envelope budget software knows that I've had issues with my Bank of America credit card.

I'm happy to report that there is a tool out there that solves my problem -- MT2OFX. It's available here:

http://www.xs4all.nl/~csmale/mt2ofx/en/

This tool will convert between many formats, but my primary use is to take in a csv (comma separated value) file and convert it to OFX, which is what YNAB takes. It comes with scripts for a number of (mostly European) banks, unfortunately none of them worked out of the box for my csv. It took me about 3-4 hours of playing with the script, but in the end I was able to create a script that does the conversion that I need. I'd be happy to share my script and some pointers with anyone who wants it -- just PM me.

The good news is that this frees me up to use any software that takes QIF or OFX imports.

I did my end-of-month wrapup with YNAB last night. I still find the idea of changing my budget to match my actuals at the end of the month (in order to move money from underspent catagories to overspent catagories so that the month is in the black overall) to be counter-intuitive.

I've been playing around some more with YNAB, partly to help me write my review, and partly still considering if I would want to switch to it if I can get over the transaction import hurdle.

The budget paradigm takes the classic envelope system and turns it a bit sideways. In a classic system (I'm mainly comparing with Mvelopes here), the flow is as follows:
1. Create your budget based on your monthly income.
2. Put money in the envelopes at the start of the month
3. As money is spent, the envelope balance goes down.
4. If an envelope gets to 0, either don't spend any more for that catagory that month or move some money from one envelope to another.
5. At the end of the month, decide whether to let your envelope keep its balance for the next month, or to "sweep" the extra funds into another envelope.

In YNAB, the flow is very similar, but there are a few twists:
1 & 2. For the budget, you start with an "Available" amount of money shown at the top of the screen. As you assign budget amounts to catagories, the Available number goes down. Instead of predicting how much you will receive in income, the "Available" amount comes from the previous month's paychecks. For many people it is a big challenge to save up enough of a buffer to do this month-ahead funding of their budget.
3. As money is spent, the balance for the catagory goes down.
4. If the balance for a catagory gets to 0, either don't spend any more in that catagory that month, or change the budget for that month to match your spending. This may make your Available balance go red (negative). You can choose to fix this by changing the budget in other catagories (in effect moving money between catagories) or else the tool will subtract the negative amount from the next month's Available balance, leaving you with less money to allocate in the next month.
5. At the end of the month, positive catagory balances roll over to the next month, while negative catagory balances get subtracted from the next month's Available. There is no provision to sweep extra funds, instead you just reduce the budget for that catagory and assign the money somewhere else.
6. When you go to budget the next month, a right-click pop-up gives you the choice of budgeting the same as last month, the amount spent last month, or the average spent in recent months.

So the big difference I see is that in Mvelopes, you set your budget once and then manipulate the envelope balances, while in YNAB you are mainly manipulating the budget. I can't decide if I like this shift in thinking or not. It seems to me that with YNAB your budget will eventually converge with what you are actually spending rather than with what your best intentions to spend are. In either case the discipline comes in deciding what to do when a balance reaches 0 -- do you stop spending or move the money from elsewhere?

One of the big downsides to YNAB is that they don't have an account view, so you (intentionally) can't use it to track your current account balance. This can make it difficult to determine if you've missed a transaction. The author of the software is working on how an account view would fit with his budget philosophy so I'd expect to see something added within the next year.

YNAB is definitely the way to go if you work on commission and your income varies a great deal from month to month. I'd definitely recommend it over Quicken for budgeting purposes. It's good software for the price ($40), but at the momemnt I'm not completely convinced to switch away from Mvelopes ($120/yr).

YNAB (see

www.youneedabudget.com) finally released a new version of software that supports downloading transactions from banks and credit cards. I've been eagerly awaiting for this release for a couple of months now because the screenshots of the program look so promising.

There doesn't appear to be any way to get a trial version -- instead you can purchase and there is a 60-day money back guarentee that you can get a refund if you're not happy with it. So I went ahead and spent $40 to purchase the PRO version.

I'm planning to do a full review later -- but the inital verdict is that it looks like I would recommend the software but won't be able to use it for myself.

The problem is that our primary credit card is through BankOfAmerica. For some strange reason, while the BofA site provides the ability to save transactions to a QFX file, you can only do this for months that have "closed". So although today is March 19, the latest transaction I can download is the full statement that closed Feb 22. Mvelopes has worked out some way to connect to BofA directly and download transactions on a daily basis. There's usually a 2-3 day delay between when I make a purchase and when it clears "pending" status and can be downloaded, but I can live with that. I can't live with a month-long delay. (And I refuse to enter all my transactions manually, so don't go there.)

I may eventually close my BofA card over this. The current one gets Hawaiian Air freq flier points, and I've been considering switching to one that can be used on any airline.

I'm so disappointed. While I still like the Mvelopes paradigm better, I could live with YNAB and really like the price.

Why do I use a full-service broker? It's a good question. My dad was a broker before he was promoted to the home office, so when I needed to do my first 401k rollover it just made sense to ask him to recommend someone. So at least I know I'm dealing with a firm and an individual I can trust. The first time I sold a house, I was originally going to sell it myself, but then balked when I realized how much paperwork was involved in CA. It was a good thing, too, because the realtor correctly priced and sold it for much more than I would have, more than making up for her commission. I think a good broker can help in the same way -- preventing you from making some costly mistakes. DH would probably prefer to see me move the account to Scottrade or someplace similar and manage it ourselves. But I find investing to be really dull, and I know I wouldn't spend enough time on it to do a good job of managing it myself. (I don't agree with DH's investing philosophy, so I'm not comfortable turning the money over to him to manage.) I'm currently trying to educate myself so that I'm an educated client rather than just blindly following what the broker says.

We met with the broker for about 2 hours. His take on the asset allocation was that 50% foreign was just fine. In fact, he recommended that the most aggressive portion of the portfolio should be in funds that have a significant foreign component.

Based on risk tolerance, I'm considered to have a focus on "growth". (The other styles are "income", "aggressive income", "balanced growth & income", and "aggressive growth").

