Not So Mighty Merch

Remember 1989 – 1992? The housing market fell an average of 15%. 747 Savings and Loans went out of business. The unemployment rate in June 1992 was 7.8%. Inflation was over 6%. Does this sound familiar?

What is the saying, those who don’t study history a bound to repeat it?

So, let’s compare to today. The housing market on average is off 15%. It will probably deteriorate a little more. You could also argue that a handful of areas are skewing the results. In particular, CA, NV, FL,MI, OH, and AZ account for most of the foreclosures. But in any case, the current market is down 15% and will probably continue to drop.

I am looking at the prices to start bottoming over the next 6 months and linger. An L curve is what I would be expecting. The market has excess inventory that just need to work its way out and that will take time, just like the 90s.

Analysts are estimating 150 banks are in or going to be in distress. That seems like a large number until we compare it to the 747 S&Ls that went out of business.

Just like the early 1990’s, real estate loans were to blame. RTC noted this was the number one contributing factor to the S&L crisis. Other factors included the high short term interest rates in late 70s and early 90s. Some might also say the deregulation of the industry. I would argue the deregulation allowed more time for the S&Ls to try to get out of the mess by being allowed to take on higher margin products (or riskier investments).

So, what happened? Well, the deposits were insured but the fiduciary did not have enough to cover all of these deposits. So, the fed stepped in to cover the gap ($124 billion).

Now, it is a little different. Banks have to be more capitalized and the insurance premiums that banks pay for that FIDC insurance have gone up. So, your money in the bank is safe. Just make sure you stay within the insurable limits.

Unemployment might go up to 6% in the short term and inflation may hit 5% or a little more. But to add perspective that 1992 saw 7.8% and 6% respectively.

So to summarize, I see this as more of 1989 – 1992. And just proves that these things run in cycles.

So, June turn into July and I still have the blahs. The main reason is my debt snowball has stopped. Why? Well, I got hit with about $4,400 in medical bills from last August. (Just showing up now, come on!!)

I decided to just cashflow rather then add it to my debt snowball. So, it basically took me about a month to pay off, but I’ll complete this either this week or next week at the latest. So, logically I understand I am doing what I need to do and realalisticly this will throw me off a month. Whoopie, no big deal.

But my emotional side feels like I’ve been sucker punched to the gut. All my breath and forward momentum have been zapped.

I have reached my heartbreak hill.

But, it’s that guy in the mirror who rides me like a rented mule and keeps me focused and going.

Mirror: Hey! What’s going on?
Me: I don’t know. It’s been a tough month. I was suppose to have the car paid off and the braces. Sigh, none of that happened.
Mirror: Murphy showed up right?
Me: Yea, the guy just comes around at the worst times.
Mirror: Yea, he’s like that. He likes to throw you off your game. Shake you up.
Me: Yea I had a great pace and now I have to stop to clean up this crap that I thought was already taken care of. All my timeframes are shot. I am missing short term goals left and right. AAARRRRGGGGHHHH!!!!
Mirror: You’ve lost focus.
Me: What? No, well maybe.
Mirror: Should we scale back the goals?
Me: No, I think I need to just vent and let it out.
Mirror: You set now? ‘Cause, I got work to do!

So as I turned and walked away, I swore I heard:

C'mon man
And with the local DBT news, LL Cool J with a triumphant comeback
[mumbling]
but tonight...
Don't call it a comeback
I been here for years
Rockin my peers and puttin suckas in fear
Makin the tears rain down like a MON-soon
Listen to the bass go BOOM
Explosion, overpowerin
Over the competition, I'm towerin
Wreckin shop, when I drop these lyrics that'll make you call the cops
Don't you dare stare, you betta move
Don't ever compare
Me to the rest that'll all get sliced and diced

And with that Mr. Murphy:

Don't you call this a regular jam
I'm gonna rock this land
I'm gonna take this itty bitty world by storm
And I'm just gettin warm

OK, time for another random Merch rant. I’ve your having a plesant day, please skip to the bottom (after END RANT) to continue your pleasant day..

Last warning…. OK, I warned you.

-----Begin RANT-----------

So lately, I have been getting more and more irritated by people in general. I don’t know what’s causing this in society or what. Maybe because we get our news from the internet or maybe it is that all news has hidden opinions or people are too lazy to research things. I don’t know.

But my issues are basically: 1) If something is repeated a certain number of times it is considered fact 2) People reinvent the definition of words 3) Feelings are more important then facts.

So let’s take a quick example. We are in a recession. I have heard this on the news and read it on the internet countless times. To the point where a recent survey found that the 75% of Americans believe we are in a recession.

Well, the definition is 2 quarters of negative growth. We haven’t even had one quarter of negative growth.

Well, that’s on definition of recession. No, that is the definition of recession.

Well, I feel like I am in a recession, so we are. OK, I admit I can’t argue feelings with logic.

Or another example. Inflation is out of control. And yes, I hear this on the news and read this on the internet all the time. The unadjusted 12 month CPI (April 2008) was 3.9%, which is hardly out of control. Source: http://www.bls.gov/cpi/cpid0804.pdf

The average since 1947 has been 3.85% so inflation seems about normal year over year. Source: http://bigpicture.typepad.com/comments/2006/06/chart_of_the_we_3.html

Well you know, the government isn’t taking into account oil or food properly so the methodology is wrong.

Really? Here’s what is measures:
§ FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, service meals and snacks)
§ HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
§ APPAREL (men's shirts and sweaters, women's dresses, jewelry)
§ TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
§ MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
§ RECREATION (televisions, pets and pet products, sports equipment, admissions);
§ EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
§ OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).
And:

-------BORING CPI STUFF--------------
Each month, BLS data collectors called economic assistants visit or call thousands of retail stores, service establishments, rental units, and doctors' offices, all over the United States to obtain information on the prices of the thousands of items used to track and measure price changes in the CPI. These economic assistants record the prices of about 80,000 items each month representing a scientifically selected sample of the prices paid by consumers for the goods and services purchased.
During each call or visit, the economic assistant collects price data on a specific good or service that was precisely defined during an earlier visit. If the selected item is available, the economic assistant records its price. If the selected item is no longer available, or if there have been changes in the quality or quantity (for example, eggs sold in packages of 8 when they previously had been sold by the dozen) of the good or service since the last time prices had been collected, the economic assistant selects a new item or records the quality change in the current item.
The recorded information is sent to the national office of BLS where commodity specialists who have detailed knowledge about the particular goods or services priced review the data. These specialists check the data for accuracy and consistency and make any necessary corrections or adjustments which can range from an adjustment for a change in the size or quantity of a packaged item to more complex adjustments based upon statistical analysis of the value of an item's features or quality. Thus, the commodity specialists strive to prevent changes in the quality of items from affecting the CPI's measurement of price change.
The CPI is a product of a series of interrelated samples. First, using data from the 1990 Census of Population, BLS selected the urban areas from which data on prices were collected and chose the housing units within each area that were eligible for use in the shelter component of the CPI. The Census of Population also provided data on the number of consumers represented by each area selected as a CPI price collection area. Next, another sample (of about 16,800 families each year) served as the basis for a Point-of-Purchase Survey that identified the places where households purchase various types of goods and services.

---------END BORING CPI STUFF-----------

Well, I feel that we are in a high inflation period.

