Retire by 35

Just this morning I got an email about our company’s Guest Instructor Program. It stated that it is open season to apply for FY 2011 Guest Instructor Development Program. So to knock down another one of the goals I set out for 2010, I put in my application to be a guest instructor. I hope that I can be selected.

I believe this will give me valuable presentation experience (just like Toastmasters). Also, assuming I get selected, it doesn’t hurt getting a few extra promotion points when applying for any promotions!

Per the information that was provided in the email, people that are selected to be a guest instructor will first attend an Instructor Workshop prior to instructing and then they will help instruct three one-week classes in FY 2011.

Net Worth Calculation as of July 1, 2010.

Assets:

• Checking & Savings Accounts – 4,600
• Internet Savings Account – 16,200
• Foreign Currencies – 11,600
• Stock Market – 17,600
• Roth IRA – 16,300
• 401k (current employee) – 35,600
• 401k (previous employee) – 16,900
• Property #1 – 500,000
• Property #2 – 490,000 (49,500 equity I contributed)
• Property #3 – 147,000 (45,600 equity I contributed)

Total Assets: 1,255,800 (265,800 not including properties #1 and #2)

Liabilities:

• Student Loans – 26,400
• Property #1 Mortgage – 133,000
• Property #2 Mortgage – 9,000
• Property #3 Mortgage – 101,400

Total Liabilities: 269,800 (127,800 not including properties #1 and #2)

Net Worth: 986,000 (138,000 not including properties #1 and #2)

Change in Net Worth since last Status Update on May 1, 2010: +21,800 (+8,100 not including properties #1 and #2)

Notes:

• My parents decided that they only need me to lend them the $5k instead of the $10k to pay off the mortgage for Property #2. Thus, my parents applied their own savings of $4k, my savings of $5k (I added that 5k temporary to the amount of total equity I have contributed to Property #2), and two monthly mortgage payments… resulting in a final mortgage of $9k as of July 1, 2010. I’m getting excited just like my parents that the mortgage is about to be paid off.
• I’ve been contributing steadily to my Roth IRA, stocks, and Foreign Currency (RMB) positions; and thus they are increasing.
• Checking and Savings have been somewhat depleted due to lending parents $5k; however, the emergency fund (Internet Savings Account) has stayed relatively steady.
• Both 401ks have dropped over these last two months since the previous update in May. And the current employee 401k has dropped more than my prior employee 401k considering I have been contributing around 1.2k every month… and yet it has only gone up 300 total for the last two months.
• I am continuing to prepay Property #3’s mortgage so it has dropped 2k in the last two months.
• Overall I am satisfied with the progress since my last update on May 1, 2010.

Let’s pretend that I never saved.

Always spent every dime that came in.

Let’s pretend that I never put money in my 401k or Roth IRA.

Let’s pretend that I never put 20% down to buy a house, nevermind even prepay the mortgage.

Let’s pretend that I never read any books on personal finance or economics.

Every chance I got I pushed the liberal agenda and looked for a handout and further government regulations.

Pretend that I have never thought of any goals and just drifted like a leaf in the wind.

Pretend that I would be satisfied with working forty years hating forty hours a week.

Pretend that my life would be stuck at a dead end job with ten years at the end, kicking it on a hospital bed cause of cardiac arrest from the stress.

Pretend that buying materialistic objects would fill the hole in my heart.

Pretend that keeping up with the Joneses is the point of staying on the hamster wheel.

Pretend that I couldn’t retire by 35 cause I can’t break away from the crowd and take a risk.

Pretend that I can’t accomplish what I set my mind to cause my life is crap.

Pretend I am always envious of someone else’s new Benz, iPad, and McMansion.

Pretend I want to buy all that shit so I can fill my house up to the brim, only to spend money to store it, maintain it, insure it, secure it.

Let’s pretend I never educated myself, instead ended up deep in debt and having to file Chapter 7 bankruptcy.

Pretend that I could never end up with hundreds of G’s in my bank account, saving for catastrophes, playing with foreign currencies.

I could never have a couple of homes along with a rock solid retirement.

I could never kick back by 35 at the beach, never needing to work another day in my life.

Let’s pretend I never did shit and just wished things would work out on their own, that I would win the lottery.

Wished that people would just give me money, that everybody just looked out for my interests and not their own.

Wished money grew on trees and gold rained from the skies.

I just pretend that airplanes in the night sky are like shooting stars.

I could really use a wish right now.

* This was inspired by the song Airplanes Part 2 by B.o.B feat Eminem and Hayley Williams. Yea, my version is kinda crappy but I like the overall idea of the song. People don’t get handed chances, they need to go out there and take chances. Things don’t just work out on their own, if you have a goal you need to work towards it and make it happen.