Here's how my retirement portfolio compares to the brokerage recommendation:
cash 4% (rec 0-10%)
income 0% (rec 10-20%)
growth & income 64% (rec 40-50%)
growth 28% (rec 20-30%)
aggressive growth 4% (rec 5-15%)

Although in the past he has urged me to put 10% in a bond fund (ie income), I've always resisted, something I'm reconsidering as I read The Intelligent Asset Allocator. So his recommendation was for me to reduce the growth & income portion by about 20% and move part of it into aggressive growth and part into growth. Since it's in an IRA and the fund family allows changes between the funds without any charge, this is very easy and economic to do. Two of the growth & income funds have so much duplication that he recommended them as good candidates for the move. My "aggressive growth" fund is showing a big profit right now, and when I asked about selling it, he said he could support doing that to take the profit and then dollar cost averaging back in, because it is still a good fund to own.

Here's how my taxable portfolio compares:
cash 4% (rec 0-10%)
income 0% (rec 10-20%)
growth & income 52% (rec 40-50%)
growth 33% (rec 20-30%)
aggressive growth 13% (rec 5-15%)

In the taxable account, we'd like to be closer to 40% growth & income, so he recommended which fund to sell. What he said to do to minimize taxes was to sell an amount equal to the original investment, but to leave the gain. So if you put in $25k and the fund is now worth $35k, you would sell $25k and leave the $10k gain in the fund. No taxes due this year because your sale is equal to your basis. Then if you later wish to sell the remaining $10k, do it when you have a loss that can offset it.

For my ROTH, we're going to sell the one stock that I still own. It's worth about $4k, and is showing a $1k profit. I just don't pay enough attention to own individual stocks.

I plugged in all our mutual fund and stock info into Morningstar's x-ray program to get an idea of what kind of asset allocation we currently have. In all I had to make 26 entries -- no wonder I'm having trouble getting this straight in my head! There are actually only 10 unique funds and 4 unique stocks because many funds are in both the taxable and the retirement accounts, but it's still a lot to get my head around.

Cash 12%
US stocks 41%
Foreign stocks 42%
Bonds 5%

The large amount in foreign stocks seems a little worrisome at first glance.

For "stock style diversification":
type value core growth
large..32....27....24.....(83%)
med.....4.....4.....5.....(13%)
small...1.....1.....2.....( 4%)

In other words, mostly large cap, some medium cap, a little bit of small cap, equally divided between strategy -- seems reasonable, although I don't really know enough to judge.

For "stock sector" the breakdown was
information 23%
service 39%
manufacturing 37%

Here's where I really have no idea whatsoever of which sectors are good to be in.

The "stock type" area wasn't useful as 49% was unclassified.

Unfortunately the book I started reading on asset allocation was due back at the library. They wouldn't just check it back out to me because I'd already renewed it once, and insisted on sending it back to its "home" library before routing it back to me again even though nobody else had placed a hold on it. So I'm still waiting to get it back.

We have a meeting with my full service broker later today to do an annual review. It will be interesting to see what he has to say.

Questions I want to ask:
* Why am I in each fund?
* Would you recommend moving any money and why?
* If there is a recession coming, should we move to a strategy that focuses on dividends rather than growth, and how would we accomplish this?
* Where should I put the $10k in cash in the IRA? Should I move it all at once or dollar-cost average it?
* I want to sell $4,000 of something taxable and put it in the ROTH -- which would you recommend?
* Is my son's 529 plan (a gift from my father) enough to cover a public university? How much more do we need to add as a lump sum to cover a private university?

Not much progress on the investment front. We didn't talk about our portfolio as we had planned -- I'll have to make sure we do it next weekend. DH is so worn out from his last project at work, the poor guy just needs some downtime. Getting his resume updated to find a better situation was a higher priority. We did do the end-of-month budget review at least.

The original lawyer who did my will and trust never called back, so I called him today. $300 for an hour of his time just to change the executor and guardian. I really don't want to give any more business to this guy who can't even be bothered to return my call!

In my last post I mentioned that the 400 point drop in the market yesterday didn't bother me and I wasn't planning any trades because of it. My husband, on the other hand, came home and said that the drop and Greenspan's prediction of a recession indicated we should watch the volitility of the market and be ready to move some or all of our holdings into cash, and to sit on the sidelines for some time (how long was unclear to me). We got into a minor argument about investment philosophy -- the same one we had 5 years ago that shut down our communication on investing. It was never resolved and we've only contributed to our separate retirement accounts since then. This is a mistake I don't want to make a second time, so I asked him to promise me we'd talk more this weekend.

My investing philosophy to date has been buy and hold and hold and hold and hold...to a fault. I had some AT&T stock (from an employee stock purchase plan) that went way way up, split into many companies, and collectively went way way down before I cashed out at a loss. I should've paid more attention to it and cashed out years sooner. I also tend to let money just sit in my funds, not rebalancing them or making moves based on performance. To be honest I don't find investing all that interesting. I've realized that I do need to understand my investments better and be more proactive about them.

DH's investing philosophy...I guess I don't really understand it. We don't even agree on what the definitions of "market timing" and "long-term" mean. When he says we should hold off on investing because the market is high or move into cash because a recession is coming, that sounds like market-timing to me. He says it is not because he is not proposing moving in and out and in and out of the market on a monthly basis. I think "long-term" means a minimum of ten years. I'm not sure what he thinks is "long-term", but he has said he doesn't believe in holding things for ten years. DH does not believe in "buy-and-hold" -- he blames that philosophy for influencing him to hold on to a stock that he knew was on the way down, and ultimately resulting in a $20k loss. It's hard for me to judge DH's investing philosophy -- he hasn't been actively managing much money since we married. On the other hand, he pursuaded me to do some rebalancing in my IRA, and the funds he picked have been the best performers of the lot.

I don't feel like I understand what we have and why we have it. I want to understand it before making any moves. DH listens to the market news and wants to act quickly. And so every conversation we've had about investing turns into a minor argument.

I just started reading a book called The Intelligent Asset Allocator. I've seen it recommended by some people who seem to be the kind of prudent investor I want to become. DH says he doesn't know anything about asset allocation theory. I am hoping it helps us to find some common ground.

I asked some friends for recommendations for a wills and trusts lawyer. I called one of the names given to me, and he seems really good. He's both a lawyer and a CPA, charges a flat fee for the documents, and future changes are free. We talked for about 40 minutes. He said that if all I wanted to do was change the executor and guardian, that it was probably going to be cheaper to go back to my original lawyer. On the other hand, my original living trust was established when I was single, and he would recommend gutting it and converting it to a "double trust" where it is joint between DH and I. He very strongly recommended putting our house into such a trust in order to avoid probate, and naming the trust as beneficiary to all life insurance and retirement vehicles. He pointed out that if DH and I both die, my existing trust has provisions to prevent our children from inheriting and blowing all the money at a young age, but our retirement money currently would go to them immediately. His normal fee for a single trust is $1400 and for a double trust is $1800, but he said he'd do it for half that since I already have a trust in place.

