ymoyl news from 2002

here's the news from 2002:

ch-ch-ch-changes...

new in september 2002
09/04/2002	graph updated i graphed the figures from august. it's a joy to see the expenses line take a dive and odd to see "expenses after fi" jump to meet it. this happened because i wanted to take into account my property taxes (which the mortgage company is paying now, but i'll have to pay after the house is mine). my real expenses this month minus the mortgage were $526.90, but i added the $1,210.02 tax bill to that. another $100/month to consider, assuming i eventually buy the house and the taxes stay about the same.
new in august 2002
08/03/2002	still investing i've been debating what to do with extra cash from now on, wondering whether i should stockpile it in my money market account until it reaches a six-month cash reserve total, then starting to invest again after that. i've decided against it, and have scraped together $2,000 to be invested in notes this month. i looked into what it would take to liquidate the money i have in notes, and the treasury department's selldirect program could have the cash to me in four days. i'd take a hit when i sold (how it would balance the interest i'd earned in the meantime would depend on how long i was able to hold it and what a brokerage would pay at the time of the sell), but i'd be able to get the money i needed with little fuss. here's to hoping i can sail through cleanly, but if i have to cash out, i can do it a bit at a time, selling notes after their biannual interest payments. even in the worst case scenario in which i have to sell it all, i'll be starting over with so much more knowledge this time around. :)
08/01/2002	graph updated i graphed the income, expenses, etc. from july. wow, is that some spike from the loan payoff! :)
new in july 2002
07/26/2002	paid off the car i gave $6,130.65 to charter one auto finance today, and the car is mine. i debated this for days. i called to get the payoff amount after i received my tax refund check, and found that between it and what i had saved to invest, i could pay off the loan if i wanted to. the idea seemed an extravagance under the circumstances; shouldn't i be saving that cash as a reserve against a time of unemployment? or at least continuing to invest, while making the monthly payments? i decided to do it after computing what i'll save on interest payments. by paying it off now, i'll avoid $400 in interest. there were 20 months left in the loan, so i thought of it in terms of the slimming i did last spring. i viewed it as getting rid of a $20/month bill that i was paying for no reason. also, it had to be paid sooner or later, and by doing it now when i have the cash available, i'll avoid having to make payments during harder times, if it should come to that. i can also see it as freeing $343.91/month to go into my cash reserves. finally, the car is in good shape, has a transferable warranty, and has had expensive work completed under that warranty in the past few months, so if necessary, i should be able to sell it at a good price and live off the results for several months. with the monthly car payment gone, the cash reserves needed for maintaining my current lifestyle through six months of unemployment should be closer to $10,000 than $12,000. i've had misgivings, but have finally decided i've done well. i have the satisfaction of knowing i've lived up to what i consider one of the most important financial principals[1]: get out of debt as quickly as possible.
07/25/2002	layoffs there were layoffs at osdn today. a conference call was held to explain why this was happening, but the answer was so discouraging that it may have been better not to bother. the financial problems have been caused not by poor work from anyone who's losing a job, but by monumental stupidity from the top which has proceeded in spite of everything that has happened in the last 18 months. just to give the tip of the iceberg: when i first went to the company offices in acton in 1999, the company (with much wailing and grinding of teeth) had just moved from the house on the lake into an office park because the officers felt they needed more room and a more professional appearance. over time, and keeping in step with the roaring 90s, they bought the entire floor of the building. they've stayed in the same office while the staff has dwindled. osdn is a web publishing company; most of its employees work from home. an office is only needed for clerical staff and as a place to meet with advertisers. in spite of this, they've kept an 11,000 square foot office for the ten (10) people who still work there. they're paying $25,000 per month to give each office worker over 1,000 square feet. that's $300,000 per year. they could buy my house three times for that. they could certainly buy all the office they need and leave themselves free from ever paying rent again, and what they save on that (and a million other idiocies) could save jobs. but the expectation of reasonable and responsible action, the hope that those given charge of ridiculous funds could set aside greed and pride and manage them as maturely and responsibly as i try to manage my own finances (meager as they may be by comparison) is a pipe dream. the children who were puffed up by ego-feeding venture capitalists in the silicon rush treated their companies' wealth with the same madness with which so many americans throw away their own money, and now my friends are losing their jobs as a result. if the company hadn't thrown everything away before, there would have been enough reserves to get through the down market, but it's all gone. gone to the officers who cashed out with millions apiece after the ipo, gone to night after night in $300 hotel rooms, gone to give each office worker $2,500/month of space. all the talk on irc has been about what people are doing in reaction to the news, how they're scrambling to find new work, renting the rooms in their homes, etc. it's brought the fragility of my situation to the forefront of my mind more than ever before. there's little hope of sanity taking root in the company, so who knows how soon it might all crumble? how long will it be before i'm the one on the market again? six months? a year? ten years? who knows? what i do is so specialized; what would be the chances of finding work like it again if my current position disappeared? no matter the answers, one question remains: what do i need to do to prepare? two things, i think: first, i need to have enough cash reserves on hand to get through a period of unemployment if there comes a time when i'm looking for a job. the guideline i've always had recommended to me is "enough to get by for six months". at my current rate, including the mortgage and car payments, i'm spending about $2,000/month, so i should have $12,000 cash on hand. including the tax refund i just received, i have $6,000 to invest in next month's auction of treasury notes. should i just keep it in my money market account instead, ready to pay bills if needed? secondly, i need to be open and flexible about my lifestyle, keeping my mind accustomed to the idea that there may come a time when i rent a room or two in my house, or when i give it up entirely. i just hope i can keep it long enough to have significant equity in it if i have to sell it.
