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tracking expenses

I do notice that I tend to blog in phases.. like a whole slew of Musical Theatre, ballet, dieting, improv, current hobby blog posts.

Apparently I'm in the finance phase, which to be honest, I needed to refocus on. I generally don't use LJ-cuts, but I figure since money is a taboo topic, there are certain things that should be in cuts so people don't accidentally read things they don't want to know.




Starting today, I'm going to track all my expanses for the month of Sept. Basically it's a step in the "Your Money or Your life" book, which is becoming conscious of all the little expenditures. Mint kinda does it, but the book wanted you to categorize everything in a way that's relevant to you. So like Food: for me can be divided into work lunch, eating out, groceries, and coffeeshop. Also, Mint doesn't know what you do with your cash. It's less about dieting and more about conscious spending.

Also, in terms of compound interest, I just found out that if I get an average annual return of 8% on my 401k for the next 30 years, even though I no longer contribute a dime, I'm set for retirement at 60. This has me a bit stunned. It wouldn't be a lavish retirement, but definitely enough. And that's not even counting social security payments.  The trick is not to withdraw money for 30 years, and figure out at least an 8% return rate. I can't wait to get my hands on my 401k when it turns into a rollover IRA so I can invest in what I want. Compound interest rocks.

I think next year onwards I will just try to max out on the roth IRAs of 5k. Between that and what I've already gotten from slaving away at a corporate job from when I'm 21, my retirement seems to be in a good shape.

Now the trick is to figure out how to be financial independent between the ages of now and 60. But now at least I don't have to worry about making enough income for my retirement. Except for the 5k a year.

The other thing that the book told me to do is to calculate all the money you've ever made in your life. I did it starting from 2001 when I started my corporate job. It also asked me to calculate my networth. Which I've been doing since 2005. I figured out that I've actually saved about 14% of my income before taxes. So I actually haven't been as spendthrifty as I though I have been, mostly because I always maxed my 401k to whatever my company was matching, which started at 3% and is now 5% matching. And in addition I have a savings acct that automatically takes money from my checking every month. Passive savings works. 



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( 12 comments — Leave a comment )
mdf356
Sep. 1st, 2010 05:14 pm (UTC)
I remember when I could max out my IRA and 401k. Then I had kids.

But I still think I'm set with compound interest even if I don't save more, since I did max it all out for a few years in my early 20s. Of course, the IRA limit was 2k/year when I started; I haven't been able to max it out since they raised the limit to 5k.
ripresa
Sep. 1st, 2010 07:12 pm (UTC)
Yeah, it's harder to be frugal with 3 kids! :) Esp if you're going to contribute to their college fund.
(Anonymous)
Sep. 1st, 2010 10:02 pm (UTC)
I might have a copy of Quicken if you want to use it, also I noticed Bank of America offers some online stuff as well; I am sure other banks do as well - Wells Fargo. -ullearn
medryn
Sep. 2nd, 2010 04:51 am (UTC)
8% is an impressive rate of return.
ripresa
Sep. 2nd, 2010 01:42 pm (UTC)
Oh I am well aware that the market has been flat for the periods of 1905-1942, 1965-1983 and 1998-2008. Granted, they were lousy periods, but if you were an "invest and don't touch" investor, and just happened to get in and out at those times, you were kinda screwed. Like I said my Vanguard Index Fund from 2004 is performing flat. Another friend posted she's had hers since 1994 and it's still not that great a performance either.

This is why I don't do long haul investments. Even my 401k gets messed around once every few months despite having only 20 funds to choose from. For the year, only bonds and cash are not red. Why do I want other people to manage my money?

Generally speaking, educated personal investors tend to beat the market, since we trade less money, and can move in and out faster then the pros who trade larger amounts, and are not watching out for you. It's all about managing risk. Like, not putting all your portfolio in penny stock cos it's dumb. Figuring out what you can tolerate and sleep in at night. Don't put more then x% of your portfolio in one basket, etc. It's common sense stuff that you can educate yourself in small doses. Trade in amounts of $1k. Fuck up a bit, learn. Then up the amounts.

Remember, these guys who are professional investors and fund managers? They were the frat guys in college. They're not smarter then you, they just have more inside tips. And they still only beat the market 50% of the time.

dnivie
Sep. 2nd, 2010 05:52 am (UTC)
inflation
8% return, seems possible, but high.

The DOW for example, was around 60 in 1900, and around 10.000 in 2000, which gives an average return of 5.5% for that period. Also, you need to consider inflation since real return is just return minus inflation. Getting 8% above inflation, is highly unlikely.

