How Low Can You Go?

No, we're not talking about the limbo. Here's the latest, according to CNN headline news.

"Stocks tumbled across the board Tuesday, with the Dow sinking about 500 points at one point. It closed 415 points down -- the biggest one-day drop since the stock market reopened after the September 11 attacks. The New York Stock Exchange tried to limit declines by imposing trading curbs. The selloff is on the back of a nearly eight-month rally."

My stock investment account plummeted by more than $5,000 today. Ouch! And the verdict is still out on my mutual funds and retirement accounts. It's a good thing I'm in it for the long haul. But still....

Steaming Stamps off Envelopes

This evening, I rode up in the elevator with a friendly, older woman I see from time to time in my building. I greeted her with a smile and a nod. And then I started flipping through my mail. I commented on the fact that we seem to get a lot of marketing postcards from Fred, one of the Realtors who lives on my floor. Sometimes one or two per day. She laughed and shrugged. "At least you can reuse the 39 cent stamps." I must have given her a confused look. "They're never cancelled," she explained. So then I took a closer look at the postcard in my hand. Sure enough, she was was right. Huh! I never noticed that before. My guess is that Fred mails the postcards from the building. And the postal carrier picks them up and immediately turns around and stuffs them into our mailboxes. I couldn't help but think about the money Fred could be saving if he only had a key to our mailroom. But his loss is my gain. Self-adhesive stamps on slick glossy paper. Can't get much easier than that. Gone are the days when you had to steam stamps off of envelopes.

Reactionary Behavior We Learn from Our Parents

One of my friends confessed that she absolutely hates DIY projects. She'll readily outsource mundane tasks that most people would do on their own. But the way she tells it, she grew up in a relatively poor household. Her parents did everything on their own. But they both worked full-time jobs, and were constantly bickering about all of the household stuff that they had to do - things like cooking, cleaning, paying the bills, mowing the lawn, shoveling the driveway, etc. So, my friend decided that she didn't want to be like her parents. She'd rather pay someone else to do all the unpleasant tasks and avoid the infighting.

I think there's some merit to my friend's argument. But as with all things in life, you can take it to an unhealthy extreme. I'm a fairly neat person, but I pay a maid service to deep clean my condo once a month. At the same time, I can't see myself hiring a personal shopper to hand pick groceries for me and then have them delivered, even though it's one of my least favorite things to do.

Why I Hate Gift Cards

I wound up ordering the Bogleheads' Guide to Investing at barnesandnoble.com because I needed to use the $25 GC that I got for my birthday 2 years ago. With tax and shipping, it came out to $25.45. I could've bought the same book at amazon.com for $20.46 with tax and shipping, even less if I qualified for super saver shipping. But I had that stupid gift card. The book was shipped in a flimsy cardboard box (no bubble wrap), so of course some of the pages were damaged. I could exchange the book at a brick and mortar, but that kind of defeats the purpose of ordering a book online.

And yes, I already tried the frugal route. Would you believe that there are only 2 copies of the book available for checkout in the entire Chicago Public Library System? Sigh...

What Boomer Pop Icons Have Learned About Money

Check out the recent article on CNNMoney.com.

My favorite quotes...

"Money doesn't make you happy. I now have $50 million, but I was just as happy when I had $48 million." - Arnold Schwarzenegger

"[F]or financial stuff I always listened to my father, a Republican investment banker. He told me if I always pay my bills with one-third, save one-third and screw around with the last third, I'll be okay, no matter how much I earn. It's the one thing he said that I listened to, and I have never been in any financial trouble." - Grace Slick

"My father used to tell me a riddle: Who is happier, the guy with $11 million or the guy with 11 kids? The guy with 11 kids. Why? Because he doesn't want more." - Bradley Whitford

"[T]he good times don't last forever, so be conservative with your money. Always try to live off half of what you make. The other half goes to taxes and investments. If you can do that, you'll succeed at money." - Bruce Jenner

Fewer Buyers Can Afford Homes

I finally finished my grad school application this weekend. I won't find out whether I've been accepted until the end of March, early April. And then I'll need to try to sell my condo. So, it goes without saying that I'm a bit worried about the current state of the housing market. According to a recent MSN article, the housing slump may not be over any time soon because houses are still priced too high for the average buyer.

"The question is when a new balance will be reached between supply and demand. The housing slowdown is unusual because it has not come amid a general economic decline. Rather, it appears that home prices simply rose to a point where fewer buyers could afford homes."

Okay, no surprise there. But check out the actual ratios of salary to home prices.

"By last year, a median-price American home cost nearly eight times average annual earnings, up from about five times earnings in 1980, according to research by New York investment firm Merrill Lynch. Now, fewer buyers can afford homes, and many speculators are trying to clear out of a cooling market."

Eight times average annual earnings? No wonder Americans have a negative savings rate!

My condo and deeded parking space cost less than 2.5 times my average annual earnings, and I put 20% down. Even then, I thought I was stretching a bit. Admittedly, my association fees for my condo and parking space are outrageously high at $500 per month. But that includes water, heat, garbage, sewer, satellite tv with premium channels and high-speed, internet access.

When the Experts Give You Conflicting Advice

Fidelity Europe Capital Appreciation Fund was recently named a best buy by Forbes magazine. But the overall Morningstar rating is only 3 stars. Same deal with Fidelity Worldwide Fund. What's up with that? This is why I don't always use stock and mutual fund 'screeners' when looking for managed funds. And yes, for a variety of reasons, I do own actively managed funds through Fidelity, rather than index funds through Vanguard.

Netflix Wins

A lot of folks in the pf blogging community have been debating the pros and cons of Netflix vs. Blockbuster. I prefer Netflix because (a) I don't live anywhere near a Blockbuster, and (b) my taste in movies is a bit eclectic.

Against my advice, my friend Shirley converted recently to Blockbuster. Admittedly, she lives right near a Blockbuster store, so it's convenient for her. But lately, she's been complaining about the limited selection. For the past 3 weeks, she's been waiting for the movie 'You Can Count on Me'. And although it's at the very top of her queue, Blockbuster has been sending her everything but that particular movie. So, as an experiment, she asked me to try to get the movie from Netflix. And the race was on. Which one of us would get it faster? Well, no contest, really. Within 2 days of bumping it to the top of my queue, I received my copy of the movie in the mail. She's still waiting for her copy from Blockbuster. Go figure.

401(k) Savings Plan Performance in 2006

Sorry it's been a while since I've posted. Life has been incredibly busy in the past few months but should be slowing down considerably in the next few weeks.

I just got my 401(k) statement for 2006, and it looks like the investment gain over the course of year amounts to a 14% increase, after you factor out the $15,000 that I invested plus a $6,500 company match. Not great, but decent, especially considering the fact that I put new money into the account over the course of eight months.

As for asset allocation, 25% in each of the following 4 sectors funds: S&P 500 Index, Mid Cap Value, Small Cap Index and International Large Cap Index. My simple allocation actually beat the company's actively managed 'Aggressive Portfolio' by approx. 1%.

My only regret is that I lost out on part of the available company match because I frontloaded my investment. You can read about it here, here and here. C'est la vie.