Evaluating Historical Financial Asset Class Returns (Part 2 of 2)

I’m off on a little camping trip, so I’m proud to allow Larry Russell, a fellow blogger, to contribute.  Part 1 was published last week.

Post-World War II economic expansion from 1947 through 1968 using inflationary dollars

Inflation was quelled by a post-war recession. The immediate post-war inflation spike ended with a drop in inflation of -1.2% during 1949. This immediate post-war downturn saw the value of stocks fall by 8.3% in 1946. For this reason, the chart below begins with 1947 as stock markets recovered and began an upward march for two decades through 1968.

Post-World War II Economic Expansion 1947 through 1968 inflationary dollars

Between 1947 and 1968, there were four years in which stock values fell measured year-over-year: -1.2% in 1953, -10.46 in 1957, -8.8% in 1962 and -10.0% in 1966. Nevertheless, during the other 18 years of this period, stock values rose. In 14 of those years, inflationary stock values increased by at least 10%. Moreover for those 14 years of double digit stock appreciation, 6 years experienced stock appreciation of 10% to 20%, 4 years experienced stock appreciation of 20% to 30%, 2 years experienced stock appreciation of 30% to 40%, and 2 years experienced stock appreciation exceeding 40%, including one year exceeding 50%.

Clearly this post-WWII economic expansion graph using inflationary dollars, shows that stock returns dominated cash and bond returns. Stock appreciation was dominant to the point that any possible appreciation for bonds or cash hardly registers on this inflationary dollars chart. While the inflationary value of the original stock dollar moved up by a factor of 18, the value of cash rose by just 73% and bonds by just 53% over these 22 years.

Post-World War II Economic Expansion from 1947 through 1968 using real dollars

This post-WWII economic expansion graph uses real dollars, rather than the inflationary dollars presented in the graphic above. Over these twenty-two years, the purchasing power of the initial stock dollar increased by ten-fold, while the purchasing power of both cash and bonds fell actually fell. Over this period, the purchasing power of cash fell by -3% and the real dollar value of bonds decreased by and even greater cumulative -13%.

Post-World War II Economic Expansion 1947 through 1968 real dollars

Escalating inflation and increasing economic stagnation from 1969 through 1981 using inflationary dollars

This inflationary dollar graphic for the 1969 to 1981 period demonstrates the increasingly caustic impact that sustained and increasing inflation can have to all asset classes — especially to stocks. Asset values measured in inflationary dollar increased over most of the period, yet initial one dollar invested in stocks dropped below one inflationary dollar in 1969, 1970, and again in 1974.

The fact that throughout this period that CPI line rises above the cash, bond, and stock asset classes means that all asset class did not maintain purchasing power in the face of consistently rising inflation. Clearly, the real dollar graphic below will tell a more accurate story about asset valuation.

Escalation of Inflation and Increasing Economic Stagnation 1969 through 1981 inflationary dollars

Escalation of inflation and increasing economic stagnation from 1969 through 1981 using real dollars

This real dollar graphic for the 1969 to 1981 period is particularly helpful in understanding the negative inflationary impacts in relative terms between the cash, bond, and stock asset classes. Initially, yields on cash (3 month treasury bill) rose slightly above inflation, but eventually lost a modest amount of purchasing power during the second half of the period. At the end of these thirteen years, the initial dollar invested in cash was worth $.95 in real dollars.

Bonds also rose in value above inflation in the 1971 through 1973 period, but they fell in value more severely from 1977 to 1981, as annual inflation rates escalated. By the end of this thirteen year period, the initial dollar invested in bonds was worth only $.65 in real dollars.

Compared to cash and bonds, increasing inflation had a more substantially negative impact on stocks in the beginning and in the middle of this period. However, relative values for stocks improved during the last several years, despite the escalation of inflation. This trend reversal reflects, in part, the ability of firms to raise prices along with inflation. By the end of this stagflation period, the initial dollar invested in stocks was worth $.78 in real dollars, trailing the purchasing power of cash, but exceeding that of bonds.

Escalation of Inflation and Increasing Economic Stagnation 1969 through 1981 real dollars

Stock and bond bull markets as inflation recedes, including the Dot Com mania, from 1982 through 1999 using inflationary dollars

Inflation was finally defeated in the early 1980s, through harsh monetary policies and an associated recession. A two decade period of relatively high economic growth and high stock appreciation followed. The 1980s and 1990s stock value growth was comparable to the post-WWII expansion period from 1947 through 1968. However, unlike 1947 to 1968, the last two decades of the 20th century was also a bond bull market fueled by falling interest rates and a growing economy.

Stock and Bond Bull Markets, Inflation Recedes, Dot Com Mania 1982 through 1999 inflationary dollars

Stock and bond bull markets as inflation recedes, including the Dot Com mania from 1982 through 1999 using real dollars

When the 1980s and 1990s are viewed in real dollars, it becomes more obvious how stock value appreciation rates differed between the two decades. In constant purchasing power terms, the initial stock dollar grew to be worth $2.89 at the end of 1989 and to $11.30 in 1999.

