Stop Milking Me! - Cow’s Journey To Financial Freedom

In my attempt to take advantage of HSBCDirect’s 4.8% interest rate, I hurried up and put my application in. After going through a length application form (although you do get to do it online), I set up a savings account with them and thought it was all good to go. Not until I was ready to wire in some more money that I found out HSBCDirect doesn’t really naturally link to other checking account. You need a separate pin number in addition to your online password and account number. Not to mention both of these numbers will only arrive via mail. The worst part is that you will have to deal with their banking branch to set up your second pin. And who knows what process I have to deal with after getting a gazillions different pins and ids. I start to scratch my head… Where is this “Direct” part of the “online” banking? I know I am done with HSBC. It’s way too complicated for my little cow brain to handle.

ING Direct, on the other hand, is designed to deal with online transactions without local branches. I am really a big fan of ING. By the way, they just raised the rate to 4%, although it does mean that all of the loan rates are rising too.

Setting up a website is always the easy part. Putting the new website in front of the public eyes is seriously a pain-in-the-butt job. I have done it once and now I have to do it again for this Cow site.

In order to draw more readership, I spent probably 2 days worth of time to do the following:

1. register with feedburner.com and coded a list of the RSS options on the site. You can see these pretty pictures at the bottom of the right bar.
2. Setup email subscription service with Feedblitz.com and coded a form on this site. If you roll your eyeballs to the right, you’ll see it.
3. I went to www.mymoneyblog.com and went though it’s fairly complete list of the Personal Financing blog sites. I emailed 4 owners to swap links and 3 returned favors.
4. Setup a Link Swap program on this site too to encourage blog owners to swap links with me. It is located on the right hand side bar.
5. Networked with my former fellow bloggers from www.b5media.com to swap links. So far, two sites agreed to add me.
6. I restored my old personal site and redesigned it in the attempt to utilize its high Google PR. I have cross linked between these two sites.
7. I am viewing 2 – 3 new Personal Financing sites a week to participate in discussions and leaving comments on some interesting posts. This is always one of the best ways to establish network and attract more visitors.

Based on my past experiences, search engine is the most powerful source in generating traffic. Of course, if your site becomes famous and gets mention in any news media, that’s a different story. The search engines not only generate large volume of traffic, but also bring in the Ads friendly readers simply because most of the search engine readers are looking for specific information and they are more likely to click on something that is relevant to the materials they are searching for. That’s why I spent most of my time trying to generate links for this site. I know the magic won’t happen overnight. But as long as I keep producing quality contents on a regularly basis; as long as I keep marketing my site and networking with other blog sites, I will be able to get the traffic I need.

I don’t normally check my retirement funds very often simply because it is a long term investment and I tend to favor the “Eyes Wide Shut” strategy. That is, figure out the asset allocation, contribute the max amount and then rebalance once a year as needed. Occasionally, I still log on and take a “peak” at how the funds are performing. To my surprise, my 401K account has gained a total of $10,598 in the first quarter of 2006, which is by far the fastest growing quarter ever since I opened the account.

I notice that ever since I broke $100,000 mark a while back, the wonder of compound interest has been working its amazing wonder. It used to take me a couple of years to accumulate $15000. Now even though my monthly contribution is capped at a little over $1200, the capital gain on a large base of money is pulling in more money than what my and my company’s contributions combined. The biggest winners this quarter are REIT, small cap and European fund.

However, even factoring in my quite handsome pension fund, it will take me 28 years to accumulate $1 million after adjusting inflation or $2.4 million without adjusting inflation assuming 7% annual return. Assuming 5% withdraw rate, that’s $50,000 annual income according to today’s living standards. Yes, that’s a very comfortable retirement income, but 28 years??? Umm… that seems awfully long to get my freedom. I think life is worth more than working for corporations for the rest of my youthful life in exchange for $50000 a year retirement fund.

Yep! $10,000 401K gain in 3 months seems to be quite cool! But I will be happier if I can make $1000 a month from my side gigs doing what I love. After all, it’s the freedom that matters the most.

I used to be a large cap funds lover. In recent years, I started to see the benefits of investing in some aggressive categories such as small cap and International. As a result, I put more than 40% of my retirement money in these two categories. And I plan on putting more money in International fund. The reason? It’s actually pretty intuitive: the world economy is a lot bigger than US. It seems riskier because we are not familiar with their economic systems. If you look at the biggest 100 companies worldwide, only 33 are US based companies. A lot of our favorite companies are foreign brands such as money blogger’s beloved ING Group, a company of Dutch origin that started selling online saving accounts in US in the 90’s.

