Monday, April 29, 2013

Creating an Investment Policy Statement

Now that I'm on the path to being debt-free by the end of 2013, I've begun to look at life post-debt. What are my savings goals? How will I use all of the money that has been going towards debt repayment?

Prompted by The Boglehead's Guide to Investing (learn more here and here), I felt I needed to create an "Investment Policy Statement."

What is an Investment Policy Statement (IPS)?

An Investment Policy Statement defines general investment goals and objectives. It also serves as a guidepost for future investing, identifies goals, and creates a systematic review process.

Where do I begin?

With GOALS. In order to know how you should be saving (what investment vehicles to choose, for example), you need to understand why you are saving. When I did this exercise I came up with 4 goals.

For now, these goals will be on hold until AFTER I pay off my remaining student loan. That is the true emergency right now!

1. Protect myself from unemployment or sudden emergencies. In other words, have a solid emergency fund. My current e-fund covers about 2 months of living expenses. I feel that I need 6 months of living expenses in order to be secure if I lose my job or have an unexpected emergency (medical or otherwise).

2. Own a modest house/condo and pay for it in cash. By "modest" I mean that if I never get married or have children, I'm talking two-bedroom max. I don't need a lot of space. Paying for it in cash is a lofty goal yes, but I don't plan on living in DC forever (hello Seattle or Denver - you have been looking mighty captivating lately!). I am also so anti-debt that I can't imagine paying a mortgage.

3. Retire between 45-50. I say "between" because I like to give myself a timeframe instead of an exact age for retirement. I also don't expect to just "retire" in the traditional sense. I always need to be doing something, so in retirement I imagine doing side/odd jobs that I truly enjoy.

4. Pay for 2 years of higher education for my future children. I don't plan on having more than three kids, by the way. This one is also a bit of an unknown entity. Who knows if I can even have kids? And who knows how many I will end up having? That is why this is number 4 on my list of goals. I really do want kids, but I need a bit of help (cough - husband - cough) so this one is a bit vague.

What comes after goals?

After you determine your goals, you need to spell out your investing philosophy. Here is mine: Buy and hold long-term, all market index strategies with very low expenses.

No way do I want accounts with high fees that earns more for the manager and takes away from my invested money. If you want to learn more about index funds, I highly recommend looking at the philosophy of John Bogle. Read the book or browse the wiki.

Philosophy, got it. Now what?

Determine your asset allocation. This step is important, but also confusing. At least confusing to me. I took an online survey via Vanguard to help me determine my ideal asset allocation. The results: I want to have an asset allocation of 30% bonds and 70% stocks. 

I want to be invested in this ratio until I own property or turn 40, whichever comes first. At 40, I'll rebalance so I am 40% bonds and 60% stocks. A good rule of thumb is to have your age in bonds. Since bonds are lower risk, you want to gravitate towards them as you age.

I've determined that my assets should be diversified in both domestic and international equities (stocks), and US government and corporate bonds. I admit that this is the most confusing part. Do I need TIPS? REITs? What do those even mean? (TIPS are a type of bond, REITs are real estate). I need to do more research here. 

Also important - determine what asset classes you want to avoid. I don't want to be involved with high-fee funds (not giving you more money, Wall Street) and I don't want annuities. Annuities are typically hard to get out of, once you have a certain amount in them. And the percent of return is also determined by the company's (such as TIAA) board.

Now that I know my asset allocation? What funds do I choose?

My guideline for choosing funds is that they be low-cost mutual funds that provide maximum diversification across classes. This means I'll be going with index funds via Vanguard or Fidelity.

What are my target allocations?

The last step is to determine what funds to invest in and how much money you will contribute. Right now, I am regularly contributing to 2 non-taxable accounts (Roth IRA and 403b). The Roth IRA has more in it, which means I'll be doing most of the diversification in that account. The 403b will likely be mostly bonds since I want the lower percentage of my investments in bonds at this stage.

I can't forget about my e-fund, though. I'm looking in to higher interest-baring accounts right now. Currently, I am with Capitol One 360 (formerly ING Direct) and I get about 0.8% interest on my savings. Terrible, I know, but there isn't much above 1% right now.

I've done the IPS, how does this help me towards my goals?

For me, my goals determine how much money I put towards my different accounts. Since my first goal after debt re-payment is to build my e-fund, then I'll be putting extra cash towards that before I contribute more towards my retirement. I'm not going to stop saving for retirement, but I might not get around to fully funding my Roth until after I get that e-fund up.

My second goal of owning a home is going to be balanced with my third goal of retiring early. My strategy will be to do both at once, contributing as much as possible to a savings or several CDs that will go towards buying a home. But I can't forget about retirement savings, because you MUST invest early if you want to see returns later.

