No Holiday For Me

Here’s to a lackluster 4th of July. I have a 3-day weekend and will NOT be taking advantage of it.

Most likely I will be cleaning the dust out of my condo and sleeping in a lot.

There might be a fireworks show if I can find a decent spot for viewing. A bike ride perhaps. The Smithsonian Folklife Festival for a day. Maybe even a minor league baseball game and blogmeet. (/me waves *Hi Ted!*)

If my friend is around, I’ll run over to her house to continue a quilt I’ve been making since March.

I have neither time nor money this year for a summer holiday. I went to a wedding earlier in May so I shall work like The Ant all summer. I ain’t no Grasshopper.

Prosper Update

A lot of Prosper borrowers tell you all the reasons they are good people and why you can trust them.

Frankly, I don’t give a crap about those things right now. I’m looking at the numbers and statistics. The reason I’m feeling cold about Prosper today is that I have my first seriously late loan. I do feel bad for the guy since he’s going through a divorce and stuff and the first time he was late, I asked if everything was alright and he replied that it’s tough going. But he did send in his payment right after.

So the question is, do I pop him another email to tell him that he’s late again? I’m sure he knows he is. Is it better for me to act as the collector vs an actual collection agency? Is a gentle nudge the way to go? What to do?

As it is, I’m not 100% sure I’ll be putting more money into Prosper right now. My first loan is in the process of being paid off right now which is great for the borrower I think. Kudos to them for early repayment! I’ll soon have another $50 to make another loan, hopefully to make up for Mr. Default. That’s about $270 total I have sunk in as an initial investment (IIRC) with a decent rate of return overall. But I’m still feeling dicey about the whole matter. But the rates for grade A loans are more attractive than a traditional bank CD so I could just stuff the money into 8%, relatively safe loans. (We’re still talking less than $500 here, money that would otherwise be languishing, i.e. not used to pay down credit cards.)

Frustration: My savings accounts aren't keeping up

I've just spent the last four hours online, researching my finances. And I feel frustrated. Not just because I'm sick and my head feels like a giant balloon is expanding inside of it, or because after four hours of sitting on the floor, my bottom has fallen asleep, or because it's a lovely summer Saturday night and I'm stuck at home. No ... I'm frustrated because I'm working hard to every day to save my money, but my accounts are acting like total deadbeats -- unmoving, unsuccessful and quite possibly hung over.

After my last post, a reader asked me to explain exactly how inflation is affecting my bank account. So I went back to pull the numbers, and analyzed my accounts during May 07, November 07 and May 08. I expected to find that expenses for ordinary things have gone up over the last few months. But on the contrary, I've been pretty good about adjusting my purchases to keep groceries and other staples at the same cost; for instance, we've made an effort to shop at Trader Joe's more regularly vs. Whole Foods, and at the high-priced Whole Foods, we've cut back on the higher-priced items.

While I was rather impressed with my spending discipline, I knew there were more accounts to investigate.

Up next was my savings account - and that is most definitely hurting. First, the good news: I have managed to save nearly $15,000 towards my downpayment during the last twelve months! Now the bad news: During the last twelve months, my money market account has plunged from a 5.05 percent APY in May 07 to a 2.75 APY in May 08. It's not even keeping up with inflation (which is currently at 4.2 percent), which sort of defeats the purpose of a savings account.

In fact, none of my accounts are keeping up with inflation. Not my bank savings account, not my money market account and not my 401K. In response to this statement, B said, somewhat sarcastically, that if my rates of return are above zero, the accounts still doing OK, and that the only people doing well right now are those who invest in commodities. I asked him if this meant I should invest in eggs and corn and cows. He laughed for a second, and then, more seriously said, "Well, if you open a brokerage account you can. Corn and gold are up right now."

Unfortunately I don't know how, or where, to open a brokerage account. Or if it's a good idea. So I looked it up on google, and found that it's pretty much just a standard investment account, which is not on my list of things to do with my downpayment funds.

It's weird - I'm so close to where I want to be with that account, but it still feels so far away. I'm probably a year to 18 months away from buying a place -- I have about $25,000 saved up right now -- and I have a plan for the next twelve months that involves home buyer education and real estate market analysis. So I should feel good, or great, about my progress. But instead of feeling like my money's doing well, I feel like my accounts aren't working as hard as I am to help me reach my goals.

But given the economy, I guess everyone's in the same boat. Maybe I should be happy that despite my savings accounts, I'm still managing to sock away money. Maybe I should also be happy that I haven't lost any money, or any equity (since I don't own a house). My net worth has steadily grown, despite the "market contraction." All very positive things. So what's bugging me?

