Financial stuff

Changing My Investment Strategy

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I have decided to change my investment strategy for retirement.  My previous strategy was to max out my retirement accounts first before setting aside any additional savings.  Since my plan is to retire at 50 though it doesn’t make sense to have most of my savings in retirement accounts where it will be difficult for me to access them without paying penalties.  The main benefit of having your money in retirement accounts is that it is allowed to grow tax-freee.  This isn’t much of a benefit to me due to my short time frame and low tax bracket.  I expect to stay in a low tax bracket for the foreseeable future.

I’m also not happy with the performance of the mutual fund in my Roth IRA.  I know the stock market is taking a beating but I don’t like the idea of paying a management fee to lose money.  I could lose my money myself.

My new strategy is to invest in dividend paying stocks.  I won’t go into too much detail since this isn’t an investment blog.  Right now I have a portfolio of five stocks and I plan to expand that to ten to fifteen stocks.  I’m more concerned with yield than capital appreciation.  I want companies that will continue to increase their dividend.  This way I can use the dividends to pay my expenses and still have a hedge against inflation.

So far my results have been pretty good.  I’ve had the stocks about two weeks and I’m up a small amount and I should receive about $250 in dividends for the next year.  This represents an almost 10% yield but that is skewed due to one very high-yielding stock.  Most of my stocks are paying around 6%.  If anyone wants to know how I chose my stocks I’ll do a post on that.  My selection process is somewhat based on guessing though so I wouldn’t recommend anybody follow my picks.  I feel I’m taking an acceptable risk to have a good shot at retiring early and am willing to live with the consequences if this strategy doesn’t work.

What’s Your Worst Financial Habit?

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Mine is procrastination.  It has caused me to delay saving for retirement, looking for a job, finding better deals, etc.  It affects a lot more than just my finances though.  I should have aksed what is your worst habit is that affects your finances.  Procrastination also causes problems with my school work, exercise,blogging, and just about every aspect of my life.  That is how I had no school Wednesday and still didn’t manage to get a blog post done.

This Monday I was stressed out because I had delayed two projects until they both had to be done that day.  I could have easily had them done before Monday and spared myself the stress and ordeal of working all day on them but I didn’t.  You’d think I’d learn from this but that hasn’t been the case in the past.  I might do a little better for a while but then I’ll start letting things slide and eventually I’m procrastinating as bad as ever.  I have a lot of things I want to do but I never seem to have time to do them.  I know I could do more if I would just stop wasting time putting off actual work.  I’m sure there is some way to cure this habit but I haven’t gotten around to looking for the solution yet.

My Identity Theft Experience

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This week is “National Protect Your Identity Week” so I thought I would share my experience with having my identity stolen.

My identity was stolen back in 2001.  I was alerted to this when my credit card company called and asked if I had applied for another card with a Las Vegas address.  I hadn’t and they advised me that someone had applied for credit using my information and that I should contact the credit bureaus.  Say what you will about Capital One’s customer service in this case they were on the ball.

I’m not sure how the id thief got my information.  I lived in Las Vegas until early 2000 and I had just visited there in the summer of 2001 a month or two before my identity was stolen.  I know I didn’t bring my social security card when I visited Las Vegas and I don’t remember giving it out for any reason.  Even then I was very cautious about revealing my social security number.  It is possible that someone got my information when I was living in Vegas and just waited to use it.  Homeless people often went through the trash at my apartment complex and one of my jobs put everyone’s SSN right on the sign-in sheet.  The timing of the thief applying for credit right after I had visited makes me think it had something to do with my visit though.

Contacting the credit bureaus and getting a copy of my credit report and putting a fraud alert on my credit file was not that difficult.  I remember having to wait on hold a long time but I did always get through to an actual person who was able to help me eventually.  I think I had a special number to dial because I tried to contact a credit bureau recently and it was impossible to get hold of a live person.

The consequences of having my identity stolen wasn’t that bad.  I just had to spend a couple hours on the phone with the credit bureaus and review my credit reports.  The biggest hassle was the fraud alert was only supposed to last ninety days but at least one of the bureaus never cancelled it.  This results in me occasionally having to provide extra verification of who I am.  Usually this is only a small hassle although sometimes companies don’t bother telling me they need extra verification and just deny me credit.  This is resolved with a phone call but it is an additional PITA.  I was lucky, my experience would have likely been much worse if it weren’t for the fact that it was caught quickly and my credit at that time was rather poor resulting in the thieves’ credit applications being denied.

I’m even more careful with my information today.

Could I Retire Now?

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Last month my alternative income was larger than my expenses.  This is the first time that has happened.  If I could continue to do that I could potentially “retire” now.  It would be more accurate to call it semi-retirement.  I’d still do things to make money I just wouldn’t have a job and I could set my own schedule.

There are several factors that keep me from being able to retire now though.  The first is that last month my income was unusually high and my expenses were unusually low.  In a normal month my expenses will still be higher than my alternative income.  Also, once I’m finished with school I’ll have to start repaying my student loans.  I’ll be on an income-sensitive repayment plan so my payments might not be more than I’m paying towards debt now but there is a chance they will go up.  One more thing is even if I do get to where my alternative income is usually higher than my expenses I need to have a safety net for emergencies and unexpected expenses.  Right now I only have about $3,000 in savings outside retirement accounts.  I don’t consider that anywhere near enough.

For me to be able to retire I need to increase my income so it is consistently more than my expenses.  My expenses are already pretty low so I can’t cut much more there although I do believe I could still lower them more.  I need to focus on increasing my income and saving money outside of retirement accounts and I still have a long way to go on those.  The fact that my income was higher than my expenses last month though makes me feel good about my chances of retiring at 50.

My Bank Was Bought Out

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Wachovia’s banking operations were bought by Citi today.  I have an account at Wachovia.  It isn’t my primary account but I do use it on a regular basis.  Looking over the information Wachovia has provided about the sale it looks like the sale won’t affect me at all.  This is the first that the financial turmoil has directly affected one of my financial accounts but it just isn’t a big deal.  The only thing I’m somewhat concerned about is whether they will honor the Way2Save bonus.

My advice on handling the current financial turmoil.  Pay attention but don’t freak out.