Uncommon Cents

Welcome to your first Link Payday of the year, published on January 5, 2009! Like usual, I try to give you some of the best posts of the personal finance blogosphere of the last few weeks, so here are some posts that caught my eye:

Her Every Cent Counts covers a controversial topic when she discusses Sex: Who Pays? This isn’t just who pays for dinner, folks, but for the actual costs of some of the necessities of actually engaging in sexual activity. Not necessarily a topic everyone wants to look at, but certainly one that’s real.

Moolanomy teaches us about a site I’ve not heard of before when he writes a MoneyAisle Review. Folks, this site helps to get the user the best rates on CDs and high yield savings accounts by having banks actively bid for your business. What a great idea!

All Financial Matters covers changes in how your credit score will be calculated with the article Bureaus Roll out New Credit Score Formula for 2009. As someone who just applied for a mortgage refinance (and got blindsided by a credit card closure that wasn’t expected), this looks like even more potential for the consumer to end up on the short end.

David over at My Two Dollars does a great job of comparing two really important savings vehicles for ducational purposes when he writes on Comparing a 529 Plan and an Education Savings Account (ESA). This can be a tough choice for many, so David does a nice job of looking at the pros and cons of each.

Finally, my buddy Ron over at The Wisdom Journal lets you in on the Secrets to Effective Complaining. I don’t like to complain, but I probably do it more than I like, so it’s nice to learn how to do make it worthwhile.

And that’s your January 5, 2009 Link Payday!

Tags: Banking, CDs and Money Markets, Credit cards, Social aspects

The Dow Jones Industrial Average ended 2008 down 33.84%. The Standard & Poors 500 ended 2008 down 38.49%. The not as well known but very useful Dow Jones Wilshire 5000 ended 2008 down 38.68%. All of those numbers are horrible.

Vanguard helped me by doing their homework on my model portfolio; their calculations say that I ended 2008 down 29.7%.

While I usually hope that I can beat the indices (and sometimes I do!), this isn’t really one to write home about–it’s the very definition of a hollow victory. Oh well. I’m hoping 2009 will be a heckuva lot better!

Tags: 401(k)s and equivalents, Investing, Social aspects, Stocks

This week Uncommon Cents was featured in:

the Rich Life Carnival, this week brought to you one again by the Rich Life Carnival;

the Money Hacks Carnival, hosted this week over at Cash Money Life;

the Cavalcade of Risk, featured this week over at Colorado Health Insurance Insider;

and the Carnival of Money Stories, seen this week at Greener Pastures.

If you’re visiting from one of these parties, please consider subscribing to our RSS feed. Mahalo!

Tags: Administration, Carnivals and Festivals, Links

After months and months of negativity, December 2008 was a positive month for my model portfolio (finally!). It didn’t make up for an awful year, but it certainly helped.

The Vanguard Total Stock Market Index Fund (VTSMX) ended the month up 11.39%! That’s the first time in a long time I can say that. The T. Rowe Price International Discovery Fund (PRIDX) was also up, showing a double digit return of 10.00%. Finally, the Vanguard Total Bond Market Index Fund (VBMFX) was also up, 2.31%, as well as continuing to pay that nice yield of 5.04%.

For the year, VTSMX was down 32.88%, PRIDX sank an astonishing 48.59%, and VBMFX was down 1.90% (they all pay dividends, which helps to cushion the blows, particularly the bond fund’s 5.04%). The Vanguard Total International Stock Index Fund (VGTSX), which I hope to switch my international exposure to tomorrow with Vanguard’s brokerage option, was down 44.85%–not great by any means, but a bit better than PRIDX.

When Vanguard publishes numbers (which I think will be tomorrow night) on performance of my portfolio for 2008–which will look a bit different from what has been posted here due to the effect of money being contributed throughout the year–I’ll blog about them. It’s not going to be pretty, but it’s what happened in 2008. I’m hoping that 2009 will build on December’s successes.

