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  • 06:00:10 am on May 29, 2009 | 4 | # |
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    The Transition

    Josh’s strategy has been clear from the start – and, with a slight ‘jump’ in Net Worth recently, due to a positive outcome on a trade (a.k.a. bet) and a stake in a pharmaceutical company, he should soon have the capital to do what he wants to do: start a hedge fund of his own. Anybody ready to throw their money in the ring, yet (7MITs aside, due to the 7 Golden Rules)? If so, why? If not, why not?

    _______________________

    At this point in our journey, it seems appropriate to graduate from the foundational principles of Money Making 101 and to immediately enroll in Money Making 201 activities. Similar to sequential classes in school, 201 principles are well rooted in 101 principles, so a strong foundation in Money Making 101 is imperative.

    The most important principle I’ve taken away from Money Making 101 is to keep my finances as simple as possible. I’ve determined to use only one credit card, and only for purchases related to my automobile, such as gas, parts and service (I just can’t pass up the 5% cash rebate). All other purchases are to be made with cash or debit card. Another financial amendment starting in June will be automatic deductions from my checking to my brokerage account, this will be the second most important deduction after my tithe.

    Speaking of tithing, I experienced a slight increase in my net worth this past month, it currently stands at approximately $450,000.  Obviously this has caused my required compounding growth rate to decrease, but after  exploring the housing options in Westchester County recently, I’ve increased my number to slightly under 9 Mil, leaving my required compounding growth rate around 53% (I guess this is an improvement from 170% not too long ago).  My date remains unchanged at 6 years, 6 months from now.

    To achieve 50+% compounded annual growth, I plan to start a hedge fund, possibly within the next year. Once the fund is established, I will consider myself partially retired because trading doesn’t demand much of anything I wouldn’t or couldn’t do if I didn’t have to work at all. As long as I have a computer, internet connection and phone, I could trade from anywhere, and frankly, the strategy I use doesn’t demand much research time. The assets I’m invested in currently have very little risk while potential future increase is large. I expect the managing executives of the company Titan Pharmaceuticals (the company I own a small stake in) to do as they recently described as “maximize the value of our current assets… for our shareholders while minimizing expenses”. The only viable option I see is for the company to be sold to the highest bidder and when the avenue for egress has been offered, I will sell my shares and start the hedge fund.

     
  • 04:43:38 am on May 11, 2009 | 19 | # |
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    April Spending

    Josh has come up with the honest truth about budgeting:” little purchases add up quick” … print it in B I G letters, frame it and hang it on your wall and you won’t go too far wrong …

    What can you add?

    ________________________

    So the month of April is over and I spent a lot of money. April is an unusual month for me because it’s the month my birthday lands on, so there was a bit of going out and living it up.  I expect May to be equally lean, mainly because I’m spending all extra time studying, I’m not obligated to go out for my birthday again until next April, and the maintenance for my car is up to date. During May, all the MIT’s have been instructed to use the 10-10-10 and 10-1-1-1-1 pricipal for all our purchases. I anticpate a reflection of this exercise in my May spending.

    Through this past months exercise, I’ve learned little purchases add up quick and it may be worth it for me to only use one credit card and use it only for emergencies.  I manage money on a “buy it as needed” basis, using mainly the credit cards which provide the most cash back (I’ve probably earned over $100 this year from my Discover Card) The problem is, the Discover bill comes in and it’s more then I planned, and now there’s none left to save.

    I’m thinking it may be worth surrendering the regular use of credit in order to better track my available cash. This will increase the pain felt when spending that I need to experience in order to pass up those small unnecessary purchase a.k.a going out to lunch.