Still, $900 is a lot of money right now -- either our laptop or vacation fund. How awful is probate anyway? Do we really need a trust at this point?

The existing trust has a bit of bad history behind it. When we got engaged I had a bunch of stock options that were going to hit it big (yeah right -- we all know how well that one turned out) and we compromised by putting my assets in a trust instead of drawing up a prenup. So now the stock options are a net loss, but this trust is sitting out there with about $300k of mututal funds in it and the wrong successor Trustees on it. DH hates to talk about the "what-if" details you need to go into when planning life insurance, wills, etc., so getting all this straightened out is not going to be fun.

In other news the 400 point drop in the market yesterday dropped my portfolio value about $15k-$20k. I didn't even think to check until other people mentioned how it affected their portfolios. I don't watch my investments much -- I tend to err on the side of inaction. Happily I can still call myself a millionaire because I'm just over $1M. I'm ok with being 100% invested in stocks because these kinds of drops don't bother me and because I have enough of a nest egg that even with a big correction it's still a good amount. DH will be happy -- he's got $55k sitting in cash in a rollover IRA, so it's a good time to invest.

I finally found the copy of PC Attorney that we picked up a few years ago. The install instructions didn't even list Windows XP so it's pretty old. It was on the $10 rack at Best Buy so I wasn't expecting much.

I was still disappointed.

Yikes. There are choices for "simple will -- all to spouse" and "create trust for children", but the children's one doesn't even have you name a guardian! Come on, that's really basic! There's no choice allowing you to leave it all to your spouse and then only if the spouse dies, leave it to the children.

I guess we're going to need a lawyer. My orignal will leaves everything to a living trust, and the trust goes to DH and then to children. I even have a clause that I like that says they get 1/3 at ages 25, 30, and 35. I just need to change the executor and guardian. Surely that won't cost as much as doing a new will from scratch. DH doesn't have a will -- do you think we should have him fill out the simple will just to have something until we find a lawyer? (I don't want to go back to my original lawyer because he was so sloppy.)

I'm not seriously moving toward anything yet, just thinking about possibilities and hoping the right thing comes to me eventually...

* Computer tutor. Would need babysitting for DS to pursue this.
* Children's resale shop. There's definitely a market hole in my immediate area, but it's a low-margin business and I'm not that keen on running a retail shop.
* A la carte cleaning -- I wonder if there are many people who don't want to fork over $80 to clean the whole house, but would pay $25 for just the bathrooms or kitchen floor. Not really appealing because it would be a labor intensive business, I would want to hire people to clean rather than doing it myself.
* Website and discussion forum. I've got the background but need the right site idea. Maybe a site to discuss and blog about books. Hmmmm, must check out the sites that are already out there.
* Software consulting. A former coworker has several people working for him on a freelance basis. Waiting to talk to him until I'm really serious about working again.
* Hardware consulting/contracting. A possible business with DH. I'd try to be more on the business end of things. I do have a EE degree (in addition to my CS degree) and could probably function at a new-grad level on the technical side.

If anyone can recommend good discussion forums about being an entrepreneur I'd love to check them out!

Thanks for all who replied to my request for investment sites. I didn't like the way the motley fool board was set up -- too hard to follow a thread. The morningstar one is promising, similar to kiplinger. It's funny, but I think people in debt seem more willing to share a bit of their personal lives anonymously than folks who are investing!

I didn't get the gig as a ghost-blogger. The poster wrote back and said that it had already been filled when I responded, but that I would've been a good candidate. It's too bad, I would've really enjoyed the look of confusion when I answered "ghost-blogger" to that "So, what do you do?" question!

I have made absolutely no progress on my Financial To Do list. It's just procrastination pure and simple.

I hope I haven't been coming across as arrogant and full of myself. I just haven't had time to look at the big picture for so long that I'm a bit stunned that things are going so well.

...at least financially.

In my senior year at college, I was both job-hunting and applying for PhD programs in computer engineering (a cross between hardware and software). I hadn't really decided what I was going to do when my dad and I went out for a walk. His advice was that if I started working straight away, and put $2,000 a year into an IRA until I was 30 and then stopped, I would have more money when I retired at 65 than if I waited and put $2,000 per year into the IRA from age 30 to 65. I was 22 and figured most PhD programs take about 6 years. My parents have always made disparaging remarks about "professional students" so it was pretty clear what his recommendation was.

I ended up receiving a killer scholarship -- admission to a top program, $18,000 stipend per year (that's about $25,000 in today's dollars), and guaranteed summer jobs at Xerox -- but turned it down. I didn't want to be a professor, didn't feel like I had the inventiveness to come up with an original research idea, and was sick of school. I went to work, signed up for the 401k as soon as I was eligible, and maxed it out at 15% until I married at age 30, then cut back to 10% until I stopped working when my son was born a few months before I turned 35.

So yesterday I was playing with an Excel spreadsheet, trying to figure out what my Target Savings Goal should be. I was having trouble because the calculations from the Complete Idiot's Guide to Getting Rich assumed you are starting from $0, and they referenced clunky future value tables in the back of the book. Plus I didn't like the numbers that came out because it would really pinch to save that much. So to account for the money we already have invested, I had to figure out how to use the FV, PV, and PMT functions in Excel. I plugged the numbers in -- 10% return, $320k today, 29 years till age 65 -- and kept coming up with either negative numbers or really large values. Finally I used the numbers from our mortgage to figure out where I needed to enter positive or negative values into the functions and what the results mean. As unbelievable as it sounds, in order to have $2 million at age 65, I actually have to take out $20k per year! If I just leave it alone, I will have $5 million at age 65. I am dumbfounded. It brings into question whether I should push so hard to get our savings back to 10% or go take more vacations now.

I said Dad was right about the financial aspect of my career decision. I'm not as certain about the non-financial aspects. Frankly, I'm bored to tears with software now. Just thinking about coding again depresses me. Although I don't really regret not getting the PhD, I think if I had I might have more interesting work to go back to. I suppose I could go do one now, but it doesn't seem right to me to ask DH to support me through both SAHM years and a PhD program -- better for us to find a business we can do together.

