Money Blue Book

Due to a momentary cash crunch of my own, my net worth finally dipped during the month of February after months of steady and fairly consistent increases. The decrease in my total assets in comparison to my total liabilities can be attributed to a convergence of simultaneous factors related to the current economic downturn, such as non payments by my cash strapped legal clients (my part time day job) and noticeably late pay checks from my online businesses’ affiliate advertisers. This month in particular, I also had to withdraw a fairly large sum of money from my emergency cash savings fund for family health reasons – primarily to make a good faith contribution to my Alzheimer’s-afflicted grandmother’s assisted care fund. Thus for reasons foreseen and unforeseen, this month necessitated that I dip into my savings and siphon funds from my monthly income stream more so than usual. However, I’m pretty confident the late income payments will be rectified and added onto the following month’s networth update, very possibly resulting in a higher than usual revenue report boost at that time.

Times Are Tough – Let’s Hope President Obama Knows What He’s Doing

In light of the ongoing financial crisis and economic recession, I wake up everyday thanking God for my continuous self employment and my ongoing ability to generate a fairly steady income. Times are certainly very difficult right now and thus far I’ve been able to dodge the painful recession bullets. Only a few years ago I was unemployed and found myself having to file for unemployment insurance benefits to make ends meet. Now, I’m on better financial footing – yet I still feel a great sense of lingering unease and perpetual pessimism as I look around the current economic landscape. A large number of my friends and acquaintances remain unemployed, victims of the never ending waves of corporate layoffs that have eliminated millions of jobs. Until times get better, I can only rise above the despair, sympathize, try not to feel the pangs of survivor guilt, and hope for better days ahead. Unfortunately, with Obama’s 2009 economic stimulus package having recently been passed, I grow more pessimistic than ever. Obama’s initiatives and economic vision for the country are indeed ambitious and commendable, but they are turning into a extremely costly and nightmarish budgetary morass.

As a small business owner of multiple small growing enterprises, I’m remain pretty frustrated and unhappy with President Barack Obama’s proposed plans to punish small business owners such as myself with substantially higher taxes. By raising devastating taxes on those best suited to create new jobs for Americans, his tax slaps will severely stifle economic growth for the future. In my opinion, Obama’s economic stimulus package, filled with porkish and utterly wasteful green jobs and useless expenditures, falls completely flat and misses the mark. I had hoped for a combination of across the board tax cuts for all taxpayers (rich and poor, consumers and businesses alike) along with a second round of much higher dollar value Obama stimulus checks for emergency support to struggling Americans. But it looks like President Obama has a different approach in mind. For those of us who voted Obama into office, let’s hope he is still listening to the voices of his constituency and hasn’t been blinded by his personal new world vision of potentially costly health care reform and the rise of a dubious American green energy industry. Those are perhaps worthy projects for a more prosperous era, but the American people need workable economic stimulus plans and infusions of real financial support now – not pipe dreams.

My Current Net Worth and Financial Status Update Compared To Last Month

High Interest Reward Checking, High Interest Savings, And High Yield CD Rate Deposits

Despite the ongoing failures and collapse of the financial industry, oddly enough, banks still remain the most solid of places to safely store money and earn a reasonable interest rate of return at the same time. Unlike investments in corporate bonds and stocks, bank deposits enjoy extraordinary security and safety guarantees via FDIC insurance, which backs all bank deposits with the full faith and credit of the United States government. Very few other types of financial deposits enjoy similar assurances and protections against unexpected financial loss. Despite the current dire shape of the U.S. economy, we are still very, very far from the type of utter financial devastation needed to render FDIC insured bank savings and certificate of deposit accounts vulnerable to loss.

Currently, the vast majority of my long term cash savings and investments remain deposited with the best online banks in the form of high yield savings accounts and high yield CD’s. My short term cash savings and immediate use funds currently reside in a few high yield checking accounts, some even interestingly saved in checking accounts that offer free reward points for usage (Citibank checking account Thank You Points).

