Google vs. Microsoft: Guess Who Will Dominate The 10s?
"Microsoft today is alot like IBM in 1985" oh touche!! Alot of truth there though I have to admit, as well as
the rest of the article.
I wonder why they would let a guy focused on start up/VC partnership go?
That doesn't make any sense; the irony is that's (one of many?) Microsoft's weak spot.
I remember back in 2000 when Steve Ballmer was talking about cloud computing; unfortunately no one trusted Micrososft back then with the concept and so it sort of withered.
So really, Google isn't the first to come up with this, it's just that they are the first to be successful with it (on a broader scale than, say, Salesforce.com).
But the customer's relationship with Google is totally different than with Microsoft, and that plays itself out in how well they have done with web - based apps aka Cloud Computing.
Pay Attention If You Have RSUs, NQSOs, ISOs, or ESPPs
One of the nice perks about working for a company that includes stock incentives is the opportunity to plan the purchase and sale of these incentives to align to your family's personal finance goals.
We've had all 4 (RSUs, NQSOs, ISOS, and ESPPs) and here's my strategy and advice for anybody that has them:
Have a plan! Don't just let them collect dust!
The risk of having no plan?
You may see their value stall, or worse, significantly decline, and/or pay higher taxes in the future and guess what boys and girls
that locomotive is heading our way FOR SURE (higher taxes).
An argument I consistently hear is that the stock should be held and not sold because if you sell it than you lose any upside on it.
Can you say "Behavioral Finance"?
Well who told you you have to spend it once you sell it? That is silly, you should be turning around and applying the proceeds towards your financial goals you have already established for yourself and/or family.
Not having a map of
what you want to do with this stock and when is just asking for a whole bunch of randomness.
A significant unacknowledged risk that I see over and over again is the unsystematic risk that comes with undiversification. Holding onto so much stock in one company is a huge source of unsystematic risk and who needs that?
Not you, for one.
One strategy that has worked out well (so far) for us is to sell over a timeline, which in essence is Dollar Cost Averaging, but in the opposite direction (stock goes up the day after sale? no problem! will be selling more in a month and may sell at a high so who cares?).
Every amount of stock that we have received from an employer has been tagged with a goal (or, given a job, if you want to look at it that way) and a timeline for selling (NOTE: this doesn't mean you have to sell everything, it just means have a plan for your stock, even if it's to fund part of your retirement).
The goals have tended to be for buying a house or for going towards home improvement projects.
Some other goals though have been to get diversification in Non-Retirement Assets through selling sections of stock and buying index funds or ETFs with the proceeds.
That strategy has lowered our unsystematic risk and has allowed us to be less emotional about employer stock
(NOTE! It is crucial that you take the proceeds and turn around and buy appreciating assets NOT depreciating assets, otherwise you just frittered away part of your future).
An added layer to this sense of urgency has been provided in the last year in the form of impending tax increases to pay for this nightmare of unfocused stimulus, health care for all, Cash for Clunkers, and grants for algea farms.
There is no way in Sam Hill we are going to be able to avoid increased Income Taxes. I can say with no doubt whatsoever you are going to see increased FICA, OASDI, ordinary income and capital gains taxes.
You are about to get spanked hard by higher taxes so you better brace yourself and prepare for how you can take advantage of the tax rates you currently have.
And that's how RSUs, NQSOs, ISOs, and ESPPs will be affected:
Timing the excercise and sale of your employer stock will significantly affect your tax bill and thus your bottom line profit on employer stock.Right now we at a minimum benefit from 15% long term capital gains rates which apply to any holdings of 12 months and 1 day.
But that is an Endangered Species so now is the time to start planning the excercises and sales of stock not already planned out.
I don't know why people have such apathy when it comes to employer stock, it really drives me nutty, because this is such a huge benefit and one that is the equivalent for so many people of being given an Aston Martin for Christmas but not knowing how to take care of it let alone how to drive it so might as well put it in the garage and throw a cover on it.
Bad Idea.
Assign stock to a financial plan, identify excercise/sell intervals aligning to that plan's timeframe, execute, and you will avoid 'coulda/woulda/shoulda'.
2009 USAA Dividend: $55
USAA distributed 2009 dividends this month and ours is $55.
They used to send checks in the mail, which were psychologically fun to get (yay, a check in the mail!) but a hassle to process (fill out the deposit slip, sign the back of the check, put it in an envelope, go to ATM).
Now they are distributed electronically and applied to your policy balance if you prefer (which I do).
So that indirectly gave us $55 more this month because our insurance decreased by that amount.