Bonds and cash appreciated more steadily in inflation-adjusted terms without the “birth of the Internet” growth inflection point that stocks experienced in 1994. For bonds, the initial bond asset class dollar grew in real terms to be worth $2.16 at the end of 1989 and to $3.28 in 1999. For cash, the initial cash asset class dollar grew in real dollar terms to be worth $1.34 at the end of 1989 and to $1.60 in 1999.

Stock and Bond Bull Markets, Inflation Recedes, Dot Com Mania 1982 through 1999 real dollars

Dot Com crash and recovery, Credit Crisis, Great Recession, and recovery from 2000 through 2013 using inflationary dollars

Because we have all lived though the most recent economic period, it is obviously fresh in our memory compared to any of the earlier historical periods discussed above. The dot com crash was followed by an anemic recovery pumped up somewhat by increasingly unsustainable debt. The Credit Crisis — induced by completely irresponsible financial industry mortgage underwriting, deceptively cleaver financial engineering, and toxic mortgage debt derivatives — broke the global banking system and quickly impacted the real economy, leading to the very ugly Great Recession.

Stock prices bottomed in March of 2009 and have recovered to record levels measured by some stock market indexes. The slow revival of fragile economic growth has been facilitated by extraordinary monetary steps taken by central banks around the world. Even though stock markets have recovered, both consumers and investors are generally shell-shocked, and our economic, financial, and monetary systems seem far from whatever “normal” is.

During this period, bonds have been in the ascendancy and falling stock values have generated massive quantities of stomach acid. However, the bond versus stocks relative performance gap had closed substantially by the end of 2013. During the past year or two, one pervasive financial media meme has been the end of the bond bull market and the expected rise in interest rates that will negatively impact bond values. And, oh by the way, cash earned nothing during this period and ended slightly below inflation, if that really needed to be pointed out.

Dot Com Crash and Recovery, Credit Crisis, Great Recession, and Recovery 2000 through 2013 inflationary dollars

Dot Com crash and recovery, Credit Crisis, Great Recession, and recovery from 2000 through 2013 using real dollars

This real dollar chart for the latest period tells a similar story to the inflationary graph above. Because inflation has been relatively low and steady throughout this period of two crashes and two recoveries, making asset value adjustments for changes in CPI do not change the story of what has happened. Most people just hope that we are done with all this financial crisis excitement for a very long time.

Dot Com Crash and Recovery, Credit Crisis, Great Recession, and Recovery 2000 through 2013 real dollars

Conclusion

Viewing the relative 85-year historical performance of cash, bonds, and stocks broken down into these five major thematic periods tells a long-term story of “see-saw” investment performance between the primary financial investment asset classes.

During these first and fifth sub-periods of relatively high economic adversity, bond assets and cash held their purchasing power far better than stocks :

    • Stock market crash, Great Depression, and World War II from 1928 through 1946
    • Dot Com crash and recovery, Credit Crisis, Great Recession, and recovery from 2000 through 2013

During these second and fourth sub-periods of relatively strong economic activity, stocks appreciated in value far more than bond asset or cash assets:

    • Post-World War II economic expansion from 1947 through 1968
    • Stock and bond bull markets as inflation receded, including the Dot Com mania from 1982 through 1999

Only during this middle (third) sub-period of stagflation were comparative asset class returns mixed and relatively close to each other, when compared to the other four major sub-periods:

    • Escalation of inflation and increasing economic stagnation from 1969 through 1981

Several things do stand out, when one looks at the long-term historical data in this manner:

    • There have been extended periods when one or another asset class is generally ascendant or descendant.
    • Even within periods that seemed generally to have favored one asset class over another, there been significant trend reversals in comparative asset class performance.
    • In the two sub-periods when stocks have been ascendant, their appreciation multiples have been very high in both inflationary or real dollar terms. This largely accounts for the cumulative dominance of stock performance across the entire period.
    • A broad, long-term, but unpredictable picture of reversion toward upward trending return averages is presented for bonds and stocks. Obviously, the upward trending performance averages differ dramatically between bonds and stocks, while cash has barely exceeded long-term inflation.

The selection of beginning-points and ending-points for these five periods was arbitrary and driven by historical hind-sight knowledge. Nevertheless, these five periods do present a long-term, cyclical pattern. These previous five extended periods alternated or see-sawed between “good and bad” stock appreciation episodes.

Given that the most recent period exhibited relatively poor performance, going forward can we now expect an extended period of relatively high stock asset class appreciation? The answer is either an emphatic “no” or a perhaps a more wishy-washy “maybe – maybe not,” which really means do not count on it.

A statistician would complain about the paucity of data points, the pitfalls of data mining, etc. The problem is that historical data is solely informative. It can never be predictive. Expecting stocks to continue an extended bull market — beyond the post-credit crisis and Great Recession recovery that we have already experienced — is just one of a range of future scenarios. History knows nothing about the future, and neither do you nor I.

Securities history is not predictive regarding any particular aspect of the future, but historical returns and price volatility do illustrate the varying risk premiums that the various asset classes have paid over time. The only sane response to the uncertainty of investment risk and reward across asset classes is to diversify broadly and thoroughly.