While I still have a sizable sum of money invested in the stock market in the form of index and mutual funds, I have not added to or even touched any of my positions since January of 2008 (more than a year ago). Time after time I have been tempted by the siren of cheap stock prices, but fortunately, my savvier Jiminy Cricket guardian angel has continuously saved me from taking the plunge and buying shares. In my opinion (as well as those shared by fellow ultra bears), this economy is poised to get substantially worse before it will get any better. For the time being, it’s best for all of us to hold on to what we have and not make any hasty moves, lest we lose it all on a whim. Those who have been patiently hoarding their money on the sidelines are better off seeking maximum asset preservation by opening new FDIC insured bank accounts or investing in certificate of deposits offering the best cd rates.

Save Money With Credit Card Rewards That Offer Cash Back

Things days, amidst the ongoing recession and financial crunch, the age old practice of clipping coupons is making a comeback of sorts. Despite the pervasiveness of online shopping deals and discount coupon codes, there are still many basic consumer staples, like groceries, gas, and food where it’s still better to stop by a retail brick and mortar store than to attempt the online route.

For the frugal types out there such as myself who seek to save money whenever possible, one of the easiest and most consistent ways to save money every time you buy, is to purchase using a cash back credit card. While debt-laden or credit irresponsible consumers ought to stay away from credit cards altogether, lest they fall deeper into debt, those that can handle the responsibility of debt usage and are able to pay off their balances in full every month, should take advantage of all that cash back credit card rebates and purchase rewards have to offer. Even though I’m still single and don’t have a full family compliment to shop for, I still regularly earn more than a $1,000 worth of cash back credit card rewards and frequent flyer miles every year, just by using my reward credit cards whenever possible.

Preparing and Filing Taxes Online With TurboTax and H&R Block TaxCut

April 15, tax day – it’s just a month and a half away but interestingly, I still have not filed my federal or state income taxes yet. For some reason, I always seem to put it off into the last few weeks like many other people out there seem to do. As I no longer qualify for the free tax filing options offered by the IRS, I’ll probably take advantage of the myriad of paid, but affordable tax preparation offers available. I’ve been using TurboTax for many years now with a lot of satisfaction and will very likely return again to the same online tax preparation program for my annual ritual.

Frankly, the practice of filing taxes is really not all that convoluted or excruciating with user-friendly online tax preparation programs like TurboTax or TaxCut, but yet I always find an excuse to procrastinate. Maybe it’s my disdain of the IRS or my rebellious preference to make things as inconvenient and cumbersome for the federal government entity that takes so much of my money away, but I never like to file my taxes early. This year, I’m even considering printing my tax forms out manually in paper form to make the IRS’ job even more difficult. My tax preparation work will be completed using TurboTax’s intuitive online tax preparation program, but the filing will be made manually in paper form, requiring the hapless unknown IRS agent reviewing my tax forms to manually transcribe the numbers from my paper tax forms into their computerized system. Why E-file and make their job any easier? Too bad I can’t pay my taxes in pennies and random coinage. If that were such an option, I’d gleefully partake.

As a work from home attorney and self driven small business entrepreneur, I like to keep tabs on the pulse of the business markets and track the breaking of current economic news at all times. Whenever I’m working from home, I always have CNBC or the Fox Business News channel playing on the TV. However, because of this constant monitoring of the markets and relentless digestion of every piece of bad economic news that comes through the news wire, I’ve steadily become an extremely bearish investor of late. With little credible positive news to speak off for the foreseeable economic future, I’ve become ever more protective of my existing financial assets, making a mad dash for safety like I’ve never done before.

Billionaire investor Warren Buffett (who despite all of his historical wealth building wisdom, seems to be suffering a bit of a credibility and legacy problem recently with the plunge of his Berkshire Hathaway investments) used to preach that the world of money and finances revolves around the inextricable interplay between two core human emotions – fear and greed. These two primal capitalist emotions dictate our personal financial paths at any given moment and determine how we each respond to potential monetary opportunities as they present themselves. The age old Warren Buffett truism is that we ought to be greedy when others are fearful, since valuations and expectations are lowest, and opportunities and potential upside are highest at the peak of overwhelming market fear – but unfortunately, I think I have succumbed to this crippling fear of the unknown. Disillusioned by the never ending false verbal diarrhea spewed out by so-called financial experts and relentless bull market fanatics in the media, I am now starting to favor the viewpoints and sentiments of bearish prognosticators like infamous NYU economics professor Nouriel Roubini, nicknamed “Dr. Doom” for his pessimistic yet accurate economic forecasts in recent years.