I don’t really understand what happened when feelings can override facts and people just except it. I feel that this is becoming more and more common place but I don’t have any facts. (Did I just fall into my own trap?)

------END RANT------------

And for those just coming back to my blog.

Puppy dogs, warm spring days, and a cool breeze. Don’t you feel better? I do.

This month had the good and the bad. I didn’t pay much debt back this month, but I did make good progress on life insurance and my will.

My goals for 2008 are:

1) Pay off debt (except mortgage) by October 1st
. DONE a) Pay off CC by April 1st
. DONE b) Pay off Car 1 by June 1st
. c) Pay off Car 2 by Aug 1st
. d) Pay off wife’s braces by June 1st
. e) Pay off son’s medical by October 1st
2) Invest $15,000 by year end
3) Invest $15,500 in 401(k)
4) Review and reallocate retirement funds by end of Q1
5) Will by end of Q2
6) Life Insurance by end of Q2
7) Save $4,000 for college by end of Q4

1) Pay off all debt but the mortgage by October 1st

Total Debt
06/26/2008 - $17,645 ($656 paid)

Car 2 (3.9% interest rate)
06/30/2008 - $929 ($0 paid)

Wife's braces (0% interest rate)
06/26/2008 - $1,716 ($156 paid)

Son's medical (0% interest rate)
06/09/2008 - $15,000 ($500 paid)

Wife's medical (Not included in total)
06/01/2008 - $4,498.52
06/25/2008 - $1,498.52 ($3,000 paid)

On April 17th, I wrote: “Somewhere between now and being debt free, there will be these hills that will test my resolve to the core.”

In the first quarter, I was finding my pace. By April and May, I was cruising along. Let’s add some more aggressive goals.

And then June hit. I got hit with a 1,500 medical bill, then 1,800, then 500, and finally 600. At the end of the month, I just got hit with 4,400 in medical bills. This is my Heartbreak hill. 4 consecutive hills. Once you get over one, there’s another one.

I knew this day would come and I know the next stage – Just grind it out. To make my goals, I just need to grind the remaining debt out over the next quarter, after I hit these hills.


2) Invest $15,000 by yearend
This will be started in Q4.

3) Invest $15,500 in 401(k)

Invest $15,500 in 401(k)
06/27/2008 - $10,210 invested

Right on target to finish this up in October.

4) Review and reallocate retirement funds by end of Q1

DONE

5) Will by end of Q2

DONE

6) Life Insurance by end of Q2

Took the physical and handing in my application. Just waiting for it to be reviewed.

7) Save $4,000 for college by end of Q4

Looking for 4th quarter on this.

Summary

Even though I am in the nasty part of my debt marathon (4,400 in new medical expenses and just having to grind it out this quarter), I feel good that I got the will and life insurance done. You see, this year (2008) is really about laying the foundation to my financial house. I feel good, surprisingly. I mean, if I look at 1 year or 6 months ago, I am in a far better place. I have traction and I just need to pull through.

So Murphy may have won this month, but the guy in the mirror is telling me to grind it out. So Murphy, enjoy the spare bedroom while you can. The guy in the mirror has me on point, focused, and fired up. So, I’m coming after YOU this quarter.

nothing which comes stays, and nothing which goes is lost."

---Anne Sophie Swetchine


Very odd. Almost like a slap in the face. You might even say rude.

Since none of this describes the BA I know, I choose to believe BA had no choice but to leave the community without posting a note.

And with that, I bid BA a fond farewell and all the luck, happiness, and success in the real world.

Much like a close friend who passed on, BA will be watching and reading our blogs from a far. He was taken away from us in his prime as a blogger.

BA will always be remembered for being candid, approachable nature and his starnge love for Bed Bath and Beyond.

So I say, God speed fellow blogger, God speed. And may you find happiness and comfort in your life.

June 24th. So?

So, in 6 days, the quarter ends. That’s right half the year is over, gone. Next week, you will have less then 6 months to accomplish all of your goals for 2008.

Are you going to make them all? Why? Lack of focus? Lack of commitment?

5 years from, where do you want to be? What are you doing this year to get there? After you accomplish this year’s goals, what’s next? Every step you take, brings you closer or further away from your goals.

5 years from now, I have 2 goals. To be working on what I want to work on and investing in real estate.

My big goals for this year are easy: have a fully funded emergency fund and pay of all consumer and medical debt. I also have some other goals but these would be my 2 primary.

Next year, I will start paying down the mortgage to get it from a 30 year to a 15 year. It will probably take me more then a year to do this but you got to start somewhere. And how do you eat an elephant? One bite at a time.

Year 3 and 4 is to start saving up to buy my first property. And year 5 is to own my first rental property.

Each year builds on the next and each missed goal causes me to take more time to reach what is really important to me. And short term goals that do not support this are given a secondary status.

So 6 months down and 6 months to go. I am still on track for my big goals for the year, which dove tail to my big goal for 2009.

So time to reevaluate our long term goals and make sure all of our goals over the next few years are bringing us towards that master goal.

So let’s keep the focus people. No excuses.

True, my oldest son is 3 and Father’s day is a foreign concept to him. To him, it means my wife having him construct a work of art and pick a card. But he doesn’t understand the true gift he gave me.

You see now I am a role model. He studies everything I do. Do I yell at people, grab stuff away, do I tell lies, do I follow through on my promises?

Being around him, I have to be on my best behavior. I have to be polite. I have to be supportive and understanding. If I make a promise or give my word, I have to deliver. I can’t say well not today.

I promised him that we would sleep in a tent the other weekend. Well, won’t you know, they sprayed chemicals on my lawn. So, I set the tent up in the bedroom and we camped there. He told me scary stories about ghosts riding alligators (or at least that’s what I thought he said).

See, being a role model, means you are under constant scrutiny. You have to mind your p and q and dot you I and cross your t. Sure, he pushes my buttons, but he’s only testing me, making sure I’ve learned the lessons he has taught me.

So I want to thank you son, for the greatest present ever – making me a better person and expecting me perfect but accepting me as dear old dad – a work in progress.

A few posts I was comparing my journey to the Boston Marathon. I had just past the halfway point at Wellesley College and the cute coeds were cheering me on.

I had found my pace and was just cruising along and was about to hit a downhill stretch. That was May. And it was easy. I had to use different muscles but still not to bad. I was setting up June to pay off 2 debts and then BAM.

Right in front of me for the next 5 miles. Sit 4 long uphills. With Heartbreak Hill being the last.

Well June starts and I receive an email from a Hospital with about $7,000 bill. Eeek. I got the final bill over the weekend (Happy Father’s Day!!!) for about $3,400.

Well no one said running a marathon would be easy. So, I’ll probably reduce the car fund and then pay off this bill. It basically throws my debt snowball off a month.

So, time to take a quick drink of water, make sure my laces are tight, and attack this hill.

I can’t wait to get over these hills and then see the final 5 miles where a few nasty hills (my wife’s birthday party about $2k and a week off in September where I don’t get paid) will test my resolve. After this hill, I just need to grind it out to the finish line.

As an aside, if this happened last year, this would have been more then an inconvenience. This would have completely deflated me and put me in one foul mood.

I was reading Mom-sense’s blog and it struck a chord with me.