    April
    12.75 Baskin Robins
    4.65 Quiznos, lunch
    124 car insurance
    63 cell phone
    36.2 gasoline fill up, shell premium @ 2.35 dollars/gallon
    200 tihe
    15.5 dry cleaning
    4.29 lunch
    2.5 lunch
    33 party
    160 party
    33.32 groceries
    300 church offering
    20 cleaning
    46.36 tools
    13.27 lunch
    75.68 alignment
    7.84 lunch
    200 tithe
    299 kaplan question bank
    23.6 ac recharge
    27.4 kinkos
    50 tax fee
    20 cleaning
    3.76 groceries

    total  =  1776.12

     
  • 03:00:41 am on April 22, 2009 | 6 | # |
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    Financial Tune Up

    After Jeff’s ‘quick and dirty‘ post became an intriguing set of discussions around his business / investing aspirations, I hope that you are finding these exercises worthwhile following along with?

    Even better, if you find an issue raised – or financial situation disclosed – that has some parallel with your life, you should feel free to weigh in with a comment, opinion and/or question … the more the merrier!

    Josh is also master of brevity, but it appears that he has made a major – and, uncomfortable – change to his ‘retirement savings’ strategy: basically eliminating it entirely, in favor of a more direct / hands-on investing/saving strategy. Is he wise to forgo the tax advantages and potential employer match?

    ______________________

    The latest improvements made to increase my net worth faster (while maintaining the ability to access the capital before I’m 59) is to drop the 401(k) bi-weekly contribution to 0% while adding the after tax cash to my bi-weekly saving and investing/trading. It has been difficult to accept this route because I know I will be forfeiting the free employer contribution, but it’s clearly best since I plan to withdraw the funds within 7 years.  I will continue to actively trade the SDRA account, from the research I’ve done, it seems once I leave my current job, I can withdraw the vested funds with 40% going to taxes and  penalties…at least I get the bigger piece of the pie.

    The current exercise of recording all monetary expenditures for the month of April has been enlightening. I clearly need to spend less money and will continue to work toward minimizing unnecessary purchases.

    It is also clear I need to increase my income as soon as possible. Over the next 3 years (approximately) I’ll be studying and taking tests’ to earn membership within the CFA Institute. I hope within the next year to land a position in finance, leading to an analytical position and finally portfolio management. Or maybe I’ll just open my own private equity group, we’ll see what happens.

     
  • 06:29:20 am on March 28, 2009 | 11 | # |
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    The Bottom Line

    Josh puts it right: “we are coming to the end of our net worth exploration and have generated a fairly specific map of where we have been financially and will soon be plotting course for the terrain ahead” … well summarized, Josh! 🙂

    What’s Josh doing right/wrong? What can you recommend?

    __________________

    cash-flow-josh2It seems we are coming to the end of our net worth exploration and have generated a fairly specific map of where we have been financially and will soon be plotting course for the terrain ahead.  My networthiq graph shows the progress made since February 2008.  Since then, I’ve put into practice what I learned on this blog and others. There isn’t much I would have done differently, I just wish I would have done everything a lot sooner.  Saving, investing and actively learning about investments are some key actions I would have preferred to start in Pre-K rather then my last semester in college.

    I still need to work on basic money management. Better budgeting for items I need to buy in order to maximize the amount I’m able to save and invest. This also includes money management for my internet business. This topic is approaching in the curriculum I’m studying in order to become a member of the CFA which has taken up ALL of my available time to do anything other then study, so learning more on that subject should solve two problems at once.

    Before moving ahead in this experiment, lets record our current position.

    Current yearly net earning from full time job: $31,300

    Expenses include:

    • Cell phone:  $720 per year ($60 per month)
    • Car insurance:  $1500 per year ($125 per month)
    • Gasoline: $ 1440 per year ($30 per week at worst)
    • Food + other: $3600 per year ($300 per month)
    • Cleaning Expenses: $480 per year ($40 per month, this is my share of a house cleaning service)
    • Charity: $4800 per year ($400 per month, this is 10% of my gross income)

    Total Expenses = $12,540

    Income – Expenses =  31,300 – 12,540 = $18,760 per year (this does not include my 401(k) savings plan, which is automatically subtracted from my bi-weekly check and acts more as a retirement safety net.)