As a self proclaimed perma-bear now, I currently remain hiding in my proverbial financial cave, hibernating and holding onto my stash of winter cash reserves in preparation for more difficult times ahead. I remain extremely cautious and stubbornly skeptical of the self interested optimistic pundits out there, who although have been proven wrong time and time again with their never ending predictions of the bottom, continue to cheer lead the market into plunging headfirst into reckless and financially suicidal decisions. “Extreme bearishness” is probably the phrase to best describe my overall investment sentiment for this month, and possibly for the entire first half of 2009. While the cash flow income generated from my active trading hours for dollars part time small law practice and entrepreneurial pursuits (one of which includes this personal finance blog) remain very healthy, I have completely halted my passive investment pursuits in the stock market, at least for now. Despite my earlier plans to purchase a single family home sometime this year, it is very possible that I may well put off the purchase until 2010 or later – at least until housing prices stabilize. I have the cash and down payment money necessary for a new first time home purchase right  now (with or without a sizable home mortgage loan), however, I want to see more visibility assurances in home prices before I invest. At least for the foreseeable future, my net worth growth and my marathon journey to become a millionaire will have to depend solely on the continuous cash flow increases provided by my regular day jobs, rather than from any improvements in passive income appreciation (via stocks, dividends, or housing).

My Current Net Worth and Financial Status Update Compared To Last Month

During Turbulent Times, It’s Best To Keep Your Money Safe and Secure In FDIC Insured High Interest Bank Accounts and High Yield CDs

In my opinion, you must be certified crazy or an extreme thrill seeking risk taker to even consider adding aggressive new investment positions into your stock market portfolio at this moment in time. At a moment’s notice, any one of the many market sectors could easily plunge 5-20% and destroy your life savings, as evidenced by the extremely volatile swings we’ve been experiencing lately. No matter the fact the market has already plummeted more than 50-75% since its peak in 2007 – the market has the potential to purge even more as current grim economic conditions have not slowed down its deterioration. This is truly not the time to get greedy and lose your money in one fell swoop. I fully understand the need to seek out long term opportunities and come out on top 5-10 years from now, but such immediate uncertainty and irrational volatility in the stock and real estate markets require a more asset protectionist mindset for the time being. I don’t anticipate the economy to experience much of a noticeable recovery until at least mid 2010. Perhaps sometime during the mid summer months of 2009 will be a more suitable time to start considering more long term objectives. But for now, I recommend greater caution and taking things a bit more short term, with a healthy dose of more fearful wisdom than exuberant greed.

During such scary times, I prefer to keep the vast bulk of my liquid cash savings stored in FDIC insured bank accounts, preferably invested into a mixture of high yield savings accounts and high interest certificate of deposits (CDs). I use laddered CDs with the best CD rates to maximize interest rate yields, but use multiple maxed out high interest savings accounts to keep money readily available for emergency fund purposes. As the cash savings generated by my day jobs and entrepreneurial pursuits have flourished, I have had to open multiple high interest online bank accounts to keep my aggregate savings fully protected under the current FDIC insurance coverage limit of $250,000.

Despite the current grim landscape of failed banks and struggling financial institutions, banks that offer full FDIC insurance coverage still afford consumers the best protection for their money that the market has to offer. FDIC insured deposit accounts at the nation’s best savings banks are fully backed by the full faith and credit of the United States government, and thus enjoy near iron-clad protection against bank failure or catastrophic financial loss. Unless the federal government of the world’s most powerful nation deteriorates and collapses into complete disarray, so much so that it can no longer honor its financial obligations to creditors, your money is otherwise 100% safe. Despite my extreme bearish sentiment, I have no real fear that the United States government won’t be able to survive the current credit crisis or economic recession. Times are certainly extremely gloomy, but the federal government and the U.S. economy will ultimately prevail – although it may take many years for recovery to happen.