There is less than one month left until my TDY is over and I will be flying to Dubai then back to sunny California. For the past five months my income has definitely jumped a bit while I tried to keep the expenses minimal, but random expenses kept cropping up throughout the TDY (eg. laptop meltdown of 2010, G-star deep discounts, food bash in Kuwait City). So here’s a average overview of the budget I’ve been trying to stick to for the past five months.

Income:

• Salary (after tax) – 6,000
• Rental Income (no tax since negative cashflow) – 700

Total Income: 6,700

Expenses:

• Rental Costs (HOA of 276, mortgage loan of 870, property tax of 150) – 1,296
• Student Loans – 190
• Prepayment of Rental – 500
• Savings – 4,414
• Discretionary Expenses – 300

Total Expenses: 6,700

Compared to the November 2009 Budget Breakdown, it can be seen that the main differences lie in lower discretionary expenses (600 to 300, down 50%) and higher savings (1,460 to 4,414, up 202%) due to a higher salary (3,400 to 6,000, up 76%). I gotta admit that I do like this new salary and being able to stash away a lot of money for investments, too bad the gravy train is ending in a month. But I am even more happy that I’m heading home away from this 120+ degree sweltering heat! Ain’t no amount of money worth living here.

• I finished The Talent Code and Economics in One Lesson, but still sporadically reading SuperFreakonomics. I definitely highly recommend Economics in One Lesson… I’ve learned quite a bit and it has debunked the usefulness of many a political decisions the population advocates.
• I also finished Basic Economics by Thomas Sowell and currently I’m reading Applied Economics also by the same author. He espouses similar opinions as Henry Hazlitt (Economics in One Lesson) but goes into further detail. I hope to read more books by Sowell before my TDY ends.
• I have been pretty much shocked/floored by how often political decisions are not in the country’s best economic interests… or even overall interests at all. Too often it either favors one specific group over the entire population or it takes into account the short-term view (the length of a politician’s term) rather than the long-term consequences.
• I have recently put in for a request to transfer to the location I want, which was one of my Goals for 2010.
• Real Estate Property #2 has around $14k left on the mortgage balance and the interest rate is 5.75% with no prepayment penalty clause. I have $16k sitting around in my savings account (for emergency fund) that is earning basically 1.2% (around 0.9% aftertax – yes interest rates are incredibly low right now). So, since I don’t want to be a chump, I am going to lend my parents the entire $14k from my account so they can pay off the mortgage in one swoop. And then they will pay me back basically around $1.5k per month until the entire $14k is paid off. That way they save $500+ in interest and it doesn’t really affect me because the interest I would have made is pretty much negligible. On a side note: My parents are ecstatic Real Estate Property #2 will be paid off within a month! And they are excited to start prepaying Real Estate Property #1 once they finish paying me back.
• I have finished transferring $5k to relatives in China for the RMB, completing another Goal for 2010. I will open an account in China and get the RMB transferred there once I visit China… hopefully sometime this year.
• Slowly chugging along at meeting my retirement Goals for 2010: I have continued to save 15% of my income to the 401(k) and also been contributing $1k/month into the Roth IRA (so far contributed a total of $3k for 2010)… only have two more months to go to max out the Roth IRA!
• Besides all that, I am also tucking away the most of the leftover money into savings and investments.

I’ve been looking into how to maximize tax efficiency for my accounts. Based on my research there are three types of accounts: ones that are taxed, ones that are tax deferred, and those that are tax-free. For each account, there are specific investments that help maximize the overall tax efficiency. From what I can gather, these are the best investments for each type of account:

Taxable Accounts:

• Index funds – very low turnover stock funds
• Tax-managed mutual funds – usually avoids dividend paying stocks, holds securities for a long time, and sells losing stocks to reduce taxable gain
• Municipal bonds – tax free bonds
• ETF – as long as not dividend paying ones
• Variable annuities
• Individual stocks – as long as not dividend paying ones

 Tax Deferred/Tax Free Accounts:

• Taxable bonds – zero coupon or deep discount bonds
• Dividend producing stocks
• High turnover mutual funds
• Any investment that generates frequent cashflow or distributions through interest, dividends, and capital gains

 Based on the information, I believe my situation can be considered tax efficient. I hold cash for emergencies, which is taxed very little since I don’t hold that much cash. I hold gold through the ETF GLD in a taxable account that I don’t receive dividends and will not churn often. My short-term and long-term bonds and stocks are held in tax deferred and tax free accounts. My foreign currencies are held in non-taxable safety deposit boxes and offshore bank accounts. And my real estate can be taxed, but only if the gain is beyond the 250k tax exemption. Furthermore, the income from real estate is offset by depreciation, mortgage interest, etc… expenses. So overall, based on current circumstances and tax laws, I don’t need to worry about my investments paying a lot of taxes. Of course this can change as new tax laws are enacted.

