So it looks like we’re in collapse and people are killing each other in the streets. Oh, wait, no, not really.

Sure, the markets are having a fit, which makes it painful to look at our retirement accounts. Except that we aren’t planning on touching them for many years, so eh. Feel a little bad for the baby boomers inching up on retirement, but really, not much. Yes, I know that schadenfreude isn’t exactly a positive emotion or anything, but many of them have defined their lives by excess so they shouldn’t be surprised when it comes around to bite ‘em. A little frugality isn’t perhaps a terrible thing.

photo credit: missdesigndiva

Meanwhile our politicians are tripping over themselves trying to do, well, I don’t really know. Looks like they are hellbent on trying to find a way to spend my son’s future income in an effort to stave off what will be an admittedly painful correction. Personally, being a free market kind of guy, I say go ahead and let it correct. But I am probably missing the big picture.

That said, at least in our household, things are certainly not flying off track. In fact, despite the supposed tightening of the credit market, we just received notice that one of our credit cards has substantially increased it’s limit. Thanks, but we really don’t need it. We won’t mention that to the government, because they may just decide they need that as well!

We did a decent job of killing off more debt this month. Broke well past the $1000 mark. And honestly are still living quite comfortably even with that kind of progress. We could probably introduce a little more pain and get the ball rolling a little faster. But that’s a budgeting issue, not a reporting one.

I’ve been having a lot of fun recently with my side business, and it’s beginning to really take off. Right now it is not adding any to our debt attack plan, as I am stockpiling cash right now in anticipation of further expansion. The holidays are rapidly approaching, and I have a feeling I’ll be spending a fair amount on advertising soon!

Oh, and oops, I will take a cue from Wall Street and restate some debt. I misread a medical bill statement and understated that debt by around $800. Where’s my bailout?

Possibly by this afternoon, if it stays quiet here, I’ll have our new portfolio.

Well, of course, I shouldn’t have written that qualifying statement in there. Because it just tempted the universe to fill the rest of my day right after I posted it… C’est la vie. Even though I was thrown off task a bit, people came in with a handful of interesting problems so I wasn’t bothered by the interruption.

After everyone went to bed Friday night, I had more than enough time to do the research I wanted anyway. And the decisions are in for this round of rebalancing. By tomorrow everything should be where I want it:

1. Put in all sell orders today.
2. Wait until market close for them to execute (mutual funds, so no instant trading).
3. Put in buy orders today after the sells have cleared
4. Buys get executed Tuesday morning

It’s not like I’m in a huge hurry to do the trades, but that delay in #2 is one minor reason why this round I’ve decided to shift quite a bit out of mutual funds and into ETFs. Well, that, and the lowered fees in most ETFs compared to their mutual fund counterparts (if there is one). Oh, and the fact that no-load mutual fund transactions have went from free to $9.95 while stock trades remain $6.95 where our accounts are held.

So, enough blathering. How about the meat already? The breakdown, largest allocation to smallest:

I will incur a bit more in transaction costs this time around versus the last time I did this. In fact, they will be infinitely more, since last time I don’t believe I had any transaction costs. Unfortunately, as I said before, Firstrade’s free mutual fund trades recently disappeared. The total was still less than $100, so not crushing or anything. But it would certainly eat into any gains if I had to do this often.

As to the overall allocation, it probably looks a little risk-heavy to some. I have no need to invest these funds conservatively – I’m perfectly comfortable with the risk, and have many years before I intend to tap these accounts. Some day I may consider a bond fund like DODIX in there for diversification reasons, but I’ve never been all that attracted to bonds. I’m not that old yet…

Despite my desire to focus most of our attention on debt reduction, that doesn’t mean other aspects of our finances can be entirely pushed to the wayside. Certain areas just need a bit of consideration to keep things going along as smoothly as possible. Plus, now that I finally have a little time to contemplate anything other than numbers, what better time to think about a few more of them?

If you are tracking the performance of your investments, you’ll notice that the separate portions of your portfolio like, for instance, your US Large Cap and your Emerging Market Micro Cap sections aren’t necessarily moving in the same direction, in the same amount, all the time. (Hopefully so anyway, or you’ve got a bit of diversification to do.) Over time, these disparities can cause one or more areas of the portfolio to be overweighted while leaving other areas underweighted. Which is just another way of saying that you’re taking on more or less risk than you desired when you set up your portfolio. So a little reallocating of funds between the different classes becomes necessary.

• Rebalance periodically – Whether annually, biannually, monthly(!) or whatever arbitrary time frame chosen, you pick some date and decide “that day is the day to rebalance.” And when that day arrives, do so. Then put a reminder in your date book for that next arbitrary date in the future to do it all over again.
• Rebalance when a your allocation is off by a particular percent – Pick an arbitrary percentage off your ideal portfolio, and decide “this is how far off perfect my allocation must be for me to rebalance“. And when some portion of your portfolio hits that percentage, rebalance.
• Rebalance when you feel a the market is heading in a particular direction – Give the separate areas of your portfolio a range of allocations – i.e. 20-40% Large Cap Value, 30-50% Small Cap, etc., etc. – and based on how you view the market, you allocate somewhere in that range when you feel that the market is about to change.