Making Sure I Use My Reward Credit Cards To Keep The Accounts Active, and Keeping Tabs On My Credit Score

The current news on the street is that due to troubled credit markets, major credit card issuers are canceling and closing out inactive and unused consumer credit card accounts. For many struggling with credit card usage temptation or are currently mired in credit card debt, this may come as a forced financial blessing. However, it’s important to note that when a credit card issuers closes out one of your unused credit card accounts, this seemingly simple act may have the unintended consequence of hurting your FICO credit score. The FICO credit score is comprised of a multitude of credit and debt payment factors, but a very large component is the proportional usage of your utilized credit in relation to the total aggregate amount of credit that is available to you. Thus, by closing out unused but available credit lines, this decreases your credit utilization ratio – thereby causing the FICO credit score algorithm to churn out a lower credit rating in your name. This is also the same reason why unused credit card accounts with reward or 0% APR balance transfer terms that are no longer desirable should never be canceled, but rather should be stored in a safe place and kept open. Thus for example, if you’ve tapped out your Citi Platinum balance transfer offer, instead of closing out the card immediately, it benefits your ultimate FICO credit score more to keep the card open and use it at least a few times a year on small purchases.

As a heavy credit card user who has a large portfolio of reward and balance transfer credit cards, I have been making a concerned effort to make sure I use each of my credit cards at least once every few months to keep them active in the eyes of the issuing credit card companies. In particular, I pay special attention to keeping active those lesser used cards opened many years ago as the FICO scoring algorithm heavily favors older credit accounts over newer, recently opened accounts. Yes, the whole process of  juggling cards and ensuring continued usage of each individual credit card at least a few times a year is somewhat of a hassle. However, my extra steps have kept my FICO score nice and high at 802, in anticipation of my future plans to apply for a home mortgage loan when this whole economic recession finally blows over.

Charting Out My Financial Plan and Tracking Expenditures With Quicken 2009 Software and Free Quicken Online

While I’ve always had a history of using Intuit and Quicken related products like the paid desktop software versions of Quicken Premier and Quicken Deluxe, it was not until the recent emergence of free Quicken Online, that I’ve begun to consider the online version to be a real viable way of tracking my expenditures and financial account balances. As a long time user of Intuit’s popular online tax preparation program Turbo Tax, I eager anticipate the day that TurboTax is fully integrated into the free Quicken Online program for a more complete online budgeting platform with tax planning analysis. Tax planning is a critical component of any family’s or small business’ financial management so it stands to reason that full integration will arrive sometime in the future as web technology finally catches up to the demands of financial consumers such as myself.

In the meantime, I recommend getting into the habit of using account aggregation programs like Yodlee, Mint, or Quicken Online to help you calculate your networth and better budget your expenditures. I know it sounds like a sales pitch, but I recommend Quicken Online primarily because it’s a completely free service and a popular choice for many people. With future potential integration with programs like TurboTax from the same software maker, Quicken Online has pretty good future upside for those that prefer sticking with a single company for their financial planning needs.

Honestly, I’m starting to regret posting my financial numbers online for all to see. It’s one thing for anonymous strangers or random online readers to be intimately aware of my current financial net worth, but it’s another mild hassle altogether when friends or family know where I stand financially at all times. It just injects a bit of awkwardness into my personal and social relationships I feel.

Just a few days ago my brother asked me to contribute to his law school tuition fund. He’s currently working full time and juggling evening law school classes. His federal government office pays for the majority of his law school tuition expenses, but there is still a little bit leftover that he needs to cover out of pocket. I’m sure his awareness of my current financial state via my personal finance blog at Money Blue Book makes it easier for him to feel comfortable approaching me for money knowing that I probably have the means to provide some measure of financial support. I doubt he would have felt as comfortable asking me for a handout or a loan if he were not acutely aware of the specifics of my monthly cash flow or personal balance sheet.