So, I owe $929 on my second car. I haven’t been paying it off. I have been putting the money aside to pay off in one lump sum. Well, I currently have over $12,600 saved and ready to go once I save up the rest.

Unfortunately, I have become quite attached to this $12,600. You see, it was brought a sense of security and safety. I know that the $12,600 well take care of almost any emergency including 3-4 months of being laid off. Especially in these uncertain times.

But alas, this money is not meant for the emergency fund. This money is meant to pay off the second car and help get us out of debt.

Now, the emotions start coming back of a little fear, stress, and anxiety. I’ll be back out there with a flimsy safety net. My wife was feeling the same way I was. Maybe we could keep it and just start saving for the car again.

As long as the fear and anxiety doesn’t rule you, it is good. The fear has caused to take a step back to re-evaluate where we are, where we are going, and what are priorities are. It also has helped to focus what are next steps are and general timeframes around those steps. And lastly, it has made us aware of some of the risks to our plans.

Re-evaluate and affirm – YES!!! Rule us – NO!!!

So in the next few weeks, this money plus another $929 will leave our accounts. What we will be left with is the memories of what it will feel like when we have no more debt.

So I thank you dear friend for helping us, but I must bid you ado in the next few weeks.

The headline may seem like a trick question — even a dangerous one — to ask during an election year. And notice, please, that I didn’t ask whether certain politicians are more honest than others. (Politicians are a different species altogether.) Yet there is a striking gap between the manner in which liberals and conservatives address the issue of honesty.

Consider these results:

Is it OK to cheat on your taxes? A total of 57 percent of those who described themselves as “very liberal” said yes in response to the World Values Survey, compared with only 20 percent of those who are “very conservative.” When Pew Research asked whether it was “morally wrong” to cheat Uncle Sam, 86 percent of conservatives agreed, compared with only 68 percent of liberals.

Ponder this scenario, offered by the National Cultural Values Survey: “You lose your job. Your friend’s company is looking for someone to do temporary work. They are willing to pay the person in cash to avoid taxes and allow the person to still collect unemployment. What would you do?”

Almost half, or 49 percent, of self-described progressives would go along with the scheme, but only 21 percent of conservatives said they would.

When the World Values Survey asked a similar question, the results were largely the same: Those who were very liberal were much more likely to say it was all right to get welfare benefits you didn’t deserve.

The World Values Survey found that those on the left were also much more likely to say it is OK to buy goods that you know are stolen. Studies have also found that those on the left were more likely to say it was OK to drink a can of soda in a store without paying for it and to avoid the truth while negotiating the price of a car.

Another survey by Barna Research found that political liberals were two and a half times more likely to say that they illegally download or trade music for free on the Internet.

A study by professors published in the American Taxation Association’s Journal of Legal Tax Research found conservative students took the issue of accounting scandals and tax evasion more seriously than their fellow liberal students. Those with a “liberal outlook” who “reject the idea of absolute truth” were more accepting of cheating at school, according to another study, involving 291 students and published in the Journal of Education for Business.

A study in the Journal of Business Ethics involving 392 college students found that stronger beliefs toward “conservatism” translated into “higher levels of ethical values.” And academics concluded in the Journal of Psychology that there was a link between “political liberalism” and “lying in your own self-interest,” based on a study involving 156 adults.

Liberals were more willing to “let others take the blame” for their own ethical lapses, “copy a published article” and pass it off as their own, and were more accepting of “cheating on an exam,” according to still another study in the Journal of Business Ethics.

Now, I’m not suggesting that all conservatives are honest and all liberals are untrustworthy. But clearly a gap exists in the data. Why? The quick answer might be that liberals are simply being more honest about their dishonesty.

However attractive this explanation might be for some, there is simply no basis for accepting this explanation. Validation studies, which attempt to figure out who misreports on academic surveys and why, has found no evidence that conservatives are less honest. Indeed, validation research indicates that Democrats tend to be less forthcoming than other groups.

The honesty gap is also not a result of “bad people” becoming liberals and “good people” becoming conservatives. In my mind, a more likely explanation is bad ideas. Modern liberalism is infused with idea that truth is relative. Surveys consistently show this. And if truth is relative, it also must follow that honesty is subjective.

Sixties organizer Saul Alinsky, who both Barack Obama and Hillary Clinton say inspired and influenced them, once said the effective political advocate “doesn’t have a fixed truth; truth to him is relative and changing, everything to him is relative and changing. He is a political relativist.”

During this political season, honesty is often in short supply. But at least we can improve things by accepting the idea that truth and honesty exist. As the late scholar Sidney Hook put it, “the easiest rationalization for the refusal to seek the truth is the denial that truth exists.”

Peter Schweizer is the author of “Makers and Takers: Why Conservatives Work Harder, Feel Happier, Have Closer Families, Take Fewer Drugs, Give More Generously, Value Honesty More, Are Less Materialistic and Envious, Whine Less ... And Even Hug Their Children More Than Liberals” (Doubleday).



Source: http://www.examiner.com/a-1419425~Peter_Schweizer__Conservatives_more_honest_than_liberals_.html

All and all a pretty good month. Executive summary: all lights are green and we are on target.

So, let’s jump into things, shall we?

My goals for 2008 are:

1) Pay off debt (except mortgage) by October 1st
. a) Pay off CC by April 1st
. b) Pay off Car 1 by June 1st
. c) Pay off Car 2 by Aug 1st
. d) Pay off wife’s braces by June 1st
. e) Pay off son’s medical by October 1st
2) Invest $15,000 by year end
3) Invest $15,500 in 401(k)
4) Review and reallocate retirement funds by end of Q1
5) Will by end of Q2
6) Life Insurance by end of Q2
7) Save $4,000 for college by end of Q4

1) Pay off all debt but the mortgage by October 1st

Total Debt
05/31/2008 - $18,301 ($4,756 paid)

Car 2 (3.9% interest rate)
05/31/2008 - $929 ($4,100 paid)

Wife's braces (0% interest rate)
05/31/2008 - $1,872 ($156 paid)

Son's medical (0% interest rate)
05/31/2008 - $15,500 ($500 paid)

I was hoping to pay off $5,500 this month, but it didn’t happen. I had camp, preschool, and a bike for the wife to pay for. And I used some money to shore up some budget items. Mainly, a party we will be having in August. I think it’s going to cost $1,500 to $2,000. So, I should start saving for that.
Still I am on target to pay off the second car and my wife’s braces this month.

2) Invest $15,000 by yearend

I am currently on track to start this one in September Looks like we will start hitting this in September. I upped this goal from $10,000. A little more aggressive, but what the heck. Aim for the stars and settle for the moon.

3) Invest $15,500 in 401(k)

Invest $15,500 in 401(k)
05/31/2008 - $8,621 invested

Right on target to finish this up in October.

4) Review and reallocate retirement funds by end of Q1

DONE

5) Will by end of Q2

Made the call to the attorney. I should have this completed end of June or July. So yes SCFR, I am finally getting it done.

6) Life Insurance by end of Q2

Just got a packet for additional life insurance. I’ll probably schedule the physical for this week or next.

7) Save $4,000 for college by end of Q4

This is also a new goal for this year. Aggressive – yes. Achievable - yes


Summary

I can’t complain. I seem to be achieving my goals while adding new ones. I added $9,000 in savings goals.

