Welcome to Financial Spiderplant!

Why is saving important? Because it adds up.

I’m currently 27. I made my ROTH IRA contribution for 2009. While the contribution limit for 2009 was $5,000, compound it at 10% over the next 37 years (when I’m 65) and it will have reached $170,016.74. Of course, that is presuming that the entire amount was withdrawn at 65.

The twist comes when you take into account the fact that I’ve also made ROTH contributions in previous years so while the 2009 contribution could reasonably grow to 170K by 65, I won’t be withdrawing 2009’s contribution when I’m 65, I’ll be withdrawing the contributions that I made in 2004 when I was 22.

Age 22 - 2004 - Withdraw contributions made at 65
Age 23 - 2005 -Withdraw contributions made at 66
Age 24 -2006 -Withdraw contributions made at 67
Age 25 - 2007 - Withdraw contributions made at 68
Age 26 - 2008 - Withdraw contributions made at 69
Age 27 - 2009 - Withdraw contributions made at 70

So, instead of withdrawing 2009’s contribution in 37 years at 65, I can plan on withdrawing it in 42 years at age 70. Instead of a planned $170,000, the additional five years allows that amount to become $273,818.50. (Growth of 61%)

Don’t forget inflation. If we assume a rate of 4% annual inflation, what can be purchased with $50,000 today will require $259,639 dollars in 2052. (42 years from now) After accounting for inflation, a $5,000 contribution today will have a relative value of ~$50,000 after 42 years. In other words, it will increase in value by a factor of ten.

This is why it is important to save early. Whether or not one continues to save after those first ten years or so buckling down becomes increasingly irrelevant, the war is already won while others haven’t even figured out that they’re mid-battle.

Another thing to remember : taxes do not apply to a ROTH. So if that 270K was in an IRA or other account where taxes are required. Withdraw that 270K and pay the current 33% tax and you’re down to $180K before you start.

That assumes that taxes won’t go up in the future…which I believe they will. There is but one path that our continued deficit growth and sense of entitlement will lead; throw in an increasingly aging population with the promises of social security and you’re talking about brewing one heck of a storm for those who aren’t hunkered down in tax advantaged accounts.

All this talk of waiting 37 years…42 years…or whichever can be a little bit intimidating, especially if you’re pushing 35, 45, or even 55 and want to believe that you’ll still have the big bucks come 65. If you invest the $5,000 and earn 10% for 30 years, you’re receiving $87,000. Invest for even 20 and you’re at $33,000. So even when you start punching in lower numbers, the incentive to save is still there.

I might not want to wait until 65 to retire and if I’ve saved early, that is a certain possibility, I could take out contributions made at 23 at age 43 in 2024 and spend my $33K/year for the next 20 years (assumes continued contributions from 23-42)…just in time to start collecting the social security checks for which I really shouldn’t expect to provide much.

$33K is hardly enough to provide for the standard of living many of us have come to expect, but shouldn’t that fact alone make the case for early savings? This is the reality for someone that starts saving at 45 with the expectation of retirement at 65.

Solution? Save early…because punching larger numbers into the compounding interest calculator leads the result to make you feel warm and fuzzy!

Happy weekend!

All things do not work for all people
Their variation calls for flexibility
All have future visions, all are possible
Their requirements dictated by past’s actions toward future
The necessity for our requirements must claim present action
To realize life’s cruel action before it’s lesson
We must realize that the cues were always there
To understand, we must observe and take action

To realize potential and refuse to act
Brings only thoughts of ‘what if’
Today’s opportunities are tomorrow’s guilty reflection
Discoveries and improvement require cooperation

Morality in action gives dignity and beauty to life
There’s no secret to balance, just feel the wave
Pursue art and dream with abandon
Chase life with stealth and calculated action

Have a binding passion for the task
Possess courage to go out on a limb
Education is the equalizer of men
Disarm the wheel of social machines without hostility

Every error is a portal to discovery
Growth requires departing the comfort zone
Know and be disappointed
Don’t regret and wonder

Life’s challenges aren’t meant to paralyze us
But to help us discover who we are.
Accept the challenge
It is the only way to experience victory

Choose to go…not because it is easy,
But because it is hard,
That goal will serve to measure and organize the best of our energies and skills,
That challenge is one that we are willing to accept,
One we are unwilling to postpone,
One which we intend to win

Duty should not content you
The horse one neck ahead is the one that wins the race
One characteristic assures success. Persistence
If you’re knocked down 70 times, get up and say ‘here comes 71!’

So how went 2009?

Jan 09 Liabilities : X ~1 Salary
Dec 09 Liabilities : X ~0.78.7 salary
Progress : -22.3%

I am proud of myself.
I have reduced debt for another year.
College=debt.
Worth it.