Offering Loans To Family and Friends Is A Bad Idea – Don’t Give Money To Others That You Wouldn’t Feel Comfortable Giving Outright For Free

I have an unwritten rule for myself that I will never loan money to family or friends, even if it’s to bail them out of a difficult financial situation such as bankruptcy. I would prefer to provide them the money outright as I deem fit to avoid all the unnecessary and potentially negative relationship issues that may arise from the need to call in contractually obligated loan payments. I am not averse to giving money outright on a charitable basis to help a loved one, but I will never permit someone to borrow money from me due to the potentially foreseeable wedges that the loan and the issue of money may drive in our relationship. In the past I have loaned money to friends before and have experienced the dread and hassle of needing to constantly remind them to pay back the loan, and dealt with the reciprocal resentment of me even asking. Lending money to people who are good for it and guaranteed to pay the amount back on time without question or prompting is a joy and a breeze, but the vast majority of borrowers, particularly those who are friends or family, are less than model borrowers. Besides, oftentimes you are potentially setting a bad example when you bail the friend or family member out financially rather than compel the person to learn and utilize responsible self reliance techniques. As CNBC financial host Suze Orman always recommends – sometimes “you have to say no out of love, than yes out of fear or weakness”. It’s corny but true.

Thus, in regards to my brother’s request for a monetary contribution to his law school fund, I turned him down. The reason he seemed to be cash strapped was not really because of his tuition expenses alone, but attributable to a monetary shortfall caused by increased rental expenditures and higher relationship spending. I recommended to him that he seek out Sallie Mae for a small federally subsidized low interest student loan for education funding, or go apply for a 0% balance transfer credit card if he only needs a little bit of money as a one or two month stop gap measure. That’s how I personally stayed financially afloat when I was in law school – through a combination of parental financial support, low interest credit cards, and student loans. By depending on student loans and my own revolving credit, I learned a valuable lesson – the ability to rely on oneself when it comes to money and personal finance. I also told my brother to stop calling me rich whenever the issue of money came up – I got to where I was because I worked hard, made frugal decisions, refrained from lavish expenditures, and seized business and investment opportunities quickly and timely before the perfect moment was lost. I was not born with a self entitled silver spoon in my mouth, but studied hard, worked hard, and made key financial sacrifices along the way.

With that tangent aside and back to the topic of this post, I have provided my financial net worth calculations below for all to examine. I chart my financial journey every month so I can evaluate my progression towards my financial dream of becoming a millionaire and financially independent someday. It’s a marathon journey and I’m still a long ways off, but so long as I continue to make money, save money, and invest in income producing assets, someday the dream can and will become a reality.

My Current Net Worth and Financial Status Update Compared To Last Month

Focusing On Defensive Asset Preservation By Saving Money In FDIC Protected High Yield Savings Accounts and CD’s

It’s difficult not to watch CNBC or Fox Business News and not feel a sense of unease and pessimism emanating from the stock market investment community. While there remains a few bullish pundits who continuously make repeated calls of a market bottom, many of those overly optimistic commentators  have already been completely discredited with their wholly inaccurate and off the mark predictions. Much like the nutty National Association of Realtors’ perpetually optimistic sales pitch of “it’s always a great time to buy a house”, bullish financial commentators have lost their credibility in my opinion. In my assessment, the deteriorating credit markets and economic indicators are suggesting a severe and prolonged period of recession, signaling that more corporate layoffs and bankruptcies are yet to come. President elect Barack Obama and his proposed suggestion of an insanely high $1 trillion economic stimulus package may inject some much needed liquidity and money into the economic system, but even that will not be sufficient to jump start the economy for several years. The only way the market will recover is through the passage of time to work itself out, eliminating inefficient banks, striking out failed unionized labor strangleholds, and doing away with unprofitable and redundant corporate entities like at least one of the big 3 American automakers of Ford, GM, or Chrysler. Obviously, I’m staunchly opposed to any form of auto bailout at taxpayers expense. The market must be allowed to recover organically because that is the only way the economy will recover back to efficient equilibrium.