As long as I stay on point and focused, they should be achievable.

GDP up more then 50% of the estimate (revised up to 0.9% from 0.6%). Consumer spending up 1%. Corporate profits up 0.3% to 1.57 trillion (annualized). The trade deficit shrank to an annual pace of $480.2 billion, the smallest since the third quarter of 2002. Trade's contribution to growth jumped to 0.8 percentage point, four times more than previously estimated.

Let the Harvard guys and Canadians argue about the US economy at stall speed. Sure there is some negatives, unemployment up by 4,00 and 3.1 million receiving benefits (highest since Feb 2004).

All in all, I believe a very good report.
Also, “MasterCard Inc. said consumers are continuing to reach for plastic. The company's shares jumped to a fresh high after the credit card processor said it still expects to see double-digit growth in net revenue this year. While it said gross dollar growth in the U.S. is slowing, purchasing is increasing in other parts of the world. Avoiding a big falloff in consumer spending and strength elsewhere in the world could help the U.S. economy avoid a serious downturn, some economists have reasoned.” (Source: http://biz.yahoo.com/ap/080529/wall_street.html)


----------------------


May 29 (Bloomberg) -- The U.S. economy grew more than previously estimated in the first quarter as Americans shunned imports and exports climbed to a record.
The 0.9 percent gain at an annual pace in gross domestic product compares with an advance estimate of 0.6 percent, the Commerce Department said today in Washington. Fourth-quarter growth was 0.6 percent. Separate figures today showed the number of Americans continuing to receive jobless benefits rose to a four-year high this month.

``It's basically like an airplane at stall speed, just skimming above the water,'' Jeffrey Frankel, an economist at Harvard University who is a member of the panel that dates U.S. economic cycles, said in a Bloomberg Radio interview. ``I wouldn't rule out going into a recession'' later in the year.

Trade remains the bright spot for an economy that is likely to slow this quarter as surging fuel and food bills and falling home values force consumers to cut back. The economy will expand just 0.1 percent this quarter as spending slows further, according to economists surveyed by Bloomberg this month.

``We are somewhere in the twilight zone between an expansion and a recession,'' said Michael Feroli, an economist at JPMorgan Chase & Co. in New York. ``We will have a poor pace of growth through the year.''

First-time claims for unemployment insurance rose to 372,000 last week, higher than economists had forecast, from 368,000 the previous period, the Labor Department reported. Those continuing to receive benefits jumped to 3.104 million in the week ended May 17, the highest level since February 2004.

Stocks, Treasuries

Stocks rose, with the Standard & Poor's 500 index up 1 percent at 1,404.2 at 12:40 a.m. in New York. Treasuries slid after benchmark 10-year note yields yesterday climbed above 4 percent for the first time since January. The yields were at 4.11 percent, from 4 percent late yesterday. The dollar rose 0.8 percent to $1.5506 per euro.

Honeywell International Inc., the world's largest maker of airplane controls, said last week it is confident in its full- year forecasts as demand outside the U.S. remained robust. Record oil prices have boosted orders for refining equipment and building projects in the Middle East, India and China has pushed up sales of its energy conservation devices.

This year ``is going to be another strong year in a more difficult environment,'' Honeywell's Chief Executive Officer David Cote said on May 19 at a conference in Florida.

Gains Abroad

Eaton Corp., the world's second-largest maker of hydraulic equipment, reaffirmed its full-year profit forecast on May 28 and projected international markets will grow as much as 6 percent. The company's U.S. markets will expand 2 percent to 3 percent this year.

Procter & Gamble Co., the world's largest consumer-products company, said last month that third-quarter profit rose on increased sales overseas and higher prices.

While a recession is often described as consecutive declines in GDP, the National Bureau of Economic Research, the official arbiter in the U.S., defines contractions as a ``significant'' decrease in activity over a sustained period of time.

The group says that in a recession, decreases would be visible in payrolls, production, sales and incomes, in addition to GDP.

For that reason, the U.S. is probably already ``in a mild recession,'' said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. ``The economy will be pretty flat on its back through much of this year.''

The Bush administration is betting the U.S. will keep growing as the economy benefits from the impact of tax rebates and seven interest-rate cuts by the Federal Reserve since September.
White House View

``We think that it will'' avoid a recession, Keith Hennessey, director of the White House National Economic Council, said in an interview with Bloomberg Television. ``We think that growth is continuing in the second quarter'' and will strengthen in the second half of the year, he said.

Today's GDP report is the second of three estimates. The median forecast of 74 economists surveyed by Bloomberg News was for a 0.9 percent pace. Projections ranged from gains of 0.6 percent to 1.3 percent.

Following a 0.6 percent growth rate in the fourth quarter, the reading was the smallest six-month expansion rate in five years.

The trade deficit shrank to an annual pace of $480.2 billion, the smallest since the third quarter of 2002. Trade's contribution to growth jumped to 0.8 percentage point, four times more than previously estimated.

Consumer Spending

Consumer spending, which accounts for more than two-thirds of the economy, rose at a 1 percent annual rate in the first quarter, the same as estimated last month. The gain was the smallest since the 2001 recession.

The revisions also showed bigger gains in incomes than previously estimated, easing concern that spending will collapse.

Personal income increased at a 5.1 percent annual pace from October through December, compared with an initial projection of 4.2 percent. For the first quarter, income growth was revised up to 4.7 percent from 4.4 percent.

Income growth may slow in coming months as the labor market softens. The U.S. has lost jobs for four consecutive months this year, and payrolls may post another decline for May, according to the
Bloomberg survey.

Inventories Drop

The gain in growth last quarter would have been even larger if not for a reduction in estimates for inventories.

Companies cut stockpiles at a $14.4 billion annual rate, compared with an initial estimate of a $1.8 billion gain. The figures added 0.2 percentage point to growth, less than the previously estimated contribution of 0.8 percentage point.

A measure of total sales, which strips out stockpiles, was revised to a gain of 0.7 percent at an annual rate rather than a 0.2 percent drop. Sales rose at a 2.4 percent pace in the fourth quarter.

There are signs that demand is slowing even more. Auto sales in April slid to a 14.4 million annual rate, the lowest level since 1998, industry figures show.

Spending this quarter will grow at a 0.5 percent pace, the smallest gain since 1991, according to the median estimate in a monthly Bloomberg survey.

Fed policy makers last month trimmed their economic growth projections for this year by about 1 percentage point to 0.3 percent to 1.2 percent.

``A number of participants were of the view that financial headwinds would probably continue to restrain economic activity through much of next year,'' minutes of the Fed's April meeting showed last week.

Construction Slump

Residential construction decreased at a 25.5 percent pace, less than previously estimated, though still the biggest drop since 1981.

Reports this month showed declines in home building will remain a drag on growth. Builders began work in April on the fewest single-family houses in 17 years.

The figures today also included a first look at corporate profits for the quarter. Earnings adjusted for the value of inventories and depreciation of capital expenditures, known as profits from current production, increased 0.3 percent to an annual rate of $1.57 trillion.

Source: http://www.bloomberg.com/apps/news?pid=20601087&sid=aKYWc5_8EEbY&refer=home

Ok. I am getting really fed up with this. Everywhere I turn people are saying we are in a recession. So where do we start? How about the definition of recession?