Anyone from the United States and has kept up with the news knows that the USD is in trouble… we have an estimated $13 trillion budget deficit (with a capital T). The other “strong” currency the Euro isn’t faring much better, with Greece, Spain, Ireland, Portugal, and others teetering on the verge of bankruptcy.

What does this mean? If the countries can’t settle their debts and instead they spiral even more out of control by printing more of the fiat currencies then all signs point to strong inflation, screwing the average Joe (I’m hesitant to state hyperinflation cause that just leads me to think of Zimbabwe and that seems like an impossible exaggeration).

On the other hand, if they don’t let the printing presses run wild and unemployment, credit freezes, collapsing commercial real estate, looming option-ARM/Alt-A loans explode in 2010-2012, etc… become rampant then we are all in a world of hurt, resulting in deflation.

On a third hand, it is obvious that China and Canada are immersed in property bubbles about to pop… so their economies might be following the United State’s lead in the near future.

On a fourth hand, people have be postulating that gold is in a ginormous bubble all of its own and dozens of soothsayers have predicted the last 50+ pops over the last five years (unfortunately for them, none of them have come to fruition).

Where does that leave us? Don’t know. Like all things economics, it is unpredictable in the short-term and there is only a statistical 78.5% of being right in the long-term (did you know that 86.9% of all statistics are made up on the spot?). With so many factors into play, I premise that nobody can predict what will happen in the future with a high degree of certainty.

As much fun as all this hypothesizing of the macroeconomy is, it does get tired after a while of seeing extreme volatity with no obvious cause. My posit that there is no order, everything in the markets is random with occasional black swan swarms arbitrary attacking us (and pecking us half to death every few years like the chickens do in Zelda when you hack them with your shiny sword) and flipping the world upside down seems to be more and more likely.

So now, my with brain on a backburner and emotions thrown in the kitchen freezer, I will just diversify according to the Permanent Portfolio. The key of diversification through stocks, long-term bonds, cash, and gold seems more relevant today than ever before. I’m done stressing out about whether we are out of the recession, still in recession, sliding into deflation or rising to inflation. I’ll probably be wrong anyways.

You know it must be a bad idea when both conservatives and liberals band together to shout NO! from the rooftops.

The latest genius idea to come from the Assembly Democrats in California is to [drum roll please] Borrow Cash to Save Welfare! What a novel idea! We haven’t heard that before. No, of course borrowing/taxing and spending beyond our means wasn’t what got us in trouble in the first place… was it? You know what they say right?

The definition of insanity is doing the same thing over and over and expecting different results.

- Benjamin Franklin

Yes, I do concede, the Assembly Democrats (as well as the Senate Democrats that want to raise taxes) are off their rockers. Instead of agreeing with Arnold Schwarzenegger and doing the sensible thing by cutting out the fat from overpaid union workers, steep pensions, and unsustainable welfare costs; the Assembly Democrats want to borrow billions more in bonds and raise new taxes on the oil companies. In a nutshell, increase borrowing/taxing and no budget cuts.

The absolute lunacy in this is they want to borrow $8.7 billion from Wall Street against the California Beverage Recycling Fund to be repaid over the next twenty(!) years. Basically, we are borrowing money that is stretched to be paid back with interest over a period of twenty years so we can keep welfare and government jobs running just a bit longer. What about next year? Are they going to pick up another twenty year loan? This is completely unsustainable in the long run and not a solution!

When you know you can’t balance your books, you’re spending beyond your means, it’s time to hunker down and cut the fat. You’re not suppose to, figuratively speaking, go out and sign up for more credit cards to pay off your home mortgage loan. You don’t add more burdens to your already over-stretched citizens by hiking up the taxes (incidentally California already has some of the highest income and sales taxes in the United States).

Of course, there is a good reason why the Democrats are doing this, they are pandering for the welfare and union workers’ votes. But seriously? You were voted in this office to help the state, not move it more swiftly into bankruptcy. Don’t throw the rest of the citizens down the river just so you can increase your paycheck by another 10k next year. How hard is it to get this message through your thick skulls: There. Is. No. More. Money.

And to think I consider myself a Democrat… what a world we live in today.