In light of this extremely bearish environment, I’ve decided to go on a saving spree – scrimping and hoarding away as much savings as I can. In the face of more difficult times ahead for the United States economy, I have essentially gone into a defensive asset preservation turtle shell in terms of my current investment and savings strategy. While I continue to earn a very healthy and steady income stream of $50,000-60,000 a month (through my legal business, various ventures, and online websites), after paying off expenses and setting aside certain amounts for various liabilities, I continue to store the vast bulk of my money away in multiple FDIC insured safe investments like high yield savings accounts and certificate of deposits (CD’s), ever mindful of the FDIC insurance limit of $250,000 for each insured account at any one banking entity. I have completely halted my previously active stock investment activity (much to the chagrin of my discount brokers) and will stay on the sidelines until the financial storm and economic recessionary pressures have eased. However, one thing that I am very aware of is that historically, the stock market has always rebounded approximately 6 months before the actual economy. I plan to take this historical statistic into consideration as I chart out my long term investment strategy in the months ahead. While I am adopting a defensive investment strategy right now, I am still mindful of the existence of potential future opportunities out there.

Taking Into Consideration My Future Tax Liability By Keeping Track Of My Estimated Tax Payments

As I am primarily self employed, running my legal, financial, and even online businesses from my home office, I have to contend with quarterly estimated tax payments to the Internal Revenue Service (IRS). Estimated tax is the way self employed people pay tax on income that is not subject to withholding. Since I myself am my own employer, I do not have income tax withholding. Pursuant to IRS regulations, estimated tax payments must be made four times a year on four specific payment due dates for the 3 immediate months prior – on April 15, June 15, September 15, and January 15. Since I have no tax withholding, in my net worth calculation, I need to set aside a portion of my monthly cash flow that will go towards my quarterly tax payments to get a more accurate picture of where I stand in terms of net worth. Thus as you can see on my net worth chart above, I have included a sum of money that will count as a tax liability account payable to be applied against my cash and other assets. Of course, when I actually make my quarterly tax payments, the tax liability account payable will be removed, along with the same denominational amount from the cash category.

Planning To Buy A Home – But Still Debating Between A Condo And A Detached Single Family Home

Despite depressed housing prices and a stagnant real estate market, I’m still set on my goal of buying a home and getting a piece of the long sought after American dream of home ownership. With 30 year and 15 year fixed home mortgage interest rates approaching historical lows of 5 to 6%, now is a great time to buy a home – but only if you can snag a home at an exceedingly great discount. We are currently in a tremendous buyer’s market right now and for prospective buyers such as myself, we have a strong tail wind on our side. On a human level, I feel a measure of sympathy for existing home sellers who have witnessed the complete wipe out of their multiple years of built up home equity, but at the same time as a potential buyer, I feel vindicated in my belief and cautious stance back during 2004-2007 when I decided home prices were severely over inflated. Because I was able to refrain from joining the housing lemming pack’s run up in the last few years, I saved myself from plunging over the housing market cliff when prices ultimately went splat.

With years of savings in hand, I’m now in a better position to negotiate favorable mortgage rates and take advantage of a favorable buyer’s market to secure the ideal home for myself. Currently I’m still debating between buying a 2-3 bedroom condominium or a 3-4 bedroom single detached house. As I am still currently single, I have little actual need for the size or spacial benefits of a large home, but at the same time, I am a bit leery about buying a condo, primarily because I would have to contend with non-tax deductible condo fees in the process. However, detached homes require much more expensive upkeep and care in the form of yard work and expenditures when it comes to household appliances – things I’m not sure I want to deal with at this moment in time. Then again, single detached homes offer a tremendous amount of freedom to customize and personalize, much more so than condominium apartments – luxuries that are the very beneficial essence of purchasing a home to begin with. These issues will likely stay on my mind as I begin the slow process of visiting open houses and browsing online real estate listings. Feel free to share any personal words of home buying advice.

In an effort to encourage readers to learn to calculate net worth and track their personal financial progression, I’ve begun the process of posting my monthly net worth updates online for all to see and review. While taking the time and effort to record and analyze my investments and liabilities requires a measure of dedication, I think it’s an invaluable method to help me better plan and make adaptive financial decisions in my marathon journey to become financially independent.

