Invest

My Money Blog:

Continued from Part 1, where you should have figured out what type of loan you want to get, gathered copies of your important paperwork, and gathered a list of potential lenders. Now to narrow things down to one final lender.

III. Narrowing Down The List
To trim down your list, you may want to call some of them up and ask them a few questions.

1) What type of loans do they specialize in? (Don’t tell them what you’re looking for yet.)
2) What do you need for a rate quote and Good Faith Estimate? What is your quote? Many will give you a rate quite easily, but the GFE is sometimes harder without submitting private information. Just remember, any such quote is only as good as the information you provide.
3) How fast can they lock their quoted rate/points if you choose them? Can I lock this quote you just gave me today? Will they provide written lock confirmation? Will they guarantee their lender fees? (See below.)

Some other people throw in some quiz questions that relate to guessing future mortgage rates, but I don’t really care about that. Your final list might look something like this:

A few Upfront Mortgage Lenders. These lenders have agreed to disclose accurate rates/points for the market niche they service, as well as guarantee their lender fees. At the very least, you should be able to get a good idea of a competitive current rate.
First-time homeowner programs in your area, or perhaps you have a preferred…

My Money Blog:

Most of you are reading this right now because you want that elusive “financial freedom”. This usually revolves around net worth, and many of us (ahem) have a specific net worth goal they want to achieve. Various formulas and calculators abound. The popular book The Millionaire Next Door suggests this formula for a target net worth:

In addition, there are various debates on how to measure net worth. Do you include your primary residence, or not? What about cars or jewelry? How do you properly account for pre-tax accounts? However, while reading this post at Early Retirement Extreme amongst others I realized that these are not the things I need to be focused upon.

Financial Freedom Ratio
If someone tells you that they have a net worth of $1,000,000, you might be impressed. But what if they spent $150,000 per year? If they stopped working, the money wouldn’t last very long. However, if they only spent $15,000 per year, they might already be set for life. In other words, your income doesn’t matter. Your expenses do. It may be assumed that the two are related, but that is not necessarily true. We all have the power to disconnect the two.

I’m sure somebody somewhere has already coined this term, but until told otherwise I will call it the Financial Freedom Ratio (FFR):

By liquid, I simply mean you can sell it for cash while not affecting your expenses. (Don’t count your car if you need it for work.) For example, if you…

My Money Blog:

Thanks for all the diverse and interesting insights on teaching kids about money, I learned quite a few things myself. As I was trying to think back and remember what I personally learned - or wish I learned - about money in 6th grade, a couple of amusing stories came to mind. They may not be all that helpful to young folks (quite possibly the opposite), but I’ll share them anyway since I am curious to see if others had similar experiences.

Flips and Underage Gambling
The allure of gambling knows no age limit. For those that haven’t heard of it - I have no idea how widespread it was - “Flips” is a simple game where first one person flips a coin, and then the second participant flips another coin of the same type. If the coins match, either both heads or both tails, then the 2nd person wins both coins. If the 2nd coin does not match, the 1st person wins both coins. Quarters seemed to be the coin of choice. For a while I was regularly losing or winning a few dollars each day playing Flips, which was a lot of money to me at the time.

The main idea was for the 2nd person to be able to control Heads or Tails, with each us having a secret flipping “method” much like craps players have when throwing dice. As the game got more and more popular, people would start to create their own cheats. One kid…

My Money Blog:

Since we just made our IRA contributions for 2007 recently and had made a few mutual fund exchanges, I figured this was a good time to post another portfolio snapshot. Since we have so many different accounts now, I changed the presentation layout a bit to clean things up.

Retirement Portfolio

Asset Class / Fund
$
%

Broad US Stock Market
$38,836
32%

VTSMX - Vanguard Total Stock Market Index Fund

DISFX - Diversified Stock Index Institutional Fund

DODGX - Dodge & Cox Stock Fund

US Small-Cap Value
$10,480
9%

VISVX - Vanguard Small Cap Value Index Fund

Real Estate (REITs)
$10,017
9%

VGSIX - Vanguard REIT Index Fund

Broad International Developed
$29,925
26%

FSIIX - Fidelity Spartan International Index Fund

VDMIX - Vanguard Developed Markets Index Fund

International Emerging Markets
$10,198
9%

VEIEX - Vanguard Emerging Markets Stock Index Fund

Bonds - Short-Term
$8,989
8%

VFISX - Vanguard Short-Term Treasury Fund

Bonds - Inflation-Indexed
$8,260
7%

VIPSX - Vanguard Inflation-Protected Securities Fund

Total
$116,705

Contribution Details
Through the end of 2007, we maxed out the salary contributions of both of our 401k/403b plans and put in $15,500 each. We didn’t qualify for a Roth IRA contribution in 2007, but after exploring the options of a non-deductible contribution to a Traditional IRA, we decided to go for it and put in $4,000 each in early April. For 2008, my wife has contributed about $5,000 so far to her 403b and is on track to max out again.…