Even then, each investor is challenged to determine how much to allocate to cash, bond, and stock securities. At one extreme, one could hold all cash, but history tells us that cash pays only a very small return over inflation. At the other extreme, one could hold all stocks, but history tells us that one needs a strong stomach and iron will to endure price fluctuations in pursuit of the higher risk premium that has been paid to equities.

Each individual investor and all investors in aggregate must face the future with complete uncertainty. All investment crystal balls are really completely opaque for both professional and amateur investors. Despite theories, models, and firmly held beliefs about the future, any belief in predictability is largely delusional.

The more certain any future event is to a larger number of investors, the larger the shock to the system when an improbable “black swan” presents itself. The factors that gave rise to the mortgage derivatives driven credit crisis of the past decade represent just another major delusion that later was made plain to investors.

Nevertheless, I do hope that this graphical review of the past 85-years of U.S. asset class performance has been illuminating. Understanding the historical context of relative financial asset class performance at least provides some reference points for deciding one’s investment strategy in the face of complete uncertainty about actual future events.

Larry Russell, the author of this investment returns article, is also a very strong proponent of investment cost reduction. While there are no reliable strategies that will beat the market, reducing investment costs to a minimum ensures that investors will keep the highest portion of their gross returns. Individual investors do not need to spend their lives paying tribute to the financial services industry without receiving commensurate benefits. Larry helps investors pull the plug on excessive investment fees through his free and paid personal investing books and articles.

Copyright 2014 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Evaluating Historical Financial Asset Class Returns (Part 1 of 2): Cash, Bond, and Stock Market Returns With And Without Inflation

I’m off on a little camping trip, so I’m proud to allow Larry Russell, a fellow blogger, to contribute.  This is a long article (but with lots of great information), so it will be split into two parts.  Part 2 will publish early next week.

Introduction to evaluating historical financial asset class returns with and without inflation

Very often, long-term historical U.S. asset class returns for the primary stock, bond, and cash financial investment asset classes are presented as:

    • graphics with cumulative long-term returns,
    • simple historical averages, or
    • dense tables of numbers

These approaches can be less than satisfying, because the relative performance of asset classes has varied over time depending upon the financial, economic, monetary, political, and inflationary situation within major sub-periods.

In this article, first I first present 85-year asset class cumulative returns graphics to illustrate this problem. Then, I break down this longer period into five major sub-periods that illustrate how asset class performance has varied depending upon the conditions of that period.

We begin by looking at cumulative U.S. stock, bond, and cash asset class returns from the beginning of 1928 to the end of 2013 with and without inflation. Then, because cumulative stock returns completely overwhelm those of other asset classes graphically, we will look at just U.S. bond and cash returns from 1928 to 2013 with and without inflation.

Later, we will break down 1928 to 2013 into five distinct periods:

    • Stock market crash, Great Depression, and World War II (1929 through 1946)
    • Post-World War II economic expansion (1947 through 1968)
    • Escalation of inflation and increasing economic stagnation (1969 through 1981)
    • Stock and bond bull markets as inflation recedes, including the Dot Com mania (1982 through 1999)
    • Dot Com crash and recovery; then Credit Crisis, Great Recession, and recovery (2000 through 2013)

Major economic, political, and securities market events influenced my choice of 1947, 1968, 1982, and 2000 as the breakpoints in splitting 1928 to 2013 into five periods. No attempt was made to make these five periods be of equal duration. The focus was on selecting distinct periods that could be described by the major economic, political, and securities market events that characterized them.

For the period represented by all graphics, it is assumed that one dollar was invested in each of the U.S. cash, bond, and stock asset classes at the beginning of the first year. No additional funds were added thereafter. Any change in asset value over time represents the total annually compounded gross return (pre-tax without investment expenses) for that asset class. Annual asset class returns include changes in asset market value plus reinvested interest and dividends.

For some of these breakpoints, perhaps one could argue that they should have been made a year or more earlier or later. Being overly concerned about a precise break-point year tends to miss the point. By breaking this 85-year period into five shorter periods, we can more effectively see graphically how the stock, bond, and cash asset classes performed in relative terms. Should you prefer a different year as a break point, simply view the adjacent graphics, note value changes for nearby years, and then make mental adjustments to a particular graphic.

This article includes a total of 14 historical U.S. asset class returns graphics. Seven graphics are provided in terms of inflationary dollars and a corresponding seven in real dollars. For each period discussed, the first graphic presents asset class values using inflationary dollars. Then, the following paired graphic provides the same information in real dollar terms adjusted for inflation. Real dollars represent constant purchasing power over time. (Note that on the screen, the background color of all inflationary graphics is lighter blue, and the background color of all real dollar graphics is darker blue.)

Concerning the U.S. annual data for stock (S&P Index), bond (10 year Treasury Bonds), cash (3 month Treasury Bills), and inflation (U.S. urban Consumer Price Index), several sources were consulted including the Bureau of Labor Statistics, Standard and Poors, Damodaran Online (Dr. Aswath Damodaran, Professor of Finance, New York University Stern School), and Online Data (Dr. Robert J. Shiller, Professor of Economics and Finance, Yale University).

