Lay Offs

Cyclist called me yesterday on his way home from work to fill me in on all the latest office happenings.

I’m very sad to report that yesterday a lay off in the Preconstruction Department was announced. That department is in the process of being temporarily disbanded and everyone is going out on different jobsites, unfortunately, one of the estimators in the department wasn’t so lucky as to be reassigned to a jobsite and has been laid off effective yesterday morning. When Cyclist told me my heart went out to the guy. This guy, Grad, just graduated from the University of Cincinnati last May. Grad moved down to Atlanta and away from his extended family and friends in order to accept a job with our company. He often keeps to himself, I really hope he’s got some good friends in town who he can confide in for moral support. He must be devastated. I can’t even begin to imagine what I’d do if I were laid off – I guess sit and stare at the wall for a few days and try and come to terms with it. Grad is still so early in his career, I can’t image what kind of a set back this might be for him – its always easier to find a job when either have a job or are still in college.

Cyclist and I talked a while more about how we felt really bad for Grad. Then he and I started speculating if there might be more lay offs. We were trying to decide if this was because of a true lack or work or if it was a convenient excuse to get rid of this person. We both like Grad, he's a nice enough guy but not a hard worker at all or a very smart worker either.

Cyclist and I tended to agree that if there was still work then they would have kept him but since there wasn’t any work and rumor has it that none of the projects wanted him on their team because of his reputation of not being a great employee, Sr. Management probably found it was easier to just let this person go. I don’t know if we decided this because we wanted to make ourselves believe this would be the end of the lay offs or if its truly the real reason.

I’m hopeful that there won’t be any additional lay offs. I’m not so worried about myself, especially since if all else goes wrong I still have the Tampa offer, but I’d hate to see something like this happen to my co-workers – the core group of the department that have been there for years is a tight knit group and any more lay offs would be a huge moral deflater.

Cyclist also hopes there aren’t any more lay offs but after that he said something that surprised me – he said if there are going to be any more layoff’s he’s going to volunteer himself to be the next one let go.

I asked him why he would volunteer himself, his response was that it would be better for him to go than someone like Big Daddy who needs the money to live day to day. Cyclist said he’s not an independently wealthy man but he’s been smart about finances plus he thinks he could find a job pretty easily because of his contacts and experience. Even if he can’t find a job he said figures with his savings he could hold off at least 4 or 5 years before he needed a job and not effect his retirement which he is planning to start in about 10 years at age 62. He started to ponder out loud that even if he could just find some part time consulting work then he’d be set and not ever need to work full time again and still be able to fully retire at 62.

While my heart still goes out to Grad, I can’t help but be dang impressed with Cyclist. I really hope to be able to be in Cyclist’s shoes one day. Its amazing the comfort and freedom Financial Independence can provide.

March Net Worth Update

Somehow the end of the month just flew by me. I’ve finally updated my net worth and am most excited. I knew it would be increasing beyond my average $2,000 due to my tax refund and that I was well under budget for this past month. When I added everything up I was very pleasantly surprised to discover I’d increase my net worth far more than I anticipated.

	Updated 4/3/08	Change from Previous Update	Updated 2/29/08
Total Net Worth	$96,478.55	$4,289.44	$92,189.11
Net Worth Comprised of
Retirement Savings:	$25,485.79	$1,847.95	$23,637.84
401k	$20,411.64	$1,411.16	$19,000.48
Roth IRA	$5,074.15	$436.79	$4,637.36
House Down Payment/CD's:	$56,912.48	$157.32	$56,755.16
Future Car Savings	$200.27	$150.27	$50.00
Emergency Fund/Money Market:	$12,263.14	$1,768.47	$10,494.67
"Cash"/Checking:	$1,616.87	$365.43	$1,251.44

I’m thinking that I should be over the $100,000 mark by mid-June. Maybe sooner, depending on when my bonus for the success of my current project is released.

PS I’ve spend a good bit of time working with networthiq but couldn’t quite obtain the format I wanted so I’ve decided to abandon that idea and stick with an excel spread sheet – its very easy to use and I have the flexibility to format it the way I want. I’ve yet again changed the format of my net worth on the left-hand side, I’ve decided to show the changes and previous net worth in this post and display only the updated numbers on the left-hand side bar. I think this will be all the changes to the format of my net worth.

What are your personal finance strengths and weaknesses?

No Credit Needed posted his response to Reader Feedback Request #1: What are your personal finance strengths and weaknesses and encouraged bloggers to write about this topic, so I thought I’d add my two cents.