    My Net Worth as of March, 2009

    • Cash: $1,000 (I like to keep this around, just in case there’s a good poker game…just kidding)
    • Stocks: $5,000 (this was down to about $3,000 in February, but has now recovered to about $5,000)
    • Retirement: $12,000 approximately in a SDRA.
    • Cars: $8,600 (just replaced the Audi with a 2002, 330xi. The Audi was totaled in a car accident, had to put in about $1500 out of pocket after insurance gave me what they thought the car was worth + cash from selling the crashed Audi + help from family.)
    • Personal Property: $1,000 (TV, computer….stuff)

    Liabilities = $0

    Assets – Liabilities = $27,600

    Recording this information is in itself exciting and motivating.  I look forward to reading the suggestions, comments, and questions of those participating, following along or just stopping by.

     
  • 03:31:23 am on March 14, 2009 | 7 | # |
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    Liability Shortage

    I said to the 7MITs that this would be a short post – and, Josh hasn’t failed us 🙂 – as I want to wrap up ‘current finances’ as quickly as possible and start working on bridging the gap between the NOW (i.e. your current Net Worth) and your future (i.e. your Number) … in fact, Josh’s post starts that process …

    … also, Josh is fortunate, in that he hasn’t (yet) accumulated much in the way of debt. Still, any advice to keep him on track as the ‘requirements’ of life start to mount up?

    _______________________

    There is a shortage of liabilities in my financial world.  I have no car loan, no mortgage, and no children (for record, I believe all children are a blessing). My monthly bills include phone ($60), car insurance ($110) and food ($100). My internet business has been cash flow positive since December and let’s not forget how I live rent free.

    I have been considering taking out an unsecured loan from the bank. Maybe a line of credit that I can tap as I see fit. This would be a way to leverage my good credit and excess capital without waiting for savings to accumulate. This would also force me to “save” every month in the form of paying off the loan, while getting hit with 10% interest.  My argument is that this is the time to invest in stocks, get as much in as you can now.

    I’ve observed a pattern the last few years that I believe will predict the next great top of any widely known security. My grandmother has an uncanny ability to spot the top of any market and I theorize the bottom too. In 2005, she would quote Oprah saying, “God isn’t making any more land, that’s why real estate is going up.” This means it’s time to sell. And now when I tell her I’m investing in stocks, she tells me, “stocks are doing bad,” that is my signal.

    So I have very little in liabilities, but I plan to create some at the same time as creating some rapidly appreciating assets.

     
  • 02:21:38 am on February 26, 2009 | 7 | # |
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    The Fund

    Josh explores 401k v Roth IRA’s …. I’m not sure of the specifics around these things, but I presume one taxes money out but not going in and the other is the opposite. I wonder if Josh can tell us which one is better?

    Also, by switching to a self-directed retirement account, Josh can indulge his itchy trigger finger and trade with his retirement money. Is this a good thing? Common wisdom would shout “NO!!!!!!’ …. but, where do you stand!?

    _______________________

    Like many people employed privately in the United States, I have a employer supplemented 401(k). The match used to be 100% up to 8% of your salary but was recently cut to 50% match up to 8% of your salary.

    When I first started at my current position I was contributing 20% pre-tax money to the retirement account, but have since  decreased the contributions to 9% and soon plan to remove it completely once the fund is fully vested in about another year. At that time I will begin contributing post tax money to a Roth IRA.  I haven’t worked through the calculations but I’m estimating a large savings once I retire and begin withdrawing the funds from the Roth tax free, instead of the 401(k).

    The factors involved include large growth in fund equity, approximately a 10% early withdrawal fee,  high future taxes and a long period of withdrawal (70 years +).

    The current equity in the account is around $12,000, I invested about $11,000 into one particular company this past week and expect it to increase over the next few months. Once I take profits from this trade, I’m going to explore withdrawing the funds from the 401(k) account and depositing the funds into an account which can be withdrawn tax free (due to the recent government stimulus spending, I’m anticipating high taxes in the future).

