Saturday, November 29, 2008

Monthly Update

Build emergency fund to 6 mo expenses - 100.4% (Up 1.6%) Yay! :)

I added some cash and the market didn't do so bad. We'll see what next month holds. I'm thinking I should just get into the habit of sticking even $50/month in there just because of the way the economy is and such. Folks have me paranoid.

Pay off car loan - 16.5% (Up 1.6%)
Pay off student loan - 8.6% (No progress)
House down payment - 31.2% (I made a booboo on how I was calculating this one so can't really compare to last month..)

Friday, November 28, 2008

Woohoo!

My student loan servicer added a new section to their website called Borrower Benefits. I recently remembered that I had an option when I consolidated. I could choose a lower interest rate after a number of on-time payments or I could have a principal reduction. I chose the reduced rate. I thought it kicked in after 2 years but I couldn't find anything in my file to suggest this was anything more than a figment of my imagination :) Ta-da! The new section has details. I'm about 8 months away from my reduced rate. I assume my payment stays the same so I just make faster progress. Way cool.. 3.75% :D

Rich Dad, Poor Dad

This was my latest read. It was a good one. The author has an entertaining writing style. Here's the two-minute summary. Buy assets, not liabilities. I know Quicken suggests your car and house are an asset but the author suggests that in this context, these things don't count. For this purpose, an asset is something that generates income. Since you dump money in a car and it only depreciates, it is definitely out. Your home will at least appreciate over the long term, but you still must dump money into it and it usually doesn't generate income, unless you rent parts of it out. Which brings me to my next point. He doesn't really give many examples. This takes away from his credibility in my mind. He suggested he didn't want to stifle creativity or narrow your visions when you look for opportunities. This makes sense but still..

So yeah, buy your house and your car but keep them small and reasonably priced, at least until you have enough assets to comfortably afford a Porsche and a mansion.

One example he did give was with real estate, which hits home at this point in time. He would buy houses at auctions for much reduced prices, fix them up, rent them out for a few years, and sell them at nearly double the purchase price. All the while the renters pay the mortgage. Not too many other examples. Some of the book sounds a little too much like get-rich-quick scheming. But he says more than once that you'll probably lose money and make mistakes. If you don't want the risk, you can buy mutual funds. But then you can only expect average results..