Primary U.S. asset class returns from 1928 to 2013 using inflationary dollars

Over very long periods and especially during the second half of the 20th century, cumulative stock returns have been so high in relative terms that they have dwarfed bond and cash returns. Yet few investors have the luxury of holding only stock investments for decades hoping to capture higher stock returns. Even committed buy-and-hold investors with a high tolerance for investment risk sometimes need to draw cash down their investments to fund unplanned negative cash flow during their working careers.

Note also that academic research has demonstrated that even highly risk tolerant investors tend to benefit from holding at least some minority cash and bond asset positions over time. This is especially true, when there is uncertainty about when an investor might need to draw down some of their equity assets to fund negative cash flow. Unplanned cash flow draw-downs tend to be correlated with the loss of income associated economic downturns, and these downturns tend to be highly correlated with stock market sell-offs.

This 1928 to 2013 inflationary dollar graphic illustrates how stock asset class returns have dwarfed cash and bond returns. One dollar invested in stocks at the beginning of 1928 through the end of 2013 had a cumulative gross total return factor of over 2,500 measured in inflationary dollars.

Cumulative stock returns have been so high in relative terms that this graphic makes it appear that cash and bonds have barely appreciated over this long period. Furthermore, relatively high asset appreciation in recent decades makes it appear that stock investment returns only began to diverge in the mid-1970s to leave cash and bonds in the dust. Later graphics will demonstrate that this was not actually the case.

Primary U.S. Asset Class Returns 1928 to 2013 inflationary dollars

Primary U.S. asset class returns from 1928 to 2013 using real dollars

This graphic presents the same cumulative long-term cash, bond, and stock returns, but the data have been adjusted for inflation. One dollar invested in stocks at the beginning of 1928 through the end of 2013 had a cumulative gross total return factor of about 190 measured in real, constant purchasing power dollars.

In addition, this real dollar chart now makes it seem that stock returns began to diverge from cash and bond returns in the mid-1950s rather than in the mid-1970s, which was suggested by the earlier inflationary dollar graphic.

Primary U.S. Asset Class Returns 1928 to 2013 real dollars

Primary U.S. asset class returns without stocks from 1928 to 2013 using inflationary dollars

From the two charts above, clearly we can learn something about cumulative long term U.S. stock returns, but nothing about cash and bond returns. Since stock returns have been so overwhelming in relative terms, one approach is simply to exclude stock returns if one wishes to understand better relative cumulative cash and bond returns over this 85 year period graphically.

The graphic below indicates that one dollar invested in 10 year U.S. Treasury bonds at the beginning of 1928 through the end of 2013 had a cumulative gross total return factor of about 64 measured in inflationary dollars. For cash returns one dollar invested in 3 month U.S. Treasury bills at the beginning of 1928 through the end of 2013 had a cumulative gross total return factor of about 20 measured in inflationary dollars. Note that over this period urban CPI inflation eroded the value of a dollar by a factor of about 13 times.

Primary U.S. Asset Class Returns without stocks 1928 to 2013 inflationary dollars

Primary U.S. asset class returns without stocks from 1928 to 2013 using real dollars

This chart presents the same cumulative gross long-term cash and bond returns, but the data have been adjusted for inflation. As noted above, inflation eroded purchasing power over this period by a factor of about 13.

This graphic indicates that one dollar invested in 10 year U.S. Treasury bonds at the beginning of 1928 through the end of 2013 had a cumulative gross total return factor somewhat above 4.5, when measured in real dollars. For cash returns, one dollar invested in 3 month U.S. Treasury bills at the beginning of 1928 through the end of 2013 had a cumulative gross total return factor of about 1.5 measured in real dollars.

Primary U.S. Asset Class Returns without stocks 1928 to 2013 real dollars

Long-term investment returns broken down into five sub-periods

The remainder of this article will break down cumulative 1928 to 2013 returns into the five distinct periods listed above in the introduction. For each of these periods, you will find separate graphics of cumulative inflationary dollars and real dollars for the cash, bond, and stock asset classes.

Again, keep in mind that it is assumed that one dollar is invested into each of the three major cash, bond, and stock asset classes at the beginning of each of these five sub-periods. Total gross returns are presented, including asset market value changes plus reinvested interest and dividend payouts. Returns are gross and do not include any taxes or investment expenses.

Stock market crash, Great Depression, and World War II from 1929 through 1946 using inflationary dollars

While the full period includes 1928, this graphic starts with January 1929 values. Doing so emphasizes the behavior of asset classes including and after the 1929 stock market crash, but without the effects of the significant run-up in stock asset values during the 1920s.

One of the first things that this chart illustrates is that stock prices declined in a continuous train wreck until 1932. So much historical memory has focused on 1929 and Black Friday that some people do not realize that the years following were much worse in terms of year-over-year returns.

In the first half of 1929, stock prices had continued to run up, so the full year effect of the 1929 crash was that 1928 year-end to 1929 year-end stock prices prices fell “only” by 8.3%. In contrast, year-over-year stock prices collapsed by an additional 25.1% during 1930, then 45.8% more in 1931, and by 8.6% more during 1932. Measured by calendar years, the cumulative collapse was 65% for 1929 through 1932.

