It’s Friday and I’ve been on vacation the last two days. I haven’t been super caught up on blog reading but there are a few that I really liked this week.

Bluebird at Hedonic Adjustment does an analysis of aggregated NetWorthIQ data.

Madame X point us to a great article about the income gap in NYC. It’s pretty much the same where I live, around DC.

Paperless finance by JD and Jim. Personally, I love paper. Yes, it does take work to tame the ‘paper tiger’, but having watched electronic backup disasters, I know that very little takes the place of keeping paper around. Plus I believe that a consumer has more rights when they have an actual canceled check in hand. (Read that somewhere, but I forgot where.) I do encourage people to think about paperless. I don’t keep every scrap, but I do keep more than probably other PF bloggers do. Because it’s a habit and organized, it doesn’t cost me much to store my old records.

Bonanza week by Tricia at Blogging Away Debt. She’s suffering a bit of a mental block as she delves into some of her deepest financial fears, but you can read these articles and still have a great week:
PostSecret has a secret about debt
Modest Needs - Thanks to her for first pointing this organization out to me. I think sometimes people just need a small hand up. I like the stories about self-empowerment best.

I’m on limited time here. Got a crying nephew to attend. Sorry this isn’t much longer, but I have been spending far less time with computers this week. In a good way!

So I am going to make a stink about this article I found via Hedonic Adjustment.

The article is from a trade journal for financial planning professionals. The story is about finding the right savings rates for people. They go through different income levels and different scenarios. I especially love the Monte Carlo analysis. (Table 6, math nerdery that merits its own sidebar at the bottom of the page. Read it if you are a numbers geek like me.) Table 6, Panel A says, guesstimating my salary and age, that at 65 I should have about $603K saved up. I think that is actually low and I am gunning for more like $1 million dollars. (Yes, secretly that is my Number, but I just made that up because I think $603K is not enough. See the next income bracket? The one to which I aspire? That says $903K, so we round up to $1 cool million.) However, that is only at 50% confidence numbers. More realistically, I’ll have only $523K at the 90% confidence number (i.e. more realistic results).

The study shows the importance of starting to save no later than age 35. It shows how higher-income people will have to save more to offset the impact of Social Security, which has a larger impact for low- and moderate-income people. Lower-income individuals who are more dependent on Social Security will also be most vulnerable to political changes in the system. Those who have failed to accumulate adequate savings will need to delay retirement or take a substantial reduction in their retirement standard of living. Finally, it suggests that those whose income increases faster than inflation will have to save an increasing amount to “catch up” so as to be able to provide for the higher assumed standard of living in retirement.

Ok so this means that everyone should start saving before they are 35. How lucky we are to be in a crazy volatile market now. Sounds like a lousy time to jump in, right? But not so. You can start socking away cash for right now. Even that will get you farther than doing absolutely nothing.

Read Table 1 of the article carefully, for 80% income replacement of a $20K annual salary in your 20’s, you can save as little as 6.8% a year. That’s not a lot. I admit, that’s pretty tight, but as your income rises over time, saving more should be come possible with cost control. Remember, spending less than you make?

The closest scenario to me would be 30 at $40K. I think when I turned 30 I was making just over that amount. Sadly, I wasn’t saving nearly 12.8%. I think I was saving 3% with 1.5% in matching funds, so a total of 4.5%. Now that I’m older, and making 70% more than what I was making at 30, I am proudly socking away 19.5% (17% and 2.5%). It’s still less than what I need for 80% replacement, but well over 60% replacement. I’ll take it. The reason is that 60% replacement assumes that your mortgage is paid off. And I certainly could do that if I stay in my little studio for the rest of my life, or upgrade even to a 1 bedroom someday.

Read the article. Think about your financial goals and where you are headed. Are you going to need 80% income replacement or 60%? There was a big stink about oversaving in the US this past spring, but I think that’s related to the assumption about our expenses in old age. I would like to play it safe and have 80% replacement and stuff leftover than 60% and money run out. Jebus only knows that the 20% difference could easily be eaten up by medical costs at that point.