I think the problem is that I feel helpless to do anything about the fact that my accounts aren't keeping up. On the downpayment account, I shouldn't move into higher risk, higher yield accounts, because I'm not planning on keeping money there five years or more. On the retirement account, a 1.9 percent rate of return is actually better than where my account was in November 07 (-4.5 percent). Truth be told, I wouldn't want to make any bold moves in this economy; there's too much uncertainty. And really, the difference between a 5.05 percent APY and a 2.75 percent APY probably only boils down to about $20 per month for me. So the best bet is to sit here and continue to save, like I always do.

I don't know, maybe it is the weekend cold talking. Let me get a little better and tell you how I feel next week.

Wednesday News Round Up: I'm a total YAWN! (...Awesome)

Sorry all, been in UP Michigan with my dad, brothers and boyfriend on our annual fishing trip, and we had no Internet there. (Yes, I am Midwestern..It was fantastic cheap fun.) Until I can catch up, here are a few helpful articles to help you pass the time. Enjoy!

Young, Prosperous and Frugal
Kiplinger.com
By Erin Burt
What you can learn from millionaires on a budget.
TOTAL BB shout-out for this fantastic article! Read it and learn how we roll.
I am a beliver in the YAWN philosophy (just without the W).

Living together while keeping money unmarried
US News and World Report online
By Kimberly Palmer
Welcome to my world, yo.

Using your tax rebate: What's good for you vs. the economy?
USA Today online
By Mindy Fetterman, Alex Newman and Juan Thomassie
It was interesting to see how what's good for you isn't really going to help the economy. Yeesh, that's a head scratcher.

What the Fed's decision means for you
CNN.com
By Jessica Dickler
This was helpful, so read it.

Positive net worth!

I updated my NetWorthIQ page a day or two ago and it looks like I finally have a positive net worth! Click here to see my NetWorthIQ profile.

OK, so it's only $367 above zero, but it's a start! (Although I am currently only including my retirement contributions, not the actual value of the account, so if I used actual value it'd be about $2000 more.)

I have some pretty audacious savings goals for this year. I'm already trying to max out my retirement savings and I want to get up to a $10,000 emergency fund (right now at $4000 and change) as well as save up the money to pay off my 0% balance transfer when it comes due in December (I'll need about $4600, have about $2700 right now) so I've still got some work to do. I have some other goals to meet if I can do those, but those are the first priority.

I'm really not worried about paying off my student loan though - it's fixed at 3.9% and I'm getting 4.5% at ING, so it makes more sense to save right now than pay down the debt.

Mutual fund frustrations

I have a mutual fund (within an IRA) that hasn't been doing very well. And by not doing very well, I mean it's doing worse in comparison to similar funds. Despite that, I wasn't panicking. I just had in mind that I would transfer it to a less-risky fund it when it came up a bit, which it seemed to be doing. So I began looking into what it would take to transfer it to some different funds.

Now this is an old account, that I had gotten back when I had no idea at all what I was doing. I'd bought it through a financial planner. So I contacted that planner to ask about putting part of it into some different funds instead. They didn't want to do that, and suggested I transfer it to a brokerage house instead. So I sat on it awhile, trying to figure out how to do that, and which broker to transfer it to. And the fund proceeded to lose almost 3% of its value while I fiddled around. Irritating? Yes. A good lesson? Yes.

What have I learned?

First, don't invest in something that you don't understand. While I did understand the concept of an IRA when I bought the fund, I didn't really know what made a good fund. I didn't know anything about risk, which is kind of important. I'm still not an expert at mutual funds by any means, but at least I now have a better idea of what to look for. I also didn't know anything about diversification, so all of my money was in one fund. Bad idea.

Second, I learned that you shouldn't invest with someone unless you fully understand their role. It's also good to look into their qualifications, level of experience, and to evaluate their performance from time to time.

Finally, I learned that I am very easily frustrated when it comes to not being able to do what I want to do. (Ok, so I knew that part already.) But what I realized is that those feelings were getting in the way of me making a rational decision. So I took a step back and thought more about what my original plan was, pre-frustration.

I also reminded myself that at least I have a better idea of both what to avoid and what to look for in the future.

Goldman Credit Funds Saw June Losses

Two Goldman Sachs funds launched to take advantage of the credit squeeze saw serious losses last month, according to a person familiar with the situation. Goldman's liquidity fund and its credit opportunities fund were meant to capitalize off bad situations, buying distressed assets in the credit and mortgage markets. Both were down in the high double digits for June, the person said.

GS Liquidity Partners was launched when the credit crunch first hit last fall, with $1.8 billion to make investments in distressed credit. The credit opportunity fund is a more recent creature, launched this year to invest in mortgage market dislocations.