Hopefully, by the time I reach my fourth goal of helping pay for a few years of my kids' higher education, I will have a spouse to help contribute to that as well. So I'm being honest here, I don't have an exact plan for that. The goals preceding this one are much more imminent and in my control than my potential child's higher education.

Confused yet?

If you are, there are many, many resources available to you. I'm still doubting these choices and they could change with more research.

Check these out if you want more information:

Boglehead's forum
Mr. Money Mustache forum The Boglehead's Guide to Investing Bogleheads wiki

Friday, April 26, 2013

Best of the Blosgosphere: 4/26/13 Edition

Every Friday I feature a blog post in the following categories: Simple Living, Financial, DIY, Before & After, and Random. Here are this week's picks:

Best Simple Living: An interesting take from Mr. Money Mustache about why you should be frugal, even if you are rich.

Best Financial: On my list to watch this weekend is The Retirement Gamble, which aired on PBS this week. The documentary reveals something I've come to learn in the last year - all of those fees you pay to manage your 401k or IRA add up over time and cost you thousands.

Best DIY: I'm loving this hanging indoor garden featured on Apartment Therapy. When you can't have an outdoor garden, improvise one indoors!
Best Before & After: This might be the coolest backsplash re-do I've ever seen. Via Better After.

Best Random: Last night's episode of The Office reminded me why I have watched this show for 9 years. This tumblr user pretty much sums up my feelings. And a reference to Ted Mosby is always appreciated :)

Wednesday, April 24, 2013

Fifty Deco: April Update

It’s time for the April installment of Fifty Deco. In this segment I feature the item(s) I purchased the previous month (on a $50 budget) for apartment decoration, organization, and miscellaneous DIY. I’ll tell you why I bought what I did, where I got it, and what I paid for it. I’ll also showcase the items in future blog posts so you can see the item(s) in use. 

I haven’t done a Fifty Deco update in a while. Most likely because I haven’t exactly been spending $50 each month. Sometimes more, sometimes less. Due to being rather busy, I haven’t done much spending in April on apartment decoration. In fact, I’ve only spent $10. So let’s see what I got!

Last weekend I noticed a sign for an estate sale a block away from my apartment. Brilliant! On Saturday I stopped in to see if there was anything I could use. Estate sales are often great places to get items at a low price. I don’t recommend making a hobby of estate sales/garage sales, though. It can get out of hand. See the TV show Hoarders for proof. But I do enjoy the occasional walk through an estate sale.

I found 4 great items. One fold-up chair and three mason jars of varying sizes. 

Since I have a small place, I don’t have many seating options. This became apparent a few weekends ago when I had friends over and was forced to use my step-stool as a chair around the table. So when I saw the following chair for $5, I couldn’t pass it up!
(c) SingleSimpleStudio

And then I saw these mason jars.
(c) SingleSimpleStudio

The larger one was $4 and the smaller two were 50 cents. Mason jars sell for at least $5 at antique stores and miscellaneous shops, so I knew I got quite the deal. 

Grand total spent = $10

Note: You may have noticed that I didn't put a signature on my photos in this post. I'm still working on my transition from PC to Mac and don't have photoshop for Mac yet. Please don't use these photos without citing this blog. Thanks!

Monday, April 22, 2013

PC to Mac Switch

After years of thinking about switching from a PC to a Mac, I've finally done it. Say hello to my new laptop!

(c) Single Simple Studio
This is a MacBrook Pro from early 2011. I purchased it from Gainsaver for around $850. I also purchased a wireless mouse, but the battery came corroded, so I'm sending it back. Everything else works great, though. I was able to specify what I wanted on the Mac (Mountain Lion OS, 4 GB of memory and a 250 GB hard drive), which really added to the value I was getting. Right now, brand new Macs with the same capabilities are going for $1,200. A bit out of my price range! 

Because this is also a financially-themed blog, I have to tell you that I put a lot of thought into this purchase. I've been saving for a replacement laptop for my HP since last summer when said HP started going wacky. The HP is now shutting down randomly for no reason, so it is probably a good thing I've replaced it. For a big purchase like this, I added a line to my savings budget in the amount of $100. It took me about 8 months to save for the laptop. Now, when the credit card bill comes in this month, I have the $850 savings ready to use. Another bonus - now I have $100 extra in my budget that I can put towards my loans!

I really hope this Mac doesn't give me the same problems I've had from every other PC laptop I've owned - get's slow, overheats, acquires so many bugs you practically need an exterminator, etc....

For those of you who have made the transition from PC to Mac, got any tips?

Initially, I'm missing the CTL+E function. In general, I'm not sure how Macs are organized - there is no Start menu. The ribbon on the bottom is good, but again, missing the explorer window. I'll get used to it and obviously need to do more investigating and teaching myself via Google and Apple's website.