Journey2Retirement has a very personal cautionary tale about rolling over a 401K plan into your new employer’s plan. I thought this was a very important article about doing your due diligence before going to a new company. My additional tip is that you usually have 90 days to take a rollover withdrawl from your old company’s 401k plan. Use the first 90 days at your new job to find out all you can because you may be better off staying in your old plan, or converting to a traditional IRA instead. (This assumes you aren’t anywhere near retirement age.)

My own story:
I had money at Fidelity with my old company. My new company has an investment company that is primarily known as an insurance firm, whom I find hateful and annoying for reasons I will explain.

1) The funds in the new company’s plan were managed mostly by firms I’d never heard of, which is scary since I used to work for a financial research provider and I have heard of nearly every mom and pop fund shop imaginable. Therefore I found it a wee bit frightening when I barely recognized the 6-10 fund providers in the plan. (It’s been a b*tch to do my own research on these firms beyond what the plan serves up. I can’t even find the right tickers for a lot of them.)

2) The GUI on the insurance company website sucks. And even though it was redesigned, it still stinks in terms of display and navigability. (I am a user experience snob, so sue me.) Why they have fixed pixel width windows makes me oh so very angry, especially since I can’t view it on my company-issued laptop’s 800×600 screen. There is no way to track a fund’s daily price over time in a pretty graph. Or do a side-by-side fund comparison. While I realize that past performance is no guarantee of future results, I find it useful as a quick and dirty point of comparison which Fidelity’s site allows.

3) They also don’t let you keep your records online indefinitely. Well, who does? Indefinitely is admittedly a really long time. However I’ve been with my current employer less than 2 years and I cannot access online transactions over 18 months old. Therefore, if I didn’t have Quicken, I’d be toast! That’s just crazy not let a person keep at least 2 years’ worth of records.

When I landed at my new company, I was surrounded by former co-workers. Mind you, I barely know these people, but I knew one of them sits on Yahoo Finance all day long, so I made a few small inquiries about which funds he liked and why. Turns out he sees a financial advisor and passed along his advisor’s recommended asset allocation plan for me to view. (He got there a few years before I did, and he’s a little older than me so it’s not THAT crazy to use the same one if we are of the same risk tolerance. Of course I tweaked the allocation to suit my tastes and have changed it over time. Not just a rebalance, but a full on change.)

Since I have to throw my money into the funds in the current plan and I was unsure of the plan choices, I decided not to rollover my old plan into the new one, but left my old funds in a Traditional IRA rollover account instead. At the time, the Fidelity stuff was going great so I didn’t see a reason to leave those funds and join into great unknown expanses of mutual funds I’d never heard of. There didn’t seem to be a point in chasing last year’s returns on funds I knew nothing about. So I used my colleague’s advisor’s advice to pick funds for my new allocation, the plan provider’s risk tolerance quizzes and asset allocation plans, and that was pretty much it.

I can guarantee you that when it’s time to leave this plan, I’ll be pushing all my money into the account at Fidelity. Sure I’ll lose a 10-year top performer of an International Equity fund, but I am not bothered by this in the least. It could all go south quickly tomorrow, and I don’t mean to Tierra del Fuego.

Time to make Single Ma’s eyes bug out!

My hair is getting really long again. When we last visited our heroine getting a salon cut, it was September and she’d been to THREE weddings with uneven hair. However, even as the maid of honor on a beautiful beach in Puerto Rico, no one gave a damn that the ends were tatty. BIG SURPRISE. Everyone was looking at the bride and groom and didn’t care at all about the other people standing near them.

So, my hair is grazing the top of my waistband. It’s got another 6 months to go before I could sit on it. It feels dry and yucky. The combination of Pantene shampoo and Tresemme conditioner has not held up well on the hair. My mom asked me if I bleached it. GRRR. I told her it was my hair product drying it out and slowly bleaching to a brown instead of a nice sleek black.

(Yes boys, this is why it matters what a girl uses on her hair. It will make it change color when she does not want to change it. GRRR again.)

Since I am feeling charitable, I’m going to do Locks of Love again. I would however like to receive acknowledgment of my gift of hair, which I didn’t get the last time, but that’s ok. I’m not sure it is considered a gift-in-kind that I can write off on my taxes.

