budget categories

percentages of major spending categories from the latest US Bureau of Labor Statistics (2003) Consumer Expenditure Survey.

• Total food and drink 14.1%
• Housing 32.9%
• Apparel and services 4.0%
• TotalTransportation 19.1%
• Healthcare 5.9%
• Entertainment 5.0%
• Personal care products and services 1.3%
• Reading .3%
• Education 1.9%
• Tobacco products and smoking supplies .7%
• Miscellaneous 1.5%
• Cash contributions 3.4%
• Personal insurance and pensions 9.9%

Roth IRA conversion

From Tom Blakes' blog on the subject of Roth IRA conversions...

the clearest discussion of taxation and non-taxation of Roth IRAs that I have seen is at the IRS website. http://www.irs.gov/publications/p590/ch02.html#en_US_publink10006523

Tom does a great job of explaining the IRA to Roth IRA conversion process.
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bonds and income

We were talking about having a cashflow without having a job. Real estate, pyramid schemes, stock dividends and bonds are the usual topics for consideration.

There has been plenty of talk recently about how the government is going out of its way to protect the bondholders of the failing financials. It is high time I learned more about bonds. John Hussman's piece today addresses the current mess and ends with a note about bonds.

the potential downside in the S&P 500 from these levels could approach 30-40%. That is not a typo, and it is not a possibility that should be ruled out. ... what matters is the long-term stream of deliverable cash flows that investors can actually expect to reach their hands. It's exactly that consideration that makes it clear that we will sink deeper into this crisis until we observe debt restructuring on a large scale. If we don't restructure the debt, the debt will fail, because for many borrowers, the cash flows aren't there, and it is not possible to service the debt on existing terms.

the overall price-volume behavior still appears more consistent with a standard bear market rally punctuated by periodic short-squeezes. ... [In bonds,] it is too early to purchase distressed corporate debt

from Financial Reality

• I’m a very conservative person and I don’t want a second job managing my money. I’d like to put my money someplace safe, like bonds and just leave it there. Is there any problem with that?
  Yes, there is a problem with hoping money will grow on trees. Where ever your money is now, it is likely earning more money for someone else than it is for you! To make your money work for you, you need to take an active role in managing your retirement investments. We provide the information and analysis for you to make informed decisions about portfolio activity. We even tell you what we are doing with our own money as a real life example of how to apply the information.
  
  
• I don’t know much about money management, but I don’t want to pay someone else to manage it for me. What is a low cost, easy to manage strategy for me to manage about $800,000?
  The amount of time that you put into managing your retirement investments does not have to be the equivalent of a full time job, but it should be regular. Think of it as paying yourself. How else can you earn money in the comfort of your own home? If you track the hours you spend and compare the returns from actively managing your retirement investments against some fixed standard that represents your current “buy and hold” strategy, you can calcualte your “pay” for this work.
  
  
• There are a lot of financial terms and concepts that I don’t understand. Do I have to learn all that before I get started?
  Fortunately, there are lots of great tutorials and reference sites on the web. We have selected some that complement the discussions throughout the web site. We advocate “just-in-time” learning. As a new subject comes up, you can also find information on the web using the topic as keywords for Google or Yahoo! searches.

  We suggest that you read the information and follow along for a while. Make notes. Practice keeping records of portfolio changes and how you would use the information for your own retirement investments. When you are familiar with the process and the terminology, you can decide when and how to utilize the information.

• Any suggestions for getting started?
  We like the idea of “core and explore” - commit a small percentage of your total investments (2-10% of your resources) to exploration. This will allow you to determine how a new strategy, asset class or investment will fit into your portfolio with your needs and risk tolerance.

http://alamedalearning.com/reality/about/faqs/

how long is this going to take?

How long do I need to spend working on this financial stuff? Well, it depends...

Everyone is different - different needs, different expectations, different interests, different urgency...

Spending some time every day probably works best for me. I like to subscribe to a couple of information sources - blogs, newsletters, publications that send out emails. I check my email several times a day. When there is something in my email and I have a few minutes, I read the financial stuff and follow up on a few links.

I also appreciate having conversations about interesting financial topics. This doesn't require divulging personal information. But it does keep the interest up.

For many years I have maintained a paper portfolio that I have been tracking sporadically. It is interesting, but it really doesn't tell me anything that I want to know. Stocks go up and down, but it doesn't show actual income that would have been generated, as some of the holdings would have provided income as dividends.

Next... Find a couple more personal financial news sources to subscribe to, and plan to be more diligent about spending 15-20 minutes each day on this. Recruit a couple of friends to participate to make this more engaging and broaden my thinking and investigation - I love to have a "topic" to research and report on.

planning financial literacy education

I thought there were some good, relevant ideas in the Beginning Your Evolution post on the Rich Dad Education blog.

The recommendation for having a plan is an important starting point. As with most things, having some sort of a plan save times and helps get something accomplished. Getting a financial education is important. So here goes...

Objective - to gain the knowledge and confidence to take responsibility for my own money management if the need should arise. I hope this doesn't actually happen anytime soon, but it would be nice to be more prepared in case it does. In a collaborative environment, investigate, discover and share fundamentals, strategies and processes to get to a reasonable knowledge and comfort level with personal finance and money management.

As of today, I have basic understanding of many aspects of personal finance and money management, but need to work on learning and understanding techniques and strategies for actually doing it. There is plenty of work to do to achieve my personal financial goal. So here's the plan.

• invite a couple of friends to join in researching and discussing our individual and group progress as blog postings. Like a book club.
• identify some topics that would help expand my current understanding - investment planning, exit strategies
  
• research and share information about these topics - resources, newsletters, blogs
  
• read more financial and money management news and information to gain a broader, more up-to-date understanding of world financial situation - The Economist,
• find credible, trustworthy writers and analyst to read regularly
  

what am I investing for?

In the post What Am I Investing For?, Kim Kiyosaki talks about capital gains and cashflow. There are a couple of points raised.

Having a plan before investing is critical. Is this investment made to generate cashflow (income)? Is this investment going to provide satisfactory returns?

Another idea - once a dollar has been committed to investing, it isn't to be used for anything else. Specifically, cashing in investments to pay for emergencies or worse, discretionary purchases defeats the whole purpose of investing. Once that money is take out of the investment pool, you are back to square one. It is really hard to put back money once removed. It may be impossible to make up for the lost investment opportunity.
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