2008 NMFA Fellowship Program available

Hey everyone, I'm writing to let you know that the Military Spouse Fellowship for the Accredited Financial Counselor Program for 2008 is now accepting applications. From now through the end of April, the application will be available online through the National Military Family Association website. It's a great program and at the end of it, the selected applicants will have attained the certification of Accredited Financial Counselor under the guidance of AFCPE and FINRA. Please see the linked website if you're interested in learning more or applying to this program. It is definitely worth the effort.

And on a more personal note, tax season will be over in less than two weeks, and I look forward to blogging again!

Kids and savings

Getting my son to develop a regular savings habit is important to me. If you start out with good habits, chances are you will continue them, because habits are hard to break.

Now, I already give my son an allowance. He gets $15 twice a month, plus lunch money every week when school is in session. I wanted to give him this money so that he would have a chance to learn to manage and budget money. He also earns a little bit extra each month by doing a chore that we would otherwise pay someone else to do. He gets money from relatives for things like birthdays and holidays too. So he uses all this money to pay his cell phone bill, go out with friends, buy lunches, snacks and gifts, save for a car and for college, etc. He does a good job with it too.

But I felt like there were a couple things missing: long-term savings and retirement. I told him the story of The Wealthy Barber, and he seemed interested. He was especially interested in the results of saving regularly. (He wants a lake house with a boat when he gets older too, just like the wealthy barber had.)

So I made him a deal. If he would agree to save at least 10% of the money he was earning now, up front, for long-term savings, and then add an additional 10% for retirement when he got a job, I would increase his allowance to $20 twice a month. He'd also immediately come out ahead with that deal.

He thought this was a good idea and agreed. So I set up an automatic savings plan for him with ING for the 10% of his allowance, and we agreed that I would transfer 10% of the variable amounts that he makes manually. (He would do it, but for some reason when we try to do that using his login, it doesn't work. I think because he is a minor.)

He agreed to start by funding an emergency fund. I told him that usually it should be 3-6 month's worth of expenses, and so he should probably aim for at least 3 in there. He said he may as well do six. Six months of expenses for him would be close to $300. At first he wasn't sure why he needed an emergency fund, since his money was coming from me and it wasn't like he could lose his job. I asked him what would happen though if I lost my job and couldn't give him his allowance, and so he saw the point of it. I'm happy that he is making smart choices, and willing to listen to all my money talk.

NMCRS to release $300 Quick Assist Loan society-wide

To mark their 104th birthday, the Navy-Marine Corps Relief Society is going to begin a $300 emergency loan program effective January 23. The program, which had been piloted in three geographical areas during 2007, will now be available at full-service offices society-wide. The idea behind the program is to provide rapid assistance for sailors who need a small amount of money for an emergency need without subjecting them to the Society's normal interview and budget process, which can take several hours. 70% of sailors and marines who use the Society only need to visit once during a career, and this product is designed to help them.



In order to be eligible for the Quick Assist Loan, an applicant must fit the following criteria:

• Must be an Active Duty sailor or marine. Retirees, reservists, widows and spouses are not eligible, even with a signed POA.
  
  
• Not have any outstanding loans with the Society and not have been a recipient of any grant aid from the Society within the past year.
• If the applicant has prepared a budget with the Society in the past year, it needs to have been a surplus budget indicating repayability.
  
  
• Must not have received more than one other Quick Assist Loan within the past 12 months.
• Applicant cannot be subject to disciplinary action from the command, either currently or within the past six months.
• Applicants under Chapter 7 or 13 bankruptcy protection are not eligible.
• Applicants must bring their most recent LES, military ID, and a QAL application in order to apply.

The loans are designed for emergency needs of specific types (basic living expenses, medical, dental, transportation, and family emergency). Repay on the loan begins the month after it has been disbursed, and the repayment period will range from 3-10 months. Each servicemember is allowed no more than two QALs in a one-year period. The QALs are not eligible for conversion to grant and must be repaid before the EAS date. If a servicemember is not eligible for a QAL, they are certainly eligible for regular Society assistance. The Quick Assist Loan is just designed to expedite the process for minor emergencies. Like other Society loans, the interest rate on the QAL is 0%.

OK how dorky am I...

I got all excited because Boyfriend asked me if I would do his taxes. Normally he mails his things home to his father, who has an accountant do them. Which is really silly, because Boyfriend has exactly one W-2 and an interest statement. It took us about half an hour, at least ten minutes of which was consumed by such activities as trying to get TaxCut to open in a browser (doesn't work in Linux or Firefox) and printing out the sheet he has to sign and mail in because he doesn't know his AGI from last year (which is what TaxCut asks you for to prove your identity.) We then went to the Ohio e-file site and filed that - hells no I would not let him pay thirty bucks to let TaxCut do it! He's getting a couple hundred back which is pretty nice. I have also been telling several other people that I will help them do their taxes, because I just don't see the point in paying a couple hundred for someone at a tax place to do what will take us and the programs in Free File half an hour. And maybe some chips. I do like chips.