The first method is just too arbitrary for me. Too short a time between rebalancing and “if it ain’t broken, don’t fix it” would apply – and you’d needless be incurring transaction fees. Too long a time period and things get too far out of whack, and the portfolio would no longer reflect the level of risk one is comfortable taking. The problem is, there is no perfect time frame; the market just doesn’t move at a steady pace.

Method three, well, that’s just a market timing play. Which, to a me, is just shy of gambling without any of the fun (ala sharing a few good cigars and drinks with friends). I generally believe in the efficient market theory, though I probably lean more towards weak-form efficiency than strong-form. Either way, market timing doesn’t sit in either ends of that spectrum.

Which leaves method two, the route I take – it personally makes the most logical sense. The Large Cap Value portion of our overall portfolio has been creeping away from ideal for some time now, and is finally enough off that the time to take some of the gains in the winners and stock up on the beaten down has arrived.

And so now the fun begins: deciding if the investments we are in are the most appropriate, and, if not, with what to replace them. Changes at the broker I use – namely, no more free mutual fund trades – initiated some looking around before the rebalance trigger hit, and I actually stumbled across an interesting group of prospective investments that I may let run for a bit.

Possibly by this afternoon, if it stays quiet here, I’ll have our new portfolio. I’ll even throw it up here, just to see if anyone has an opinion or two on my choices….

Another month sneaks past, and another report comes due. Not a whole lot of time has been spent focusing on finances this month, as our little family has been spending an insane amount of time finally doing our part to complete our renovations. Let’s just say, my life would be well lived if I never saw another paintbrush – or discovered the holding power of primer on skin – ever again!

But after all is done, we will finally be able to kick back and relax. (OK, you old house owners out there can stop laughing at that statement already – yes, I’m quite aware we’ll have tons of things that will need our attention, but renovation on the scale that we’ve undertaken is a stress I’m not sure I would do again had I known what we were getting into! 8O)

Nevertheless, of course money moved around a bit even without a whole lot of attention being focused on it. So without further ado, let me present The Report – November 2006 Edition:

A little commentary:

• 4.4% return on our investments? Give me that every month and I’ll paint a room or two…
• Many people got many things taken care of as far as the renovations. Most of them haven’t bothered to send out a bill yet. My guess is, over the next few months, as everything rolls in, that used line of credit total may approach our mortgage! Am I thrilled about this? Well, no, not in the slightest. But it still brings the cost of our home to substantially less than I feel it’s actually worth. While I may be coming from an optimistic viewpoint, I’m not being that optimistic – we got an absolutely astounding deal on our home.
• Chase keeps sending out these “4.99% for the life of the balance” transfer checks. I’m considering using one to transfer a bit of the used line of credit, as we have a ridiculous $15k+ of room left on it. I’m not quite sure that it’d be worth the $45 per month we’d save in interest to be playing with a credit card, but just saying, I’m considering it…
• All I want for Xmas is the ability to move in… and it looks like it may just get my wish.

[tags]debt,report card, credit cards, mortgage,investments,assets,liabilities[/tags]

I’ve always liked Morningstar‘s portfolio tracker, and even signed up briefly as a paying member just to use some of the more interesting investment planning tools like their Portfolio X-Ray. But I don’t look for new investments nearly often enough – maybe a couple times a year, if I notice some of my holdings performing particularly poorly – to justify the cost of subscribing to Morningstar.

But here’s a little something I ran across today: T. Rowe Price offers the same portfolio tracker, plus all those tools normally reserved for subscribing Morningstar members, for free. Yes, you do have to register to access it. But it’s a free sign up, and at worst I may get a little T. Rowe Price spam that Gmail will cheerfully delete for me if they get too aggressive about it…

[tags]Morningstar,T. Rowe Price,investments,tools, x-ray,portfolio[/tags]