Note: I don't have photoshop for Mac yet, so I can't add a watermark to my photos for this blog. If you do reblog/pin anything from here, please cite my blog!

Friday, April 19, 2013

Best of the Blogosphere: 4/19/13 Edition

Every Friday I feature a blog post in the following categories: Simple Living, Financial, DIY, Before & After, and Random. Here are this week's picks:

Best Simple Living: The Everyday Minimalist blogs about getting your Inbox down to ZERO emails. I've done it a few times and it is amazing. Such a feeling of accomplishment! Have you ever done it?

Best Financial: I've been following Lisa's series of posts from Get Rich Slowly on learning more about investing as part of my goal to be a better-informed investor. This week's post is about how to audit your own investments.

Best DIY: Cuckoo 4 Design takes a plain bar stool and adds some color! How many blah bar stools have I see at garage sales and used furniture stores? So many! This would be a great project for my tiny apartment and a way to get some extra seating without taking up too much space.
Best Before & After: Speaking of chairs, Better After has a plethora of refurbished seating before and afters.

Best Random: This pretty much sums up how Americans feel this week. Thank you, The Onion (if you don't know, The Onion is a satirical newspaper).

Wednesday, April 17, 2013

Tragedy in Boston - The Helpers

On Monday afternoon, many in my office in DC followed the events unfold in Boston. We tuned in to news briefings and heard the early reports. Being in DC, there were rumblings of what this meant for us - were there attacks planned here? Watching 9/11 unfold on TV in high school was a wake-up call for me to tragedy in the real world, and the feeling I got then is the same now, whether I'm witnessing the aftermath of Boston, Aurora, or Newtown. But what many have already stated and what is going around the Internet in the aftermath of the Boston Marathon tragedy is "the helpers" who came to the aid of strangers. These are the good people, the ones who remind us that humans are inherently good, not evil. I'd like to take a moment to acknowledge the heroes, or "the helpers," as Mr. Rogers put it: "Look for the helpers. You'll always find people who are helping."

Carlos Arredondo
The Man in the Cowboy Hat

Marathon Runners and Officials
Coming to the aid of the wounded

Police Officers

Carrying the injured to safety

List from Buzzfeed
If you look back through history, you can find where the goodness of humanity triumphs, even if their names do not last as long as those that perpetuate violence. Some heroes are well-known, such as Miep Gies or Oskar Schindler, who both saved the lives of Jews during the Holocaust. But most remain unnamed and unacknowledged. They just did what they thought was right. I think we all hope we would do the same.
More Heroes in the US and around the globe:

And many more.

Monday, April 15, 2013

New Pillows At Last!

I finally took pictures of my new bedroom pillows! Remember when I asked you to guess which ones I decided to purchase?


So which one did I choose?

Number 2!
When they came in the mail, I expected the pillows to be more green. At first I wasn't too happy with them and thought that I wanted more of a green color instead of a teal/blue. But then...this happened:
I took a step back and realized that the pillows are a PERFECT match to one of the globes I have sitting on my room divider. Yay!

To remind you, the bed looked pretty bare before:

Here's a picture of my bedroom as it looks now:
What do you think of the new pillows?

Friday, April 12, 2013

Best of the Blogosphere: 4/12/13 Edition

Every Friday I feature a blog post in the following categories: Simple Living, Financial, DIY, Before & After, and Random. Here are this week's picks:

Best Simple Living: Trent from The Simple Dollar challenges us to take a day to reflect on what you really want in life. Is your life full of stuff that doesn't matter?

Best Financial: Give Me Back My Five Bucks asks a good question - Would you ever date someone who had debt? I would date someone with student loan debt, but I'd be leery of someone with massive credit card debt.

Best DIY: Ever thought of making your own laundry detergent? Here's a good DIY recipe from Man vs. Debt.
Best Before & After: Sigh. Now that the weather is nice I would love this patio for hanging out! Via Better After.

Best Random: If you haven't seen this yet, you've probably been living in a cave this week: Reasons My Son is Crying.

Wednesday, April 10, 2013

Recent Financial "Wins"

Sometimes, I get frustrated looking at my long-term goal of paying off my student loan debt. I have made some great progress, but I still have over $14,000 left to pay off. When I get in “one of those moods” where I feel like the hard work will never end and the debt will never go away, it is important for me to focus on smaller financial “wins.” Taken individually, my latest financial “wins” might not be that amazing. But altogether, they lead to great savings and further propel me towards my goals.