Tags: 401(k)s and equivalents, Bonds, Goals, Investing, Mutual funds, Retirement, Stocks

As I write this, it’s the last day of 2008. In a few hours, fireworks will be lighting up the skies in Kane’ohe as well as all around the island (as well as much of the world). In the meantime, I look on and off at eBay because a bicycle crankset I want is on sale–until the end of the day.

The kicker on sale prices isn’t the discount as much as it is the limit on how long the discount will be in effect, which is why phrases like, “prices good until Tuesday,” “while supplies last,” and “no rainchecks,” increase pressure on the consumer to spend; the point being simply that the price reduction is temporary. After all, if you could always get the item at the discounted price, your urgency to buy it would be close to nothing.

Even someone who thinks about (and blogs about) frugality like me feels that pressure. “Can I get that price again? And how quickly? Do I really need to get this now?” Those are some of the questions that run through my mind. After all, if it really is something that’s high up my priority list and it’s discounted, that’s a lot better than it being high up my priority list and regular price.

I’m still not sure if I’ll pull the trigger on this eBay purchase (this blog post is forcing me to think about it hard, fortunately or not!), but it’s pretty clear that deadlines are one of the things that help to add pressure on the consumer when something’s on sale; it’s happening right now!

Tags: Budgeting, Frugality, Social aspects, Technology

I keep going back to the issues I had with my truck (not fully resolved yet, even though it is operational). Fortunately, I was insured, although I had a deductible of $500, which I needed to tap into my emergency fund to pay.

I had additional expenses as well. Because I was without a vehicle–which I need to make it on time to my two jobs–I rented a car for about a week. That was an additional $224, which I also thought was justified to come out of the emergency fund. How about gas? No. I’d have been paying for gas anyway.

While having an emergency fund is great, it can be a temptation if you’re in need of cash. Defining what a true emergency is and having the discipline to stay away from the fund in non-emergent matters is key. A vehicle repair is an emergency here; but what about a computer crash? Hard to say. In my case, since I use my notebooks for work and for this blog, I would say that qualifies, but maybe not for others. A wireless router dying? I would say no.

Just as importantly, an emergency fund needs to be replenished after it’s tapped into, which is one of the things I’m going to be working on doing over the next few month–so frugality is still key even with the emergency fund when crisis truly does strike.

Tags: Emergency fund, Frugality, Social aspects

To all of you, have a great and safe 2009! Looking forward to more blogging adventures with you over the next 12 months.

I typically redo my asset allocation (aka rebalance or reallocate) once a year, around the first of the year. In a taxable account (which is not where I do this), this puts off any capital gains until the following year (although it would also put any losses there too, so if you are trying to take a tax loss to offset some gains, this may not be the best thing to do).

Reallocating is something like pruning a tree; you are selling certain assets and buying others in an effort to maximize the health of your overall portfolio. With reallocation, you must consider possible tax ramifications [which is why I do this in my 403(b), so I don't have to worry about this issue] and what you wish your new allocation to be.

In my case, for 2009 my target allocation is to have 30% of my portfolio in bonds, 50% in domestic stocks, and 20% in international stocks. Currently, it’s 39.71% in bonds, 42.26% domestic stocks, and 18.03% in international stocks. It started 2008 roughly at the target levels mentioned previously. What happened? The decline in the stock market and a steady performance by the Vanguard Total Bond Market Index Fund (VBMFX) resulted in this imbalance.

In previous years I’ve ended up with portfolios that were somewhat out of kilter with my 30/50/20 target, although not quite to this extent. When things have been off by a percentage point or two, sometimes I’ve just decided to live with it (even though I can make changes–within limits–to my portfolio without charge, others might not, which is a consideration), sometimes I’ve decided to make changes just by altering the allocation of my new contributions, and sometimes I’ve actually moved assets fund to fund–which is what I’ll do this year because the discrepancies are so large.