“In macroeconomics, a recession is generally associated with a decline in a country's real gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year.” (Source: http://en.wikipedia.org/wiki/Recession).

Of course, the NBER can overwrite this and say that we are in a recession, but I didn’t see that in their news release. (Source: http://www.nber.org/releases/). Now true, I only go to this site every few weeks and may have missed it but I don’t see anything there.

So, let’s stick at our working definition of 2 quarters of negative growth. So we should go to the BEA site, right?

“Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 0.6 percent in the first quarter of 2008, according to advance estimates released by the Bureau of Economic Analysis. In the fourth quarter, real GDP also increased 0.6 percent.” Huh, seems like the economy has been expanding for the last few quarters, slowly but not negatively. (Source: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm)

Oh yea, this was released April 30, 2008 so it’s pretty current.

Well it FEELS like a recession. Well, my desk at work feels like I’m in a cockpit of a jet fighter. Guess what. I’m not. And we aren’t in a recession.

So enjoy life because we have 4 months before we could possible be in a recession. That’s right, we need 6 months of negative GDP before we can declare a recession.

So back when I was but a little Merch, I joined a swim club. I was like 12 but for some reason had to swim with the high schoolers. Every day in practice I got my but kicked, made fun of (I was a skinny kid with long arms), and would bike home.

In meets, I would swim the back and again get my ass kicked. I was a 12 year old , swimming with 17 year olds, and an outcast from there group. After practice and meets, I would bike home and have my headphones on listening to my walkman.

I listened to the same tape before every meet and before practice, especially one song – Don’t Look Back. At first, I think that my coach would always yell at me “MERCH KEEP YOUR HEAD BACK!!!!!! DON’T LOOK AT ME!!!!! DON’T LOOK BACK!!!”. So the song just re-enforced what I needed to do.

Well, then I started to listen to the song and the lyrics. One set really grabbed me.

I can see
It took so long just to realize
I'm much too strong
Not to compromise
Now I see what I am is holding me down
I'll turn it around, oh yes I will

At age 14, I was extremely competitive and 15 – 17 I was undefeated for 3 seasons. And I always listen to that one song before a meet and it got me fired up and focused.

Through out my life, this song has been playing in the background, whether a new job interview or first day at college or first date with my wife. The song reminds me to quit holding myself down and sometimes to enjoy the ride if you are on the right road.

Today on my way to work, I heard this song and I feel all fired up and ready to tackle what’s next, because:

Now I see what I am is holding me down
I'll turn it around, oh yes I will

Do you have an anthem? Does it change depending on where you are in life?

If I had to rewrite the lyrics, I would change “Don’t look back” to “Won’t go back”. The whole lyrics:

Don't look back
A new day is breakin'
It's been too long since I felt this way
I don't mind where I get taken
The road is callin'
Today is the day

And I can see
It took so long just to realize
I'm much too strong
Not to compromise
Now I see what I am is holding me down
I'll turn it around, oh yes I will

I finally see the dawn arrivin'
I see beyond the road I'm drivin'

It's a bright horizon but I'm awakin'
Oh I see myself in a brand new way
The sun is shinin'
The clouds are breakin'
'Cause I can't lose now, there's no game to play

I can tell
There's no more time left to criticize
I've seen what I could not recognize
Everything in my life was leading me on
But I can be strong, oh yes I can

I finally see the dawn arrivin'
I see beyond the road I'm drivin'
Far away and left behind, left behind

(guitar bridge)

Oh the sun is shinin' *and I'm on that road*

(guitar solo)

Don't look back
A new day is breakin'
It's been too long since I felt this way
I don't mind where I get taken
The road is callin'
Today is the day

I can see
It took so long just to realize
I'm much too strong
Not to compromise
Now I see what I am is holding me down
I'll turn it around, oh yes I will

I finally see the dawn arriving
I see beyond the road I'm driving
Far away and left behind

Don't look back
Don't look back
Don't look back
Don't look back...

I was looking at your target trade and thought I would put in my two cents.

The red lines I put in is the current trading channel. It has been trading in here since middle of March. I also noticed some resistance points just below 52 and 55. Over the next week or so, you should see whether it is following the red or the green area.

Personally I believe it is fallowing the top green line and the bottom red line. If this is the case, it should be setting up a classic pennant and then shot through 55. At that point, I would buy.

That’s my 2 cent thoughts. By the way, if the news was not reflected into the price of the stock, it would have gone down more then 55 cents with greater volume (probably closer to 2 or 2.5 times the 3 month average).

So, bottom line is I think you made a great pick. But I think you got in too early and out too soon. But we shall see.

I believe the author of the blog made few incorrect points and with my rambling still I thought a blog might be needed to encompass what I wanted to say.

So the major assumption that Dave makes is that the individual is not making enough to attack all the goals on has (reducing debt, saving for college, saving for retirement, emergency fund, etc.). So he lays out a road map to get you to a stable base as quick as possible. These are the first three steps (1,000 emergency fund, all debt paid off but house, and fully funded emergency fund).

And, he wants these three steps not to linger. You want to get on them and knock them out. He wants you very focused on these steps. Once you get through step three, he usually let’s people loosen up. You want a vacation? Go ahead but pay for it in cash. You want to go out for dinner and a night out. Go ahead, make sure it’s in the budget.

As for step 4, 5, and 6; these should all be done at the same time (15% in retirement, college for kids, and pay off home).

As for the compounding argument made by the author, it really doesn’t hold much weight. Isn’t the compounding on your debt working against you? And aren’t those interest rates generally higher then what you are earning in your retirement accounts? Also, Dave Ramsey has said that the first 3 steps should only take a couple of years and not longer.

In general, people who are trying to reduce their debt are not saving 15% towards requirement. In fact in general, I would argue that most people are not saving 15% of their income.

The argument I make is that if you could get out of debt and live within a budget, it is far easier to reach that goal then if you have to make debt payments.

And if you look at his plan as a diet, it is an intense diet for about a year. During that time, your doing things like changing your attitude and habits with a small safety net to catch you. And after step 3, it’s all about maintaining.

And, step 7 is all about getting to the point in life where your money makes more then you and you can coast. Do what you want. And that is living like no one else.

Now in all honesty, if I was following Dave’s advice. I would dropped my emergency fund to $1,000 and stopped contributing to 401(k). I didn’t do this, but I am on a budget and intense on getting rid of my debt. And I will be through step 5 by the end of the year.

That's great, it starts with an earthquake, birds and snakes, an aeroplane -
Lenny Bruce is not afraid. Eye of a hurricane, listen to yourself churn -
world serves its own needs, regardless of your own needs. Feed it up a knock,
speed, grunt no, strength no. Ladder structure clatter with fear of height,
down height. Wire in a fire, represent the seven games in a government for
hire and a combat site. Left her, wasn't coming in a hurry with the furies
breathing down your neck. Team by team reporters baffled, trump, tethered
crop. Look at that low plane! Fine then. Uh oh, overflow, population,
common group, but it'll do. Save yourself, serve yourself. World serves its
own needs, listen to your heart bleed. Tell me with the rapture and the
reverent in the right - right. You vitriolic, patriotic, slam, fight, bright
light, feeling pretty psyched.

It's the end of the world as we know it.
It's the end of the world as we know it.
It's the end of the world as we know it and I feel fine.