Personal Finance Strengths – I’m dedicated and driven not to have debt and to become financially independent. I’ve seen and lived through my mother the stress of being in debt so I know I will never allow myself to be in that situation - I’d sell everything I own before I’d incur any debt other than a mortgage. And to be honest the idea of mortgage debt even scares me a little.

Another personal finance strength of mine is that I have been able to put things in perspective and see the big pictures which makes me willing to make wise money choices (a more pc term for sacrifices). I’m more than willing to live below my means to ensure that I can save for my future - be it short term or long term future. I think these strengths make me IMHO an amazing saver.

Personal Finance Weakness – My biggest weakness is that I’m too conservative. While I think I’m an amazing saver, I’m not a good investor. I shy away from risks, and in fact it was only with in the last two years that I started investing in mutual funds instead of FDIC insured savings accounts. I work hard for my money and make wise money choices and hate the idea of loosing even a dime – trust me this current market has been rough on me since I invested in mutual funds. With this current economy and market I have been pretty proud of how well I’ve managed the storm. My retirement accounts keep showing negative growth and I haven’t completely freaked out yet…so maybe there’s hope for me yet.

I know I need to learn more about investing and take a deep breath and just do it. I think this is also my biggest obstacle to true financial independence where my interest/portfolio income = my desired life style.

Passive Income

I’ve recently exchanged a few emails about different financial matters with a reader (shout out to Grant). In one email Grant asked me about what I meant for passive income when I stated my goal for financial independence would be when my passive income = desired life style. Our email conversations got me to thinking more about passive income so I decided to share my thoughts and share Grant’s thoughts so you could then share your thoughts. J Thoughts, Thoughts, Thoughts – the best way to gain knowledge.

Until writing this post I considered passive income to be income/money that I didn't have to "work" for, as in a traditional 9-5 (or in my industry 7-6) job. What passive income plans entail is to have saving and principal money that earns interest and dividends.

For 2007 I earned $2,919 in passive income, which is the equivalent of more than a month of expenses for me. This was earned through laddered CD's which contain my house down payment, a money market which contains my emergency fund, and an interest baring checking account which contains my monthly expenses budget.
For the time being I do not include in my passive income calculation any money earned from my retirement plans (401k and Roth IRA) since I don't actually have access to them until I retire. As I progress I want to grow my passive income so that it's about 20 times what I earned for 2007 and invest more in non-retirement brokerage accounts.

Grant was kind enough to share his thoughts:

I have a slightly different perspective on passive income. I view it as money I can make while I sleep (even if it requires a little work here or there). For example, owning a business like a gas station or car wash, owning real estate, earning residual income on intellectual property, etc. Of course, income from investments like yours also fit in my definition.

I agree with Grant – owning businesses is a type of passive income, just not that type of passive income that I personally want.

Before posting this article I did a little recon about other types of passive income besides owning a business and earned interest and discovered something very interesting from Wikipedia. “There are three types of income—earned, portfolio and passive income. Most types of passive income are derived from rental/property, while other types of passive income are derived from royalties from patents or license agreements.”

So while finding out more ways to obtain passive income I learned that what I considered passive income is not passive income. What I considered my type of passive income is actually portfolio income. I guess I’ll be modifying my goal explanation to be financial independence when investment/portfolio income = desired lifestyle.

What about you, what are your plans for passive or investment income? How are you going to achieve financial independence?

PS check out this article, How to Earn More and Work Less at About.com – it has some interesting ideas of how to obtain passive income.

Updates

Thought I’d share some updates on some decisions I’ve made that I pondered out loud with you all in some past posts.

Roth IRA Diversification (click here for original post): I’ve decided go with option 1 and wait until next year to diversify my Roth IRA. I decided upon this because I did not want to deplete my cash reserves because in the coming months you never know I might need to have an emergency FU fund. (Check out Single Guy Money and Single Ma for their take on FU funds)

New TV (click here for original post): For the time being I’ve decided to use Mr. Be-Mine’s TV. I’m going to wait a few months and get a good feel for my expenses after moving and recover financially from the move before adding the additional expense of a new TV. But, I’m definitely planning in indulging myself with a new LCD TV, the timing is that only thing I’m unsure of.

I think that’s about it for items to update you all on (other than work). If you think of anything else let me know and I’d be happy to share.

When to Buy a New Car -- Car Enthusiast's Purchase

I wrote a post awhile back about my friend Car Enthusiast* and how he asked for my advice about how much to spend on car. He took my advice in part - I love it when people do that. J

* I have also referred to him as Car Fanatic in some previous posts. Somewhere along the line I inadvertently changed his nickname. Sorry for any confusion.

I thought I’d share an update on his story in conjunction with a follow up to the open discussion from last week regarding When to Buy a New Car.