And who wouldn't like that?
Lifestyle Creep 2009
The economy was in the crapper, people were losing their jobs every which way to Sunday, losing their homes to foreclosure...but not Bear and I.
Because we are very hard core about cash flow (no debt outside of mortgage) and savings (25-30% in savings), we were able to take this last year in stride.
Actually we let the notch out of the belt quite a bit, come to think of it.
The ways we had Lifestyle Creep:
1) Grover. After driving my Acura Integra for 17 years, it was time to call Uncle. It just couldn't take the hill and garage anymore (especially after breaking it's tie rod October 2008). So we went Big on New. We bought a 2009 LR2 in June. We took on a 3.99% that we pay off in full next month, and could have paid all in cash, but did a 6 month for 'emergency' contingency.
2) Big Dinners: Well after a $40,000 purchase what comes next? We started going out to nice dinners much more frequently. Whether with friends or just us, we really enjoy going out to a nice dinner and it's something we are happy to be able to start doing again without feeling like we are compromising something else.
3) Microdermabrasions: Yeah, really like these. $140 a pop and I love every second of them.
4) iPhone and subsequent Data Plan: Not a big one but still $30 more a month than before. I love my iPhone!
5) Slimline PS3 with Blue Ray: Bear bought this and switched out our old DVD player. Blue Ray, very nice!
6) Upgrades for Bear Truck: Bear's 10 year old truck has aged really well and it's time to baby it a little bit (Bear is going to keep it for several more years). He started upgrading some of the items on it this year and although the are expensive they are worth it.
7) Gardener for Rental Property: We hired a gardener for 6 months this year to take care of the rental house. The front and back look very nice as a result and even though this cost us $150 a month it did give us peace of mind knowing that the landscaping was being taken care of.
I don't see us having much more Lifestyle Creep in 2010. We will be saving our money for a kitchen remodel we want to do in 1 1/2 years and so that will be a big source of motivation to keep it contained.
We were able to take a notch out because we are hitting all our savings targets and are even going to ratch it up starting next month (increasing IRA contributions to maximum).
Since we no longer have a Car Fund that we are throwing extra savings at, the extra savings will go into general non-retirement accounts, which is the bucket for kitchen remodel, emergency savings, and other home related projects.
I feel pretty good about 2009 and how we fared, and feel very optimistic about what 2010 has in store for us. Yes we got a little bit crazy last month but so what, we were still able to pay everything in full and not compromise our savings goals.
Merry Christmas, Here's a 4 Digit Surprise Bonus
Dang if I don't think Bear's Employer is awesome.
When I logged into our checking account this morning I spotted a bigger-than-should be balance.
"What's that from?" I thought. It hadn't logged as a separate line item yet, so I couldn't tell what it was from.
"Monkey, I have some good news! What's your favorite kind of news?!?" said Bear, all happy with himself.
I thought wha....well there are lots of news that are my favorite kind of news, but Bear insisted on having me guess.
"Come look" so I did.
An email from the CEO thanking the employees for the year, and informing them that they would be receiving an extra 'thank you' bonus.
Right now.
Gotta love that!
I immediately said "Bear, that's great! How much would you like for your Bear Fund and what do you want to do with the rest?"
I tell you, Bear is a fantastic bear.
He only wanted 10% for his Bear Fund and wanted 10% to go to charity.
He said I could have the rest for a new handbag, but I decided to put 40% in the non-retirement accounts and then the remaining as 'extra' to leave in checking account.
He was right, this is definitely one of my favorite kinds of surprises!
Great Seeing You, Can I Move In?
A few years ago I got back in contact with someone from school, F. It happened via a relative that ran into F. She had gotten F's contact info and given it to me, and so I contacted F.
"Hey girl!!" and so it went.
I haven't done a good job through the years of keeping contact with high school and college friends.
When I look back, they were clearly closed chapters (too abruptly?) by moves on my part right afterwards.
After high school I moved 2 time zones away to college, and only went back once a year.
After college I moved back to NOLA, but then a year after that moved to the way opposite direction, where I have been ever since.
In all that, I lost contact with people. Mostly my fault, as I definitely went through bouts of thinking 'new chapter new life'.
And so, whenever someone from those life periods contacts me, I am delighted.
So it was with F.
F has some family here...he had grown up here.
F had had a bit of turbulence in his adult life since I had seen him last.
2 marriages (at the time). 3 kids (at the time). Serial low level, low paying jobs.
It seemed (seems) he has a new job every year, sometimes more than once a year.
