In December 2006, I wrote a post called Learning how to save which put down in words what I had done to organize my finances the year prior (opened an IRA and rolled my previous retirement accounts into it). Since then I’ve been posting yearly updates (2007, 2008), recording the major financial decisions I’ve made as a way to encourage long-term thinking.

In 2009 I made one change. At the end of July I diverted the money from my paycheck that I was automatically investing in three index funds over to a “high” interest savings account at Schwab. I made this change primarily to bolster my emergency fund. As a plus, the market had risen so much since its low in March, I’d recovered the unrealized losses I’d weathered since I’d started investing outside of my retirement accounts.

Though I could be disciplined and regularly save something like 10% in cash, and 90% in stocks and bonds, in reality, sometimes I actually need cash to buy things, so it’s easier for me to alternate between investing, when that makes sense, and building up a little nest egg when I anticipate some major expenses on the horizon.

My IRA still has quite a way to go to regain lost ground, since most of my investments there occurred while the market was at its 2006/07 highs. Meanwhile, my Roth 401(k), which I began in September 2008, has been doing quite nicely, currently worth about 120% of its “cost basis”. Net-net, across all my investments, I’m about even, which is good, because at the end of 2008 I was kind of wishing my money was all just in savings.

One thing I plan to do in the next few days is rebalance my index fund portfolio, as the mix between stocks and bonds has gotten a little out of whack. And then I’ll probably shift the garden hose back to automatically investing in index funds once the money bin is shored up.

Update: Learning how to save, four years later

Or a cascading series of errors

Last night I had a platform release to help with, which begins at 7pm and takes about an hour. I don’t have much to do, but it helps for me to be on hand to deal with any problems that might crop up. It takes me about half an hour to walk home, and I got delayed leaving the office, so I wasn’t out the door until 6:20, which is cutting it pretty close. I figured I’d catch a cab (would be the 2nd time this week!) but every one was dark. Eventually I reached that point of no return (where taking a cab would just be silly), so I just hoofed it the whole way.

The side of the street where I usually park my scooter gets “street-cleaned” on Friday morning between 6 and 8, which means I have to remember to move the scooter to the other side when I get home from work on Thursday night. Then on Friday morning before I walk to work I have to move it back because our side of the street is a commute lane between 3 and 6 every weekday afternoon. This is a well-choreographed urban reparking ballet that I do EVERY WEEK.

Since I was racing home for the release, I didn’t have time to move my scooter across the street, so I made a mental note to ask my dear Stephanie to move it for me (or to do it myself later). Of course I promptly forgot all that after getting into things. Somehow I beat Stephanie home (she had an errand to run)—and even she noticed my scooter on the wrong side of the street, but by the time she made it in the apartment building and up the stairs, she completely forgot to mention it to me.

The release went well, but then we discovered an error in a config file that got pushed out to umpteen servers, so I was chasing down some lingering issues until after 10. Release nights don’t really feel like work, it’s mostly just hanging out online and watching the last 3 weeks of work go live. But it’s still work, so I stayed up a little bit later to compensate, to have some “me” time—which included listening to the Fresh Air program on Shepard Fairey and Mannie Garcia.

So this morning, I was in the shower, and my brain was totally chewing on something that annoyed me about what I’d heard on that program, and I was worried that if I didn’t write it down, I’d forget it all, so I started telling Stephanie the story to aid my own memory. Except this only got me more worked up. She left for work while I was still getting ready, and I figured I had a whole blog post worth of stuff to write. So I decided to take a little bit of time to get it out (I was up late working after all—I can show up a little later).

I pounded out this blog post on fair use, left a comment on another blog, and saw that it was around 10:15. As it takes me half an hour to walk in, 10:45 felt a little too late to show up, so I decided to scoot. Whereupon I discovered my first ticket of the day: $50 for parking in a street cleaning zone. Grrr.

I got down to Folsom where I usually park, and everything had changed. There was a new block of motorcycle parking without meters that was completely full. The several blocks of motorcycle parking along Main were totally gone (while they build the new Temporary Transbay Terminal). And even the little secret free spot where I sometimes park was now painted red. There was no place to park, partly because I was showing up late, so I circled once or twice, and eventually found a promising free spot at the end of some parking meters where another motorcycle was parked. Safety in numbers, right?

Fast forward to tonight, I walked out to my scooter, at the corner of Harrison and Embarcadero, and IT WAS NOT THERE!!! FUCK. I parked in the least obvious commute lane there ever was. Oh, except for that sign right above my head that said no parking from 4-7pm ANY DAY! I walked 3 blocks to where Stephanie was waiting for me on her scooter and told her that my scooter had been towed. How could this happen on the same day I got a street cleaning ticket?! My helmet was in my scooter, so she couldn’t take me anywhere. Eventually I caught a cab ($10) to the impound lot on 7th and Harrison, while she went home to dig up my license plate number.

Cost to free my scooter: $244.25

Ticket for parking in commute lane: $70

Total scooter-related fines: $374.25

Living in San Francisco: Pricey

Even though I could certainly afford to have someone help me do my taxes, I feel very strongly that I should not be forced by the government to pay someone to help me figure out how much I owe government. That and I consider myself a pretty sharp guy. This year though…I’m getting close.