I really enjoy the SavingAdvice board and will keep posting here, but I'm also interested in finding another forum that has more people focused on the details and experience of investing rather than debt-reduction. EnoughWealth was kind enough to suggest

www.kiplinger.com -- it's got the right focus but it isn't as active or as personal as I was hoping for. Maybe I just need everyone here at SavingAdvice to reach the point where they're hanging out on the Investing & Banking forum!

So far I've found the following blogs where the author is focused on investing, yet is also blogging from a personal perspective:
EnoughWealth: http://enoughwealth.savingadvice.com/
My 1st Million at 33: http://www.1stmillionat33.com/

With over 150 blogs on SavingAdvice alone, I don't have time to check them all out, so if you see one you think I might like, let me know!

Hooray! In the middle of January I asked DH to sit down with me twice a month and go over our envelope balances. I did this because he had made a joke that I was beating him over the head with Mvelopes, and I realized that our budget had always been a one-woman show. After the 2nd review he made the comment that he liked the system and it was really going to keep us on track, and after our 3rd review he asked if I wanted to do it weekly instead of twice a month! I actually prefer twice a month but it was nice that he was so enthusiastic.

DH has a fiscally sound mindset to begin with, which makes a big difference, but before we started the envelope system we had trouble communicating about our spending priorities and where we stand financially. I think what makes this system work for us is that I print out the envelope balances and highlight just the ones we need to talk about -- anything that is in the red and the progress toward goals that DH really cares about. This makes the discussion go very fast. Every time one of us mentions wanting to buy a big-ticket item, I create an envelope for it. We don't necessarily fund the envelope, but it makes it easier to talk about prioritizing. For instance, we recently decided to move all the "landscaping" money to "laptop" and "US vacation". DH regularly asks me if we have enough money in the envelope to buy the laptop yet, and seeing the envelope grow from month to month is very motivating.

The default catagories in most budget software group things by "Auto", "House", "Household", etc., but I find it useful to do something a little different. I based my catagories on the All Your Worth system of dividing money between needs, wants and savings. Further splitting the wants and needs between "monthly" and "accruing" makes it really easy for me to do a sweep of extra funds from just the "monthly" envelopes at the end of the month. Before I split them this way I had to look at every envelope each month and decide which to sweep and which to let grow. In the utilities envelopes I do carry over $10-$25 to the next month, and only sweep above that amount.

The "misc" envelope deserves special mention. I've found over the years that it's hard to predict what I'm going to spend each month at places like Best Buy, Linens -n- Things, the post office, etc. I might buy nothing several months in a row and then make several purchases in a row. I've decided that it doesn't matter exactly where we spend the money that goes to those places, as long as the total isn't more than $300 a month.

DH and I each have a "free $$" envelope that can be spent on anything we want. In keeping with All Your Worth I make a distinction between a basic grocery allowance in "Monthly Needs" and the "fun" food (and alcoholic beverages) in "Monthly Wants".

The envelopes that tend to go in the red most often are "dining", "food", "misc", and "clothing zetta". Usually "cash", "home depot", and "target" have enough extra to cover the first three, and I transfer my free money to "clothing zetta". A purist would insist that we never make a purchase that would cause an envelope to go red in the first place, and if money were tighter I would follow that philosophy. As it is I feel comfortable with moving money between envelopes in the "monthly" catagories to eliminate red at the end of the month before I sweep the extra funds into one of the "big-ticket" envelopes.

I regard the "emergency fund" as untouchable unless DH gets laid off, so the "basic savings" is sort of a "baby emergency" fund. It was very welcome when I discovered we were going to owe on taxes this year. I'm still trying to decide how much we should keep in it. The "emergency fund" has two months of all spending -- counting the month-ahead funding we really have three months worth -- if we cut out all wants and savings this would stretch for 5 months.

We are able to fund the envelopes a month ahead -- DH's two Feb paychecks sit untouched until after I do all the bookkeeping on March 1. If you are living paycheck to paycheck I highly recommend saving a month's spending so you can switch to month-ahead funding.

Here are my catagories:

Monthy Wants
baby stuff
cash
cleaning
dining
food (above basic groceries)
home depot
misc
netflix
target

Accruing Wants
clothing DH
clothing zetta
free $$ DH
free $$ zetta
charity
gifts

Big-Ticket Wants
landscaping
laptop
laundry cabinets
vacation US
vacation overseas

Monthy Needs
car fuel
car loan
grocery (basic allowance)
home HOA
home mortgage
utilities cell phone $10
utilities gas & electric $25
utilities phone/dsl/satellite $10
utilities water $10

Accruing Needs
car insurance
car registration
home insurance
home property tax
professional membership
life insurance
medical
vision, dentist

Savings Investment
ROTH contrib
investment contrib

Savings Reserve
basic (ie baby emergency/slush fund)
emergency fund
car repair reserve
home repair reserve

There's a lot of financial housekeeping that I've procrastinated on for a long time, and it's time to get into gear and knock it out already! I've decided to add the following goals to my blog profile -- I love the feeling of crossing something off a list so writing it down should help motivate me!

[ ] update wills
[ ] invest IRA rollover money
[ ] stock basis into Quicken
[ ] annual review with broker
[ ] review life and disability insurance
[ ] review phone & cell phone plans

It's terrible that DS is almost 1.5 years old and we still haven't updated our wills. DH actually doesn't have one, I put one in place for myself before we married, but named my father as executor and guardian if DH also died. My parents have since divorced, and we want my mother to be guardian, so this needs to get fixed ASAP!!! I used a lawyer last time who was very sloppy -- his first draft had tons of misspellings and wrong names, and if I hadn't had to pay half the fee upfront I would've fired him. This lawyer was recommended by my broker, must've been a client because he certainly wasn't any good. DH wants to just use a software will package we picked up ages ago...and now I can't find it. Grrrr...maybe I'll go check out

www.legalzoom.com that is heavily advertised around here.

With Quicken I need to buy the 2007 version (I got a notice that downloads won't be supported for the 2004 version anymore) and just start over. When we switched from Etrade to Scottrade I don't think the basis information for about 3 stocks followed, so I need to go find the old statements and enter everything in. I'm thinking I'll just let the brokerage track all the mutual fund basis, but it might be fun to download all the investment info into Quicken and play with the analysis tools. I won't bother with downloading my checking and savings accounts into Quicken this time -- Quicken's budgeting just sucks and I'll stick with envelope software.