This inflationary dollar graphic shows this 65% value for one dollar invested in stocks at the beginning of 1929. Because it uses annual figures, this graphic tends to mask the somewhat greater peak to trough decline that occurred in stock prices measured on a daily basis. This is not very important, because our purpose is to understand relative behaviors between the asset classes from the 1929 stock market crash, through the Great Depression, and through World War II.

Stock Market Crash, Great Depression, and World War II 1929 through 1946 inflationary dollars

Clearly, an investor with a portfolio much more heavily invested in bonds and cash did much better throughout most of this period until after WWII, when equity prices recovered and almost closed the valuation gap with bonds. However, when the stock to bond gap was at its greatest during the Depression at the end of 1932, in inflationary dollars the initial bond dollar was worth $1.15, while the initial stock dollar was worth only $.35 for a difference of 80 cents. A second peak inflationary dollar valuation gap occurred in 1941, when the original bond dollar was worth $1.59, while the original stock dollar was worth only $.65 for a difference of 94 cents.

In addition to the more well known advantage of bonds and cash versus stocks over this period, there is a lesser know story that this chart tells us. From 1929 through 1932, the U.S. economy suffered cumulative deflation of almost 25%. If you ever wonder why central banks during the more recent Credit Crisis and Great Recession expressed so much concern about deflation and took such extraordinary measures to prevent deflation, the reasons can be found in the 1929 to 1932 period.

Laissez faire national fiscal and monetary policies during 1929 to 1932 period were almost completely hands-off, and securities markets, the economy, and consumer prices were left to find their own equilibrium points. Unfortunately, those were very low equilibrium points that induced a severe and sustained depression.

Economic demand plummeted, because the one-quarter of the working population that was unemployed could afford to buy very little. Moreover, the remainder of the population who still had jobs and/or possessed financial assets did not consume as they might normally. Deflation in the Depression was so pernicious, because declining prices provided an incentive to delay consumption. Particularly during the first five years of the Depression, the cost of products and services declined steadily. Delaying consumption is hardly a recipe for a growing economy, and the 1929 to 1932 period is an important case study for anyone who wishes to understand the deleterious effects of deflation.

Stock market crash, Great Depression, and World War II from 1929 through 1946 using real dollars

The 1929 through 1946 real dollar graphic below adjusts cash, bond, and stock values for changes in the urban CPI over this period. This chart displays asset values in terms of constant purchasing power, and thus the CPI line is displayed as a constant $1 over this period.

Note that the real dollar charts below for each of these five major sub-periods all draw a constant CPI, wherein the CPI is, in effect, adjusted by itself. Holding CPI at a constant $1 value is intended to remind the reader that all asset values on these real dollar charts are inflation adjusted and reflect constant purchasing power over time.

Stock Market Crash, Great Depression, and World War II 1929 through 1946 real dollars

During the worst of the financial collapse from 1929 through 1933, it is notable that a flight to asset safety caused the real dollar value of both cash and bonds to escalate by 50% to about $1.50 for each dollar invested at the beginning of 1929 through 1933. Also, in 1931, stock values had begun to stabilize in real dollar terms and recover unevenly in value between 1932 and 1936, reflecting the fragile financial recovery that began with the New Deal era.

In 1934, cash and bond asset values began to diverge, as the value of holding cash declined over the remainder of the period, while bond values moved upward to peak at about $2 in real dollar terms in 1940, just before U.S. entry into WWII. In contrast, real dollar stock asset values experienced another significant set-back in 1937, as stimulus measures were reduced.

Stepped up economic activity related to war production caused stock asset values to rise throughout the war and almost close the gap with bonds by 1945. However, economic adjustments after the end of the war caused another decline in stock prices, as inflation rose by 8.1% in 1946, 14.1% in 1947, and 8.1% in 1948.

Lawrence J. Russell wrote this article. He is a Pasadena, California fee-only family financial planning consultant and registered investment adviser. He is also the developer of the VeriPlan personal financial planning software.

 

 

Copyright 2014 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Mid-Year Review of 2014 Financial and Personal Goals

I listed a couple of posts which addressed financial and personal goals at the beginning of the year.  Since we’re just past the mid-point of the year, I thought it would be a good idea to get a check of where things stand.