The only question is how much to cut off and when to do it. I have been contemplating going with a really short bob. I haven’t had one in years. I think of all the shampoo I could save, but then I think that I look better with longer hair.

Since it takes 6-8 ponytails to make a hairpiece for a child, are there 5-7 other people who are willing to pledge either a donation of hair or a charitable contribution? It actually takes $1000 to sponsor a single child for their cranial prosthesis. The retail value of the hairpiece they receive is $3500-$6000. Each child will receive up to 6 of them before they turn 18.

If I can convince one or two other people to try growing their hair and making a donation, I would be very happy. Come on! The dog days of summer are here! What better time to chop it all off than in the swampy humidity of summer?

Free Money Finance has the latest Carnival of Personal Finance available. It’s edition #115!

While he’s got his editor’s choice picks, I am skipping them in favor of what else is out there that caught my eye.

Pinyo at Moolanomy asks what money wasters do you do? I do 1, 2, 6, and 10. But I definitely don’t do 3, 8, 9.

Saving Explained with the contrarian advice on emergency funds. I’m a big advocate of them, but I like to keep an open mind. Read the companion article he references about keeping small savings subaccounts assigned for specific financial goals. What do you think? Good idea? Crazy idea? I still think emergency funds are a great idea for anyone with a home, car, or unpredictable job market. I know that I just covered like 90% of the people out there, but that’s why I think an emergency fund is worthwhile for nearly everyone. It’s really only a question of how much, not if.

Clever Dude with the skinny on Carfax used car reports. Read to the bottom and follow the Consumer Affairs link from Super Saver as well.

Make Your Nut has advice on how to have a big party on a small budget. I don’t think 20 is really a big party, but the advice is still great for entertaining on a shoestring. The main thing is, your friends will bring you more beer than you will ever drink if you don’t stop them and assign them something else to bring. ‘Bring chips!’ ‘Bring salsa!’ ‘Bring a salad!’ ‘Bring some bread!’ ‘Bring some dessert!’

Grad Money Matters on the Joys of Homeownership. HAHAHA. Damn if I haven’t been there, cursing myself at buying a condo. “What was I thinking?!” is an unfortunate thing to say to yourself after the mortgage is signed.

Oh Boy! I really missed Bluebird from Hedonic Adjustment. Everyonce in a while I’d click my link to his blog only to be saddened that some link spammer had gobbled up his deleted site.

But he’s back and I love his commentary. Smart. Intelligent. A PF blogger to admire. His ducks are in a row.

What’s not to like about a person who encourages us all to go get some?

Seriously, he’s the kind of guy who points out informed articles like this one on recommended savings rates. I don’t generally seek out articles like that, so I am glad someone like Bluebird does.

“Mr. Bluebird on my shoulder…”

Trent’s advice made me exceedingly nervous which is why I wrote my Caveat Lector post last week. First and foremost, I think he should have referred her to a professional before writing anything else. FWIW, I believe JLP of All Financial Matters is a financial consulting professional, so his advice is backed with expertise.

I happen agree with JLP’s basic principles, which I have slightly modified to be affirmative in statement and re-jiggered the order.

1) Have your emotions in check: If Lily is nervous in this market, she needs to consider why. If she’s afraid of losing capital, she’s like a lot of us, but that is no reason to sell everything off. Did she stop and take a moment to see how far she had come? My REIT fund is doing crappy this year, but I’ve had it for almost 4 years, and for the 3 year return, I’m still doing 17+%. Does that mean I should sell it? Not necessarily. I could continue to hold onto it till the market rebounds. I could double down on it and make money as the market rises again. But selling it means I’ve locked in my 17+% 3 year gain, and locked in a flat performance for YTD 2007.

Investing with one’s emotions is not recommended, which is something that the famous Graham and Dodd put forth in their seminal work, Value Investing. One reason why I like Suze Orman is because she points out the connection between one’s emotional experiences and the choices we make with money. Investing is not for the faint of heart. If Lily can’t take the heat, stay out of the kitchen by limiting your exposure, which segues into points #2 and 3.

