My Pocket Change

Most people agree that we all need an emergency fund — a safety net in case things get rough financially.  This could mean loosing your job or having a freak accident or other unexpected expense.  But how much do you need in your emergency fund?  Two months’ salary?  Three months’ salary?  Pre tax?  Post tax?  Wait… isn’t that a wedding ring???  I’ve heard lots of rules of thumb, and honestly, I can’t keep any of them straight.  Well, how about six months of living expenses?  This approach gives you a significant amount of time to find a new job, and seems most in line with the “safety net” mentality.

So the next question should be: how much money is six months of living expenses?  I propose two approaches to this: one working forwards, and another working backwards.  Read on to see how I used these two methods to determine my emergency fund.  I have updated this post (Feb. 5, 2007) due to some great comments from the readers. Continue Reading »

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I’m proud to say that my “How Long do You Need to Leave Your Money in the Market” posts are featured in the latest Carnival on Investing.  Check out the rest of this Carnival’s posts here.  There are ton of good looking posts there (I honestly haven’t have time to read them yet… but some of the synopses look intriguing).

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A couple weeks ago, I had mentioned how I was rear-ended and had to take my car into the shop while I was in Austria.  I had concluded that the insurance company was low balling me with their estimate of $425 because the original estimate I received was for $720.  Assuming the insurance company would need to fork over the cash for the more expensive estimation if I took the car into to get fixed, I figured the insurance company gave the initial estimate to save themselves money if I decided to simply pocket the cash.  Well, maybe I was a little too quick to judge who the bad guy really was… the real moral is that both the insurance company and the body shop were trying to take advantage of me, and the other victim besides myself is actually the nice girl that hit me.  Continue Reading »

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I just got back from a 10 day trip to Austria with my girl friend and best friends from college.  Nine of us in all.  We hit the Alps for some snowboarding and toured the Bavarian and Austrian countryside.  Before I tally up my trip’s final costs, I wanted to first share my predicted costs.  Predicting and planning costs is an important step in controlling and minimizing unnecessary expenses.  Let’s see what I came up with.  Continue Reading »

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In part one, we examined some the basic charactistics of historical S&P 500 data.  Most importantly, we noticed that month to month, S&P 500 returns are terribly unpredictable.  However, in this part, we will exam how time will be our great risk reducer!  We will model our historical S&P 500 data to answer one very important question: long do I need to leave my money invested in the market to reasonably ensure I will have solid returns?  I’ll conclude that from historical data, planning on 10 years seems to do the trick. 

Continue Reading »

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You know how all the “experts” love to give advice on which funds to buy each year… sometimes for a sizeable fee?  I’m sure that you, like me, always wondered how well they actually do.  John Bogle would have you believe that they are pretty much just lucky.  Well, now that I’m running a blog, let’s test the experts at Money Magazine!   Continue Reading »

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 So a little a month ago, I got into a car accident (don’t worry, no one was hurt).  I was rear-ended (not my fault!!!).  It really wasn’t a bad accident at all.  The damage to her car was non-existent, and the damage to my car was very minor. 

However, I knew I had the long process of dealing with insurance in front of me.  And then there was the question of what to do with the insurance money: fix my car now or pocket it (and fix it later).  By the end though, I realized that if I ever wanted to fix my car without using my own money, I’d have to fix it now.  The insurance companies make sure of that… Here’s the story. Continue Reading »

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Jim of Bargaineering ran interesting post examing those new target retirement year funds that many financial companies are offering.  I suggested plotting his data in the comments.  So with his permission, here we are!  Read his post and the comments — there are lots of good thoughts.

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Everyone knows the stock market is a risky investment.  It gives hope for high returns, but first you must take your chance in the market up’s and down’s.  Year to year, there is a significant chance your investment will do really well, but also a significant chance your investment will do really poorly.  The longer you leave your money in the market, the more up’s and down’s you will ride, resulting in a nicely averaged return.  At least, that’s the hope.  Here, I explore how your risk/return changes the longer you leave your investment in the market.  I analyze historical S&P 500 data.  Find out why 10 years is the magic number for how long you should plan on leaving your money in!  Continue Reading »

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Recently, I have tried to put some emphasis on the benefits of rebalancing your portfolio.  I would guess most people agree its important but maybe not understand exactly why.  Most people understand that rebalancing helps maintain our desired risk/reward level.  But a little more subtle, rebalancing also forces us to buy low and sell high — advice everyone can agree with.  Here I will explore this second (and honestly, more important) reason for rebalancing. Continue Reading »

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