Financial Goals and Progress

  1. Adjust to ‘new’ employer – I’m doing the same job with the same pay sitting at the same desk, but because IT services were brought in house, there were changes that I’d have to adjust to, most notably going from being paid twice a month to every two weeks.  So far, this has been a smooth adjustment.  COMPLETE.
  2. Modest gain in our home value - I’d hoped for a modest 2% gain in our home value, but based on pricing through our neighborhood, this has been far exceeded, to the tune of an 8.9% increase year to date.  I think the housing market is running a little to fast, but it’d be nice if this held or continued.  ON TRACK.
  3. A 20% decrease in the value of our autos and camper – I’ve already taken steps mb-2014-07goalto realize this in terms of our net worth.  Bottom line, as all of our ‘wheels on the ground’ are now 7 years old or older, I want them to be less of a contribution toward measuring our net worth.  COMPLETE.
  4. A 10% gain in our personal investments – I’ve been making some short term trades and things have been going well.  So far, this has been exceeded by about double.  ON TEACK.
  5. A 5% increase in cash savings – I did some shuffling here in the short term, so as of now, we have slightly less cash on hand than we did at the beginning of the year.  I expect we’ll make that up here very soon, but I’m not sure we’ll hit the 5% gain mark, though it’s still a target.  NOT ON TRACK.
  6. Retirement balance increase of 12.5% – While I have been more aggressive and confident with individual investing, I got more conservative than I probably should have with our retirement accounts, so we are behind on this.  Rebalancing and focusing extra contributions will hopefully get us back but right now we are NOT ON TRACK.
  7. A 6.6% reduction in debt – As this included simply making our regular payments, we are ON TRACK.
  8. A 13.6% net worth gain – Overall, we have already exceeded this, which in theory is great.  However, since the home value increase was a large part of this, I still am not happy as I want the retirement account to be more in balance with our projected goals.  CAUTIOUSLY ON TRACK.

Overall, I’m happy with our financial situation from a year-to-date perspective, but I will now take the rest of the year to get more in line with the individual goals on which I see us as behind, while also keeping an eye to try to protect the areas where we are on track.

Personal Resolutions

  1. Floss Regularly – Unforntuately, this one has gone largely as in years past, as once I stick the floss in a drawer, I can go a few weeks without it.  I’ve been back on the wagon for a few weeks now, so hopefully can keep it up.  FAIL.
  2. Redesign the blog – Unfortunately, I have not even started this.  FAIL.
  3. Lose six more pounds – I started off at 156 and am currently at 153-154.  I touched my goal weight for a day but that was after a bout of nasty, nasty stomach flu, so it doesn’t count.  SORT OF ON TRACK.
  4. Have treats primarily in social situations – I can’t say that I cut back to the level where I wrote, but I’ve definitely cut back on my snacking compared to last year.  DOING OKAY.
  5. Simplify my finances – I have started the process of revamping our financial tracking.  I consolidated two Excel tabs down to one and archived the old data as of July 1st. There’s still much work to be done. ON TRACK.
  6. Be more patient with our kids – This is hard to measure.  I’ve tried to be more attentive and patient, especially as our kids are now of the age where one bad conversation can leave an imprint, but it’s also challenging, especially when we have a 5-year old that is currently testing boundaries big time.  NOT SURE.

All in all, it seems like I’m making a lot more progress on the financial side than on the personal side.  I suppose the financial goals are more measurable and more black and white, so perhaps that’s why.  Either way, I do like the opportunity to look back and realize that there are still 5.5 months left in the year.  A lot of progress can still be made!

Readers, how are you doing with your goals for the year?

Copyright 2014 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Why I Pushed My Wife To Spend More Money

My wife has started to really enjoy drinking wine.  I’m more of a liquor guy (neither of us likes beer), but she’s started to really get to know different things about different types of wines, and whereas it was usually ‘white’ or ‘red’, she knows and is continuing to learn more and more about what’s out there and what she likes.

One of her first big steps came last fall when she went on a weekend trip to Traverse City, MI.  The surrounding area is home to many wineries (yes, Michigan has great wine) and was able to learn quite a bit.  She went with her mom, sister, and aunt, and they had a great time.

Earlier in the year, she talked about what fun it was and how she really thought she’d miss it this year.  I looked at her and asked why she didn’t plan something with her sister.  Her sister has had a bit of a rough patch, with a somewhat recent break-up, and I thought some bonding time would be great.  They talked it over, agreed on a weekend, and started planning.

The original idea is that they would go up and stay at the nearby campground.  They looked into hotels but given that it’s peak summer season, they were around $250 per night, and that’s pretty expensive.  Given that they both love camping, that it was low cost, and that they knew the area and the campground, everybody was happy with the idea.

Except I came up with other ideas.  I actually sat down and proposed the idea of re-visiting a hotel stay.

Here is why:

  1. A third person had been added – A mutual friend of theirs had got to talking about wine, and my wife and sister-in-law decided to see if she was interested.  She was.  This now meant that the costs of the trip could be split three ways.
  2. Camping takes away time – A girls-only weekend is fun, but there’s not as much sitting around the fire or cooking camping meals as is part of a normal camping weekend.  Just the act of setting up tents, air matresses, etc. and then tearing them down would take considerable time, time which I knew they would rather spend doing wine related activities.
  3. I'm glad to say that the wine enjoyed nowadays is a bit more upscale than this!

    I’m glad to say that the wine enjoyed nowadays is a bit more upscale than this!

    Costs are not always what they seem – Even when I brought up these things, the restrictive price was noted as a remaining obstacle.  I pointed out Priceline.  I advised that they go and try to name their own price.  My wife spent considerable time finding properties with the star rating that she was looking for, and was prepared to make an offer of $129 per night.  Then, she stumbled across a ‘Priceline Instant’ where they offered a deal of $145 per night.  There was one particular hotel she was really gunning for, and her research (she was able to see the ‘parent company’) gave her reason to think that was the hotel that was being offered (you don’t know for sure until you sign up).  They talked it over, she took a chance, and got exactly the hotel she was looking for.  Between the extra person and the lower price, the cost per night per person went from $125 to $48 (plus fees).  Not bad!