Jan 09 Assets : X~0.5 Salary
Dec 09 Assets : X ~1 Salary
Progress : +73.4%

I passed the level of >$50,000 in investments this year. One of the things to remember when you’re first starting to build your account values is that your contributions will far outweigh any potential market reactions. Keep contributing, watch the market, identify trends, and learn. You can try to learn the market without market exposure but when actual emotions and actual dollars enter the equation, the game changes…always.

The liabilities is shrinking and the assets is growing. Commence dancing! WOOT WOOT!

The primary goal of anyone with debt should be simple. Reduce debt. Grow assets.
Do not fear the acquisition of debt if your debts can continue to shrink and your assets can continue to grow.
Save.

Major Account Shift Notes :
Schwab ROTH IRA :
3/19/08 Visa ‘ROTH All In’ investment currently +50.88%.
5/05/09 Wal-Mart ‘Leftover Cash’ investment currently worth +7.1%

Schwab IRA : (Rolled over from prior company 401K 11/03/09)
11/04/09 $12,052 JOHNSON & JOHNSON ‘IRA 75% in’ investment currently +8.38%
11/04/09 $6,785 MICROSOFT ‘IRA 25% in’ investment currently +9.89%.

Employment 401K : New, build it to 10K, now is not the time to stray the path.

2010?

It is going to be a good year…those who are looking to battle always have the opportunity, you just gotta pick the right target.

Goals :
New Employment 401K : 12/30/09 : Goal : $10,000
Schwab ROTH IRA : 12/30/09 : Goal : $50,000 (2009+2010 contributions)
Schwab IRA : 12/30/09 : Goal : $30,000

Net Worth : Positive Goal : Shooting to double net worth in 2010.

“If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you
But make allowance for their doubting too,
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:

If you can dream–and not make dreams your master,
If you can think–and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ‘em up with worn-out tools:

If you can make one heap of all your winnings
And risk it all on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: “Hold on!”

If you can talk with crowds and keep your virtue,
Or walk with kings–nor lose the common touch,
If neither foes nor loving friends can hurt you;
If all men count with you, but none too much,
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And–which is more–you’ll be a Man, my son!

–Rudyard Kipling”

Happy New Year.

“Do I trust the government to leave Roths untouched? If you’ve been following the headlines — in particular the health care debate — you know that the deficit is big and getting bigger, which means that some taxes will, in the future, be going up. Although it’s unlikely that the government will decide to tax withdrawals (that would be double taxation), the ability to pass the account on to your heirs may find itself on the chopping block.

All in all, your best defense is likely a good offense. Just as you don’t want all your eggs in one basket, you don’t want all of your retirement funds subject to the same tax treatment. Having some in a Roth, others in a traditional IRA and still others in discretionary accounts makes you an agile investor — able to deal with whatever curve balls Congress throws your way.” 1

Wikinvest : ROTH IRA

“A Roth IRA is a retirement plan in the US which allows investments to grow without being taxed. Unlike the traditional IRA, the Roth IRA does not offer tax deduction for contributions. However, if certain requirements are met, the Roth IRA allows all investment earnings to be withdrawn tax-free.”

Well…what does that mean?

What that means is that taking the tax hit on your principal, (amount you initially invest) you can avoid paying taxes on your investment returns when you withdraw. Taking the route of pre-tax investments may appeal because you get to see a larger number in those accounts sooner, but this isn’t a panzy sprint where your first leg of the race counts more than the last…we’re talking about endgame measurement.

As with most important choices where time a major factor, you should hope for the best, prepare for the worst, and expect things to end up somewhere in the middle. One can use an 8,10, or 12 percent rate of return for a general gauge of expectations…I usually stick to 8% calculations so that I’ll be surprised but the hope of the long term 12% always makes for some interesting projections. Once you start getting up higher than that, you’re just asking for a let down. (Some, like Ibboston associates, would stick to the average stock performance (since 1926) figure of 9.79%.)

While the current ROTH contribution limits are at $5,000/yr ($6,000 if you’re over 50) I used a $5,200 annual contribution with the expectation that contribution limits will eventually go up so that we can project our values with an even $100/wk contribution.

You may delay, but time will not. Time discovers all truths and those who claim to be wasting time are only wasting themselves. While time gives its test before teaching its lesson, it isn’t difficult to understand the rules of the game and the log behind the rules and principles it uses to express its power.

If you start saving that $100/wk at 25 instead of waiting like a chump (yeah I said it) until 35, you’re talking some serious differences in what you’ll be dealing with in retirement and if you wait til 45, you can pretty much forget about early retirement.