What I’m hoping to gain from this exercise is a portfolio that does better in the long run that maintains enough fixed income holdings to maintain some stability; my belief is this is it. We’ll revisit this periodically as well as rebalance again next year!

Tags: 401(k)s and equivalents, Bonds, Investing, Mutual funds, Retirement, Stocks, Taxes

If you have interest in a bond fund because stocks have made you nervous or just because you realize having a healthy amount of dollars in fixed income investments helps to weather the storm of a bear market in stocks, there’s a couple I really like. Fortunately or not, they’re exactly what could be predicted by those who know my investing style: low cost, high quality, high performing, and from Vanguard (no, I am not a Vanguard shill, just a satisfied customer).

The Vanguard Total Bond Market Index fund (VBMFX), down 1.9% for the year but with a yield of 5.04% has a low .19% expense ratio and broad diversification. Over time, the net asset value has fluctuated a bit but nothing dramatic, and the yield has been impressive–exactly what you want in a bond fund. My personal favorite, however, is the Vanguard GNMA Fund (VFIIX), which is up 1.55% with a 5.16% yield for the year. It has a slightly higher expense ratio of .21% and invests at least 80% of assets in Ginnie Mae certificates, which are directly backed by the federal government (notice that while you hear all kinds of gloom and doom about Fannie Mae and Freddie Mac, you hear none for Ginnie Mae, specifically because of this direct government backing).

Remember, I am not a financial advisor so I cannot give advice; I am merely pointing out two bond funds that I really like and have money in. Consider these two when looking at fixed income funds.

Tags: Bonds, Investing, Mutual funds, Stocks

As you may or may not know by now, the island I live on was largely without power for an extended period of time starting the evening of December 26th and ending the afternoon of December 27th. It was the second island wide blackout since 2006, yet despite being without electrical power from Hawaiian Electric, I was able to do some banking, go over the mortgage paperwork for the refinance, browse the Web, get updates on the power situation faster than the media could put them out, and put up a couple of blog posts. Even more importantly, we were able to satisfactorily keep refrigeration going well enough that we didn’t lose any food–just some ice. The result was not just frugal–we spent less than $30 on emergency supplies–but also reasonably comfortable. What did we do to make this potential nightmare livable?

Prepare, prepare, prepare!

Consider the basics: Since this island has a history of hurricanes, every year I take stock of things like bottled water, tarps, first aid kits, batteries, propane tanks, flashlights, and gas powered stoves to make sure we can deal with an extended period without power or water. I always find it curious how there’s a run on these things after the stores open following a disaster!

Be smart about what you’re doing: The times I needed to use my truck I also used my inverter to charge up my MacBook and Aspire One as well as my cellular phone. Using that combination, I was able to communicate with my Twitter buddies to figure out what areas of the island had power, enough for me to find open gas stations to get gasoline for the generator, as well as lunch for the family while we waited for the power to come back on. We knew from previous experience to keep the refrigerators and freezers closed as much as possible, and to unplug the sensitive electronics from the walls just in case the power came back in an electronics killing surge.

Spend money where it makes sense: I purchased a low cost gasoline powered generator (and at least as importantly, the necessary oil for it!) some months ago. It sat unused in our garage until today, when it ran our freezer and refrigerators for several hours; it cost $99 on sale. Is it the greatest generator in the world? No. Did it work well enough to get us through? You bet. The inverter for the truck is something I’ve had for awhile–it’s always around for those times I’m mobile, and in this case it kept the computers going long enough for me to get what I needed to done. It cost $30. That’s $129 well spent!

In the end, we made it through with flying colors. We lost no food to spoilage, nor any electronics. The generator and inverter worked fine, and I spent just under $5 on gasoline for the generator and $14 for a couple of propane tanks. I do need to get more oil for the generator, just in case. It wasn’t the longest outage, but it was long enough to be less than comfortable; what I learned was that being well prepared certainly helps make these situations better even if they’ll never be ideal.

Tags: Frugality, Social aspects, Technology