Apparently stuck on the extra-special super-extended hold line (when and how did customer service get so incredibly bad that 10 15 20+ minutes waiting on hold isn’t anything but outrageous anymore?) and thought I’d take a little initiative and get this done before a week of November has passed! How about taking a quick peek and see how that ol’ balance sheet did this month. Of course followed by a few notes if interest, to me at least…

a little random commentary

• Must say that a 4% gain on the retirement investments for the month was a pleasant surprise. A couple of our fund allocations are enough out of line to probably need a little rebalancing, but I’m going to continue our plan and wait until the beginning of next year to do so. (mental note to myself: our investment strategy might make a good post!)
• Well, I was enjoying seeing our assets increase and our liabilities decrease. At least until we hit that line of credit. No surprise at all, but I wouldn’t have complained if my mental calcalutions weren’t quite as accurate as the one on screen! And just going to get larger, I’m afraid. Ah, well, someday I’ll have to assess what our home value actually is and not feel so bad about taking on all of this extra debt…
• Not directly PF-related, but our migraine-inducing contractors (plumbers, if you were interested) did actually show up over an entire weekend – including a Sunday – following my warning and the parade of interested parties I mentioned earlier. We’re not done with them quite yet – they still have to attach a few faucets and other minutae after a bit of drywall work is done. No bill of any type from them yet, and I expect I’ll see a few charges on there that I’m going to refuse to pay – i.e. any non-regular working hours charges, seeing as the only reason they had to work those hours is because they blew our job off so long that I had to threaten to fire them. But the vast majority of their job is done and we will soon be rid of them forever.
• So, obviously we’re still renovating away, and progress on the total debt is still going the wrong way for the time being. But for the first time in a while, I’m seeing light at the end of the tunnel. Here’s hoping it’s not a train…

[tags]debt,renovations,report card,balance sheet,credit card,investments[/tags]

September has come and gone – as has a bit of October already – so you know what that means. That’s right, the ever thrilling rundown of our quasi-balance sheet. And of course, as always, followed up by a little commentary on some of the minutiae.

Again, just like last month and the month before that and, well, the month before that, we’re still neck deep in the haze of renovations. So, needless to say, traction as far as finances is hard to come by right now. (And as an aside, I’m really surprised I don’t read about a contractor or two being hunted down on a fairly regular basis – I know I’ve had my share of dark thoughts! Apparently, skill with tools and skill with time management don’t necessarily go hand in hand.)

A few things of note:

• I’ve taken the MBNA card off our balance sheet, as it’s never going to see any use outside of being a line on our credit report. Unless, say, I need bail money (see aside above)…
• That AMEX balance is, again, not yet reimbursed business expenses. Full disclosure. Blah blah blah…
• The Wife’s 457 has been rolled over into her IRA. Fairly painless process, just took a little longer than I thought it would. But I understand the paperwork shuffle that any financial transaction of sufficient size takes, so I really shouldn’t have been surprised.
• Most of our renovation expenses have been covered, but again this month a little more got tacked onto the line of credit. Expecting it to balloon when they finish everything. Do you think they’ll let me blow off paying them for 3+ month like they’ve made me wait when they’re done? I just might find out…

Outside that, nothing all that interesting as far as the balance sheet is concerned. Just waiting for the homestead to be completed so I can hit that debt as hard as I can.

[tags] debt, renovations, report card, balance sheet, credit card[/tags]

Hey, whaddya know, August ended – a weeks ago!

First off, a bunch of numbers, lined up all purty (excuse the drawl; I’ve been meeting with cattle ranchers most of the afternoon… ):

And like always, a thought or twelve:

• 2% (calculated with my SIMPLE contributions netted out) just isn’t too bad a return on our investments for an altogether boring August in the markets. I’ll take that any month…
• Despite my vow to switch over those funds from the ING 457 plan last month, they’re still there. The paperwork has been filed for the rollover, but as of this moment, I still see those monies sitting at ING instead of their new home in my wife’s IRA.
• Still renovating away. Amazing how much delay some people can put into their work. Especially considering the fact that I haven’t prepaid a single thing. You’d think a big payday would be a bit of motivation, but apparently not. Nevertheless, we did end up adding a bit more to our running total on the ol’ line of credit. I’d still trade that upcoming bigger number today in a heartbeat for them to just finish…
• Finally got tired of ING Direct’s lackluster interest rates and transferred everything over to HSBC. HSBC may not have the top rate today (for instance, EmigrantDirect looks like it’s paying 5.15% right now), but at least they’re still playing the game. ING Direct’s 4.40% just tells me they aren’t trying anymore. I left $10 to make sure they don’t close the account on the off chance they decide they’d like to be competitive again. But leaving over half a percent on the table just because their site has a slightly better user interface isn’t worth it anymore.

So, not a heck of a lot of change from last month. Investments did a bit better, credit card debt down a little, and the renovations inching ever-so-slowly along. Yada, yada, yada. Slow and steady’s getting a little boring, but at least the bottom line is going the right direction!

[tags] debt, renovations, report card, balance sheet, credit card, ING, credit, line of credit[/tags]

The end of July sees our intrepid family digging an even deeper hole.