  4. She can afford it – As I’ve mentioned before, my wife runs a side hustle doing digital designs for invitations, thank yous and wall art.  Her primary savings for this is our planned 2015 trip to Disney World, but her shop has been a greater success than she could have originally hoped for, so she’s well ahead of the original target savings she had set.
  5. She deserves it – I know more than anybody that even though she doesn’t go to work and bring home a paycheck, that she has a full time job taking care of our kids and our home.  Even though we take trips for camping and such which certainly are vacations, I know that she deserves a break from it all (yes, even yours truly).

She’s heading out this weekend and I hope they have a great time!  With all the new savings, I have a feeling she’ll be coming home with an extra bottle or two of wine!

Copyright 2014 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Winners And Losers: Seven Years of Woot Purchases

Woot has always been a pretty nifty site to me.  They were the first and most popular site to offer one deal over one day.  They would put something up, and it would be available for 24 hours, or until it sold out, whichever came first.

They really got famous when they started their Woot-Off days, which were unannounced and would consist of deal after deal, at even lower prices, presumably to clear inventory from unsold daily days.  These often included what is now legendary among Woot followers, the Bag of Crap.  For $5, you got whatever they sent you.  In most cases, it was just as the title described, but people went crazy for them because every so often you could receive something like a flat screen TV, laptop, or a whole bunch of stuff.

I have tracked Woot for years, and have purchased a handful of things.  I just made a purchase on Friday of last week, during an event that was had sales of one-hour-per-item.  Right at the top of your account, they have a link where you can look at ‘Stuff You Bought’ and it gave me a full list.   The prices include shipping.

May 2007 – Dyson DC07 Low Reach Vacuum – $304.99

This was my very first Woot purchase as I’d just recently heard of the site.  We were weeks away from moving into our new home and we’d been looking at getting a new vacuum cleaner.  My wife-to-be had locked onto getting a Dyson, which typically ran for around $400-500.  When I saw this deal I jumped.

VERDICT: We still have this vacuum and it does great.  I’ve had to replace the hose, but that was through my own fault (I dumped part of a bag of sugar on the floor, tried to vacuum it up, only to find that it had landed in a wet spot, which led to the hose getting moldy on the inside).  GREAT PURCHASE!

November 2009 – Bag of Crap – $8

I purchased a Bag of Crap, having gotten in during the few seconds that they’re available, only to find out that I didn’t.  They oversold and ended up cancelling the order.

VERDICT: Never got it, but still kind of bitter.  STILL WAITING!

August 2010 – Five Gilmour Impulse Lawn Sprinklers – $9.47

We have an inground sprinkler system, but there are times when I want to do some very specific areas, so I’ll use the hose and sprinklers.  This particular year, I’d decided to do some overseeding, so this was an incredible deal, as just one is normally $9 at any of the big box stores.  These can daisy chain together so I’ve been able to use more than one at a time when needed.

VERDICT: One is broken but I still have four of these that I use occasionally.  For the price and what I’ve gotten out of them, this has been a GREAT DEAL!

November 2010 – Six LeakFrog Water Leak Alarms – $43.97

I’d been looking for some water alarms to place in areas where water might potentially leak, so when I spotted this deal, I jumped.  They’re easy to use (just put batteries in them, test, and go), and they’re cute, as they’re shaped like little frogs.

VERDICT: We have five of the six remaining, as one got ran through the washing machine.  They have definitely paid for themselves as two leaks were detected (one under the sink with a loose pipe fitting, and the other under the dishwasher, saving our subfloor and finished basement underneath).  GREAT DEAL!

May 2012 – HP TouchPad 32GB Wi-Fi Tablet – $199.99

I had wanted to get a tablet, and even though HP came in and out of the tablet market, I jumped on this deal.  Since it originally went for around $500, I fell into the trap of thinking I was getting a great deal.

VERDICT: When I first got it, I was pretty impressed and it wasn’t bad. Luckily, I bought a SquareTrade plan, because the touch screen went bad.  Once I had it replaced, it pretty much went into a drawer, as I realized quickly that the HP WebOS was a dud.  Eventually I pulled it out and installed Android over the top of it, which does make it useful, but I don’t get nearly enough usage out of it.  FAIL.

November 2012 – Canon EOS Rebel T3 Digital SLR Camera – $404.99

My wife indicated that she would like an SLR camera for Christmas, and I started saving to surprise her with one.  Every other deal I saw on this camera was for $500 or more, so when I saw this, I jumped on it.

VERDICT: She uses it all the time.  She has since gotten a second lens for it, as the one it came with was pretty basic, but it’s taken lots of great pictures for us of family, vacations, and other events.  GREAT PURCHASE!

January 2014 – Roku 3 Streaming Media Player – $69.99

I had wanted to get a streaming player to eventually get Netflix and also look at potentially ‘cutting the cord’ from cable.  This normally goes for around $100 so I nabbed it.