Car Enthusiast bought a new car the Saturday before Easter, he called me up that evening all excited about it and drove over to Mr. Be-Mine’s house to show it to us. Its a beauty. He purchased a gorgeous black Honda Civic Si - the sports package. He’s hoping to race it as a hobby.

We’re close enough where we talk finances, while we may not discuss salaries, we do talk big purchases so he told me some of the details of the deal. He put down $2,000 which he’d saved under my advice and financed just under $20,000 at 6.75% for 5 years with a monthly payment of just under $400.

Personally I’d prefer to be able to buy a car outright, but I know that’s not an option for him right now and timing for everything else worked out right where it was the best time to buy a car. I think that financing will work for Car Enthusiast, even thought he’ll have to pay interest it will work out for the best and he should be able to handle the payments after all he’s managed to save more than that for the past four months in order to create his down payment. All and all I think he might a right move for him.

It got me to thinking about when to buy a new car, which promoted the open discussion from last week.

I thought it would be an interesting case study to examine his timing for buying a new car. I had told Car Enthusiasts a while back about my post about the advice I gave him and I ask last Saturday if he minded (not that it would matter since I post anonymously anyway and could have just done it anyway) and he told me to feel free to analyze his purchase.

The big areas to look at before buying a car in my opinion are:

Personal Timing, Financial Timing, Life Span of Car Timing, and Anon added Research which I’m in full agreement with adding to the list.

So here goes the examination of each area for Car Enthusiast’s situation:

Personal Timing – Car Enthusiast is being transferred from Atlanta to Louisville and will be there for the next two years starting in June. With his transfer it makes sense to exchange his 16 year old Honda Civic that has been driven over 280,000 miles for a more reliable car. Car Enthusiast doesn’t mind doing car repairs, in fact he enjoys it but once he moves won’t have the equipment to do any major repairs that his last cars. In Atlanta he’s able to have access to just about any tool or equipment he needs for repairs since his dad owns a car repair shop and he could always go over there and the best mechanic in the shop (his dad of course) would fix it. Being 8 hours away will limit this opportunity.

Financial Timing – While many of us, me included, would rather wait until we can buy a car out right I think Car Enthusiastic passes the financial timing test because he planned for this expenditure. Saved for months, adjusted his budget to accommodate this new monthly payment and knows he can afford these payments since he’s been “playing house” and making them for the last few months.

So check – financial timing

Life of Car Timing - As mentioned in personal timing, Car Enthusiast’s car was well past the mileage mark most would being the life span of his vehicle. While he could continue to make the repairs on this vehicle, no longer having free mechanical work it would not be cost effective to make the repairs.

Research - Car Enthusiast definitely did his research, as you can tell by his name he’s very into cars, attends car shows all the time, researches all the models and could quote spec on just about any car on the road. To make this purchase he has been planning for months and has checked out every detail from gas millage to performance to seat color for just about every car on the market. He also did his homework on pricing and the options he wanted.

So check – research

All in all I’d have to say my friend bought a new car at the right time. I hope/plan the timing will work out as well from me when it starts getting time for me to buy a new car.

And the Winner is....

Congrats JB you've won a copy The Millionaire Next Door! Email me your shipping address and I'll have it sent to you.

To determine the winner of this contest, everyone who commented on this blog from March 6 to Friday, March 28 was entered, if you made more than one comment you got entered more than once. I then randomly drew one of the pieces of paper.

Thank you to everyone who participated in the comment contest.

We interrupt the regularly schedule Monday’s Money Funny segment to share a wonderful sense of accomplishment.

As many regular readers know my brother and I have been training to run our first Marathon. We were inspired after running our first half-marathon last March and have been training ever since with the heavy training and gearing up occurring over the last four months.

D-day arrived this Sunday and we put on our running gear and headed out in the cold to accomplish out goal. Even thought we’d been training for so long and many long runs ramping up to our peak of over 20 miles, we still struggled some during the actual race. But we persevered and finishing just 4 minutes past our training goal finish time.

I have this amazing sense of accomplishment from having run 26.2 miles and knowing that my hard work and training paid off. I’m still feeding off my runners high from yesterday even thought I’m rather soar and walking like an 80 year old today.

Like most things in life I can relate it all back to personal finance. While personal finance is usually not as physically painful as a Marathon it does take sacrifice and planning to achieve your financial goal. To achieve a financial goal, be it retirement or a new TV, you make the plan to achieve it, implement the plan, and then do it.

I got this similar sense of accomplishment (although not nearly as great) when I opened my Roth IRA and started saving for my future car.

The photo on the left is of my brother and I after we finished the Half-Marathon last March, I’ll share a picture from this years Full-Marathon once they are posted