If you look at my asset allocation table, I current have about 19% holdings in International fund and I plan on expanding this portion of the pie to 30% by selling the US Large cap. By the way, “Mutual Fund Window” is a program offered by my employer to invest in any funds outside of our normal 401K offerings. In my case, I chose Dog & Cox’s Stock Fund, which has closed its door to the investors in 2004.

I still plan on keeping 25% in bond funds, mainly in inflation protected bond fund to fight the inflation. Large cap currently has quite a bit of Index and Value. I tend to keep 15% of that and move the rest to International. I will keep my small cap at 25% range with Real Estate and Small Value. Since my Roth IRA is mainly focused on Growth fund, to balance out, I left the Growth category out of my 401K mix. More money will be moved to Dog & Cox Stock Fund to keep its 10% balance.

When to do this and how to do it are tricky questions since I try not to touch my retirement too frequently. But once in a few years, I re-mix the pie a bit. I will have to find a good timing to sell high and buy low.

Well, I figured that one can’t always just talk about money. There are so many other cool stuff outside of our wallets so here it is, my personal site that talks about everything else but money:

The Cow’s Life – Thinking Outside Of The Barn.

The button to the site is located on the top menu bar.

For those of you who are familiar with Yuna’s Village, yes, I am simply restoring the site by integrating it into FreeTheCow’s look and feel. My original personal site : Yuna’s Village has been moved to here as part of my personal collection for my great grand kids to inherit. Hehehe..

Happy Blogging!

We all have the concept to save for an emergency fund to cover the unexpected events. Well, I certainly didn’t expect my emergency fund could be used to cover.. umm… my bra emergency.

Lately, my usual elegant comfy Victoria Secret bars that I have been wearing for a while are irritating the heck out of me. They even caused quite a bit of bruises on me. So to fix the problem, I went to a nearby VS store’s wardrobe room to seek for professionals’ help. Turns out, I have naturally gained a cup size so all of my other VS bras don’t fit anymore… Ok, I guess that’s a good problem for a girl…

But after I came home and laid all of my beautiful VS bras on the bed and did a calculation, I wasn’t too happy with what I saw. Since I buy the top line designs, each piece costs me about $45. To replace my entire collection, I am looking at a whooping $720 budget! Although it is not as severe as Carrie’s shoe problems (if you remember Carrie from Sex And The City when she found out she spent $30,000 on shoes over the years), it’s still a steep price tag for me since I am saving every penny to try to buy a home this year…

But the thought of downgrading from Victory Secret Very Sexy Collection to WalMart Granny Collection is just not too appealing to me.

Well, maybe I will just have to make the Cow site to work harder and pull in some Ads dollars and expand my sales on eBay. So my next month’s Free The Cow’s Project goal is to milk enough money to make my boobs happy… Ok, that just didn’t come out right.. but.. you know what I mean…

It has been a month since I formally launched FreeTheCow project to achieve financial freedom. How did I do in my first month? Without knowing the progress, it would be hard to make improvements and set goals. So I’ve included montly performance report as part of the project to track my progress on saving, spending, investing and money making activities.

Savings:
Thanks to my 2005 bonus payout, I put away $5000 total in the last 30 days.

Non-Retirement Investment
After giving alway a big chunk of my non-retirement investments, I started this project with just a little over $25000. Although I have not invested anything in those accounts, the dividend and market appreciation have kept the total return in the green. Although my company stock holdings dropped a bit, with the healthy returns from my stock funds, I have managed to maintain a positive gain overall.

Spending
I went over my budget by nearly $600, mainly because of the 3 personal trips I took in the last 30 days. Comparing with my co-workers who make the same amount of money and buy Mercedes, Bimmers and $500K homes, I live way under my means. So if I need to go over my usual budget to do something necessary, then so be it.

eBay Sales
I am still in the “Testing the Water” mode, so I have only closed 5 sales in the last month. After deducting the fees, I have made $51 from those 5 transactions. Although making money is a sweet thing, I am more thrilled to be able to learn a few lessons about eBay and Sales in general. I plan on writing a post about the lessons learned in the next a few days.

WebSite earnings
With my friend cyco miko’s help, we modified the Gallery PHP code and added Google Ads and tuned the placement. The good news is that ever since we moved the Ads a bit closer to the pictures, I have seen clicks coming in everyday. The bad news? Those clicks don’t generate any meaningful amount of revenue. So far, the entire site including FreeTheCow, Gallery and PhotoBlog have pulled in $30.18.

Current Total Bottom Line
My total non-retirement bottom line has increased from $26400 to $32929 in 30 days, including $81 net income I have made from the side gigs. I know.. I know.. The number is pathetic comparing with my 6 figure paycheck. But hey! This is the money I made from somewhere else! And there is much greater potential in the future.

Next Month Goals
I’d like to increase the sales on eBay by selling some larger items with higher prices the next month (so I can buy a few bras..hehehe.. ). I have been studying our kitchen store’s inventory these days and there is a massive amount of work to be done before a formal online store can be set up. But knowing that there is a great potential to make money online is good enough to keep me going.