He abruptly got married one month after meeting wife #3 and promptly had a baby (baby #4).
F's kids from prior marriages were bounced around a little bit, and I saw it as none of my business, although I had to fight not judging it (Fathers, your kids need you, period. I don't give a crap what your relationship is with the Mother, those kids are your priority until they are launched as adults, NO EXCUSES!!!).
Oops, where was I?
Anyway, F's kids ended up here with their Mom, with a little bit of help from F's family.
F was in town recently visiting his family (and his kids) so I made a point of making ourselves available when he was here.
I was looking forward to seeing him after all this time (20 years!!) and reconnecting.
So we did.
Then yesterday I got an email....letting me know that 1) he lost his job (again), 2) he wanted to move here after all and 3) did I have room in our house for him to live in until he got on his feet here and could move his family here (wife #3 and baby #4)!!!
-!-
December Balance Sheet: Up Over $7k
It's definitely nice to see the Balance Sheet up this month, even if it isn't as much as the prior months.
Look at me now, not being happy just to have a positive month.
Our non-retirement accounts and retirement accounts are starting to recover % wise which is really nice to see.
Nowhere near where they were minus contributions since last Fall but what are you going to do, be mad forever? Well that doesn't do anybody any good.
So that's where this month is.
Next month we start putting $1,000 in IRAs and we increase HSA amount (by whatever amount maximum is indexed to, right now I can't remember what the number is).
I am greatful for the fact that Bear and I are on same page financially and that neither of us are doing money things that are not discussed first.
Bear was asking me today what I wanted to do in the next couple of weeks.
I said, "Honestly? I am kind of sick of spending money every time I turn around, I just want to enjoy the things we already have lined up for the rest of the month and call it good.".
I am glad we are able to put money aside with every paycheck and really look forward to next month where we also pay Grover off.
Another House Pulled Off The Market In Our Neighborhood
This one went up for sale about 4 or 5 months ago....just noticed today the For Sale sign is gone. It did not sell, who knows if it ever even got any offers?
This makes more than 1/2 the houses I see going up for sale in my immediate area (within 6 blocks) being taken off the market instead of selling.
4 weeks and $3130 Later
"Why don't we just go downtown and go shopping this week? You still want a new handbag, don't you?" says Bear.
"Well yeah, of course, and we are going to the
Men's Half Yearly on the 26th, for...socks...and...jeans..." I say.
"It seems like we have been holding back and I just want to go spend money!" said Bear.
"ok, well, with what? Because we have these savings goals and are tapped out because of our crazy spending this last month...come here....look at this month's credit card statement".
I have told Bear that we got Crazy this last month but it hadn't quite sunk in.
So I pulled it up.....
And his eyes got as big as saucers.
It was a very long list of alot of fun and alot of stuff.
"My Gaw, is all that really $3130? I can't believe it" and so he started manually adding it up.
When he got to $2k he realized "I am only 1/2 way down the list....ok ok...I get it."
It was sobering for him, and it's not like he has his head in the clouds and just leaves all money things up to me, but it really hit him like a 2x4.
"No wonder people are in debt!" "How does everyone afford all these large lifestyles, when we just spent $3130 just by letting out the belt a notch or two?"
And there it was.
We further chatted about, yep, this is exactly why I am a bird dog with the cash flow, and why we have never had a carrying balance on a credit card in the 10 years we have been married (sans his legacy debt he brought with him when we were married but that he paid off 1 1/2 years later).
We are blessed to be able to pay these things off in full every month without sacrificing other savings goals, as we usually have more disposable income in November and December, and those are expensive months for us.
But it really is all too easy to start to have fun that costs money and buy stuff that you really really want.
Nothing wrong with any of that as long as you are meeting your pre-set savings goals for yourself and your family.
Bear's Employer Has Profit Sharing AND A Pension Plan
When Bear started with new employer Spring 2008, there were many goodies that neither of us had been exposed to with prior employers.
RSU (Restricted Stock Units).
Profit Sharing Plan.
(Defined Benefit) Pension Plan.
However, the pension plan information was confusing, and I didn't think it applied to Bear.
But, in looking over retirement accounts this morning, I saw a link for 'Pension Plan'.
'What's that?' I asked myself.
'Bear qualifies for Pension Plan?'
I remembered it from all the paperwork when he was first hired, but it wasn't very straightforward and was hard to understand.
So I clicked on the link.
And there it is!
Bear's in the pension plan.
Not vested, but shows when he would be.
This plan serves as a 'floor' for when the Profit Sharing Plan isn't sufficient for any given year (and in the Employer's history the profit sharing has always been > 7%).