What I really dislike about taxes is how they treat people like Turing machines. Add lines 1 through 3. Subtract line 5 from line 4. Multiply line 10 by 25% (.25) and enter the smaller of the result or line 7 above. Or my personal favorite thus far:

Are you filing Schedule A? If No: Skip lines 1 through 3; enter on line 4 the amount from Form 1040, line 38, minus the total of (a) any amount from Form 8914, line 2, and (b) if you are claiming the standard deduction, any amount from line 6 of the Standard Deduction Worksheet on page 35. Then go to line 5.

A sphincter says what? I literally had to go fill out another worksheet just to level up.

It’s worse than watching TV. I can feel myself getting dumber by the minute, obediently entering numbers I don’t understand, for reasons they don’t explain, trying to remember which line on which form the number I’m calculating refers back to. All the while I’m thinking to myself, why doesn’t a computer just do this for me!

Anyway, here are some examples of the tax fun I’m looking forward to this week:

• Due to an unexpected bonus I received in 2008, I over-contributed to my Roth IRA, which means I need to finish my taxes in order to figure out how much I should have contributed, so I can withdraw the excess (all at a loss, considering the market conditions) in order to submit yet another form along with my taxes.
• Like the previous 2 years, I get to fill out 2 extra forms (Schedule C-EZ and Schedule SE) just for the fun of having Google AdSense on my blog—which added ~$1700 to my gross income this year.
• I exercised some vested incentive stock options (ISOs) in 2008, which may or may not have any effect on my taxes or whether I might owe the dreaded alternative minimum tax (AMT).

To recap, in 2006 I started an IRA with Schwab. In 2007 I moved my money over to a “high” interest checking account, also with Schwab. It happened to come with a brokerage account which I used to start automatically investing in some large cap and bond market index funds on a biweekly basis. I also set some money aside in a money market fund.

Somehow I managed to time this move exactly at the point when the market was as it highest, in October 2007. Since then, obviously the world economy has been in a precipitous decline. Oh well, this is supposed to be long term right? And it’s not all bad, thanks to dollar-cost averaging. But it’s definitely not great (compared to say, you know, a near-zero-interest savings account).

So what did I do this year? Well in the spring, when it didn’t seem yet that financial apocalypse was upon us, I took some bonus money I’d received and used it to diversify into an international large cap index fund (SWINX). So I adjusted my asset allocation from 70% large cap and 30% bonds to 60% large cap, 20% international, and 20% bonds. I don’t include my money market dollars as part of this breakdown because I don’t add to it on a monthly basis (though I probably should), and because I consider it a fixed value emergency fund.

My thinking was that if the US market was headed further down the toilet (which is where it seemed to be going) maybe the international markets would help balance things out. What I’ve learned over the past several months is that when the US economy is down, it just drags the rest of the world down, thanks to globalization. So as far as my unrealized losses go, I’ve lost the most, percentage-wise, on the money I dropped on international companies.

The other thing that’s happened is that my bond investments have done a much better job of holding their own compared to my equity investments, which has caused the market value of my assets to be more than 5% off of my targets. So just recently I decided it was time to rebalance. This meant for the first time I sold shares, yay, unfortunately I had to do so at a loss, boo. But I used that money to buy shares of my large cap and international index funds on the cheap, which was kind of fun.

The other money thing I did this year was start a Roth 401(k) in September. This is neat because it means that the ceiling on my retirement savings was effectively raised from $5k to 15k. It also means that my IRA is now on ice, just hanging out and weathering the same economic storm as the rest of the world.

Update: Learning how to save, three years later

Back in May I created a Kiva account, and funded it with $100. At the time I was feeling especially fortunate, and wanted to give something back.

Kiva is this really amazing non-profit organization that makes it possible for anyone to make microloans to people in developing countries. The best part is that I get to choose who my $100 goes to, in as small as $25 increments. So I chose four different applicants, two in Cambodia, one in Tanzania, and one in Vietnam. I didn’t realize it at the time, but all four were women. (In retrospect I consider this just retribution for all the unspeakable violence that has been, and continues to be, perpetrated against women around the world.)

One woman needed a loan to purchase a cow to reduce farming costs. Another needed a loan to buy a motorbike to commute to work more easily. And two others needed loans to further expand their poultry businesses. I didn’t fund their requests in full, but I didn’t need to. Many other Kiva members contributed a portion of the loans. You can check out all the details on my lender page: who I’ve lent to, who else has lent to them, the status of repayment, etc. It’s really quite engrossing.

With the money that’s been paid back so far, including one loan in full, I was able to lend $25 each to two women in Peru to purchase animals. Which means I’ve been able to make $150 worth of loans, even though I’d only “invested” $100. Put another way: my $100 has done $150 worth of good in the world. This makes me really happy.

One of the things I’ve heard people say about Kiva is that it’s addictive. It’s true, I didn’t want to stop at the two Peruvian women. So I decided to add another $75 to my account so I could lend to three more people, an aspiring restaurateur in Peru who buys and sells scrap iron, another Peruvian woman’s poultry business, and a couple in Cambodia who want to buy a cow for breeding.

Here’s what my loan portfolio looks like:

I am so proud.