The numbers don’t lie. Manage to bank an 8% return and you’re batting 800K higher than the saver who starts a decade later. Make it 10% and you’re pushing a million and a half…manage 12 and you’re talking a solid 3 mil or in retirement terms, annual spending (without draining the principal) of $42,000 yr vs $134,000…over three times the earning power.

If you run the figures on a 25 year old vs a 45 year old, that’s when the numbers start to get a little crazy. It isn’t often enough that readers of investment and retirement literature cite the figures for a 25 year old that saves on a regular basis…I think that one of the primary reasons for this is that it really begins to expose some of the flaws within our educational system. They can teach the students calculus, get them to memorize the periodic table, and countless other important but not ‘essential’ facts as simple as ’save $100/wk in a tax deferred account and you’re set for life.’

I think one of the other reasons is that if you’re 35,45, or older and start to run the math, realizing how much you’ve ‘lost’ by waiting for so long can become something that really throws people off and keeps them from seriously stepping up their game to catch up. (Even though time won’t let them) Plain fact is that even if a 45 year old manages to save TRIPLE ($15,600/yr or $300/wk)that of the 25 year old and still manages a 12% rate of return, they’ll only be swinging with 1.2 million come 65. I’m not sure how to make the picture more clear, save as much as you can…as early as you can…don’t touch it…and let time do the work.

While it is great to have a nice chunk of change stashed for retirement, the ability to dodge mandatory withdrawals and taxes can be even greater. But the evils of the tax man deserve their own rant.

Maybe the best present one can get is the lesson that the smallest changes really do make the biggest difference.

Merry Christmas.

Sources:
1 Sweet Deal: Is the Roth IRA right for you? : Posted: 10/30/2009 By Jean Chatzky

“-The latest string of economic reports deserves a little cheer. The University of Michigan consumer sentiment index jumped meaningfully from 67.4 to 73.4, though it remains below the long-term average of 86.
-Retail sales also surprised on the upside with a 1.3% year-over-year growth rate reported last week; twice what was expected.
-Household net worth is up 5% year over year and has increased by $4.7 trillion from its low.
-For inflation alarmists out there, take comfort in the index’s inflation expectations component, which showed a drop to a 2.1% expectation vs. 2.7% the month prior.
-Even the index’s longer-term inflation gauge improved: The five-year outlook showed a drop from a 3% expectation to only 2.6%.
-Retail sales also surprised on the upside with a 1.3% year-over-year growth rate reported last week; twice what was expected. Even excluding the most volatile components (autos, gasoline and building materials), sales were up 1.2%, and have jumped at a 5.6% annual pace during the past three months. ” 1

Long term inflation gauge? Year over year what? The consumer sentiment index? What does any of this mean? Chances are that it doesn’t mean much in the general scheme of things, it is interesting to learn about and knowing how to read the right statistics can help one to understand the bigger picture…but it doesn’t change the fact that in the end, people act in self interest; they are just people making decisions, trying to carve out a better life for themselves. A lot of people do not know how to do this, they aren’t equipped with the requisite tools for the job or maybe they haven’t been given the right opportunity to show their strengths and their ability to endure what others cannot. Chances are that none of it will matter if they are unable to change their minds.

Progress is impossible without change, and those who cannot change their minds cannot change anything. The small insight, a fact learned, a deeper understanding of a different perception, or a clearer understanding of where you stand. Many people are unable to change their minds the accept the fact that if you want to eat an elephant, there is no fast way, you’re gonna have to chow down one bite at a time.

You are not going to do that by changing the rules of the game, you’ll get there by understanding the rules and applying them towards strengthening what is important to you.

“-In November, both the number of unemployed persons, at 15.4 million, and the
unemployment rate, at 10.0 percent, edged down. At the start of the recession
in December 2007, the number of unemployed persons was 7.5 million, and the
jobless rate was 4.9 percent.
-Among the unemployed, the number of job losers and persons who completed tem-
porary jobs fell by 463,000 in November. The number of long-term unemployed
(those jobless for 27 weeks and over) rose by 293,000 to 5.9 million. The
percentage of unemployed persons jobless for 27 weeks or more increased by
2.7 percentage points to 38.3 percent. “2

Maybe they’ve got an excuse, maybe they’ve simply decided to stay in geographical areas that don’t have jobs and are too stubborn to realize that they gotta pack their bags and go where the jobs are…but what about the 90% of our citizens with jobs? The mere fact that one has obstacles to overcome is in their favor. All possibilities should be entertained just not readily accepted. Growth depends on being in motion one way or the other, the stock market can’t always continue to increase in value, neither can homes, and jobs will not always be easier to come by, but there is always a classification.