My Current Net Worth and Financial Status Update Compared To Last Month

Saving My Small Home Business Income To Weather The Economic Recession

While October and November have been extremely difficult months in terms of the significant paper losses I’ve been seeing in my current stock and mutual fund investments, I continue to see a positive growth trend in my overall income cash flow (currently around $55,000-$60,000 a month). Despite the current economic situation, I continue to enjoy a steady stream of income from my legal practice day job and significant contributions from my side projects. While my small legal practice business has gyrated a bit in terms of leads and overall receivables, most pullbacks have been noticeably buttressed by steady increases in my alternative income streams, which includes profits generated by my online business blogs and my other real world developing ventures. However, as times get tougher, I anticipate monthly variable income drops in the coming months.

In this deteriorating economic climate amidst the ongoing credit crisis backdrop, it’s important to take prompt actions to preserve capital. That is why I have made a concerted effort to save as much money as I can to ensure I have enough emergency fund savings to weather any prolonged financial storm. While I currently remain gainfully self employed and have other immediate employment prospects in the way of legal temp jobs should my own legal practice or blogging business suddenly fall flat, I am very mindful of the fact that we are entering precariously unpredictable times. Even the once abundant spigot of 0% APR balance transfer credit card offers that used to be so popular among credit card arbitragers, that I used to rely so heavily upon as a secondary means of emergency fund support during periods of unemployment have slowed to a trickle. While my current savings rate is thankfully quite substantial, I remain perpetually dissatisfied, and remain determined to strive for ever increased levels of reasonable frugality and belt tightening to ensure I can endure the worst financial recession or depression scenario possible. I can’t predict what will happen months or years from now, but I can control my actions today and structure them so that I minimize my financial risks down the road.

My Stock Investments and Retirement Accounts Have Been Wiped Out

When I used to have a regular day job outside of the home, I had the luxury (if you can call it that) of not being able to track the market closely until I got home. Unfortunately (depending on how you look at it), I work primary from my home office now and have CNBC and Fox Business News on all day long as back ground noise. As a result, I am extremely in tune to the snowballing financial calamity and constant dire news coming out of Wall Street minute by minute. Every time I think the market surely must have hit a bottom, the bottom of some sector falls out and the entire stock market plummets yet another 5-10% as a whole. If we are not on the brink of a major financial market collapse at this point, we are surely close to it. With complete irrational fear gripping Wall Street and Main Street alike, as much as I hate to say it – I don’t think we’ve truly yet seen the worst – the worst is still yet to come. First it was the banking and insurance sector that felt the stabbing pain and now it’s the American auto industry that is on the verge of Chapter 11 bankruptcy. The huge recent plunges of the S&P 500 Index has by and large wiped out the bull market of 2002-2007 after the previous stock market wipe outs of 9-11 in 2001. Like a horrible nightmare of self fulfilling prophecies, it just keeps getting worse and worse, and the stock market bottom keeps getting spanked.

At this point, I’ve lost such a large percentage of my existing investment and retirement portfolio that I don’t even bother checking my account balances anymore. Due to my overly aggressive previous positions in foreign emerging market index funds, my stock portfolio is down more than 60% since their peaks in mid-2007. What was once a thriving stock portfolio worth more than $50,000 has been chopped to less than half. I debated whether to pull out of all my positions, but ultimately decided that I had ridden the stock price roller coaster too far down to bail out at this point. Thus, for the foreseeable future, I intend to ride this stock market coaster of doom as far down as need be. Having already lost more than half of my paper value, the prospect of losing the other half just don’t seem to hurt as much anymore. Besides, the sun will rise tomorrow, and tomorrow will arrive yet another day and another chance.

Cash Saving Accounts (Banks and CD’s)

Better days are ahead for the SS Money Blue Book Stock Portfolio, but this ship’s going to be pounded mercilessly until then. Thankfully (and I thank God for this everyday), my stock portfolio currently only comprises a comparatively small portion of my total combined assets, as I was able to wisely refrain from attempting to catch the falling knife of plummeting stock prices. Until there is more guidance on where this psycho market is headed, I intend to safely sit on the sidelines and continue stashing my cash savings in high interest savings accounts and certificate of deposits (CD) with the best online savings banks I can find. Sorry Warren Buffett, but for the moment, I guess I’m not fiscally strong enough to be greedy when others are fearful. Call it missing out on a juicy investment opportunity when prices are low or simply call it wise capital preservation if you will – in this unpredictable market, I intend to save my money in FDIC insured assets like money market savings accounts. While I might miss out on the potential of future gains by not taking a calculated risk today, at least I’ll sleep better at night knowing my money won’t suddenly evaporate overnight due to some irrational panic selling in the stock market. I will return to the market soon, but just not right now until there is more guidance.