First off, how about a bunch of numbers, which I’ll follow up with a little commentary:

And, as always, a few notes of interest:

• Debt not Really Debt. OK, It Is…
  The American Express balance again catches me with a little unreimbursed business expenses. So, it’s not really debt. But then again, technically it is, so in the interest of complete disclosure…
• Get Out of ING Already!
  Despite a chaotic month in the market, our retirement accounts ended up pretty well where we started, with the big exception of one of our funds in the wife’s deferred compensation account at ING that, for whatever reason, lost more than 10% for the month. That slice of the market (small cap growth) certainly didn’t have a good month anyway, but the particular fund did substantially worse than average. Of course, it’s also the only fund the ING Retirement offers that fits the area I’m trying to diversify into. Consider this my kick in the pants to get those monies transferred into an account with some choices already! (*And as always, ING Retirement Plans’ website offers up info a day or three old – today (7/31) it’s info from July 28th. Yet another reason to drop them – how hard could it possibly be to have this info updated at the end of trading for the handful of funds that they offer in their plans???)
• Tapped ‘dat, err, Line of Credit
  As expected, our line of credit was finally tapped this month – though really not too hard consider everything that got done. My guess is it’ll get tapped quite a bit harder in the months to come. But I’m not all that bothered by it, since even if we spend a fairly large amount renovating we’ll still have a very nice home for a ridiculously low price, even for the area. (A large amount being relative; I’m thinking we’ll spend around $50,000 on renovations in the end – but let’s see you east/west coast’rs getting anything liveable for the $90k total we’ll end up spending for our home! ) I’m not really sure how I’m going to integrate these renovations into the value of our home, since we’ve already increased our property value by, most likely, many thousands of dollars. For now, the house will remain on our quasi balance sheet at what it was initially valued until everything gets done, and then I may go about trying to figure out a new meaningless number…
• No Progress? Sure There Was!
  Despite the fact that no big progress was made towards eliminating that credit card debt on Chase, just like last month it’s in lieu of taking out even more on our line of credit. Chase is locked up at a ridiculously low rate “for the life of the balance”, so I’m not feeling particularly driven to get it paid off rapidly, only to have to turn around and tack on extra to the not-as-ridiculously-low-rate line of credit. That said, I’m also in no hurry to add any more to that Chase total, even if I could use one of their lock-in-the-rate-for-life balance transfer checks. Yes, I know, I’m not being entirely consistent here. I’m sure I could pay a little less interest going that route, but personal finances aren’t entirely about the logic – I simply don’t trust credit card companies to use them like I did in the past!

So, how was the month financially overall? Well, it looks worse on paper than I think it actually was. Sure, the total value of our assets dropped, but any home value increases weren’t taken into account. And I think substantial ground was made there – at least there better have been with the work we’ve been putting into it! That said, I’m still not at all thrilled about the idea of our total debt climbing despite my fairly nonchalant commentary – like I’ve said, I don’t believe in the concept of good (personal) debt, just bad debt and worse debt. Nothing will thrill me more than when we can complete this work and I can focus on making smaller numbers out of those big one!

[tags]debt, renovations, report card, balance sheet, credit card, ING, Chase, credit, line of credit[/tags]

If it hasn’t been clear in my past postings, I’m a huge fan of [tag]index funds[/tag]. The vast majority of our [tag]retirement[/tag] [tag]savings[/tag] are held in a variety of index funds. I’m generally of the view that the individual investor has almost no chance, at least consistently enough to make the risk worth it, of beating the market. And that belief extends to mutual fund [tag]managers[/tag] as as much as it does to Joe Public.

One of my big beefs with actively managed funds are the generally high [tag]management[/tag] costs associated with them. For instance, the management fee for an index fund like the Vanguard Total Stock Market Index ([tag]VTSMX[/tag]) is 0.19%. It’s category average? 1.19%.

OK, yes, I hear you. I know, I know, just a 1% difference. But, as I just said, I don’t believe the individual has much of a chance consistently beating the market (which a proper index fund should be attempting to passively mirror). So I’d just be paying an extra percent on something I believe is destined to fail over the long term anyway. Doesn’t seem a smart move!

But here’s an idea for active mutual fund managers that I might be able to get behind: Beat the index, of don’t get paid!

Two [tag]money manager[/tag]s are trying out a new [tag]pay-for-performance[/tag] system: If they don’t perform, they won’t get paid.

I especially like the concept of dropping the fee to zero if the fund merely matches the index or underperforms it. Though it’d be especially appealing if, when they underperformed the index, they’d refund that back to you rather than just drop it to zero. [Hey, I can dream, can't I? ]

So does that mean I’m signing up for some TFS Small Cap [[tag]TFSSX[/tag]]? Nah. Like I said (and said again!), I don’t believe they can beat the index consistently. If I wanted to index the Russell 2000 (TFS Small Cap’s ‘index’), I’d just pick up a little iShares Russell 2000 Index [[tag]IWM[/tag]] or some similar index vehicle and be done with it.

But, I have to say, it tweaked this investor’s interest, so we’ll have to see if anybody else decides to follow suit and somehow makes the proposition a bit more tempting.