For the 2nd quarter 2006, I wrote that my 401k performance was negative. In the 3rd quarter 2006, I did better but not by much. At least it’s in the positive range. My personal rate of return for the period ending September 30, 2006 was: 3.54%.
Hope you’re doing better than that.

Lately I’ve been thinking of reducing my contributions to 401k to the minimum contribution dollar amount an employee needs to contribute to get the maximum employer match in order to pay off some home equity line of credit, which is at approx 8% or so interest rate. I’ve already maxed out the 401k in the past few years so I’m thinking that I can take a break until my higher interest line of credit is paid off. Is this a smart idea?

Wall Street workers took home nearly $300,000 on average last year as profits from trading and merger advising fueled record earnings, New York State Comptroller Alan Hevesi said.

Wall Street compensation averaged $289,664 per person, 5.1 times the average $56,634 for workers citywide, the comptroller said in a study released Tuesday. The highest-paid bankers and traders can command eight-figure pay packages.

Bonuses totaled a record $21.5 billion, or $125,500 per person. The securities industry paid out $48.8 billion, while generating $2.1 billion of taxes for the city, Hevesi said.

Source:
Wall Street average paycheck near $300,000, CNN.com

Since the last post, I’ve joined an investment club for young and aspiring millionaires, updated my net worth statement, and focused on work. My portfolio (401k, investment accounts, and bank account) was fairly flat when I last wrote, but the stock market has come back and is close to breaking 12,000.

Hope to catch up with you all soon!

• 20s who have had accounts since 1999 was $24,169
• 30s, it increased to $50,930
• 40s it rose to $91,848
• 50s had an average account balance of $127,766
• 60s was $140,957.

Are you on track with your retirement fund? I hope I get out of the negative territory for the next quarter!

Keep what you earn
“People love you today, but it’s off with your head tomorrow. I just keep it in perspective and never, ever buy into the lifestyle. I didn’t buy a house until I started selling records. Now I put my money into my business. Get what you need and a couple of things that you like. Everything else after that is just stuff.”

With that answer, he gained my respect. It’s refreshing to hear a celebrity in the hip hop world, where the more flashiness the better, saves up money before buying a home. With that thinking, I’m sure Ice Cube is financially free and can do what he wants rather than relying on his next hit song or movie.

Many students for graduate education focus on jobs and potential income for selection to universities, but in this day and age, a bachelor’s degree is the baseline for a ‘decent’ career. An article in today’s NY Times states:

Today the United States ranks ninth among industrialized nations in higher-education attainment, in large measure because only 53 percent of students who enter college emerge with a bachelor’s degree, according to census data. And those who don’t finish pay an enormous price. For every $1 earned by a college graduate, someone leaving before obtaining a four-year degree earns only 67 cents.

I found the last sentence interesting. I guess being a professional in NYC attracts other professionals and college educated people, so I don’t normally think about people’s educational background. I assume everyone went to college. I went to a top 10 university (according to recent rankings in US News & World Report), but I rarely think that I am smarter than anyone else. In fact, there are so many smart people around me that I feel that I’m normal in terms of educational background. And I certainly don’t make close to Investment Banking or Attorney dollars.

In fact, in the very same day, the NY Times featured an article titled “New York Area Is a Magnet For Graduates“. According to the article, in 2005, in Manhattan, more than 57 percent of all residents had at least a bachelor’s degree, up from 50 percent in 2000. Of course this brings up the issue of lack of affordable housing, lack of people who are willing to work hard labor jobs, and the decline of artistic or creative types in NYC. Considering that average apartment is over $1.2 million, that brings up my previous question, how do these people have so much money? If I didn’t budget my money and wasn’t aware of all the personal finance topics that the PF community brings to me, I would not be able to live anywhere near NYC. The income gap between the rich and poor makes me nervous that NYC will not be affordable for anyone but the top 1% of earners in the US.

Sources:

• Rank Colleges, but Rank Them Right, NY Times
• New York Area Is a Magnet For Graduates

What’s the absolute best time to purchase a ticket directly from the airlines? Turns out it’s Wednesday from midnight to 1a.m. in the time zone of the airline’s “home base.” (For instance, Delta is headquartered in Utah and United currently calls Chicago home.)

Why? That’s when the computer systems of most airlines get rid of the reserved but unbooked lower fare reservations. Most of us at one time or another have booked a reservation, then let it go without purchase. Snap-up these discounted fares right after this happens and you’re likely to get a significant discount.

I like using Kayak.com to search for airfare since they consolidate airline searches from one website. Thanks SeekingAlpha!