Between us, DH and I have worked for 7 companies in the last 4 years. We rolled over the 401k for all but DH's current employer into IRA accounts, and have about $70k sitting in money markets within the IRAs that need to get invested. It's about $10k in mine and $60k in his -- I had resolved that I was going to understand my current portfolio before investing my $10k, while he's felt that the market was just too high and he's been in such a crunch at work that he hasn't had time to decide what to do. It's not good that the money is just sitting there, so it's time to really figure out what to do.

For life and disability insurance, I plan to get 5 quotes. The hard part is deciding how much coverage to take out. Currently we have $500k life on DH and none on me -- at a minimum we need to take out at least enough on me to cover daycare. I don't know if we have any long-term disability at all, maybe $100k through DH's employer if we're lucky. This is one area where it's frustrating to be the at-home spouse who takes care of these things -- I have no direct access to the benefits information at DH's company, and have to rely on asking him to contact people and bring info home. When he worked for large companies this stuff was all online, but his current company is very small and poorly managed -- I'm not sure if they even have a dedicated HR person. DH's current project has been a nightmare for the last 3 months, and he's currently working 12 and 16 hour days, so dealing with benefits is not really on his radar. Plus as soon as this project is over he's planning on getting his resume out there and finding somewhere else to work, so hopefully it will be a moot point soon. I'm guessing the best deal for LTD will be through his professional association, but unfortuately their quotes are all over the phone and not online, so it's time-consuming to figure out the best deal on coverage.

Our cell phone contract is up in April or May. I can't find out the exact month because the contract is in DH's name and the company won't disclose any information to me. Grrrr. All future things like this are going in my name as the primary! We only use about 200-300 minutes per month and are paying about $78 after all is said and done. I need to figure out whether it's cheaper to have two phones on a shared monthly plan or to do two pre-paid plans.

Every time I hear a news story about the rising cost of health care I ask myself, “Just where does all the money go?” Somebody must be getting rich from all this, but it’s not clear who it is. So I was pleased to see Money-Driven Medicine on the new books shelf of my library. It’s written by Maggie Mahar, a financial journalist. While I have no means to judge her credentials, the book is well written and has some interesting points. (If anyone else can recommend similar books on the topic I’d love to read them!)

First, a breakdown of where the money is coming from:
(* denotes money from taxpayers, for a total of 51% funded by the government)
30% Private insurance
17% *Medicare
16% *Medicaid & SHCIP (I think this is a program for uninsured children?)
14% Patients out-of-pocket (ie copays and uninsured self-pay)
12% *Other public spending (including veterans, public hospitals, school programs)
6% *Private insurance for government employees
5% Charity and philanthropy (includes private money for hospital construction)


Next a breakdown of where the money is going:
31% Hospital care
22% Physicians and other clinical services
22% Other spending (dentists, home health services, over-the-counter medicines, etc.)
11% Prescription drugs
7% Nursing home care
4.5% Private insurance profits and administrative costs
2.2% Government programs administrative costs

According to the author, in theory free market competition should reduce the cost of a product, but in practice, “the current system pits each of the health care industry’s players against one another: hospital vs hospital, doctor vs hospital, doctor vs doctor, hospital vs insurer, insurer vs insurer, insurer vs drugmaker, drugmaker vs drugmaker.” She quotes Michael Porter, a Harvard Business School professor, “competitors do not create value, they divide it. And sometimes, they destroy it... all are trying to assemble bargaining power so that they can strike a better deal for themselves while shifting cost.” Gains from one player come at the expense of another, creating no net value and adding administrative cost.

Another thing that hinders market forces is the nature of health care. The customer is faced with a great deal of ambiguity. According to Kenneth Arrow, a Nobel laureate economist, “Recover from disease is as unpredictable as its incidence…The information possessed by the physician as to the consequences and possibilities of treatment is necessarily very much greater than that of the patient.” The author states, “Health care is not a commodity. While two consumers may derive pretty much the same value from a new refrigerator, a particular course of treatment can have a drastically different effect on two different bodies…Three out of four health care dollars are spent on products and services that the patient has not purchased before…there are no warrants and no guarantees. The patient cannot return an unsuccessful operation.”

Historically, the fee-for-service model of medicine had the supplier (the doctor) both telling the customer (the patient) what he needs to buy and setting the price for it. “Allowing physicians so much autonomy all but guaranteed that the cost of health care would soar…The patient wanted as much care as possible; the physician had been trained to provide the best care possible. The price was not his concern. To the contrary, from a purely economic point of view, it was in his interest to see health care spending climb.” Until the 1930’s the patient’s ability to pay was the only check on rising health care costs.

When private insurance became the norm, this restraint was removed. “Blue Cross helped pave the way for health care inflation by reimbursing hospitals on the basis of their costs – an early example of the perverse incentives that would fuel health are spending for the rest of the century…Any hospital that tried to be more efficient and managed to reduce the cost of doing business would find its income reduced by an equal amount….hospitals were encouraged to solve financing problems, not by minimizing costs but by maximizing reimbursements.”

The book’s first chapter goes on to cover the rise of insurance, Medicare, and HMO’s, and concludes, “As medicine becomes more corporate, it is driven by the quest for profits…more sales lead to higher earnings. But more health care – more devices, more drugs, more procedures – does not necessarily lead to greater health.”

The second chapter covers how all the players are competing against each other. For instance, all the hospitals in an area may have a “medical arms race” to all open competing facilities in the most profitable areas such as cardiac care. The result is redundant service centers and a push to do procedures to profit from the investment, thus encouraging patients to have things done sometimes with doubtful benefit. On the other hand, “If too many facilities are trying to specialize in heart surgery, the surgical teams at these hospitals do fewer procedures. They may draw enough business to turn a nice profit – but not enough to remain at the top of their game.”

“Private insurers regularly skim off the top 10-25 percent of premiums for administrative costs, marketing, and profits. The remainder is passed along a gauntlet of satellite businesses – insurance brokers…lawyers, consultants, billing agencies…and so on. Their function is to limit services in one way or another. They, too, take a cut….as much as half of the health-care dollar never reaches doctors and hospitals.”

The third and fourth chapter cover (in far too great length!) various instances of hospital takeovers by for-profit companies and some of the sleazy doings of the guys at the top.

