New Financial Plan

With the market already down a good chunk for the year, and a big drop on Tuesday, it looked like a great buying opportunity.  A common feeling is that when things are cheap it is time to buy more of them.  That is why stores have sales.  It is the reason people suggest buying stocks when everyone else is selling.  There is a bit more to it than that.  Everyone believes the market will go up over the long term, and most people feel the market will move up relatively soon, as several quarters of back to back declines are considered unlikely.

I also assume those are true.  I agree that indexes are the way to go, that over time they will go up, and that large dips are buying opportunities.  If I had enough free money to play with I would trade on big market moves.  The trick is having enough money with enough flexibility to make up for transaction and account fees while keeping the right risk strategy.  Unfortunately I am not in position yet to have money for that type of investment.

I believe that you should time financial moves when you can.  If you itemize taxes it can make sense to pay taxes early, or to delay income.  It can pay to sell losing investments to offset gains.  When buying or selling a house you hope to find a relative bargain when buying, to get a high price when selling, and to meet the criteria for tax exemption of profits.  When buying and selling investments you also have to look at the prices when buying and selling, along with distributions, gains, and taxes.  Those are all types of timing, although for slightly different reasons.  With investments you have to invest according to your goals.  My goal is aggressive allocation, timed deposits, and frequent evaluation with adjustments as needed.

My investment strategy is all about retirement.  The retirement funds I hold use a two day delay to discourage timing.  They also have restrictions on moving back into a fund within so many days of selling it, and many funds now charge fees for selling within so many days of purchasing.  I know the limits and fees I have to work with.  For those reasons this week was not a buying opportunity for me.  Without those restrictions, if I had free money to invest, I would have looked at buying some index ETFs on Tuesday morning and been watching for a bounce back.  Even yesterday, if you had money to invest in the morning, could have been a very quick gain of a couple percent.

Since I know the limits and delays in my retirement accounts I put my investments in last week.  You could say I missed this bottom by a day or two, but I wasn’t trying to find the bottom.  I am investing according to my plans.  Being relatively early in my investing plan I am able to be aggressive.  I invest throughout the year and fully fund IRA accounts.  But I do not simply throw money in as it becomes available, or at set points each month.  Instead I buy when the price seems right.  I thought about investing throughout October, November, and December.  I decided to wait then.  With the nice discount January had already brought it was good enough for me.  Very soon the market could move down again and go for a full correction.  In that case I will do everything I can to come up with money to invest more while it’s down.

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This article is about discussing money with your partner.  The points in it are pretty basic but I disagree with some of it.  I thought it would be worth sharing my opinion.  I think my idea of handling finances and relationships are pretty easy.  Basically to me it comes down to the fact that if you want a real relationship, or a real financial plan, you have to be grown up about it.  The five points in the article are: 1. Ignore right and wrong beliefs, 2. No $ as a weapon, 3. Goals as a couple, 4. Commit to goals, 5. Keep some for yourselves.

I don’t like ignoring things.  People have feelings and emotions.  The trick is getting past those, being accountable and responsible, and doing things right even if it isn’t easy.  With that said, my thoughts on the article are as follows:

1. While there may not be right and wrong there are some attitudes and actions that are better than others.  The key is to base this comparison on your situation and goals.  If you cannot take criticism or be corrected than you will have trouble in a real relationship or making your own financial plan.
2. Don’t use anything as a weapon.  You are partners.  Work together.  If you have to fight then do everything you can to fight fair.
3. Great point, especially planning for how things will change in order to get there.  Understand together what you want, what it takes, what risks and tradeoffs are involved.
4. Commit to it and track progress.  This is key in working toward any goal.
5. Hmm.  I have two thoughts here.  First I don’t like having set amounts.  Strict limits or budgets like that are too generic for me.  We each spend little bits of money on our own.  When it seems a bit too much we discuss it.  Second, I disagree with point 1 and have the same thought here.  Some things are bad moves, there are better ways to use money, and you are in it together.  If I was taking money and burning it I would hope my partner would stop me.

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Yes, this is a personal finance blog.  No, television and the way it is transmitted is not a personal finance issue.  But spending money on a new TV, buying a converter box, and signing up for converter box coupons are spending issues which are part of personal finance.  Are those things in your budget?  Are you planning on what changes you might need to make?  Using coupons and taking advantage of programs available to you are personal finance issues.  It is good to know what is available and appropriate to use.

The government has a program where you can sign up now for coupons for $40 off a digital converter box.  If you have any TVs hooked up to antennas you will put the converter box between the antenna and the TV and it will convert the new digital signals to work with old TVs.  Or you can change the hookup on back of newer TVs and have the antenna go straight into the digital input if your TV has a converter in it.  Or you can buy a new TV.  With new converter boxes and TVs come new features.  With those come higher prices.

I signed up for coupons right away so I wouldn’t forget.  I figured there would be a little processing time.  I have also heard that there might be a limit on how many coupons you can get, and that after so many are issued or used they will stop issuing them.  After signing up I know a little bit more about it.  Unfortunately it does not work like I expected it would.  I’ll list here a few things I learned about the program, and share how I believe they relate to personal finance.

1. The website to sign up is at www.dtv2009.gov.  You have to enter your name, address, and whether or not you subscribe to any pay TV services.  You can request 1 or 2 coupons.
2. Coupons will not be processed or sent out until converter boxes are readily available, probably late February at the earliest.  Processing, mailing, and delivery time estimates are not provided.  Coupons will be valid only at participating retailers.
3. Coupons expire 90 days from when they are mailed.  They are not transferable, have no cash value, are not replaceable if lost or expired.
4. 22 million coupons are available first come first served, and an additional 11 million are available to households with no subscription TV services.
5. Coupons cannot be used for “upgrade” devices such as converters with DVRs in them.

My two cents and personal finance perspective on each of those points:

1. The website is quick and easy.  I filled out the info and requested coupons.  The FAQ section is also easy and has details about all of these points and more.
   As with anything, it’s nice to use a quick and easy tool to get something done.
2. I didn’t know what I was getting into here, and even know I don’t know when I’ll have my coupons or details.  I’m guessing that different companies will be making different types of boxes.  I’m guessing that different stores will carry different boxes.  At some point I’ll have coupons valid somewhere for something.  Will it be a good box, or a market trial, or an early version?
   Just like your finances, make sure you know as much as you can BEFORE you take action.  These details weren’t brought to my attention until after I signed up.  Learn from my experience.
3. This is frustrating.  I don’t know when these coupons will be here, where I can use them, or what options will be available during the time they are valid.  Will these boxes come down in price after I buy them, or be on sale some time, or be cheap and basic the first year until there is really a need to compete to get people to buy one?
   Watch out for limitations and exceptions.  Even after signing up I hadn’t thought about some of these things until now.  Know the risks.  Understand what you expect and what you are able to tolerate.
4. There are limits.  Understand what is available.  We don’t know how many people are signing up for this or how long supplies will last.  There is an artificial pressure here to take action to lessen the risk that they will run out before you sign up.
   Understand the limits and risks.  Interest rates change, application criteria change, and markets move.  Consider your tradeoffs and opportunity costs.  What is it worth to take action now?  When is it worth taking time to learn more, to consider more options and wait for better ones, or to time a market?
5. More limits.  One big point some people are highlighting is that going digital will be good for the consumer.  Unfortunately certain consumer “upgrades” appear to be too good to be supported.
   Different purchases have different fees and costs.  Free consultations will give you basic information but nothing too detailed.  Understand the value to know what the upgrade is really worth, and when it is worth paying for.

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