I won't file my own until April, although they are done, so I can hang onto the money a little longer.. plus TaxCut still does not have the Ohio form that assesses me a penalty for underpayment. (I probably should have looked into this earlier, since the estimated tax payment deadline was Jan. 15th and I could have made that and saved some bucks. But, since I have no idea what they are going to charge me, I might actually earn more in interest than I will pay in penalty.)

A better plan

The more I thought about the plan I came up with yesterday the more stressed I got that it might not work out (like if they don't process the paperwork to return my contributions to a normal level in time!)

So what I am going to do instead with the extra savings is to max out the Roth now, and change my monthly contribution to $1000 from $500. That way I won't feel much of a pinch since I won't be contributing the $200 per month (which sadly since I am now in such a high tax bracket, I would only get post-tax about $300 from the extra $500).

Also I figured out that I would only be able to do the whole-month thing twice before I hit the cap on my 403(b) contributions. What a dilemna to have, eh? ;)

So if all goes as planned, I will contribute the following amounts to my 403(b) during the year 2007:

$3990 - involuntary contributions
$500 - already made, voluntary
+ $11000 - will make, voluntary
----------------------------------
$15490 - juuuust squeaking under the maximum voluntary contributions

Also: $5784 - employer contributions
$4000 - Roth IRA

Total: $25274, maxing out both the IRA and the 403(b).

I am extremely pleased with myself. =) Maybe I will hit my retirement goal before 30!

Developing my legitimacy bit by bit

It pleases me to report that I have passed the first of two exams necessary for me to attain the certification of Accredited Financial Counselor, a designation awarded by the Association for Financial Counseling and Planning Education. Once I have completed a second exam (probably sometime in the spring), finished several hundred hours of practicum experience, subscribed to the Code of Ethics and paid the membership fee, I will be a blogger with a legitimate, real-life accreditation, and not merely an "internet professional"! How many other personal finance bloggers can say the same?

It was quite a test. Nothing at all compared to the CPA exams or the CFP nightmare, but it definitely required a lot of preparation to fully understand all concepts covered.

If you are eligible and interested, this program is a great opportunity for military spouses and survivors to get free education and certification in an important field. The certification would cost about $900 out of pocket otherwise. Applications are accepted in the spring sometime, usually in March. For more information on the program, click here.

Writing Off 2008 Already

The new year has a rough start. Will it continue? Who knows but historically the beginning of the new year has little impact on what happens for the rest of the year as shown in the following article from Marketminder.com.

January Ineffect
1/7/2008

Story notes:

• January’s rough start has many investors invoking the old saying, “So goes January, goes the year.



• Statistically, this belief isn’t supported. History shows negative starts can be followed by positive years and vice versa.



• Market volatility is normal, no matter when it happens, and doesn’t mean a prolonged downturn is at hand.

_________________________________________________________________________

January has commenced with gray weather, record snows, fierce storms, already broken New Year’s resolutions (stupid leftover pumpkin pie), and the usual post-holiday gloom—not to mention a continuance of December’s volatility. Most major market indexes are negative so far this year, leading many investors to invoke the old saw “so goes January, goes the year.” Already, we’re seeing stories highlighting the long and widely held belief that a rough start to January portends trouble ahead.

The Stress Is Just Beginning
By Tomoeh Murakami Tse, Washington Post
http://www.washingtonpost.com/wp-dyn/content/article/2008/01/05/AR2008010500149.html

This article states, “If the first three trading days of the year are any indication, 2008 is bound to test the nerves of even the most poised investors.” Fair enough—volatility always “tests nerves.” Except the first three trading days are never an indication of what’s ahead. Not ever. Three days of any month, no matter the calendrical significance, tell you nothing. Investors wouldn’t make a stock forecast based on the Ides of March—there’s nothing about any one day or group of days’ returns that tells you anything about what to expect looking forward.

Statistically, this is easy to disprove by checking historical data to see what happened each January and the annual results. Throughout history, negative starts to January have been followed by all sorts of combinations of positive and negative returns. Positive start, negative January, positive year. Negative start, positive January, negative year. On and on. Looking at the six worst first 10 days for the S&P 500, you see US stocks ended positively four of those times—one year up a big 42%! Another up 26%! What does that tell you? Nothing—beyond stocks are positive more than negative. And the third best start ever ended the year down 15%. Not so great.

Fundamentally, this makes even less sense. What do a few days in January tell us about investor demand for securities? Markets don’t obey a calendar. There’s nothing magical about January’s start suggesting markets must suddenly begin “behaving” themselves. Markets are volatile. They can be volatile in January, July, on Tuesday, the day after the Fourth of July—pretty much any time. Markets don’t have neat steps-and-stairs increases, and if they did, you wouldn’t be happy with the return you got. If you want that kind of steady appreciation, you’re going to have to be satisfied with what you can get by buying US Treasuries and holding them to maturity (i.e., not much).