2) Understand how the market works: If she doesn’t understand how the market works, there are investments she can hold which expose her to less risk. Clearly she’s not sleeping well with what she is holding, but that is no reason to dump them immediately. She needs to stop and evaluate her risk tolerance. Then over time, rebalance her portfolio into an asset allocation model that fits her risk tolerance. This is why planned sales of assets is probably a good strategy for her. This is what founders of IPO’d companies do, because by diversifying over time, they minimize the impact of their sales upon the current market value of the stock. At the same time though, they are diversifying their assets and spreading their risk. (Oops, that’s point #3.)

3) Have a solid asset allocation plan: Because Lily doesn’t have a solid asset allocation plan, as JLP suggests, of course she is going to flounder. She has no idea what she is doing and could probably benefit from professional guidance.

Me personally, I’ve never paid anyone for help, though I’ve put out feelers and have a list of people I should see. I have received help from the information widely available to me through my 401K plan and popular personal investment books like A Random Walk Down Wall Street, Stocks For the Long Run, and the WSJ’s Guide to Personal Finance. (I am reading Value Investing right now, though some of it goes over my head.) The difference between me and Lily is that I am confident in my choices and comfortable with my risk tolerance.

I believe that Trent didn’t consider her time horizon very well. If Lily truly is 20 years away from retirement, say a standard age 65, she actually needs her money to last 20 years beyond that, making her timeframe 40 years! Since that’s a more likely scenario, his advice basically tells her to time the market’s ups and downs. To paraphrase: “Get out now, wait three weeks till you think it’s bottomed out and jump back in.” Well, as the fine print always says, “Past performance is no indication of the future.” So three weeks from now, the market could be soaring once again from Fed action. Heck, he might as well have told her to wait 6 weeks for the FOMC to have had one of their regular meetings. So once again, his advice on timing the market doesn’t seem well-informed. There is timing the market, and then there is doing the research to time the market well. (I heard on the radio the next meeting date is mid-September.) Lily is getting what she paid for.

I’m not knocking Trent as a person. I like his blog and was very happy to add it to my permanent blogroll. He has great information and advice about a lot of stuff, but I also take it with a grain of salt as I recommend anyone do with anything. Live life as a skeptic! Don’t take me too seriously either! His advice varies from the norm of what an investment professional would tell someone at a time like this, which is to remain calm and evaluate risk, asset allocation and consider the time horizon. I mean, honestly, if it’s about assuaging her fears, did he even ask her to take stock (pun intended) in her historical performance? I lost money in this volatile market too, but I remain dedicated to educating myself about my investments and perhaps that’s the gem of advice that he forgot to give her.

But I’ll leave you with a quote from LeVar Burton and Reading Rainbow:

You don’t have to take my word for it.

I got my second permanent crown placed last week. It was quite an ordeal. It should take an hour, but it took about 90 minutes. The main thing is that I had my teeth yanked out last year in one efficient surgery. I couldn’t afford to put in all the implants at once, so I waited a year to add in two. These two are in the very back of my mouth and one toward the front, under my nose.

The one in the rear was being done first and the dentist had advised me that my upper tooth would grow downwards into the empty spot where my lower molar had been removed. Sure enough, my dentist was trying to put in my permanent crown when he encountered a small issue. I couldn’t close my teeth. Now, this is to expected somewhat since the crown has to be ground down to fit your bite. However, my porcelain over gold crown was being ground down to the metal under the porcelain! I wasn’t going to have much of a crown left!

What’s does the dentist do? He tells me to scooch down the chair and open wide. He’s going to ground down my upper tooth!

5 minutes later, I’m able to close my mouth completely, but it still feels funny. It does not feel nearly as good as my first implant. I am going to probably have to have it adjusted, i.e. grind down the upper tooth some more. I’m not very pleased with this, but he did warn me about this being a problem. Now I am worried that my last implant will involve the same issue. The final implant is under my nose and it takes about 4-6 months to heal because it’s so close to the nasal cavity. I should be able to get the last one put in in a few more weeks.

