2million - My Journey to Financial Freedom

A Personal Finance Blog      ANNOUNCEMENT:2million has moved to www.2millionblog.com.     

Tuesday, November 29, 2005

General Electric Dividend Performance

A short time ago, GE announced they were selling part of their insurance business, raising their dividend, and increasing their stock buyback. This was great news for the company and the stock price closed 2.4% higher after the news.

What was most exciting to me is not the stock price, but the new dividend yield on the shares I purchase a couple of years ago. I made an investment in General Electric starting in 2001 that had a dividend yield 1.7% when I invested in it. However, now that GE has again raised its dividend, that dividend yield on the money I had originally had invested is now close to 2.8%.

Thinking about this made me want to take a look at my overall GE investment. I have been investing in GE since 2001 in a DRIP. This table details my annual investments:








$ 1,411.96






$ 1,188.47






$ 60.67






$ 65.57






$ 73.91






$ 2,800.58




Note: PV = Present Value, CAGR= Compound Annual Growth Rate, Dividends are excluded in the returns and CAGR, but dividend reinvestments are included as part of the annual investments.

Looking at this table I am pretty disappointed at the return from appreciation on my GE investment. However, I don't think this table gives us a complete picture. What about the dividend?

Based on the annual investment table above, to date I have acquired 85.3297 shares for an average cost of $32.82 a share (including investment fees). Based on this average share price my GE investment had a dividend yield of 2.68%. Now that they have announced the dividend increase my dividend yield has jumped to 3.05%. If you were to buy GE stock today you can only get it at a dividend yield of 2.8%.

That sounds a little better, but doesn't get me too excited. I bought GE because I thought this was going to be a great stock and help make increase my net worth. How is this going to happen?

Well what I really bought was the future dividends from GE. I thought GE was a great company with great management, and if any company can weather the storm, I think GE will. So if I assume GE will continue to grow and prosper as it has been then what can I expect?

This latest dividend represents a 13.63% increase in the dividend. In fact, GE has long history of annual dividend increases. Since I have owned GE stock the dividend has been increased annually.

Quarterly Dividends
2002 0.16
2003 0.19
2004 0.22
2005 0.25

So what will the dividends look like in 10 years? First let me make some assumptions about the dividend increases. If GE continues to roughly increase its dividend by 13.63% then the annual dividend payments for the next 10 years would look something like this:





$ 1.00



$ 1.12



$ 1.27



$ 1.45



$ 1.64



$ 1.87



$ 2.12



$ 2.41



$ 2.73



$ 3.11



$ 3.53


Notes: AD=Annual Dividend, DYASP=Dividend Yield on Average Stock Price (based on my avg stock price of $32.82)

Wow! Now that is what I am talking about. This suggests that in 10 years I could be yielding over a 10% dividend payment annually. Add a 10% yield to any additional stock appreciation when I sell and this could still turn out to be a great investment. I think this investment is still worth holding.

Considering an investment in a GE or another stock? Take a look at my guide to comparing DRIP fees to Sharebuilder fees to find the lowest cost vehicle.

Monday, November 28, 2005

Worried About My Potential Tax Liability

This has been a big year for me. I started a new stage in my IBM career with a position that may force me to relocate a couple times in the near future. I took on an improvement project to my home, and then later rented it out for a positive cash flow. I began renting a room from a friend of mine to minimize rent expenditures. All these events add up when it comes to my tax bill.

With only about 1 month to go in the tax year I finally started thinking about what I need to do to make sure I don't have a potentially large tax liability. At the end of the year I estimate my work income will be about $10,000 more than last year, and I have lost about $4,500 of deductions from the property taxes and mortgage interest on the conversion of my home to a rental property.

In a perfect world my goal would be to find an additional ~$14,500 in deductions over last year to avoid paying any additional federal income taxes (I already feel like I pay too much). I had been planning on buying a new house which would have helped reduce this exposure, but after months of searching I haven't found a home that has met my criteria yet.

So far I can add the following to my list of additional items to minimize my tax increase:
-$1,000 for the 401k limit increase this year
-$500 - a rough estimate of the additional charitable contributions I have made above and beyond last year
-$1,000 - loss from rental activity, there is still a LOT of number crunching I need to do here, but I am currently estimating that my loss from the 6mos of renting my house will be about $1,000 when I factor in maintenance costs, mortgage interest, taxes and depreciation. I did a rough estimate a couple months ago when I hoped it would be a larger loss, but it turned out that the positive cash flow would minimize the deductions the and net loss looks to be only about $1,000. I definitely need to do a better analysis of the rental activity.

So this still leaves me with potentially $12,000 more in tax exposure over last year. That means I could roughly owe about $3000 more in income tax above last year.

So what else can I do?
-MM set up an individual 401k that sounds like it has possibilities. However I don't really have any self-employment income. I think a good goal for 2006 would be to start creating some additional sideline income and then this option may be a good strategy to defer taxes on some of this income.
-I have already made Roth IRA contributions this year, but I was thinking maybe I could also take advantage of a Traditional IRA to shield another $4,000, but a quick search reminded me that I can only contribute a total of $4,000 to a Roth or Traditional IRA. Long term I think a Roth IRA is a better bet so I will stick to sending my contributions to my Roth IRA.
-Jonathan over at mymoneyblog had a great post about a sure way to beat the market that I would love to try especially with the large loss I am holding in Pfizer stock. Unfortunately I have already nearly maxed out my $3k tax loss from capital gains this year so it won't help me with this year's taxes.
-I recently discussed increasing my charitable giving, this may be a good time to get this started.
-I could accelerate some expenses for my rental property - I need to think about what items/services I need for my rental property (since I will buy them anyway) to increase my rental activity loss.

