Monday, December 03, 2007
I’m trying to decide on a new car… that has been the most painful part of the process so far, and I haven’t even discussed price with any dealerships yet! Most of it has been in the form of agonizing over different makes and and models, looking at their stats and pictures and records of reliability, depreciation, crashworthiness, etc. It’s driving both me and Dave crazy, but buying a new car is a big deal for us, and we want it to last at least 7-10 years.
So far we’ve test driven several contenders:
Toyota Camry – It felt just like Dave’s current 2005 Camry (smooth and easy to drive), and it looks even cooler. What’s not to like? But I’m hesitant because of negative reviews on Yahoo! Autos.
Honda Accord – This car did not feel as familiar as the Camry – the steering was tighter, the gas pedal was harder to push, and the engine was noisier. The design inside and outside was very angular and masculine, which appealed to Dave but not so much to me. It had an MP3 disc player – very important to me.
Nissan Altima – I was quite impressed. Nissan is introducing CVT technology transmissions, which is usually used in luxury cars and hybrids. It feels like one continuous acceleration when you press the gas pedal, and there are no bumps or jerks of the transmission switching gears, because there are no gears! Pretty cool. The power was great for a V4, thanks to the CVT. The Altima had the biggest glove compartment we’ve ever seen – enough space to hold two Los Angeles Thomas Guides!
Mazda 6 (5-door) – Similar to the Accord, it felt noisier and more “sporty” than I am used to. The fifth door, i.e. the hatchback trunk, opened to reveal a very large storage area.
Honda CR-V – Yes, we are considering an SUV, in order to have an alternative to the Camry with more space, and for something more fun. Also, everyone at work who has kids tells me that I should get a bigger car if I plan to have kids in the next couple years. I don’t really understand why. I know a kid means more stuff, but does such a small person really require that much space?
Toyota RAV-4 – Not a contender. Too small and the side-swinging trunk door annoys me.
Still agonizing over the decision…
| Tags: money, married life
Saturday, March 17, 2007
I’m changing my mind about hiring a financial advisor. Dave and I met with him on Wednesday for a couple hours for him to present our personalized financial plan, along with his recommendations. The data part was interesting, especially finding out that together we have a negative net worth.
But when it came to the “recommendations,” I started getting suspicious. He had picked several products in order for us to divert our monthly disposable/discretionary income and put it to better use. I agree that we need to invest whatever extra income we have, but as soon as I saw the front-end load fee of 5.75 percent on the mutual fund he was suggesting, a red light went off in my mind (thanks to Kevin for warning me). That didn’t even include the maintenance fee of 2 percent charged annually by the mutual fund company, and I’m sure there are hidden costs too.
Moreover, he was recommending whole life insurance. Luckily I had read a book that explained the difference between term insurance and permanent insurance. Whole life insurance is about five times more expensive than term because you’re buying both insurance and a savings account (basically money market which earns 3-5 percent returns). He said term insurance is bad because, while cheap, it gets exponentially more expensive when you hit age 60 or so. With permanent insurance, you lock in whatever price applies to you at the age you sign up. In our case, our premiums would be around $150 each since we’re young and healthy. “You’re not getting any younger,” he said.
But all the books I’ve read say don’t get permanent insurance because you shouldn’t mix insurance and investing. And I had dinner with a very financially minded friend who owns term insurance. She said when you’re close to retirement age, you can either afford the higher term premium or you won’t need life insurance at all. Our advisor never said you might not need life insurance if you’re financially independent and have your financial affairs in order. So that is one big strike against him.
We spent a while at the meeting grilling him about the commission-based nature of all the products he was recommending. “How do we know you don’t have a conflict of interest?” we asked. His answer was that he wants a long term relationship with us and he doesn’t work for free. Well, there are other pricing structures such as an hourly rate or annual percentage of our portfolio, but he didn’t mention that.
We almost signed up for his recommendations because we felt overwhelmed by all the planning we have yet to do, and we want an expert to handle it so we have more time to do other things. We should not spend too much time researching and obsessing over our finances. But something in my conscience or whatever made me hesitate, so we ended up asking the financial advisor for more time. He set us for an appointment next weekend. (Smart.)
I am so glad we didn’t sign up, because we would have been doing so out of fear and convenience, and because I started reading (devouring, really) The Bogleheads’ Guide to Investing (thanks to Kevin again for that one). This book is excellent. It’s written by people who don’t work for the financial industry and don’t have a vested interest in taking your money. The biggest lesson I’ve learned so far is that the life principles that generally hold true do not apply to investing. E.g. in life, you get what you pay for, it’s good to listen to an expert, go with your gut… but the complete opposite is what will ensure success in investing. Another lesson is that the financial industry doesn’t want the public to know the truth about investing – that it is really simple, and that nobody can beat the stock market.
This weekend my goal is to look into buying Vanguard index funds and figuring out how much we can afford to put in per month. I think there’s a $3000 minimum, so we might have to save up for that.
So much to learn!!!!!!!!!!
| Tags: money
Wednesday, March 07, 2007
One of my readers commented recently that the financial planner that made me cry might have been psychologically manipulative, trying to make me upset so I’d be more prone to buying his products. I think there’s a point there, but after reading some more on personal finances, I also think, if done right, the soul-searching that some financial planners make you do can actually be beneficial.
Yesterday I started reading Smart Couples Finish Rich by David Bach. He is best known for his best seller, Automatic Millionaire, published in 2003. He appears to have an empire of endless permutations of the same principles packaged for different audiences (women, couples, late starters, prospective homebuyers). Sprinkled throughout the books are little worksheets and diagrams marked with a “TM” symbol (my first clue that this is truly a commercialized author).
Despite the slick and polished exterior, David Bach’s advice has proven to be effective because of its layspeak and simplicity, at least through reader testimonies and reviews. So far in my limited foray into Financial Planning Land he is one of my favorite authors, but I know like with everything else I read, I should take what he says with a grain of salt.
That being said, Smart Couples Finish Rich made me cry. Again. The second chapter is all about defining your purpose as a couple because money in itself is meaningless; rather, it’s the personal values that money allows you to fulfill that matter. The hierarchy is “be,” “do,” and “have,” which corresponds to values, goals, and material possessions. Bach says people reverse the order and end up unhappy because they are not living their values, which causes stress and ultimately the destruction of marriages, families, and everything good in life. Before going on to the practical steps outlined in the rest of the book, Bach makes you define your top 5 values and write them on his (you guessed it) patented “Values Circle.”
Sounds gimmicky, right? But I think he has a point with figuring out what matters most to you. He gives an example of a couple who articulated their values. At first they said things like “I want to have enough put away so if anything happens to me, my family is protected,” “I want to lose 20 pounds” or “I want to travel and play more golf,” but, those being goals, he figured out the underlying values, among them security, marriage, health, freedom, fun, friends, and parents. He offers a long list with even more possibilities: spirituality, fulfillment, power, career, etc.
Once you figure out your values, all subsequent decisions flow from and answer to the values. Tying this back to the First Command planner in Oceanside, I think that’s what he was trying to do with the staircase and asking me “what’s important about [each response I gave]?” He wanted to identify my core values. He didn’t simplify them to the point of a single word, though.
I think mine are spirituality, relationships, health, freedom, and career/fulfillment. Maybe I’m being manipulated, or maybe I’m being taught something useful – or maybe it’s a fine line between manipulation and instruction.
| Tags: money, married life