Forget the Hybrids, check out Diesels

Kiplinger's has a pretty good article on Diesel vehicles and how you can recoup their mileage savings from the upcharge the dealer charges for the diesel engine option quicker than hybrids. I recently had a discussion with a good friend on this exact topic as he was considering purchasing a recently used TDI (diesel) Volkswagen. It makes perfect sense to me. I'd especially like the Mercedes E series diesel. Hey, one can always dream!


Business Week Cover Story: Jim Cramer and Mad Money

Jim Cramer and Mad Money are the subject of the October 31, 2005, Business Week cover story. The story, titled "The Mad Man of Wall Street", provides a day a in the life of Jim Cramer, as well as a little bit of his background and the success of Mad Money for CNBC. It is a fairly long article (at least it seemed like it), that is unbiased and worth the read.

I still don't particularly like Jim Cramer's Mad Money or the effect it could have on the general investor as I have pointed out before. This article really drove home the point for me that Jim Cramer is a Wall Street and stock picking FREAK!

PS - One thing I was missing from my original post on Jim Cramer was his viewership which Business Week says is 384,000 as of October.

Carnival of Personal Finance #19

This week's Carnival of Personal Finance is being hosted over at Consumerism Commentary.


I am Oxymoronic

This will be first in a series of posts on why I would currently describe myself as oxymoronic.

As I was driving home from work this week, I realized that I don't do what I say and vice versa. I almost feel as if I am deceiving my readers, so lets "right this ship" and expose myself.

The first thing that comes to mind regarding myself being oxymoronic is two-fold in regards personal finance. One is the fact that I have a rather large amount of credit card debt (over $10,000). However, I have read almost every program/idea that has been published regarding paying down debt. I have even advised friends on how to pay down debt and have kept them in check by following up with them. I just can't seem to get on a program and stick with it myself!

The second reason is that my personal networth is $6,149.40. Seeing as this is not that high, I almost feel as if I have been lying to my readers. Don't get me wrong, I know I haven't been lying because I haven't said anything either way. But, it is now on the table and everyone knows (please make note of it FMF!) Yet, I still feel that up to this point I have been somewhat dishonest about it.

So there you have it. One (wait a minute, it turned into two) of the reasons I feel oxmoronic is now out in the public. So what am I going to do about it? Well, I figure right now that I should develop some short- and long-term goals that I would like to accomplish regarding this problem:

1) Make a conscious effort to spend less than I earn
2) Post more on debt elimination and personal finance that will increase my networth

1) Pay down all of my credit card debt by December 2006
2) Post the % of my debt paid and provide a monthly update to my networth


Carnival of Personal Finance #18

The 18th Carnival of Personal Finance was posted on Monday over at My Money Blog. Take a look when you have a moment, as there are some good posts. Due to my absence, I wasn't able to submit a post for this week's Carnival.

Update - Out Sick

Just to let my readers know, I'm fine, but a 3 day weekend followed by a severe cold caused me to be unable to post. I'm still recovering from the cold but should be able to resume my normal posting at Financial Fruition. Thanks for your understanding!


Personal Finance Software or Excel Spreadsheets?

There is a good Q and A regarding financial software over at the Chicago Tribune website. Unfortunately there is a registration required, so let me piece this together for you...

A reader asked the following, "You're always recommending that people track their expenses, but I never seem to be able to keep at it. Is there any software that would make this process less tedious and cumbersome?"

The author, Humberto Cruz, answered the software part of the question by mentioning Quicken and MS Money. Well, of course, those are the leading personal finance software titles. Let me add however, for those Mac users out there, that MoneyDance is an excellent program that is designed for the Mac, unlike Quicken and Money which are converted from the PC platform to Mac.

Mr. Cruz, then stresses the importance of tracking your expenses, stating "before you rush out to buy either, you need to understand what will be required of you, and why." He tells the reader that recording information and tracking your expenses is made easier via Personal Finance software, but you still have to use the software and input your cash purchases and do it regularly. Buying the software can aid in tracking expenses, however you still have to sit at the computer and put some time into it. I couldn't agree more, it's tough work, but software can help.

The most interesting part of the article to me was the last two paragraphs:

Finally, rather than dedicated personal finance programs, the computer-savvy consumer might consider using the versatile Microsoft Excel spreadsheet program, which is often included in the software pre-loaded in many computers when you buy them.