Here are my latest “wins”:

1. Purchasing conditioner for 30 cents. Last week I needed conditioner for my hair. The day I was going to stop by CVS to buy some, I noticed an email from CVS in my inbox. I normally ignore all of the “sales” because they usually just try to get you to buy more stuff that you don’t need. But this time, I opened it. And what did I find? An instant coupon for a generic hair conditioner. Since there isn’t much difference between conditioners, I lept at the chance. The coupon gave me an instant refund for the price of the conditioner ($4.99), so all I paid was 30 cents in tax. WIN!

2. Making my own hand lotion/scrub for free. This is another serendipitous find. I had bought an avocado and only used half of it, so I was thinking of ways to use the rest of the avocado before it went bad. That same day I happened upon the Crunchy Betty website and found a recipe for a hand lotion/scrub that contained an avocado! The only other ingredients are olive oil and sugar, and since I already had those, this hand spa treatment was free! WIN!

3. Walking to work is saving me money AND helping me contribute to retirement. Now that the weather is nice I’m walking to work in the mornings. This saves me at least $1.60 a day (the cost of one bus trip). Taken over five days, that’s $32 a month! When I did this math it dawned on me that I could minimize the amount of pre-tax dollars that go to my bus/metro card. I had been contributing $80 a month. Now I’m contributing $50. I freed up an extra $30 a month in my paycheck, allowing me to up my retirement contribution from 5% of my take-home pay to 6%. This allows me to save an extra $450 a year towards retirement, all pre-tax as well. So let’s recap - walking to work every day helps me save $450 MORE dollars towards retirement than not walking to work. Plus, it keeps me in good shape. DOUBLE WIN!

Via. I want to be that guy with the sunglasses, winning!
Have you had any financial “wins” lately?

Monday, April 8, 2013

Retro Gallery Wall

The other day while I was browsing Pinterest, I saw a fantastic idea for a tiny wall I have in my apartment. What me? Getting an idea from Pinterest!? Say it ain't so.

Anyway...the idea that struck me was this one:

Pinterest (no actual source)

I have a wall slightly more narrow than this at 33.5 inches wide. And I love photographs, especially black and white ones. I pinned this a few weeks ago, so the idea had been floating around my head for a while. The project came to fruition in my mind when I went home for Easter. I saw an old photograph of my mother and I immediately wanted to frame it. Then I remembered my parents gave me a framed black and white print of their engagement photo, THEN I remember I wanted to frame a picture of my grandparents from the 50s, and so on. Until, boom! I put two and two together and decided that I would gather together a collection of black and white family photos, frame them, and put them on small shelves to make a gallery wall. Brilliant idea!

Here are a few of the photos I brought home with me:
My grandma (on guitar) with her sister
My grandparents in 1946
My mom in 1971
And some more gallery wall inspiration:
Via Always Chasing Life
Via Cool Photo Ideas

Friday, April 5, 2013

Best of the Blogosphere: 4/5/13 Edition

Every Friday I feature a blog post in the following categories: Simple Living, Financial, DIY, Before & After, and Random. Here are this week's picks:

Best Simple Living: Words to live by, from The Minimalists.

Best Financial: Mr. Money Mustache challenges us to track our automobile use in April. Do you use your car for short trips or long trips? If you track your use this month, it might tell you something useful about your lifestyle and the money you spend on your vehicle.

Best DIY: I would never think of making my own lamp shade, but after seeing this DIY from 7th House on the Left, I think I could do it!
Best Before & After: The closet in this before picture of this makeover is very builder-grade looking (aka boring!). The after, though, is just splendid. Check out this closet-turned-mudroom via tidbits.

Best Random: I have the itch to do some spring cleaning and get rid of stuff. A good thing I ran across Donate Stuff. The bonus: they send you pre-paid UPS bags for shipping your stuff!

Wednesday, April 3, 2013

Wicker Basket DIY

Remember when I said a while back that I had a ton of project ideas and not enough time to do them all? Yeah, that's still the case. But...I did get one project done before the madness of travel and the Easter holiday. I spray painted wicker baskets!

This was super-easy, and anyone can do it. I swear! All you need are some fugly wicker baskets, paint primer, and spray paint. Oh, and a yard. Do not do this indoors.

Here are the three wicker baskets I started with:
I took each wicker basket outside one-by-one, and wearing rubber gloves, applied a basic primer. I used this one from ACE Hardware. After I primed each one I let them sit for an hour.

Note the rubber gloves. They are a must. As is spraying with the wind. If you don't, paint blows right back at you.

For the final color I chose a deep blue that matches other blues in my apartment. This is the exact brand I used.
It got a bit messy at the end, and I had to be careful to get every nook and cranny of the wicker. One additional tip, if you have to dry these indoors like I did, open a window. Spray paint stinks!
This was also a really cheap DIY. The spray paint cans cost me about $8 total and the wicker baskets were free!