Besides the online store, I’d like to tune the keywords a bit on my photo sites to pull in more Ads revenue.

I didn’t forget about the house flipping project. I will need to find a broker the next month and start looking at the potential homes. After doing some local research, I realized that I will have to bump up the price a bit to get what I want in the desirable location. So I have increased the project required funding size from $46000 to $50000. I should have no problems to accomplish that figure.

A lot of us think that saving 50 cents on the cereal bar and 20 cents on a bottle of milk is a great thing to do for our finance. But aren’t we forgetting something? When did anyone in the history get rich by cutting coupons? Not to mention all the precious time we could use to do other more productive things to boost our financial health such as learning a new skill or just read money.cnn.com.

I have always been told by my parents, who both run businesses right now that the difference between poor people and rich people is the different mentality:

• Rich people (or soon to be rich) try to do everything they can to make more money rather than just saving every penny. They do whatever they can to boost their earning powers by either moving up the chain or start their own businesses.
• And the poor people (those hard working but still poor) focus on working every hour and saving every penny.

So the fundamental difference is the concept of “Making Money” vs “Saving Money”. As far as I can tell, the riches do both with the focus of “Making Money”, either by making the “saved money” to work harder for them, that is INVESTIING, or bringing in new fresh money from the higher paying jobs or business earnings.

We only have 24 hours a day. If we can spend the precious time to pick up a new skill, learn how to invest, get a degree, learn from others, or set up a business rather than cutting coupons or counting the pennies in the piggy bank, I am sure we will have a whole lot more money coming in than just $2 we saved from the coupons we cut.

OK, I know I haven’t started my “Flipping Project” yet. But here is a great tip I saw that I don’t want to forget:

You want to write down your very first impression about the house you see and focus on the bad stuff, because these items WILL be on your “Home Improvement” list. If you are annoyed by some features of the home, say a cracked drive way, or the disgusting landscape, your potential buyers would not appreciate these features either.

Then, write down the good stuff about the house. Although you don’t have to worry about these good stuff this time. It might be something you want to add to your next flipping project.

In time, you will have a comprehensive “First Impressive” list that documents all the appealing little features with those not so appealing ones that you want to work on.

After all, buying a home is an emotional process for most of the buyers. They want to “feel” the home is right for them and the first impression and guts instinct play a major part in their decisions. The statistic reports show that the buyers usually decided whether they like the homes or not in the first few minutes. So capture these little things that matter a lot in the first few minutes.

I just had an interesting conversation with a friend of mine about purchasing a vacation home as an investment property. She is a young single 100% traveling consultant just like what I used to be. She makes great income and pretty much lives in hotels and on company’s dime with no other significant expenses. With all the extra cash she has saved up, she’s been toying with the idea to buy a 500K – 600K beach house in the East Coast where she vacations a couple of times a year.

On the paper, it all looked great: It’s a wonderful vacation spot! She can use it for her own benefits or invite family and friends over. She can then rent it out the rest of the year. But for some reasons, my guts feeling tells me NO.

I have always had a principle to “Start Small and Start Simple”. Real Estate investment is a tricky long haul business that involves in a lot of money, energy and time. If you are using it as your primary residence, then it is a different story. Because in worst case scenario, you have bought a piece of roof on the top of your head. But if the property is purely for investment purpose, you will have to crunch the number to see whether it suits your current situation or not.

Using my friend as an example, the reasons I think it is not a good idea to sink in $100,000 cash right now are:

1. After crunching the number, she has to spend about $15000 a year to keep up with the cost. That is, after factoring in the rental income (which is a hugely optimistic assumption), the tax benefits and other regular maintenance expenses. It’s more than $1200 a month expense! Unless she lives in it, it doesn’t make sense to throw so much money in it.
2. She is still young and hasn’t started a family yet. There will be a lot of good usages for that 100K cash. By putting so much money on one property, that’s one giant egg in one giant basket. I just don’t think it is a good idea.
3. Vacation rental home is a tricky business simply because A) You are not local B) You have to rely on management company. C) You change tenants every week or so. Without any previous landlord experiences, it could be a bit overwhelming at first

So my suggestion to her is to start small and start local. Find a cheaper rental property near where her parents live and ask them to help out to manage it. Then, after a few years, refinance it or take out the equity and buy another (or more) rental(s). Repeat the process until she is comfortable with the whole thing. Then she can buy something big and fabulous.

A few years? Doesn’t that take way tooooo long? You may ask. After all of these years investing in rental properties, I have to say that real estate business is a long haul type of thing. There is really no fast money especially in rental business. Well.. flipping business might be a different story. I will soon find out.