07/22/2002	massachusetts tax refund check! it finally arrived today. $2,139. it was deposited instantly.
07/04/2002	expenses postfi i've decided to start tracking another line on the graph. it represents what my monthly expenses would be if i had already achieved financial independence. i've plotted it for this year by taking the expense figures for the last six months and subtracting the costs of the mortgage, the car payments, and the income tax, so this line represents what i would be spending if i owned my home and car and were living off my investments so that my income taxes were nothing or negligible. this is the real line that my investment income line needs to cross to be able to support me, assuming i also have a cushion and cache to cover the unexpected.
07/01/2002	june values added a spread is growing between income and expenses; good.
new in june 2002
06/15/2002	updated table i couldn't help reworking the table to be more accurate: jeff's possible investment future year savings + interest = year's contribution total capital yearly investment income monthly investment income 1 $12,000.00 $585.00 $12,585.00 $12,585.00 $602.19 $50.18 2 $12,000.00 $1,198.52 $13,198.52 $25,783.52 $1,233.74 $102.81 3 $16,000.00 $2,036.95 $18,036.95 $43,820.47 $2,096.81 $174.73 4 $16,000.00 $2,916.25 $18,916.25 $62,736.71 $3,001.95 $250.16 5 $16,000.00 $3,838.41 $19,838.41 $82,575.13 $3,951.22 $329.27 6 $16,000.00 $4,805.54 $20,805.54 $103,380.67 $4,946.76 $412.23 7 $16,000.00 $5,819.81 $21,819.81 $125,200.47 $5,990.84 $499.24 8 $16,000.00 $6,883.52 $22,883.52 $148,084.00 $7,085.82 $590.48 9 $16,000.00 $7,999.09 $23,999.09 $172,083.09 $8,234.18 $686.18 10 $16,000.00 $9,169.05 $25,169.05 $197,252.14 $9,438.51 $786.54 11 $16,000.00 $10,396.04 $26,396.04 $223,648.18 $10,701.57 $891.80 12 $16,000.00 $11,682.85 $27,682.85 $251,331.03 $12,026.19 $1,002.18 i changed two things: i'm calculating at 4-7/8% interest instead of 5%, and i'm taking account of the fact that my car loan will be paid in 03/2004, so i'll have another $4,000/year free to invest. i added two new columns; "monthly investment income" is the real bottom line, and what i want to watch. i keep getting a sneaking suspicion that my real monthly needs are around $500. i was looking at $1,000/month on the basis of the average expenditures of the last 6 months (minus the mortgage and car payment), but didn't take into account the fact that i made a $2,000 downpayment on the car during that time. you can see the anomalous bump on the graph. in any event, i'm curious to see how i'll be doing in 7 years. the difference in interest rates continues to bother me. it's a losing battle to earn 4-7/8% interest while paying 8.19% on the auto loan and 7% on the mortgage. at the end of this year, i should look into what i can do about cutting down the length of the auto loan. in a few years, when i've approached what could be an ultimate living income, i should put serious thought to the idea of pulling out of investing for a while and redirecting my savings toward paying off the mortgage asap. say i put 7 years into reaching my $500/month, then was able to pay off the mortgage in two more years... so many possibilities.
06/04/2002	may values added back to normal after tax month.