Vehicle Asset Valuation and Dreams Of A New Car Purchase

Readers may notice that my 2004 Honda Accord EX-L’s vehicle asset value suddenly dropped more than 21% from last month. No, I didn’t get into a car accident nor did the vehicle end up in a lake. For the last few months I’ve been rather lazy in updating my car’s projected Kelly Blue Book dealer trade in value. While not an exact science, after running Kelly Blue Book’s online tool for used vehicle trade-in pricing and being extra conservative in valuation by plugging in my current mileage of 65,000 miles and condition of “good”, I came up with a reduced price that I felt accurately reflected its fair market value if I were to sell it today within a very short period of time.

As I currently have the financial means to purchase a new vehicle, I also briefly flirted with the wild idea of buying a new high performance luxury vehicle – contemplating a 2009 BMW M3 Sedan or a Mercedes Benz C63 AMG, both priced at around $55,000 to $60,000. But then I came out of my stupor and realized the irrationality of such a luxury purchase at this point in time. The enjoyment of owning such a high powered vehicle just didn’t seem to outweigh the tremendous financial loss of $60,000 worth of lost savings and investment potential. At least for now in my current stage in life, it would seem to be a very foolish financial splurge. Perhaps I ought to wait until I was married first and settled down with a family with a more sizable savings before indulging myself recklessly.

No Rush To Pay Off My Low Fixed Interest Rate Student Loans

Despite the relatively large amount of cash I’ve been able to save up in the last few years, I’m in no rush to pay off my student loans in full. That’s because currently my former subsidized federal student loans from law school remain nicely consolidated at a very low fixed annual interest rate of 2.25%. I consolidated several years ago back when interest rates were extremely low, and was able to further lower my rate over the years by satisfying all Sallie Mae good borrower perks for debtors who consistently made timely repayments. Because this fixed rate’s actually lower than what I could get if I stored the loan amount in a high interest savings account, I’ve decided to take my time paying off the loan principle. By keeping the loan balance in my interest earning bank account, the interest income generated (variable 3.50%-3.75% APY) is actually paying for the interest carrying cost of the loan (fixed 2.25%). Essentially, what I’m doing is engaging in a form of student loan arbitrage much the same way I used to make money from balance transfers.

Taking The First Few Baby Steps Towards Buying A New Home

While my luxury vehicle fantasy is just that – a fantasy, my desire to purchase a home for myself is very real. Currently, I’m renting a brand new one bedroom condominium in a suburb of Washington D.C. for $1,475 a month, but I feel it’s time I invested in a home to call my own. Of course, as home prices have plummeted and continue to drop, any major home purchase decisions I might make probably won’t happen until the second half of 2009 at the very earliest. I’m in no hurry to purchase a home and would be willing to wait an extra year until 2010 if the housing market conditions continue to stagnate. While potential home buyers such as myself certainly have the clout and means to price gouge home sellers mercilessly and demand unreasonable concessions to our heart’s content at this point, I think home prices still have many more months or years of continuous depreciation to go before they reach true fair market value. As evil or heartless as it may sound, when home values finally stop dropping in about 12 months or so, I’ll be there waiting, amidst the excess housing inventory, to eagerly select my home of choice and take it off the hands of some former owner who has no choice but to sell it at a desperate discount. Like it or not, it’s just efficient capitalism at work.

While I’m heavily leaning towards the purchase of a detached single family home, I’m not adverse to going with a high rise condominium with a view. As a relative newcomer to the realm of home buying, my preliminary research currently consists of watching home buying TV shows and occasionally browsing online real estate listing websites like Yahoo Real Estate, Zillow, and Trulia. I don’t even have a real estate agent yet as I’m still in the early preliminary research and scouting phase of home buying, primarily still working on maintaining my FICO credit score to improve my chances of getting an excellent home mortgage loan when the time arrives. I will talk about my search for a house in future posts.