    The performance of the 401(k) fund was terribly poor until I switched from mutual funds into a SDRA (self-directed retirement account), with around 50% loss at the time I switched.  I’ve made one trade since then, realizing a 10% gain. I’m expecting the company I’m in right now to do well, getting me closer to the point where I started, minus the gains I should have incurred since then. Either way,  I’ll let you know how it goes.

     
  • 01:15:22 am on February 9, 2009 | 8 | # |
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    bmw-snowboardThe Driving Machine

    The image is mine … since Josh likes BMW’s nd snowboards, I thought that this image of a BMW with matching snowboard would be appropriate 🙂

    From Josh’s comments on Ryan’s post, the BMW ‘fetish’ comes as no surprise 🙂 A caviar taste requires a Greek shipping magnate’s bank balance … let’s see as this experiment unfolds how we can help Josh along the way. In the meantime, I think that Josh has a sensible strategy about buying used … read on and you’ll see

    _______________________

    The vehicle I currently drive is a 2001 Audi A4 1.8T, manual transmission. Ever since I began driving, I’ve always liked Audi’s but preferred BMW’s, unfortunately due to the price of newer BMW’s, I’m driving an Audi and have been  enjoying it quit a bit since I bought it in August of 2008.

    This car has definitely come in handy with the snow storms this winter and since the backseat drops down, I can easily fit my snowboard in the trunk for impromptu ski trips. Not to mention spending about half as much on gas compared to my last car, a 1995 BMW 5-series V8 which I sold in July for $3700.  The proceeds from this sale plus earned money went into my current vehicle and necessary repairs.

    I bought my current vehicle in Queens, NY from a New York City police officer for $2600. At the time of purchase the exhaust system was severed at the flex pipe which is right below the exhaust manifold and the clutch was slipping. The main cause for concern is obviously the clutch because the cost to replace it (not that much if you do it yourself, but without a garage and lift, it’s near impossible). I found the car on Craigslist, called the gentlemen on Friday, offered him $2600, and he told me to call him Sunday. If no one had bought it by then, he would consider the offer.  Sunday came, I called, went down to Queens and bought the car.

    Once I got it home I had the exhaust fixed the next day and the clutch done two weeks later, both repairs together cost $1300, leaving the final cost of the vehicle at $3900.  One thing I would like to note about this purchase is, I enjoyed buying a used car with a bad clutch. When buying a used manual transmission, there is always some ware on the clutch but unless it is slipping, you don’t know the extent. Since it was an obvious factor in the value of the vehicle,  I was able to negotiate the cost of replacing it into the price of the car. Now that the repairs are completed and the car has 110,000 miles, the value is in the ballpark of $5000.

    Selling the car and taking public transportation would not be worth the hassle where I live in rural New York, nor would it fit my lifestyle of ski trips to the Catskills and visiting friends in  New Jersey and Connecticut, so losing my wheels is not an option.

    The next car I purchase will probably be a new BMW 3-series.  I like the dual turbo 335xi or the new M3 (a loaded 335xi or a base model M3 both go for around $55,000), but by the time I get tired of the car I have now, who knows what I’ll be into.

     
  • 02:03:55 am on January 27, 2009 | 15 | # |

    Residential Planning

    Short and sweet … Josh is still on the ‘there IS such a thing as a free lunch’ gravy train. My parents had to push me out the door when I was 27 😉

    Josh asked me if he needed to post, since he was still living the good life … I left it up to him, but now I can see that I’m glad he did choose to post: I’m wondering why Josh’s folks have 100% equity in their little rental condo?

    Deal or no deal??

    I have some ideas brewing … what about you? What advice do you have for Josh?

    _________________________

    I currently do not own my own home, nor due I pay rent, so the option of using stored wealth from property and using it to invest elsewhere is not currently an option.  My plans for the near future does not involve owning or renting, but it’s likely I will soon be managing a rental property for my family. The property is a one bedroom co-op which is paid off, the maintenance is about $650 per month and we expect to rent it out for around $1,100.