After doing more research (and getting actual vendor quotes) and rearranging my previously scheduled flight back to the US, I have finally finalized my vacation plans in Dubai. These are the revised numbers for the trip (at an exchange rate of 1 USD for 3.673 AED and 1 KWD for 3.436 USD):

• $109.95 USD (32 KWD) – Round-trip ticket (including taxes/fees) from Kuwait (KWI) to Dubai (DXB) through Jazeera Airways
• $201.93 USD (800 AED + foreign transaction fee) – Three night stay at the hotel Arabian Courtyard (four stars) including airport pickup and taxes
• $50.37 USD (185 AED) – Evening desert safari with the company Desert Safari Dubai. This safari includes:
  • Pickup from hotel
  • Dune bashing
  • Camel rides
  • Belly dancing
  • Henna painting
  • Shisha
  • Buffet Dinner
• $80.34 USD (285 AED + foreign transaction fee) – 48 hour ticket Big Bus Dubai Guided Tours. This tour includes:
  • Two sightseeing bus tour routes (red and blue)
  • One hour Dhow river cruise
  • Entry to the Dubai museum
  • Entry to Sheikh Saeed Al Maktoum’s House

Thus, the total fixed expenses should be approximately $442.59 USD. I have already booked and paid for the flight, hotel, and big bus tour; the only thing left for me to book is the safari ride.

The hotel cost came way below what I had previously projected. Also, with the Big Bus Dubai Guided Tour buses, I won’t need to pay for cab rides because I am just going to hop on and off the bus to sightsee all the different places in Dubai (the bus runs every 20 minutes and hits all the main sights in Dubai). The airport pick up and drop off is already covered by the hotel price so no worries there. And the safari cost also includes it’s own pick up and drop off so no costs there.

Hence, the only additional costs in addition to the above fixed expenses should just be for food and shopping. I think a nice $550 USD should cover a three night stay (truthfully I don’t intend on spending that much unless the food is delectable and the malls have mind-boggling deals). So now my overall budget is $1,000 USD.

Here is my schedule for the trip to Dubai:

• 7/16/2010
  • Leave Kuwait (KWI) in the morning and arrive in Dubai (DXB) at noon
  • Airport Pickup from Dubai Airport to Arabian Courtyard hotel & check-in hotel
  • Evening Desert Safari pickup in the afternoon and come back at night
• 7/17/2010 – 7/18/2010
  • Ride on the two bus tour routes and go to the following places:
    • Red Bus Tour: Dubai Museum, Wafi Shopping Mall, Dubai Old Souk, Gold Souk, Burjuman Shopping Mall, Karama Market, Sheikh Saeed Al Maktoum’s House, Deira City Centre Shopping Mall
    • Blue Bus Tour: Jumeirah Mosque, Mercato Mall, Jumeirah Beach, Souk Madinat Jumeirah, Atlantis on the Palm, Mall of the Emirates, Ski Dubai, Dubai Mall
  • Sail on the Dhow River Cruise for one hour
• 7/19/2010
  • Leave Dubai (DXB) at noon and arrive in Kuwait (KWI) in the afternoon

Whew! It’s going to be a busy couple of days, but I want to make sure to see all the sights because I know that I am never going to come back here again. And coming at just under $1,000 USD for the entire experience, I definitely think I am getting the most bang for my buck!

Doesn’t that just send chills down your back? It does to me. I just read this post on Mish’s Global Economic Trend Analysis about an article in Australia’s Sunday Telegraph Revealed: The home loan that could save you a fortune.

According to this article, ING is planning on offering loans that have “no fixed term and no requirement to repay any capital along the way”. Basically ING wants to become a “mortgage partner for life” by having “borrowers carrying the same interest-only loan from property to property for as long as they wish”. But why is this article saying that this home loan could save the homebuyers a fortune? Cause according to them, in lala land, prices of homes only go up and the homebuyers should be “accumulating equity from rising house prices as they go” from property to property.

Accordingt to ING, “There is no economic reason for banks to insist on regular capital repayment. It just makes the loan more expensive for the borrower… If this catches on and people carry the same mortgage around for life, instead of switching every five or six years… Depending on the size of the loan, it could add hundreds of thousands of dollars to a borrower’s cash flow over their lifetime.”

All I can say is: Are these people for real? Are they really trying to spin a positive out of carrying a huge motherf*ing mortgage loan for life? Do they really think there is no reason for banks to get regular capital repayment? Is this really going to save homebuyers a bundle? Is Elvis really alive and sipping Pina Coladas in Newport Beach? How stupid do they [the lenders] really think we are?

The current housing crisis has shown us that no, housing prices don’t always go up. What if you get one of these mortgages for life and the market crashes again? You would owe that amount of money forever and be underwater while not being able to accumulated any equity. And anyways, what’s the point of buying the house if you don’t really own it? Why not just rent and not deal with market fluctuations? This is the same lunacy as making tiny minimum payments on credit cards that drag out the balance for years. But this is even worse, you will never pay it back, you will be paying interest until perpetuity.