The fifth chapter covers the issue of end-of-life spending. Some of the rise in health care cost is attributable to doing lots of procedures on elderly and frail patients who die anyway a short time later of other causes. There is a map of the US showing a map of Medicare spending. It’s titled, “During the final six months of life, Medicare patients in high-spending regions receive 60% more care.” “Doctors like to fix whatever is fixable, and as a result, many patients die in intensive care units with their blood chemistries in perfect order.”

The sixth chapter covers the impact of the uninsured. “While well-insured Americans face the hazards of overdiagnosis and overtreatment, millions of uninsured patients routinely receive care [that can be described as] ‘too little, too late.’ And in the long run, ‘too little, too late’ proves expensive.” “Contrary to urban myth, it is not the uninsured who are crowding emergency rooms.” Hospitals find subtle ways of discouraging uninsured patients – such as charging the uninsured higher rates than those with insurance.

The seventh chapter calls for the industry as a whole to improve their use of computer technology, to move to “pay for performance” models (paying hospitals and doctors based on measured quality rather than simply on number of procedures performed), and to adopt evidence-based medicine.

The eighth chapter covers device makers, drugmakers, and their relationship with the FDA. Large device makers have very high profit margins – something like 19 percent in some cases. Some things other countries do to regulate or negotiate prices for devices and drugs: set reimbursement rates for new drugs based on how they compare to existing drugs (Japan), capping profits (Britain), putting a ceiling on total spending (France), restricting the rate of medical device and drug inflation to no more than general inflation (Canada). In the US, drugmakers and device makers can charge whatever the market will bear.

All in all, a very interesting read, although it’s hard to take away from this book a bullet list of why everything is so expensive.

Being a stay-at-home mom leaves me little time to concentrate (except during naptime!) but lots of opportunity to mull over things. My thoughts on starting a business are really going three different directions at once, which may make my ramblings seem a little inconsistent from entry to entry.

First, there's the idea that it would be nice to have a little extra cash to spend on some of the fun things in life. Hence the idea of finding something fun to do during naptime that generates a little cash. A key requirement for this type of business is that it enhances our quality of life -- nothing too time consuming or stressful. It wouldn't have to be at all related to any future career plans.

The second direction is that maybe I should be doing a little something useful for my resume, so that I have an easier time of it when I do decide to return to the workforce. Perhaps I could take on a small project for one of my former employers. The upside is a little cash and not having that gaping hole in my resume, the downside is that it would require more time and I would be on the hook to deliver.

The third direction is that DH and I have often talked about going into business together. We're both getting fed up with being at the bottom of the engineering hierarchy, having to put up with long hours due to poor planning on the part of managers and VP's. In theory, once the kid(s) are in school, I could be the one to start a business while DH continues to work. Once it gained sufficient momentum, DH could quit his job and join me. But what business? And how do we gain some of the skills we lack like sales and marketing? It's still mostly a daydream at this point.

So today I decided to browse the want ads and gigs on Craig's list, just to see what's out there. Something really interesting popped up -- someone wants a ghost writer for their blog on career development. I got the impression that the poster had some ideas, and the ghost would flesh them out -- 30 posts upfront, then 3 posts per week, at $10-$15 per post. Could this be legit or is there some sort of "pay-for-blogging" scam that everyone but me knows about? I love to write and to edit, and I could see myself doing this during naptime. I emailed the poster a summary of my relevant experience (I was in charge of a lot of interviewing and hiring at my last job), so we'll see what happens.

I stumbled across The Millionaire Maker on the "new books" shelf of my library. While it is actually a "get rich quick" instead of a "get rich slow" book (the things the author recommends doing with your home equity and your IRA are truly frightening, and her example investments and returns are ridiculous), it did have a couple of ideas that I found useful.

I really liked her version of a net worth statement:

One-Year Freedom Day Goals:
• List goals for where you want to be in 1 year, for example:
• Establish a business
• Shift from draining assets to performing assets
• $ of invested assets
• $ /month in passive income
• Create $ / month of cash flow from new business
• Eliminate $ of debt
• One less employee in family (replace salary with passive income)

Asset plan

Shift $ of Assets as follows:
• For instance:
• buy $ of rental property
• invest $ in a business
• loan $ in a promissory note

Revenue

Cash Machine
• List type of business, cash flow goal, and ramp-up time

Passive Income: $ /mo
• For instance:
• $ /mo in rent
• $ /mo from note
• $ /mo from dividends

Appreciation:
• Projected appreciation on rental property

Financial Baseline:

Income: $ /mo (pre-tax)
Expenses: $ /mo (average)
Assets: $
• List assets
Liabilities: $
• List liabilities

Skill Set:
• List skills

The author doesn't believe in saving your way to wealth -- in her view it takes too long. Instead, she advocates finding ways to generate extra income, through starting small side-businesses and passive income from owning rental property. She wants you to think up a business you can start within the next 24 hours based on skills and resources you already have (simple things like dog walking, computer tutoring, etc.) You use this first business to learn about how to run a business, and to provide a source of income for real estate investing. Eventually your goal is to reach the point where you have enough income from your side businesses and rentals that you can quit your job if you choose.

Our goal is to take those skills and gifts you have and put you in immediate action so that you can learn a whole new skill set, that of running your own business….Here’s the sequence:
1. Use a known skill set.
2. Create a viable Cash Machine.
3. Learn business skills.
4. Take those business skills into any arena you desire.

Whatever you decide to do, your first business:
1. Should have a low barrier to entry. That is, you should be able to have it up and running and possibly generating real money within 24 hours.
2. Shouldn’t take more time than you can allot, though perhaps you can get up an hour earlier every day.
3. Shouldn’t take more of your capacity than you can allot, tough it will be a stretch.
4. Should diversify your income.
5. Should give you a nice return on your investment.

Again, I want to emphasize that I think the book promises the moon, and I’m definitely not following her investment advice. However, a few worthwhile ideas gave me that lightbulb feeling: 1) the idea of starting a side business to learn business skills, 2) focusing on passive income in addition to salary vs. expenses, 3) setting long term and one-year goals.

Recently I’ve been mulling over the idea of starting a side business. An extra 10k-15k net per year would allow us to visit the in-laws in Australia, take another nice vacation, add a front patio, buy cabinets for the laundry room, buy a 2nd laptop and other toys, and maybe even invest a little more. (Notice how low investing falls on the priority list --- bad Zetta!)