So this is exciting, since 1) the Profit Sharing is way way more than what other companies provide as a company match to their 401(k), and, if there ever is a year in the future where it's insufficient, a floor is provided to meet their internally established minimums for retirement accounts.
Wow, I haven't ever even heard of this!
It's obviously meant to placate those that were in the Pension Plan prior to Profit Sharing, and they must have included all employers because that makes it more equitable (although that's a total guess on my part).
Either way, I am super impressed.
The benefits and compensation (incl. stock) at Current Employer far outweigh the benefits and compensation at our (I worked there too) Prior Employer (Microsoft, I'm talking to you).
After A Year You Aren't Going To Care How Big It Is
...I mean the ring, what were you thinking?!?
I have 2 female relatives who are on the brink of getting engaged.
They are all about The Ring.
Size (at least 1 carat) and price.
I've never understood this: Money spent now on a stupid rock is money you won't have for a house, savings, retirement accounts, paying off debt, after you get married.
Please find me a woman who says "Gosh, we are so in debt, I can't afford to quit my job to stay home, I'm still paying off student loans....but ohhhh....look at my wedding ring!"
Doesn't happen.
It has nothing to do with him showing how much he loves you: He asked you to marry you him, right?
That's not enough? No one notices The Ring. We talk about our houses, kids, pets, jobs, careers, vacations....The Ring never comes up. EVER.
So maybe, just maybe, if it is so important to you that you have 'at least a carat', maybe think about why?
First, it's massively superficial of you. Second, you are sacrificing your financial future for your vanity.
Very few men in their 20s/30s are financially established enough to afford more than $5-10k for a ring.
By financially established I mean they are maxing out their retirement accounts, have no debt, have a 6 Month Emergency Fund, and the down payment put aside to purchase a house.
Putting that pressure on them is super uncool; it's the equivalent of them asking you to get a Boob Job to prove your love for them.
Just Improved The Rental House Cash Flow By $25
...but in a very stupid way. USAA renewed the fire insurance on the rental house and increased the price (again).
In 7 years it's gone from ~$383 to ~$739 annual cost.
That's a 1.9 times increase (almost double) in 7 years!!
So I called.
And it turns out I had wrong square footage on house *hand wave* and had a $1,000 deductible (vs. $2500 deductible).
So after those 2 modifications I brought it down to ~ $420 annual cost.
Much better (thanks USAA)!
So that's a saving of $25 a month on the current rate, so I improved our cash flow on the rental by that much a month!
Which is great, and of course means yeah I need to do a better job of reviewing our insurance policies every year!
When Should You Start Social Security?
The (literally) million dollar question. And one that, depressingly, most people think should be 'as early as possible'!
I personally suspect Social Security is not going to 'go away', as so many people seem to think it is.
My hunch is that as there are less and less workers to pay for those receiving benefits, the tax (currently at 7.65%) will be increased and/or the income cap (currently at $106,800) will disappear.
Just like most things, delaying the benefits pays off for people who can otherwise afford not to start it until later and who are healthy (2 big criteria).
This is a great article on the process one needs to go through to determine when to start.
Buying Land Can Really Smack You In The Backside
"We don't like Seattle anymore, we want to move", they told us. "The rain here is driving us crazy and we don't have roots here, so nothing is keeping us here".
Sounds fine, right? Except for one thing:
They made a huge bet on raw land 7 years ago.You likely know the type: They want to make some (fast) money, and think they are onto something that no one else is.
No goal attached to the investment aside from a vague desire to make a quick profit.
There's virtually no such thing with raw land....which is what they bought.
Raw land in the mountains.
They bought it with the intent to develop it. As in, build cabins on it.
So they started and quickly realized that raw land 1) doesn't produce income but 2) costs a whole lotta money (taxes, infrastructure development, permits).
Now they have discovered that, along with this life change (wanting to move to a different state), the state government has notified them that
they can't tap wells on their property, because the water table is lowering.
Erm....that makes their land pretty much worthless (hard to develop land that has no water access on it).
I definitely feel for them, as this is a significant hindrance to their plans, but only reinforces the wisdom in always, always, always having a goal behind your investment.
It's not enough just to buy an asset because you want to make some fast money (duh, who doesn't want to do that? Guess what it's just luck if it happens).
You have to attach some meaning to it, something larger, something with significance to your future.
Otherwise, when it dips in value, you are just going to get upset about it and want to sell it.
I hope it works out for them; this land just seems like a big anchor to all their plans.