For this group, I recommend the book "Manage Your Money and Investments with Microsoft Excel," by Peter Aitken, which includes a CD-ROM containing all templates covered in the book.

I have discussed before how I like to use Excel spreadsheets for budgeting and expenses. However, I have never heard of this book. Has anyone else used this book to set-up your personal finances in Excel? Do you have any other favorite books on Excel that could be used for Personal Finance purposes?


Carnival of Personal Finance #17

This week's Carnival of Personal Finance is up at Hello, Dollar!. Check it out when you have a chance.


Honda May Up Cost of Pet Ownership

I do not currently have a pet. My building will not allow dogs and I am allergic to cats. However, in the future I plan to own a larger dog (yet to be decided between a Lab or a German Shepard). Back in June, Free Money Finance found an article that referred to the monthly cost of pets. He put some straightline calculations together:

Let's put a few numbers to this. If a pet costs $400 per month and lives for 10 years, that's $48,000 (not to mention what you could have earned on that money if you had invested it). If the pet lives for 15 years, that's $72,000!!! Even if the pet only costs $200 per month, that adds up to $36,000 over 15 years. Yikes!!!

These were not even future value calculations. If you instead took $400 and put it into an investment vehicle that earned only 6% over 10 years, you would have $65,551.74!! Up that to 8% expected return and you are over $73,000.

According to an article at the Denver Post, Honda is debuting a pet friendly vehicle at the Tokyo auto show later this month. They are trying to promote a safer car for dogs (and other pets) as their research shows that a major danger for pets hitching a ride in the car with you is that they may get ejected from the car during a crash. There is no figure on how much this vehicle may cost or if it would ever reach the United States. However, it would no doubt impact the cost of pet ownership for those that would trade their vehicle for this one if and when it is released. But, if you were already planning to buy a car at this time it would not necessarily cost you extra, but could sway your decision to buy this new vehicle.


Monte Carlo Simulations: An Overview

I have pieced together what I think is an overview of what to know about a Monte Carlo simulation. These have become quite a popular tool for financial planners to gauge how well your portfolio and your financial decisions will do over time. One of the best things about the Monte Carlo Simulation is that it does not take the market average and assume, let's say, an 8% return over time. Instead, it tests your portfolio and financial decisions against a 1,000 or more hypothetical returns on what the market has historically done. Therefore, in the simulation you may see years of downturn in your return with the upside prevalent as well. This helps an investor to stay focused and understand that the market is not always going up, but you can plan your decisions and portfolio so that over the long run your returns will be just fine.

To be more in depth, most people when they estimate what their portfolio will do over time build an Excel spreadsheet to project the results and make assumptions about how each part of the portfolio will perform.

For example, let's say there is $100,000 to invest and the assumption that the asset classes will produce the following annualized returns:

Stocks 9%
Bonds 5%
Cash Equivalents 2%

Now let's assume that the allocation is:

Stocks 70%
Bonds 20%
Cash Equivalents 10%

If all the investments follow exactly this pattern for ten years, the portfolio would then be worth $213,722, for an annualized return of 7.89%.

This sounds realistic. But for in-depth planning purposes is really only one of a wide range of possibilities. In real life, stocks often return much more or much less than 9% a year. Bonds and cash equivalents also fluctuate, however they are usually less dramatic.

So there could be wide variations around this deceptively specific estimate. But how wide? How good, or bad, could it reasonably get?

Imagine a bad, but by no means impossible, scenario: over those ten years, stocks lose 5% a year, bonds lose 2% a year, and cash equivalents are flat. Then the $100,000 stake would be down to $68,253, for an annualized return of -3.75%.

In a good, but not extreme scenario, stocks gain 12% a year, bonds gain 6% a year, and cash equivalents gain 3% a year. The $100,000 would have grown to $266,665, for an annualized 10.31%.

Reality will probably be somewhere in between, but this is not a given. And how can you quantify the chance that your stake will reach a point that will get you to your investment goals?

A Monte Carlo simulation provides the answer. This estimation technique allows for the wide range of possible percentage changes in each asset class—and, therefore, the even wider range of possible portfolio values over your time horizon. Using thousands of scenarios, Monte Carlo simulation charts the relative likelihood of portfolio values. This enables a person to estimate the probability of reaching their goals. It should not be the only piece of financial planning, but is an important part of the overall picture.


Carnival of Personal Finance #16

This week's Carnival of Personal Finance is up at Canadian Capitalist. Check it out when you have a chance.