That’s right. I feel fine.

Yep. My wake up to date started with an earthquake of 25k in medical debt last August. Then, I was listening to my inner voice just churn with self-doubt. Then, the fear of the height of my debt crept in. Then, I saved myself and served myself and it was the end of my old world as I knew it, but I feel fine.

During the first quarter of this year, mid month was always the apex of the stress for the month. Then last month, something happened. There wasn’t any stress. This month, no stress.

Why? I had a plan at the being of the year. It’s basically the same plan I have this month. It’s because I have full faith in the plan. As they say “Plan the work and work the plan.”

So now, I don’t have to devote my mental energy to worry about the whether the plan will work or not. I can now start mapping out my next steps. My plan, which encompasses my goals, is pretty much mapped out for the rest of the year. I work the plan and I should get there.

This leaves me to start looking at what I want to do in 2009. What direction do I really want to go? And what are the main variables?

So what’s on the table for 2009?

Definite:
1) $15,500 to 401(k)
2) Contribute to 529s – total of $4,000
3) Max. 2008 IRA contributions

Now comes the harder goals. I need to explore if it is better for me to be a 1099 consultant or a W-2 consultant.

But the real big question is whether to stock up cash for real estate investment purchases or to pay down the mortgage. My thought process is that I am probably 2-3 years from purchasing my first investment property. I have a child that is 9 months and one that is 3.5 years old. At this juncture in my life, I really don’t want to take time away from them. Also, I want to do tremendous research into the market and formulate a business plan. I also want to enter the market from a position of strength (good down payment, strong cash reserve, and time to devote to it).

I also would love to get my 30 year mortgage down to a 15 year.

So those are the three things rolling through my head right now. But I have time to think before 2009 gets here. Time at the moment is on my side.

I keep on hearing about gas prices. How they are hurting the average American. Typical media frenzy? Have you wondered how much gas prices increased from last year? A dollar? 2? 1.50?

How about 40 cents. That’s right the average price of gas went from 3.22 to 3.62 a gallon. Yes I do have sources below from CNN.

So what does that translate to? If you fill up your car every week, it’s probably an increase of $32 a month. 20 gallons X 40 cents X 4 weeks.

Is the average American so over extended that $32 a month per vehicle is the straw that broke the camels back? What’s the median income in the US? About $48,000.

Well, I guess if you have a $600 car payment, mortgage, HELOC, boat payment, plasma TV and credit card debt, it might be hard to come up with that $32 a month.

I really haven’t felt the gas or the food increases. Maybe because I live on a budget and follow it. True, I might have to substitute lower priced options like pasta for rice. But, it’s not like I have to go from Lobster to Ramen noodles.

Anyway aside form truck drivers, I really don’t see how all this really affecting the average American. Maybe, I’m too rich. After all, I am only 23k in debt.


Source: http://money.cnn.com/2007/05/21/news/economy/record_gas_monday/index.htm

Source: http://money.cnn.com/2008/05/05/news/economy/gas_prices/index.htm

So I had a conversation with myself this morning.

Mirror image: You make me sick!!!
Me: What did I do now?
Mirror: Your goals. Are you going to up them or what?
Me: Well, I am still working on some scenarios ?.
Mirror: LIAR!!!!!
Me: Well, they?re very aggressive ?.
Mirror: So we shouldn?t do it because it?s hard?
Me: Well I might fail and it will be in my blog ?
Mirror: This isn?t about them. This is about you and where you want to be.
Me: But?..
Mirror: You got keep on adjusting those goals every time they become achievable.
Me: But?.
Mirror: But nothing!!! How do you think a baby learns to crawl? You put the toy just out of reach. Then the baby twists and turns until he gets the toy. Now, you move it further away. And the baby learns to crawl
Me: These last goals are just in my grasp.
Mirror: Exactly!!! Time to move the line!!!
Staring into the mirror and in my best Rambo voice: GOALS!!! I?m coming to get you!!!
As I was leaving, the mirror: That?s my boy. Keep the focus.

And with that, I am upping my savings goal from 10k to 15k. Yes, a 50% increase.

I am also adding a new goal of saving 4k in college funds for my kids.

This should keep that guy in the mirror happy and off my case, at least for a little while.

June is next month. At the end of the month, we will be half way through the year. Are you on track? Do you need to make your goals more aggressive? What?s holding you back?

You might need to talk to that guy or gal in the mirror. Be careful, they know when your lying and they don?t take excuses.

I am a deadbeat and a freeloader and am not alone.

I found out today that some of the largest companies in the US thinking of me as a deadbeat. How could that be? I have excellent credit, I pay my bills on time, I pay off my credit cards every month … How could I have such a soiled reputation?

I am also considered a terrible customer. And my wife or I use these companies probably every other day. Now, they have never said anything to my face but I know what they say behind my back. “He’s not generating enough profits for us. He’s costing us money.”

Yes. I am taking about credit card companies. I read somewhere that it costs credit card companies about $25 per account per year. Now, if the charge 1.25% per transaction, I would need to charge $2000 just for them to break even. And after $2000, they make 1.25% off my transactions. They could make more money opening a savings account.

So who are their best customers? People who carry outstanding balances month after month paying 16%, 20%, or 29% interest on those balances. But these aren’t even their best customers.

The best customers are late on payment that way they can charge fees plus increase the interest rates. These are the best customers. This is where all their profit comes from.

So yea, I’m a lousy, deadbeat, freeloader customer, and I wouldn’t want it any other way.

A third of the year is almost gone already and I am doing great on my goals so far. Paid off another debt this month and made a substantial debt in another.

So, let’s jump into things, shall we?
My goals for 2008 are:

1) Pay off debt (except mortgage) by October 1st
. a) Pay off CC by April 1st
. b) Pay off Car 1 by June 1st
. c) Pay off Car 2 by Aug 1st
. d) Pay off wife’s braces by June 1st
. e) Pay off son’s medical by October 1st
2) Invest $10,000 by year end
3) Invest $15,500 in 401(k)
4) Review and reallocate retirement funds by end of Q1
5) Will by end of Q2
6) Life Insurance by end of Q2

1) Pay off all debt but the mortgage by October 1st

Total Debt
04/30/2008 - $23,057 ($15,059 paid)

Car 1 (4% interest rate)
04/01/2008 - $0 ($4,264 paid)

Car 2 (3.9% interest rate)
04/30/2008 - $5,029 ($10,139 paid)

Wife's braces (0% interest rate)
04/30/2008 - $2,028 ($156 paid)

Son's medical (0% interest rate)
04/30/2008 - $16,000 ($500 paid)

True, I did have a huge tax refund of $13 k and I put about $11.3 k towards the debt but I also but in an additional $3.7 k. That means I put more then $15 k towards my debt.
We received the title for the first car, which just got my wife a little jazzed up. I only owe $5 k on my second car and I am hoping to have most of that paid of in May. May has 5 pay weeks for me, so I am hoping on putting a majority of that last paycheck towards the debt.
I am still on track on having car 2 and the wife’s braces paid off in June. That will leave me with only my son’s medical, which is looking at earlier September, if I can keep the pace up.