I just hope to god the dental insurance covers the implants, because they are being all weird about it and denying coverage on some stuff. I am all out of Medical FSA funds for the year, so no more getting sick for me. All of my stuff is out of pocket from now on. Expensive for the teeth, but what’s done is done.

But at least it was a free visit and I got to talk to the dental assistant about her love life. Gotta live vicariously through young, attractive people since I’m apparently, literally, a little long in the tooth.

Last week, I got to see my favorite opera, “The Magic Flute” by Mozart at Wolf Trap. Normally I don’t care for German operas, but the Queen of the Night aria is spectacular. The Pamina role was fantastic, we all agreed she was the best singer in the production we saw. I was worried about the Queen of the Night. Her voice was weak in the first act, but we think that’s because of the funny staging apparatus she was standing upon. She seemed kind of shaky. All was well when she came out for the second act with THE SONG. She was breathtaking. (FWIW, opera trivia: The highest note written for the human voice is in the Queen of the Night’s aria. However, I’ve been told now that the aria sung in The Fifth Element has the highest notes now, but I don’t think that’s true. Can anyone verify this?) Oh the other thing is that often the Three Spirits in this opera are sung by young boys. They were adorable, but terrible. That was part of their charm. They forgot their staging and were off-key a lot. It was really funny.

We sat in Center Loge seats at Wolf Trap. They’re the cheapest ones you can get under the roof. For dinner, we got a large bucket of chicken to feed 5. It was about $35 with lots of sides and extra for white meat. That was about the price of a single opera ticket. The store manager even gave us sodas for free! (Because apparently they’re not included.)

You can go cheaper for the opera by doing these things:

1) Go to an opera in the park event. They have them in San Francisco and NY. The singers are usually from young opera singer programs. It’s the best part of the opera without all the expensive staging, i.e. the arias in fully costumed singers. Usually these are free events sponsored by corporate donations.

2) Get a libretto and get lawn seating. You can enjoy the music and sit back and read along with the opera. Tickets often push down to less than $20 if you do this route. IIRC, in San Francisco, SRO tickets are $25, but there really is no seating and you cannot see the staging at all. Librettos are de rigeur there, unless you know the opera really well yourself. (Fat chance. I can’t afford to go often enough!)

3) Student discounts. If you are young enough, try to find student ticket pricing.

4) Student operas. I went to college affiliated with a conservatory and the voice students were pretty amazing. I got to go to a few operas for cheap or free at the conservatory. (Though I did miss one of my classmates doing the Queen of the Night role. One of the biggest regrets of my life. She was an amazing coloratura soprano.)

5) Volunteer! At Wolf Trap, they need ushers for the event. I am always being ushered by senior citizens who love the music there. You have to work, but in the end, it’s a very economical thing to do for shows that can cost as much as $90 for orchestra seats.

6) Pick your opera carefully. At Wolf Trap, different operas cost different amounts. Denyce Graves sang Carmen this summer and tickets for that show were $42, but the seats for the Magic Flute were $36. The Mikado, $28. It all depends on the stage production and the costs. The trick for the Mikado is that it was the NY Gilbert and Sullivan Players, which reuses their costumes and sets, unlike an original production of Carmen.

7) Recital vs. Full performance. Much like #1, you can often see stuff in recital with just singers vs full stage productions. Frequently a master class or graduate student will have to do a recital and you can see them for cheap or free. See #4.

Go cheap on the trappings: We did a fancy steak and arugula salad and wine the first time we went. The second, we decided to go with KFC. We saw some other people bring fast food, and couldn’t see a reason not to do it ourselves. Three adults and two kids. We dined at my friend’s house so we could feed her kids and then left them to their own devices for the night. If you want to get all fancied up for the event, go for it, but the beauty of outdoor productions is that it’s fine to show up in shorts and dress shirt.

9) Wolf Trap in particular allows you to bring water into the formal seating area. We always bring our own water from home to sip in the heat.

That’s all I have for you. Next time you see people with KFC and PBR at Wolf Trap, it might just be us.

Hello and welcome to readers of Grad Money Matters!

ISPF posted in reply to my tag on living frugally, including my old post on the same subject. I appreciate your stopping by here.

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