    I definitely plan to take Scotts’ advice and spend ample time and recourses locating the best possible tenant. This extra time spent in the beginning will hopefully pay off later. I’m looking forward to taking part in this project because it will expose me to a new form investing (real estate), even though it doesn’t spark my interest as much as stocks do.

    If you have any advice, please don’t hesitate to leave a comment.

     
  • 01:50:23 am on January 14, 2009 | 17 | # |
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    The Game Plan

    Sounds like Josh’s future is pretty much set: stocks, stocks, and more stocks … I see the next generation of hedge fund managers right here. Just to fill you in on the profit potential, a friend ‘in the business’ recently related the story of his self-made hedge-fund-manager friend who told his 8 y.o. daughter (who had to travel alone for the first time) “you will be traveling on a plane that has strangers on it” … she had only ever traveled by private plane before!

    _________________________________

    This is ridiculous

    In order to achieve My Number, I must realize high percentage gains to my net worth, approximately 170%, and according to Michael Masterson’s Seven Years To Seven Figures, the only way to get to 50+% (that’s a really big plus sign), is by starting my own successful business.

    I started an e-commerce business in late 2007, got it off the ground in 08, and am looking forward to profits in 09, but this is not the business I believe will launch my net worth to substantial levels.  The business responsible for that is buying other business’ when they are cheap and selling them when they’re over valued, this is also called stock investing, and is made possible by centralized market locations where people from all over the world gather to participate, most of them virtually through the Internet, like me. 

    I believe earning an MBA from a prestigious college will better qualify me to take a position in the financial sector, but this is not imperative. You could be a grade-school drop out and get hired by a firm or start your own and actually attract investor’s if you can show and prove consistent profitable trades. This is what I’m focusing on, as well as studying to sit for the GMAT (Graduate Management Admission Test), this is what I like to call “covering all the bases”.  Of what I’ve read thus far, a year’s worth of trading is usually sufficient to prove you can be an asset, I work on this everyday in some form.

    After completing the exercise Adrian wrote about recently, I ended up with basically what I’m doing now, minus the e-commerce business. It’s amazing how I have a lot more fun researching biotech stocks and trading than learning marketing techniques and editing HTML code.  In that light, it also comes to no surprise which one is currently profitable and which is not.

     
  • 03:37:00 am on December 5, 2008 | 6 | # |
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    6 Years, 11 Months To Go

    Josh: I’ve always wanted to know a hedge fund manager! Hang on, I already do 😉  Given the current market, it’s probably a good idea that Josh is preparing to ‘soak’ a few years up in preparing to start his own hedge fund: getting an MBA and the likeof course the acceleration curve will then need to be HUGE unless the internet businesses have kicked in some serious bucks, as well

    __________________________

    My current financial situation is not too bad. I’m not in any debt, I make a comfortable wage, one that should be increasing soon due to a promotion, and my expenses are relatively low. I recognize the unique situation I’m in and plan to take advantage through the following ways.

    I’m currently pouring all excess money into my online business. It’s costing more then it should right now because I’m basically learning what avenues are effective by trial and error. I believe these costs will eventually be recouped as more and more orders come in, which is what happened after I tweaked the advertising campaign. I’m committed to seeing this business through till it becomes profitable; I think a realistic time frame for profitability is six months.

    The only possible way I can accomplish the goals for my business at the rate I’m currently working at, is because I still live with my family. This luxury allows me to save on lodging every month, which is money I put towards my business and other investments. After disclosing this information in a previous post, there was some concern about how much I was inconveniencing them. I can assure everyone, the only reason it works is because it’s convenient for all parties. It’s actually so convenient that I’m considering…

    Graduate school is also an option at this point. NYU offers an MBA program which I could complete in about three years time and attend as I work at my current job. I would pay for the program through my salary, in the hopes that the on-line business would supplement the huge gaping hole in my income that $1,400 a credit would create. Although this seems to be working backwards, it would set me up, in an idealistic way, to eventually open my own hedge fund.

    Check out my NetworthIQ profile.

     
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