2) Invest $10,000 by yearend

Looks like we will start hitting this in September. If my calculations are correct, I can surpass this goal and throw $4 k total into my sons 529 plans. That would be sweet. And, I’ll have very close to a fully funded emergency fund (about 6 months).
So I am currently looking at making upping this goal to $15,000 and adding another goal of a 529 savings of $4 k. I have to run a few numbers and scenarios and should have it done for my mid month update.

3) Invest $15,500 in 401(k)

Invest $15,500 in 401(k)
04/25/2008 - $6,547 invested

I am 42% through this goal so I am still planning on this being hit by end of October. Then I plan to use this money towards Christmas, New Years, and Thanksgiving. A lot of wine and presents need to be bought and I also host a little family get together. Hoping not to have debt after the season and it looks like it shouldn’t be a problem.
That’s right. I’m already planning for Christmas.

4) Review and reallocate retirement funds by end of Q1

DONE

5) Will by end of Q2
6) Life Insurance by end of Q2

Yep, I still got to get on this and still plan on getting it done this quarter.

Summary

I am pretty happy as debt still continues to drop off. Now is the point in the race where I have to remain focused and it is getting harder. I feel myself starting to want to stray a little bit, which I think is odd. In other words, I feel myself saying look at how far you have come, loosen up the reins and enjoy life.

I have to stop and look at myself in the mirror and say, that’s great but we have a lot of work to do this year and debt is only the first goal of 6.

This post is mainly for Ceejay. Of course, if you feel inclined, please read on.

We all probably have a spreadsheet showing our debts and the like. Well, I’m no different. I have one sheet showing all my debts, the current amount I owe, and how much I have paid on a monthly basis.

I don’t just use this sheet to record my payments to the debt, but I also use the sheet kind of as a scenario analysis tool. For instance, in March, I was coming up with different ways of using my tax refund and how that would change pay off dates. I also look at it to see if I am keeping around the same pace.

I usually play with this sheet every couple of days so I am very aware of how slight changes effect my overall goals. A little nerdy? A little anal? Maybe.



The next ones are the executive reports for the boss. As we all know, bosses don’t have time for the details. They just want to now the bottomline and how we are progressing month to month. These big picture thinkers don’t want to know how I swept the residual from an envelope on the 8th to add $28 to a car payment.

So the first report shows where we are now (it ties into my other sheet). And the following two show the monthly progression.

I have organized the reports to show Dave Ramsey’s baby steps. It just gives a nice way to categorize the different goals.







So those are my sheets. (Notice how the executive ones are pretty, bosses like that.)

I was thinking about my journey on my way to work. Basically, where I was last year and where I am this year and where I am going. About every 6 months, I look back over the past year and I look forward for the next year.

About 7 years ago, I had a job where I would be vested in 5 years. The company would put away 15% of my salary allocated the same as my 401k every year and it would be vested after 5 years.

Jokingly, I told my boss at the time “looks like you got me for the next 5 years.” His reply was “If you look at it that way, this job will kill you.” And he went on to give me probably the best corporate advice I ever got. He said that after every six months look at where you are, where you came from and where you are going. The philosophy is that during that six months, it is a short enough time that you can stay in a job or situation you hate with enough time to rectify the situation.

After 5.5 years at that company. I left that job. It baffled more then a few people. I was leaving at the top of my game, but I could see my opportunities a year out not being there. I need to retool. So I took a job as a consultant. I told by wife that I’ll do this for a year and then we could reevaluate. Will we did and ten months ago, I took a different consulting job that had no travel (I had 80% travel before).

Yes, I do talk to my wife about career moves. A new job directly affects her whether a move or hours I’ll be home to money we have to spend. I know men who just concentrate on their careers and could care less about their wife’s input. Sad.

Well in August my second son was born and started having medical issues (seizures). He’s ok now but my health insurance was less then spectacular and I owed about $25k.

Well that was the cause that forced me to reevaluate where we were with my wife. We decided that for the next six months we would put together a budget and really stick to it. We would go in fully committed and see where it took us.

It’s been about six months since we made that decision, so time to reevaluate.

First, if you can have an honest conversation about money you can have an honest conversation about anything. The communication between my wife and me continues to improve. Six months ago, we had money fights (she spent to much, I spent to much, grocery cost too much). Now the conversation centers around our goals and budget. If we buy that then we have to reduce our debt snowball this month.

My wife also asked advice about parenting our 3 year old. I would have never envision this 3 weeks ago never mind 6 months ago. I feel that we are getting on the same page and acting more like a team instead of individuals.

I also feel less financial stress, especially this month. I see the snowball really taking hold and see my cash flow freeing up a little bit. My wife is about a month behind me in where we are on our path, but we are on the same path.

I also feel a lot of hope lately. Probably because I am moving in the right direction faster then I thought I could.

I have already planned my last half of 2008 and it looks like all my goals will be met, plus I might add a few in Q4. I have started roughing out my goals for 2009, which are really sub goals that bring me closer to my real goals.

My real goals are to work because I want not because I have to and spend more time with my family. In other words, I am looking at passive income (whether real estate or investments) to support my monthly expenses.

So when I look at setting up my goals, I ask myself do they support or get me a step closer to my big goals. I review everything every 6 months just to make any course corrections or evaluate new paths.

By the way, my two big goals also align with my wife’s.

I was reading Petunia’s blog and it got me thinking why some people fail and some succeed.

My first thought was having a “what” or a vision. You start by dreaming what would by life be if I was debt free. But that isn’t the answer. We all have dreams but not all of us will achieve them.

Maybe it’s the “how”. After all, it wasn’t the “what”. Well, it’s really not hard to get out of debt. You budget less then you make or pick up another job and throw the excess at the debt. Not rocket science and I could even give you a formula. Income – expenses = what’s left for debt reduction.

The leaves us with the “why”. But not any old “why” will do. You see if I said to you your life would be better off if you could save $30,000 this year. Could you? Maybe and then again maybe not. What happens if you need to save $30,000 because your spouse or child needs an operation. Well now, that’s one big “why” and I can tell you I would have $30,000 saved will before operation whether 6 months or a year away.

But with the first scenario, it would be a hit or miss. Yea, it would be nice, but then life happens (nice vacation, eating out, etc.).

My point? A big enough “why” keeps us focused and on point and our dreams can be achieved. For spouses, the “whys” maybe different but should be big enough.

My “why”? For me and my wife to feel more secure and spend more time together as a family. And the first goal is getting out of debt with the second goal to reduce my hours away from the family.

I know the “how” for the first but not the second, because my “whys” got me focused.

And Happy Marathon Monday from Boston!!!!

I have hit the 50% mark on my consumer debts. Yes, I have paid off over 50% of my debts. It’s more of a physiological thing then anything else. I am at the halfway point. Like a marathoner, it’s like getting my second wind.

But, I know up ahead is Heartbreak Hill. In the Boston marathon, there are four hills in succession right after mile 16 and going to mile 21. The last one is called Heartbreak Hill. Many a marathoner has “hit the wall” on Heartbreak Hill and dropped out of the race. At this point, everything is telling you to quit (your body, your mind),, but those crowds are egging you one. “Come on!!!! Only 5 more miles!!!” “One foot in front of the other!!!”