VERDICT: We use it for Netflix, and I’ve found a few other cool things that we use regularly.  The recent verdict regarding Aereo has curbed our interest in potentially cutting the cord.  This one is getting ranked slightly lower just because we don’t utilize it to it’s full capacity.  I probably could have gotten a version lower (the Roku 2) and saved some money, and gotten most of what we get today.  Still, it’s a PRETTY GOOD DEAL.

July 2014 – Hoover Power Scrub Carpet Washer – $94.99

Years ago, I had a steam cleaning device, and it was very useful.  It was very heavy, though, and poorly designed for cleaning it out, which was a problem with my two cats.  As much as I tried, eventually the thing got too clogged down with hair, and became useless.  I’ve been looking for the right deal since.  On Friday, I saw this, and after reading reviews that say it’s very lightweight, very easy to clean out, and that it does an excellent job, I took advantage of it.  A similar version sells on Amazon for $170.

VERDICT: We haven’t received it yet, so it’s TOO SOON TO TELL.

Overall

Not counting our recent purchase and the one I never received, we have FIVE wins and ONE loss.  I’d say that’s pretty good.

What has made the numbers work in our favor is that, if you look, I only purchase items which I was looking for anyways.  I know that Woot and other sites prey on those who purchase based on impulse, and I’d venture to guess that the ‘winning’ percentage for people who fall into those traps is probably much lower than 83%.

Readers, do you use Woot or a similar deal of the day site?  What are some of your wins and losses?

Copyright 2014 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Hazardous Waste Is No Longer Cluttering The House

I’ve been working slowly to reduce clutter around our house after looking around and seeing that it’s been creeping slowly from closets, corners, basement, garage, and just about anywhere else it’s allowed.

Just about every week I’ve been breaking down cardboard from some area or another and adding it to the recycling pickup.  I’ve also got a few stacks of items to go up on sale at eBay or Craigslist, some toys, collectibles, and plumbing fixtures.  Nothing that’s going to make us rich, but it’ll get rid of clutter and add a few bucks to our pocket.

Recently, I was able to tackle a significant area that has been building up: Hazardous Materials.  Specifically:

  • Paint
  • Electronics
  • Motor Oil
  • Old Batteries

All of these are items that should not simply be tossed out, as they can pollute landfills and groundwater supplies.  So, when I saw that the county was having a hazardous materials event, I put it on the calendar a few months in advance, and started working to plan for it a few weeks leading up.

Paint Cans Galore

mb-2014-07paintMy wife loves color around the house.  As such, every room is a different color, which means lots and lots of paint cans that get stashed away once painting is complete.  I had three shelves of paint cans in the basement from various painting we’ve done since we moved in, as well as a bunch out in the garage that was left by the previous homeowner.

I went through the basement cans one by one.  In some cases, shaking the can yielded basically nothing, so I knew that they were gone.  In other cases, when I popped the top off, you could smell that they’d gone bad, or in other cases, rust had built up around the lid, which contaminated the paint.  There were a few instances where we had paint that was no longer on the walls, like rooms that have since become kids rooms, or a can of bathroom paint which got painted over because we couldn’t stand it after just a few short months.  We had some ceiling paint and primer, both so old that last time I attempted to use them, there were solid chunks.

The paint in the garage, I didn’t even bother with.  It’s been out there for at least seven years, since we moved in, possibly longer.  That’s a lot of extreme heat and cold.  I knew it was worthless.  In fact, one can of paint was basically sucking itself in.  It was no longer round.  So that was time to go.

After all was said and done, I had 29 cans that I took to the event.  For each paint can that corresponded with paint that we still have, I wrote down the manufacturer, the finish, the blend number, the blend name, and the room where it goes.  If I ever need more for any reason, I can go get a reasonable match.

Electronics

I had been building a stash of old, broken or useless electronics.  I had some laptops from the 1990′s, PDA devices (remember your Palm Pilot) from the same period, a broken Discman, and a few other goodies.  I ran a magnet over the drives and such, and was able to get rid of that pile.

Motor Oil

I take my lawn mower in every couple of years to get checked up, and they change the oil, but on years where I don’t, I end up changing the oil at home and storing it.  I was able to pull that down off the shelf and get rid of a few bottles.

Batteries

Where I work used to have drop off points for batteries, but they stopped doing that. Now, we have a battery drawer, and I just have a ziploc bag that I throw the bad ones into.  I was able to grab that and take it.  All told, there were probably at least 100 batteries.

Simple Process, Low Cost

It was a very simple process.  They took care of everything for you.  They had you pull up to a big parking lot in a nearby college, where there were cones that had you weave through in line.  You had to show your proof of residence, an in our case we had to pay a small fee ($10), which varied by community depending on how much the local community contributed toward the event (residents of some communities paid nothing, others had to pay upwards of $60).

Once you pulled up, to the unloading area, you had three stops, one where they pulled out anything liquid other than paint, so the motor oil came out, the next for paint, and finally the electronics.  They also took medicine, household cleaner, and other assorted items.  We didn’t get into any of that, but by getting rid of 29 cans of paint and everything else, I have a lot of shelf space freed up for items that we’ll never need.

How much clutter is hazardous material taking up around your house?  How do you handle the stuff gone bad so that it doesn’t take up unneeded space and gets disposed of properly?

Copyright 2014 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.