We call the market “The Great Humiliator” (TGH for short) around here for a reason. Its sole purpose is to humiliate as many people as it can for as long as it can for as much money as it can. Scaring investors out of superior long-term returns with a bumpy start to the year is one way the market robs otherwise rational people of their senses.

We remain confident the world is altogether too dour. Don’t let TGH humiliate you out of the market with a bumpy start to the year—that’s just what that filthy trickster wants

Cheating Today

Actually I've been cheating for the last couple of weeks since our son went to blow up things in the Las Vegas desert, we're building a house, I may have to sue some people in Florida, and I'm having trouble getting the electrician to show up. Not a lot of time for other things like concentrating so I'm cheating. Actually the subject is about paying attention to only certain things so take a look at this article from Marketminder.com (again) and learn to ignore thinking that only gets in the way of getting rich. Here goes---

The Myth of One

9/12/2007 |

Right now, you’re reading this column and your mind is focused on each sentence. That’s a marvelous and miraculous thing your brain is doing! The ability to focus on one thing is an incredible feat of focus allowing us to accomplish much in life. But there’s a big drawback: While you’re focusing on this column, there’s a whole world of activity your brain is ignoring!

That pain in your back, the chatty co-worker across the room, the phone that won’t stop ringing, the fly buzzing around your head…where did all those pesky thoughts go? None of them ceased to exist, you just stopped paying attention for a few seconds.

Blocking extraneous issues from our minds and directing our focus towards what’s most relevant is a nifty feature of the human brain: We’re actually designed to ignore most of what’s going on around us. Human brains—and those of many animals—are made to focus and reduce situations to actionable, understandable steps. We can’t keep a whole lot of information at the forefront of our consciousness for very long. At best, we can hold on to a few items at a time, but mostly we just focus on one thing or we’ll forget it.

That’s because evolution designed the brain as a hierarchical thing—receiving stimulus from the outside world and running the data through various neural unconscious systems (which account for the vast majority of brain activity) and deciding what, if any, information is worth bringing to your actual frontal lobes (where most of your consciousness is believed to reside). You’ll never even know about most of what your brain does or perceives!

That’s a great thing because nobody wants to be thinking about regulating their heartbeat, digesting this morning’s cinnamon raisin bagel, or focusing the lenses in their eyeballs to read the newspaper every second of the day. Our unconscious brains do all that heavy lifting so we can put our attention on other issues.

Only problem is, the brain’s tendency to block out extraneous information can be a very hazardous thing for investors.

I like to call most of today’s financial media pundits disciples of the “Myth of One.” That is, most stories we read today tend to focus on one issue alone as if that was the only thing moving stocks. “Oh, stocks were down today because housing starts fell last month!” or “Stocks went up because mortgage loan demand was higher than expected in August!” (Really? Since when are we suddenly all so focused on mortgage demand as the seminal market moving issue?)

The reality is millions upon millions of factors are acting on the market at any given time. But our brains can’t live with that idea so we write and read stories about single factors as if they were the only relevant thing. How absurd! But that’s how our brains work—we’re just not made to see the big picture. (In fact, our brains are so blind no one seems to notice corporate earnings are easily surpassing expectations this year!) Today the singular mythic issue is credit and housing, yesterday it was energy prices and carry trades, and tomorrow it will be something else. That’s your brain tricking you into the Myth of One.

It seems impossible to truly understand what’s going on in markets if we can only focus on a few measly issues at a time. What can we do?

One useful strategy is to put things into perspective. Often when investors get too focused on a single issue it gets blown far out of proportion. A great example is last week’s US employment report. Investors headed for the hills as the S&P 500 relinquished more than 1.5%–supposedly all for a job contraction of 4,000. When we consider a workforce of over 153 million, 4,000 jobs account for less than one thousandth of a percent of the employee base. How silly! There’s virtually no way such a small thing could account for such a big move. That tells you investors irrationally fell prey to the Myth of One. If you can see that, you’ve put the issue into perspective and gotten ahead of the game. Read more about the employment issue here:

Belaboring Labor, 9/7/07
http://marketminder/commentary/CommentaryPage.aspx?articleID={FCC988F3-72BA-4D67-97CE-10681D05A89C}

Ultimately, you’re just going to have to live with the brain you’ve got. But that doesn’t mean you have to buy in to the myth that just one story alone moves global markets at any given time.

Stock Screen for Tuesday 6-17-08

Today's screens give us an interesting mix of stocks that were higher on above average volume. I was specifically looking for stocks that were up at least 1% and had volume of at least 50% larger than the average. Several names, such as AAP, ABFS, ACM, EEP, ERES, FDS, GDI, IPHS, NDSN, OMI, PQ, TEVA, TITN, TOT and VIT, showed up on multiple screens. I will admit that not every one of these stocks look appealing after viewing the charts.