Thirty percent of our youth can’t even figure out that a high school degree will lead to a better life than not having a high school degree. 3 So 30 percent are destined to a ‘lower future’ right off the top, they made a bad decision, is it possible that you are making an equally ‘bad’ decision without knowing it? Only half of the students that attend a college in the United States graduate with a bachelors degree. 4 Half of our college students leave for various reasons, all likely having to do with the thought that ‘leaving college will somehow make my life better in the short/long term…’ They are making a decision that will likely harm them vs if they had chosen to do what was needed to do to graduate. Is it possible that we are making equally ‘bad’ decisions without even knowing it? These two ‘choices’ can be argued to be the most important in regards towards one’s long term earning and employment potential.

Given the fact that so many in our country of 300 million can make such ‘bad’ choices, how do we know what is right? Maybe these were good choices to them, maybe they would have been better choices for me, but I don’t believe that because of what I’ve seen and what I’ve experienced. Does someone or some entity have the right to choose what is right for us to do and what is wrong for us to do? Should they be able to force us to graduate high school? To graduate college? To obtain degrees in XYZ subject? To enter XYZ career at XYZ pay in XYZ location in XYZ type house eating XYZ food with an XYZ pet (or no pet) with an XYZ schedule in an XYZ office….with XYZ% of our salary directed towards XYZ healthcare?

Or does diversity enter the issue, does free choice promote diversity? Is diversity good for us? Do we as individuals have a better idea of what is best for us or does the thought process where the desire for maximum efficiency with as little marginal error as possible prevail? Maybe it is as simple as appreciating the moment.

Are we realists or possibilists? Is humanity the master of its own fate? Can we change direction without first questioning the assumptions underlying our philosophy? Assumptions. Bigger is better, progress cannot be stopped, no speed is too fast, globalization is good, yes we can, have it your way, the customer is always right. Evil to some is good to others. Can we even replace those assumptions are they hardwired into our thought process?

Back on track, coming out swinging.

Out.

Sources:
1 One Step Closer … to Job Growth by Liz Ann Sonders, Senior Vice President, Chief Investment Strategist, Charles Schwab & Co., Inc.
December 14, 2009
2 Employment Situation Summary : Friday, December 4, 2009
спални комплекти3 US high school graduation rate climbs to 69.2 percent
4 Colleges Are Failing in Graduation Rates

One of my Kiva loans was repaid and I was able to re-loan the proceeds. When I went to the site, there were only two loan listings, by the time I read the loan request and went to loan…

The impact this week was one loan every 19 seconds with a total impact of $64,621,585 in loans since Kiva began. Since these loans are being repaid and re-loaned, the impact of the loan cycles is dramatic enough that loan funds are in higher demand than loan requests.

What a service! While traditional charities spend the money, make their impact, and then need to raise additional funds, Kiva is raising more funds than it knows what to do with!

This brings to mind two important questions. Can Kiva continue to expand their loanbackgammon free casino money free craps game play free black jack craps video poker strategy play black jack online how to win video poker casino game online uk best casino online casino secure online gambling jackpot casino online casino black jack learn to play craps how to win at video poker craps online blackjack casino game online casino betting free on line video poker casino games no download casino online gambling casino play free casino slots video poker machine bonus video poker free on line slots double bonus video poker free video poker gamesmach zehnder modulator free casinos roulette online craps rules free on line casino rules of craps online casino free money blackjack 21 internet casino how to play craps free casino game download fortunelounge online casino free casino download free casino card game free roulette game free casino play no deposit free money casino internet casino online services at a rate that will exceed loan capital? What will Kiva do if there continue to be excess loan services?

I don’t know where it is headed but I’ve got a Kiva reserve ready to loan when more requests come in. I guess if that reserve continues to build, I’ll have an extra emergency fund.

Have a great weekend, I will!

Nine entrepreneurs….”They want to buy 15 hectares of land in their native village and they will also need fuel for the tractor that will help them plow the land.”

online casino net$25 loaned. Funds raised via another loan that was repaid.

The field partner has been around for 27 months, funded 167 entrepreneurs, raised $146,700, and has a 0% delinquency and default rate. Done deal.

Keep the ball rolling.

Whoops, in the time it took me to write that, they funded the loan…I loaned to someone else in Shahrituz, Tajikistan who is raising cattle.

Kiva Stats :
Impact This Week1,115 gift certificates purchased.
3,008 entrepreneurs funded.
5,855 new lenders joined.
14,431 lenders made a loan.
1 loan was made every 20 seconds.
$1,029,750.00 lent.

A quarterly review:strong>
Increase in real GDP of3.3 percent
Personal income increased $61.5 billion, or 0.5 percent, and disposable personal income (DPI)
decreased $93.3 billion, or 0.9 percent