The problem is that I would have to give up my free time when DS naps for 3 hours each day. So ideally it should be something I enjoy and would want to spend time on anyway. I can’t see getting anything productive done during the 9 hours he is awake, and don’t want to take away from time with DH in the evenings or on the weekends. Let’s say I could spend 10-15 hours per week. Dreaming some more, the ideal would be something flexible where I could work on something at home as it suits me and sell it when its done (as opposed to working according to a fixed schedule or delivering on deadline.)

I really don’t know how much other people are able to net from that kind of schedule, but even 5k would be a nice addition to our finances.

Hobbies: reading, surfing the net
Skills: software design, writing, layout, public speaking,
Personality: detail oriented

I’ve browsed through a couple of books along the lines of “101 Home Business Ideas”, but haven’t come across anything appealing. Some ideas that do occur to me are freelance writer, newsletter editor, website designer, discussion forum moderator – I wonder how one gets into this sort of work, and how well it pays…

Anybody have a good entrepreneurial or home-business website to recommend?

DH and I are mostly on the same page financially, but there are a few areas where we’ve got philosophical differences. We agree on never carrying a credit card balance, on putting 20% down on a home, that money that’s been invested is basically locked away, and that it’s good to have an emergency fund in case he gets laid off.

Cars are one area of disagreement. I was taught to look for a car that was 2-3 years old and 20k – 30k miles, while he and his family believe in buying new. I hate car loans while he believes anything under 2% is a great deal and should be taken advantage of. Having a really “nice” car gives him a lot of pleasure. He cares about horsepower, I care about trunk space. He’d like to get new cars every 5 years; I’d like to make them last at least 10. (To be fair, I have to admit that I only kept my last two cars for 5 years each, although they did both hit 100k miles.) When I got pregnant, we bought a new SUV for me, with all the latest side airbags and so forth. A year later, we bought him a new car. We compromised in that I agreed to take a $7k loan at 1.9% in order to get the car he really wanted without dipping into our emergency fund or selling off investments. I remind myself that it’s only costing us $300 over the life of the loan, and I’d gladly spend $300 on a present for him.

When we met, I was putting 15% into 401k and he was putting in only up to the company match, maybe 6%. We compromised at 10% each for a few years, but had to cut back when we went to one income. Currently we don’t like the funds in his 401k and his company doesn’t match, so we are prioritizing contributing to the ROTH IRA first.

Gifts are another area where we differ. His family is very generous with presents, and DH is naturally generous as well. I probably tend to be a bit on the cheap side. With friends birthday parties and the like I sometimes worry that giving too expensive of a gift will make the other person uncomfortable, as they may feel under pressure to reciprocate. In our budget I’ve just allocated an envelope for gifts and funded it according to how much we spent the previous year rather than trying to bring the amount down.

Traveling is very important to DH. I love it too, but don’t mind giving it up for a few years so I can be a SAHM. I think the cutback in traveling is what pinches the most about not having two incomes. DH really wanted to set up a trip to Hawaii this year, but unfortunately we don’t have the money right now, and have some higher priority items to save for first. He talks a lot about the places he’d like for us to go see, and I have to be careful not to squash his daydreams.

I like to get down and dirty with the numbers on our spending. For years I would periodically download all our transactions into Quicken, make lots of graphs, set up a budget, and contemplate the results. Quicken is impossible for truly tracking and sticking to a budget, however, and I am much happier since switching to an envelope system. I make up spreadsheets with our mutual funds and net worth, and puzzle over what I should understand as a result. I sometimes get too caught up in getting all the little details recorded accurately rather than in comprehending the big picture. DH, on the other hand, is more intuitive. He will look at our bank balance, mentally subtract the large upcoming payments like property taxes, and quickly make a judgment on whether we can afford a big purchase. He’s usually right, too!

Speaking of big purchases, I have to be pushed to spend money even on things that really enhance our lives. We spent a lot of money on remodeling the kitchen and bathrooms, and have gotten a lot of pleasure out of them – very worth the money, but without DH’s influence I would’ve held back.

The first time I read The Complete Idiot’s Guide to Getting Rich, I got a bit depressed for a few days because we weren’t saving my calculated Target Savings Goal each month (and I didn’t realize that our investments were returning as much as they are.) We had a big conversation about whether it was worth being super frugal now in order to retire very wealthy 20 or 30 years from now. We decided to go for more of a balance – spend some and enjoy life a bit today, while still saving enough for a comfortable (but possibly not wealthy) retirement.

A final point I almost forgot -- investing! I favor buy-and-hold (to a point that is detrimental as I've missed out on selling declining stocks) very long-term investing, loaded mutual funds (Dad's influence there), and using a full-service broker. DH trades individual stocks through a discount broker, looking to make a profit within a couple of years. When we first met he talked about the ups and downs of the stock market so much it drove me crazy, as I really had no interest in individual stocks (and my eyes still glaze over). He hasn't been trading stocks much since we married -- I'm afraid I've really discouraged him by not wanting to join him in it.

I was looking over DH's first paystub of the year and noticed that the company didn't withhold a contribution for 401k. Grrrr...this company is pretty poorly managed, and we had a big fiasco at the end of the year when they didn't have the open enrollment information available until Dec 15 -- after we'd already left the country to visit my inlaws -- and they required the forms back before Dec 31. We had to sign up for health insurance without having any information on how much the premiums would be, and I still don't know whether we've got any LTD coverage. Looks like you had to re-enroll in the 401k instead of your previous contribution just continuing automatically.

So I told DH about it and didn't think much more about it until I sat down to fund our envelopes for the coming month. The January paychecks were $250 less than normal. Very odd -- without the 401k contribution it should've been higher than normal. Did our medical premiums go up that much? So I dug out an old paystub from the end of 2006. The medical premium was only $20 more. The main difference was that the new paycheck had $300 withheld for something called OASDI. This didn't ring a bell until I went to

www.paycheckcity.com -- it's social security.

There is a cap on how much income is taxed for social security, and apparently instead of spreading the payments evenly across the year, we have this withholding until about October and then suddenly get a larger paycheck. Unfortunately I based our budget on a paystub from November, so now I have to find a way to trim $500/month. Ugh. Although I'd prefer to have a simple budget with the same contributions to each envelope each month, I think I may have to make an exception for the envelopes for Christmas gifts and IRA contribution, weighting them more heavily at the end of the year.