Related:
Saving on Airfare
More Airfare Saving Tools

Mimi Wong, a 61-year old widow claimed she was “looking for the last bit of glory in life.” Her extravagances are nothing new to Hong Kong, where there is said to be no shortage of big spenders. However, an Argentine dance instructor offering lessons there at a more modest rate of $70 per hour commented, “It’s just ridiculous. No one could actually take enough lessons to make it worth it.” Never mind the costs, dancing is serious business in Hong Kong and Wong is known for seeking perfectionism at any cost. She is now in court suing her instructors for the return of her prepayment following an embarrassing and threatening incident she suffered at the hands of Saccani at a mock dance competition. According to court documents Saccani shouted at her to “move your arse” and called her a “lazy cow” in front of fellow dancers. After this incident Wong came to realize the money involved for her lessons was “stupid,” “crazy” and “completely out of hand,” leading to a further falling out between them. Soon thereafter, she won a court order to freeze her instructors’ bank accounts. Although the publicity surrounding her obviously isn’t good, HSBC is standing behind its top Asia banker. A judgment in the court case is expected later this summer and in the meantime Wong is paying a new instructor $21,000 per month.

I know people can do what they want with their money, but this seems to be a case of ‘out of touch with reality’. I’m sure this banker has the means and money, but that’s a lot of lessons for 8 years. And at 61 years old, she’d be 69 years old by the end of her ‘lessons’.

I also took dance lessons with my fiancee before getting married so we look like we know what we’re doing. It was another wedding expense that I hadn’t anticipated, but it was well worth it. We had a friend who knew an incredible dance teacher who has been in those Gap clothing commercials a few years ago and in movies such as “Mona Lisa Smile” with Julia Roberts. He gave us the friends rate at $70 an hour. We had 6 lessons which was perfect for our first dance preparation. It was one more thing I didn’t have to worry about on the day of our wedding. It was well worth it in our minds. But then again, maybe that’s the way the super rich, like Mimi Wong thinks when she agrees to a $15.4million dance lesson…until she realizes that she paid enough money to feed a starving country.

I can’t believe that 2006 is 60% done!:

• 212 days elapsed (1/1/06 - 7/31/06)
• 153 days left (8/1/06 - 12/31/06)

For me, the end of July is a good time to think about my mid-year financial picture. It helps me assess what I’ve achieved and what I need to do in order to reach my financial goals. Here are some of the financial items I think about in July for the end of the year preparation.

1. Review 2006 income/salary (and how am I going to bump that number up?)
2. Compile tax deductions for 2006 by keeping a 2006 tax file
3. Review 2006 expenses and find areas to cut
4. Create and review 2006 income statement (aka profit and loss statement, or P&L)
5. Create and review 2006 balance sheet

I try to think of my financial picture like a business. Think of the balance sheet as the ultimate scorecard for your “business” at a fixed point in time (mid-year). The income statement shows money in (income, revenues, sales) and money out (expenses, costs) over a period of time, while the balance sheet is based on this equation: Assets = Liabilities + Equity. These two are really needed to understand the current and future conditions of your business.

I have to admit I still have to create my income statement and balance sheet, but it shouldn’t be too difficult since I’ve compiled my year-to-date information in a folder.

I’ve been happily married for three years. For our wedding, we spent $26,421, just under the average wedding today. I revisited our spreadsheet and my wife broke out the wedding costs between his, hers, ours. Here’s the breakdown:

• Hers: $13,943 (53%)
• His: $4,311 (16%)
• Ours: $8,167 (31%)
• Total: $26,421

I didn’t even notice that there was a breakdown, but it made me think about this. We both split the costs, so it didn’t even occur to me. When couples get married, everything is a joint cost, but there’s so much more to get for the bride:

• dress
• alterations
• underpinnings
• dress cleaning
• veil
• jewelry
• shoes
• hair and makeup
• flip flops (I’m told she needs this for walking around)
• bridesmade’s skirts
• bridesmade’s tops
• bridesmade’s shoes
• mother’s dress

For the groom:

• Tuxedo or black suit

Everything else you either own already or can borrow from someone (cufflinks, etc), and tell your groomsmen to wear their own black suit. Our joint expenses included the music, photographer, rehearsal dinner, invitations, marriage license, venue. So to answer my own question up above, to be fair, the wedding costs should be split equally, unless the parents want to impress their closest 200 friends (which didn’t happen for our wedding, thank god!). But brides need to think about so much more to look good for the groom. But if she’s looking good for the groom, shouldn’t the groom pay for it all? Now I’m talking in circles, but you get the idea.

Source:
To Avert a Fractured Fairy Tale, a Wedding Planner, NY Times, Published: July 23, 2006