I know this is coming up. Somewhere between now and being debt free, there will be these hills that will test my resolve to the core. After Heartbreak Hill, until the finish, are just nasty little hills. You have used everything you got just to make it pace Heartbreak Hill and now you have these small nasty little hills where every step is an effort. At this point, it is the mind dragging the broken down body to the finish line.

And what do you get when it’s done? A medal. A little bronze medal for finishing. Was it worth it? You bet.

And that’s how I see my journey. I’m at the halfway point running through Wellesley College. Everyone is screaming and the real work is just about to begin.

The first half was mostly pacing my self as people pass me and get out of debt faster. But now I have my pace and feeling pretty good at the half way mark, knowing that soon it will be a battle of pure will.

And when I cross the finish line, what will I get? A little piece of paper generated from a computer in a billing department saying “PAID IN FULL”. And will it be worth it? You bet.

But until then, keep the pace, work the plan, and keep the focus.

OK, this has been simmering in the back of my mind for about a month now. My wife’s best friend came over with his family. Him and his family are nice people. I really like them.

Well, there in the same place I was about 5 months ago. The cash flow is getting squeezed. Under my old thinking, there were only a couple ways out: find a new job making more, get a second job, or hold on ride this because in the future we will always make more. Right?

He has decided it best to hold on tight and hope for the best. He has a pretty good job and could have a decent jump in income over the next 5 – 10 years.

I started to talk to him about budgeting and how we have been able to find money and start cutting down the debt. While I could tell, he felt I wasn’t under the same financial pressures as him. In other words, my cash flow was better. Well, needless to say, I ended the conversation by saying that he should look into Dave Ramsey. No sense in getting things all heated for no good reason.

I was also going to say that if I could do it, you can do. But I knew that wasn’t true. And this is the issue of my rant. It’s not that what I am doing requires a master degree in finance. It requires something that a lot of people today do not have: discipline, focus and the ability to sacrifice.

Yes, it’s hard work to stay focused, to have the discipline, and be able to sacrifice. But it’s far better then the stress of picking which bills to pay and just scraping by.

To each there own, but don’t suggest to me that luck played a part in this. There’s a lot of hard work behind these numbers. YTD through debt reduction and adding to my 401(k), I have added $29,843 to my net worth (not taking into account market conditions during that time).

My 2008 goals are very aggressive for me, and I am right on track. Why? Because my yearly goals are broken into quarterly goals, which are broken into monthly goals. which are broken into weekly goals, and daily decisions are made on how they effect weekly goals. The weekly goals may need to be adjusted to keep the monthly goals on track or the monthly goals must be adjusted to keep the quarterly goals on track but the yearly goals are not being adjusted.

What have you done to increase your net worth YTD? Are you where you thought you would be? Why not? What decisions are you making today to keep you from your goals?

You still have 8 ½ months left in the year. Time to get back on track and start accomplishing your goals. There’s still a ton of days left in the year, time to get cracking.

It’s the halfway point of the month and I’m chillin’ like a villain. I can’t believe tomorrow is April 15th.

As I said before, the 15th is usually my stress time when all my big bills are due. This month was no different. I looked at my watch last night and it was the 13th and I just logged onto my bank account and paid them. No muss, no fuss.

Great feeling.

As you can see from my sidebar, I have paid of $12,803 just this month. Most of it was due to a large tax return but I plan on adding another $2,200 to payments this month (see if I can crack $15,000). So, now car 1 is paid off and am working on car 2. I have $7,129 left to pay off on it. The current schedule is to have it paid off in June with the wife’s braces.

Since I paid off the CC and car 1, I can start feeling the snowball gaining strength. I also feel some breathing room. Rather then treading water keeping my head up, I am starting to swim to the shore.

In fact, I have started dreaming, dare I say, of a debt free existence. Yes, I have calculated the time needed to pay of my mortgage, fully fund my emergency fund, fully fund my retirement accounts, and fund my kids college funds. It may be 5-8 years away, but I can almost taste it. I can almost see it. Dare I dream?

Yes, but now is the time to keep the head down and focus. No time to pat ourselves on our back. We got a lot of work to do before we get to these sweet dreams. A lot of work…

Bottom line: I have paid off $24,129 or 48.8% of debt to date.

In a previous blog, I linked to an article about some quick on the back of a napkin ratio that you could quickly see if you are on target or not. These ratio are just meant as a quick sanity check,

Well, one of the ratios is savings to income. The debate then rages as to whether to include or exclude your house. The only way you could realize that equity in the house is to downsize or move to a less expensive area of the country. Neither one of these are in my near future.

The only way then to tap the equity is through a loan on the equity, which really isn’t taking the equity out but securitizing the load with the equity in the house. Therefore, I don’t include my home equity in the calculation.

However, if you plan on moving in the next few years and will be getting cash between the sale of the old and purchase of the new, I would include that in savings. Also, if you have investment properties, I would include that in savings.

For debt, I do include the mortgage. First, it is a debt. Second you have to live somewhere.

In my net worth calculations, I do include home equity but not cars.

I look at these as quick numbers to get a sense of where I am. If your income jumped recently, then the ratio are very different then they were last year. Maybe, you removed a huge debt and your income is far less now then you needed in previous years.

The idea is to be honest with yourself to see if you are on track. Where are you? Where are you going? And to a less extent, where did you come from?

Right now, I am in the forest and concentrating on my debt to income ratio. You may be further along on the journey concentrating on the savings numbers. Or you might be doing both.

So, I came into work this morning and it was a little slow at 7:00. So I decided to cruise the web a little and found an interesting article on retirement ratios from the Financial Planning Association.

The article talks about looking at three financial ratios. They are all based on income and are savings to income, debt to income, and savings rate. There are 2 tables in the article: one for a 5% real rate of return (think 8% return on portfolio) and 4% real rate of return.

The author doesn’t include home equity into the savings ratio, which I agree with. You have to live somewhere and most of that equity is going to be tied up in that home, so better not to include it.





Anyway the article is at: http://www.fpanet.org/journal/articles/2006_Issues/jfp0106-art6.cfm

So are you on target?

Personally my savings is a half what it should be, I am carrying 50% more debt, but I am looking at saving 12% - 15% this year. I got a lot of work but I got 1 year before I hit the age milestone.

Time to get cracking!!!

I was hoping to post this over the weekend or Monday to close out the quarter on a great note but whatever.

So, I got my refund from the fed on Saturday for $12,922. Most of it was due to my taxes being screwed up when I switched jobs. Bottom line, this is one time refund that I will not see again. The check cleared today and so I have already allocated the money.

So, what did I spend all this new found wealth on? A new boat? A first class vacation? Invest it in BA’s pyramid scheme?

They all sound so tempting, but alas I just decided to reduce my debt (and pay for TrueGreen or ChemLawn to take care of the lawn). The breakdown was Car1 paid off and $7,195 towards Car2.

I was hemming and hawing about whether to pay off the braces or Car2. Truthfully, in the end, it won’t matter. One way, I pay the braces off now and Car2 at the end of June. This way I pay the car off in mid June and the braces at the end of June. Since the braces are a 0% loan, it really doesn’t matter. So, I decided let’s due it this way and have both of these paid off in June.

So there you go. I started the year with $49,422 in debt and now I am down to $26,657, paying off 22,785 in just over a quarter.

Yes half of it was my tax refund, but Murrphy and his family are getting pretty nervous as an eviction is coming in Q3.