Shortly after I graduated and started working, there was an article in the "Living" section of the local newspaper. You know, where they put the fluffier human interest pieces as opposed to hard news. It was entitled "How Much is Enough?" and really had an impact on me.

The journalist had interviewed many people at many different income levels, and asked two simple questions, "How much are you making now?" and "How much would be enough for you to be comfortably well-off?" The person making $15,000 said they were just getting by, and thought $30,000 would be enough to live very comfortably. The person making $30,000 said the same, but they thought $60,000 was where well-off started. The person making $60,000 thought $120,000 was the magic number, and so on and so forth up to the family bringing in $5 million. They said that the yacht and the horses and sports cars were all very nice, but they wouldn't really be well-off unless they had $10 million! Now I'm sure that there's a lower limit to this, and I bet the top end was a setup, but basically the point was that everyone thought that about twice what they currently had was "enough".

At the time I had just started my first "real" job, and I was making $36,000. One of the perks of engineering is the high starting salaries, and it was easily more than enough for a single person with no debts in a low cost of living area. I resolved then and there that I would always look at whatever I was making as "enough". I've been stumbling with this a little bit lately, as we can't afford to do the amount of travel and home improvements we used to do when we had two incomes. But overall we are definitely blessed to have much more than "enough".

2006 was the first time I decided to adjust our withholding so that we would have more money coming in each month and not get such a big refund at tax time. It's kind of complicated for us because I have to take into account dividends, capital gains distributions on the mutual funds, capital gains/losses of any stock sale, and an unpredictable AMT recapture credit. So I was very keen to do our taxes this year and see how I did.

Looks like I blew it. We're going to owe about $1380 on federal and $840 on state. We won't have to dip into the emergency fund, but it does almost wipe out the funds from an envelope I call "Basic Savings" -- I guess you could consider it our baby emergency fund rather than the emergency fund we'd dip into if DH got laid off. It also means that now we really really have to live within the budget I set up in Mvelopes -- I'd hoped to have a few more months to fine-tune it.

When working on the W-4 I correctly anticipated about $6k in dividends, but I'm not sure about the $13k in capital gains distributions. And I completely forgot about $15k in profit from where our broker advised us to sell one mutual fund and redistribute the money to some other funds. I can't remember why we did this, maybe it wasn't performing that well. I've decided I need to keep a notebook where I write down the reason for each purchase or sale. I have about $600k spread across 11 different mutual funds (within the same fund family) and I really couldn't tell you why. Luckily I was conservative on the AMT recapture, predicting $850 when we got back $2500, and we had a capital loss carryover of $10k, or we would've ended up owing a lot more!

I don't trust TurboTax's W-4 page -- it told me to take something like 12 deductions in 2006! I can't remember if we did that for any lenght of time, but at the end of the year DH's paystub shows that we were taking 6 deductions and still ended up owing money. TurboTax is telling me to take 12 deductions for 2007 as well...something's not right. There's a withholding calculator on the IRS website that I trust a lot more:

http://www.irs.gov/individuals/article/0,,id=96196,00.html
and it has us at 5 deductions.

Real estate here in California has had an amazing run over the last 10 years. I bought my first house, a 1170 sq ft townhouse, in 1998 for $189k, and sold it 4 years later for $369k -- a profit of about $160k after paying the real estate commission. At the time, we considered keeping it as a rental property, but were nervous about carrying two mortgages. Too bad we didn't -- those townhouses were selling for $600k just a couple of years later!

Our current house is 1900 sq ft, 4 bedroom, 2.5 bath. It has a large yard (for California) and is in a very special location -- our back yard borders a large canyon, probably a quater mile across, that is protected by the city as a nature corridor. We fell in love with the view and went $70k above our intended budget to buy the place for $520k in 2002. We thought we were at the top of the real estate bubble then, but closing prices on this model have gone up over $200k since then. (They've fallen $20k since the peak a year ago. Not sure how much more they'll fall, but I don't think they will go back down to the price we bought at.) With the downpayment and the principal we've payed off, we're sitting on about $300k of equity.

Interest rates have been in our favor as well. We started off with a 30 year fixed at 7.0%, and refinanced twice in the first year as they kept falling and falling. In the end we decided to go for a 10/1 ARM that is fixed at 5.125% for the first 10 years. I figured that the longest my parents had ever lived in one house was 9 years, so it was worth the risk of taking the ARM to get the low rate. This decision has been a major factor in allowing me to be a SAHM.

After reading a few posts on EnoughWealth's blog, I'm wondering if we should consider doing some "gearing" -- taking a home equity loan and using the money to invest in either mutual funds or rental properties. The biggest problem I can see is that servicing the debt could really put a squeeze on our cash flow.

The other issue with our house is that the local schools are only average. I recently looked at the published test scores for our local elementary. The 2nd graders did great, but then the test scores for that same group of kids was lower for each succeeding year. Not encouraging. Of course we knew the district wasn't the best in the region when we bought the place, but we figured we'd have years to make a decision about either moving or paying for private school. At this point, it might be cheaper to pay for private school than to pay for a higher mortgage and property taxes if we moved to a similar house in a better district. I'll have to go back to work for us to afford either option. We do have a choice lottery within the district, so I'll also be looking to see if any of the other elementary schools are better. The houses on the other side of the canyon are in a much better district, the California rating index is a full 100 points higher, but the house prices are easily $500k more than ours.

As for the house itself, when we were looking we really wanted about 2200 sq ft but compromised for the view. Ideally I'd like one more bedroom, a kitchen table separate from the dining room, and a slightly larger living room. I guess it's human nature to always want just a little bit more than you've got. When we have a 2nd child, the current guest bedroom will become his or her room, and we just have to figure out what to do with the queen guest bed (the room is 10x10, so a queen doesn't leave much room for a kid to play.) I really love the bedframe, so I don't want to sell it. I'd like the office bedroom to be a combination exercise/playroom, although today it's too cluttered up with outgrown baby equipment, computers & printers, and bookcases to be useful. (Houses don't have basements in this area, so you end up storing stuff in either a bedroom or the garage. I really miss having a basement!) We might add a murphy bed so it can double as the guest room, although I'm worried about losing a couple of feet for the murphy. The room itself has 3 windows along the hallway so we'd need blinds to use it as a bedroom.