new in may 2002
05/15/2002	first investment big day today -- i made my first investment in federal notes. $2,000 went into a 10-year note at 4-7/8% interest. the decision to do this was not as clear-cut as i thought it would be. the investments available today are not what they were when ymoyl was written. the days of 30-year bonds at 7% or 9% are gone. investing should seem a responsible action, but how responsible is it to put money toward earning 4-7/8% when i could be using it to pay off my 8.19% car loan early? i did it anyway for the psychological benefits. after tracking and saving since november and anticipating the buy, there's a great sense of accomplishment in taking the first step on the path, in knowing that from now on, every day, my money will be making money for me. so what will i be getting out of this? $2,000 at 4-7/8% is $97.50 i'll earn each year for the next ten years. that's $0.26/day. well, it's a start. :) and what do i need to reach? i amuse myself a lot these days by running numbers through my head. right now, i'm spending about $2,500 a month and always working on bringing that down, down, down. $1,207.55 of that is the mortgage and $343.91 is the car loan, so if we exclude those from what i'll be paying 15 years from now, i'll need about $1,000/month or $12,000/year. interest rates may rise again, but if we assume they'll hold around 5%, i'll need $240,000 invested to produce cash to live on. if i continue putting away $1,000/month, it will take 20 years. but not really. that ignores the fact that the house will be paid for in 13 years. let's say that for the first 13 years, i put away $12,000/year. i'll have $156,000 invested, and i'll no longer have rent or a mortgage to pay. the $1,200 that was going toward the mortgage could then be invested, allowing me to invest $26,400/year. at that rate, i could add the extra $84,000 and reach $240,000 in just over 3 years. 20 years becomes 16. i'm then 46 years old and financially independent. if i like what i'm doing, as i do now, i can choose to continue doing it and donate my salary, use it to travel, etc. or i could cut back my job hours and pursue others interests, or leave the work-for-pay world altogether. at 46. that's a far cry from the 65 i used to consider the norm. but even that's completely bogus. it doesn't take into account the million things that could happen in 16 years. maybe i become ever more frugal, and the expenses line drops to meet the investment income line long before i expected. maybe i earn more (or earn far less). maybe i come into money from unexpected sources. maybe i invest some money into the house and sell it at a good profit. maybe i move to a cheaper part of the country and the cash from the first house goes toward something cheaper, with a mortgage i can pay off in five years. also, this reckoning doesn't account for the fact that investment income doesn't just appear at the end of the progression; it's all along the way, and growing all the time. today, my first day of being invested, i earned that $0.26. maybe that's not much, but it's $0.26 i didn't have to acquire through a paycheck. in five years, i'll be making $3,000/year from investments. since i'll still be living off the paychecks, that $3,000 isn't needed, and can also be invested. let's run the numbers on that a bit. here's a table showing how the interest compounds: year savings + interest = year's contribution total capital 1 $12,000.00 $600.00 $12,600.00 $12,600.00 2 $12,000.00 $1,230.00 $13,230.00 $25,830.00 3 $12,000.00 $1,891.50 $13,891.50 $39,721.50 4 $12,000.00 $2,586.08 $14,586.08 $54,307.58 5 $12,000.00 $3,315.38 $15,315.38 $69,622.95 6 $12,000.00 $4,081.15 $16,081.15 $85,704.10 7 $12,000.00 $4,885.21 $16,885.21 $102,589.31 8 $12,000.00 $5,729.47 $17,729.47 $120,318.77 9 $12,000.00 $6,615.94 $18,615.94 $138,934.71 10 $12,000.00 $7,546.74 $19,546.74 $158,481.45 11 $12,000.00 $8,524.07 $20,524.07 $179,005.52 12 $12,000.00 $9,550.28 $21,550.28 $200,555.79 13 $12,000.00 $10,627.79 $22,627.79 $223,183.58 14 $26,400.00 $11,759.18 $38,159.18 $261,342.76 after the first year, my $12,000 investments have earned $600, so i have not $12,000, but $12,600 in capital. in the second year, i not only get another $600 on what i invested that year, but also the interest from the first year's capital. 5% of $12,600 is $630, so my interest in the second year is $600 + $630 = $1,230. now i have $12,600 (first year) + $12,000 (second year) + $1,230 (interest) = $25,830. not $24,000, but $25,830. and so it goes, cascading down, getting bigger and bigger. after five years, i don't have $60,000; i have almost $70,000. in the 14th year, the savings skyrocket -- i made the last payment on the mortgage at the end of year 13. i not only hit my mark, but overshoot it by $20,000. and it happens not in 20 years, not in 16 years, but in 14 years, without even taking other shortcut events into account. i'm 44 years old, with perhaps as many years ahead of me in which work is not something i have to do for money. it's mischievous fun to commit these numbers to the screen and wonder how i'll look back on them. will i be smiling as i see it took even less time than i thought, or laughing at the naïveté that thought i could get through it so quickly? it doesn't matter. what matters is that there is a finite time between now and then, and that time is much shorter than i thought. getting started today means that not only the beginning is in sight, but the end as well.
05/01/2002	april values added oh, april... not only the cruelest, but the most anomalous month! :-) yes, it was tax time last month, and my income and expense lines shot through the roof from my maryland state payment and federal refund. still waiting on the massachusetts refund...
new in april 2002
04/16/2002	march monthly tabulation the monthly tabulation for last month is up. there are bad one-time expenses from some mistakes i made, but the regular month-in, month-out expenses continue to come down.
04/02/2002	march values added there's a nice gap between the income and expense lines again, but only because i happened to get three paychecks this month. there were some silly expenses; i'll give details when i do the tabulation.
new in march 2002
03/14/2002	february monthly tabulation the monthly tabulation for last month is up.
03/04/2002	february values added well, they crossed again. :) i bought a car with a $2,000 downpayment, so the expenses line took a steep climb. it should be back to normal next month. i'll have a car payment to contend with, but i'm cutting down on other expenses, so things will hopefully not get out of hand.
new in february 2002
02/16/2002	january monthly tabulation the monthly tabulation for last month is up. things are progressing nicely.
new in january 2002
01/31/2002	january values added yeah! what a joy to see the lines cross again. i got a couple of reimbursements that have been owed me for too long, cut back my spending, and got rid of ridiculous, unnecessary expenses. good to be moving forward. let's hope i don't buy a car and spoil it. :)