Nevertheless you're right, your retirement looks good. Time helps a LOT, thus you're significantly ahead of the pack just by considering retirement at all when you're sub-50.
ripresa
Sep. 2nd, 2010 01:44 pm (UTC)
Re: inflation
Here's my response to medryn above. Also, Eivind, I've been trading since 2003, I know :)

Oh I am well aware that the market has been flat for the periods of 1905-1942, 1965-1983 and 1998-2008. Granted, they were lousy periods, but if you were an "invest and don't touch" investor, and just happened to get in and out at those times, you were kinda screwed. Like I said my Vanguard Index Fund from 2004 is performing flat. Another friend posted she's had hers since 1994 and it's still not that great a performance either. So much for index funds.

This is why I don't do long haul investments. Even my 401k gets messed around once every few months despite having only 20 funds to choose from. For the year, only bonds and cash are not red. Why do I want other people to manage my money?

Generally speaking, educated personal investors tend to beat the market, since we trade less money, and can move in and out faster then the pros who trade larger amounts, and are not watching out for you. It's all about managing risk. Like, not putting all your portfolio in penny stock cos it's dumb. Figuring out what you can tolerate and sleep in at night. Don't put more then x% of your portfolio in one basket, etc. It's common sense stuff that you can educate yourself in small doses. Trade in amounts of $1k. Fuck up a bit, learn. Then up the amounts.

Remember, these guys who are professional investors and fund managers? They were the frat guys in college. They're not smarter then you, they just have more inside tips. And they still only beat the market 50% of the time.

dnivie
Sep. 3rd, 2010 07:32 am (UTC)
Re: inflation
They "still" only beat the market 50% of the time ?

You do realize it's a mathematical impossibility to have a situation where the majority of large-scale investors beat the market more than half the time ?

This would be true even if every single investor was Einstein.

It's -really- unsurprising that the average participator in the market has a return equal to the average return in the market.

If the extra agility of small investors generally trumps the extra insider-information of larger investors, is an interesting topic, I don't know of any actual research into this. (and I don't put much trust in random hunches), do you know of any work that delves into that ?
ripresa
Sep. 3rd, 2010 08:40 pm (UTC)
Re: inflation
"do you know of any work that delves into that ?"

Feel free to do R&D on it, I have no desire to spend more time researching for you, you're always so skeptical. My proof is my life, and my investments. It's fine if you want to do the conventional thing, and have conventional returns, but I don't believe in it, and I put my money where my mouth is. My 401k rate of return since 2001 is 7%. The S&P500 is 2%. If you're interested, I'll even email you my actual numbers and the balances of my 401k each year.

The point is, I don't believe in conventional investing that the professionals tell you. And I've been rewarded in my beliefs. If you do some of your *own* research instead of just arguing with me whenever I've presented an idea that I read somewhere or try out, then maybe you'll start to believe. Otherwise, just playing devil's advocate is tiresome.

The simple reason why I beat the professionals is probably because it's my money. So I take better care of it then some stranger who has to take care of thousands of accounts, and also sell funds that he gets paybacks on, and have to answer to a boss on other metrics.

ripresa
Sep. 3rd, 2010 08:43 pm (UTC)
Re: inflation
Actually, here are my %s without the actual cash value and balances.

S&P 500 401k
4 2001 -11.90% 7.99%
5 2002 -22.10% -0.85%
6 2003 28.70% 22.11%
7 2004 10.90% 13.40%
8 2005 4.90% -1.54%
9 2006 15.90% 8.46%
10 2007 5.50% 11.26%
11 2008 -37.00% -18.45%
12 2009 26.50% 21.92%
13
14
15 average 2.38% 7.14%
ripresa
Sep. 3rd, 2010 08:46 pm (UTC)
Re: inflation
And then my play account, which I do much better on, because I invest in actual stocks then only 20 funds to choose from. I pretty much have beat the stock market every year on that one. Even in 2008 I still had to pay taxes on my profits, when the market was down almost -40%.

It's harder to track the actual rate of returns on that one because I don't have the numbers past 2008, aside from my post on LJ every year where I find out I have to pay taxes on my trades because I made a profit. But I'll start tracking it this year onwards. I've created a rate of returns spreadsheet that should be useful for that.
preservationgal
Sep. 2nd, 2010 12:14 pm (UTC)
Matching is awesome
Free money is good.
( 12 comments — Leave a comment )

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