Unfortunately this doesn't look good. Other than increasing my charitable giving and rental expenses I don't see any easy ways to avoid paying additional income taxes. I guess I also need to start setting up a reserve to pay this potential tax bill.

Friday, November 18, 2005

Looks to be a great deal for Thanksgiving

A perfect compliment to a free turkey is a good deal on all the stuff you need to cook it! Between this deal for all the preparation materials and a free turkey with rebate I can put together a nice turkey meal for about $7.11.

I found this deal at SD for a nonstick roaster pan, rack, carving utensils, large cutting board and turkey serving platter from Linens N Things. Purchase the Culinary Essentials Roaster Set and receive the Turkey Completer Set for free. Use a 20% coupon (coupon code: 935339071363) to save an additional $4 off the purchase price and then receive $10 back on a rebate. Your net cost is $5.99 + tax.

Purchase includes:
-18" x 14" wooden cutting board
-18.5" x 14.5" oval platter
-8" carving knife
-7" meat fork
-16"x12"x3.75" Rack

$19.99 (Roasting Set) + $19.99 (Carving Set) -$19.99 (discount at purchase) -$4 (20% coupon), -$10 (mail in rebate) = $5.99 + tax

Yesterday I purchased this online and request in store pickup to avoid shipping fees. Last night I was able to pick up my order and was surprised to find them well stock for this promotion - if you have a physical $5 off $15 coupon from the LnT mailer you could save an additional $1 off the purchase price if you purchased in store instead of online. I also questioned the associate at the store since the web site said the set included a baster (which it did not) and the associate gave one to me for free (note: as of this morning the web site description no longer says includes baster).

After inspecting my purchase I am pleased with what I received - I think its a great deal for the money.

Thursday, November 17, 2005

Should I Continue Participation in the IBM ESPP?

Ever since I started working at IBM I have been contributing to the IBM ESPP plan. If your not familiar with ESPPs (Employee Stock Purchase Plan), it is a company plan to encourage stock ownership among employees. Many large publicly traded companies including Microsoft and Capital One offer similar plans.

Up to last year, IBM's ESPP was a great benefit to employees. A participant could make up to a 10% payroll deduction to the ESPP. The price that a participant paid for the stock is the stock price at the time they started contributing (reset every 6 mos), or the stock price at the time you purchased the shares (whichever is lower) with a discount of 15 percent off the lower stock price. Either way, the participant buys the stock at a price that's lower than the current stock price.

However, this year IBM made significant revisions to the IBM ESPP. The plan has changed so that the purchase price is simply 5% off the current stock price. My understanding is that these changes where made to help IBM meet the new accounting changes to report stock option expensing.

While a 5% discount is still nice, a large part of this benefit has been wiped out. I have continued to participate through this year because as an investor I believe IBM's stock price was undervalued and had very little downside risk. However, IBM's stock price has rebound slightly, and should IBM's stock price continue to move up, the downside risk outweighs the 5% discount.

At the end of the current period (Dec 31) I am considering withdraw of my participation until I feel IBM's stock is a more attractive investment. After each period I plan to assess the potential of IBM stock as I would any other potential investment and if I think IBM would be an attractive investment I would consider enrolling in the IBM ESPP again.

Wednesday, November 16, 2005

Keeping up with S&P changes

Here is a great investing tool that I use all the time. It is a link to free daily listings of S&P rating changes on stocks.

Several years ago one of the best things I loved about my Etrade brokerage account was it provided daily updates to S&P rating changes. Unfortunately this featured was removed and I missed it terribly until I found this site.

I find this daily listing a concise way to get updates on large-cap stocks and get analyst opinions at the same time. Best of all its free.

Tuesday, November 15, 2005

Donating Time to Habitat for Humanity

I just got back from spending a day volunteering for Habitat for Humanity this past weekend and have to put a plug in. I have volunteered several times with them over past couple of years and absolutely love every minute of it. I think Habitat for Humanity is such a great organization to volunteer for, if you have never tried it, try it once; I think you will be hooked.
Great reasons to volunteer with Habitat:
-Trying to control your spending? Volunteering time doesn't cost you a thing
-No long term commitment needed. Its easy to sign up to spend one day or even a 1/2 day volunteering with Habitat.
-It great for individuals or groups. If you and your friends are looking for something to do one weekend - this is perfect.
-Learn about housing construction. By volunteering with Habitat, I have learned how to roof a house, put down a subfloor, install interior trim, install a door, and practiced my painting techniques.

Other Benefits:
If you own a home or are considering owning a home, I have found Habitat for Humanity a great way to learn more about my house. This is so important especially if you don't consider yourself handy. Knowing how your home is constructed will give you better insight when you are troubleshooting home problems or negotiating with contractors on repairs or improvements to your home (This is the money saving tip part).

Volunteering your company or organization for Habitat for Humanity is a great, inexpensive (I mean FREE) team building event. I have organized a day outing with my group at IBM in the past and thought it was a great team building experience because:
1) It doesn't cost your organization anything (read easy sell to management)
2) I always end up working with people I typically don't work with and get to make new connections (great for networking)
3) Its allows your teammates to show their skills in other skill areas you wouldn't normally see (read team building).
4) You are helping others
5) Generates good image for your company by volunteering

Learn more at the Habitat web site or find your local Habitat for Humanity affiliate for more information.

Monday, November 14, 2005

If You use Wachovia, Watch Out!

Over the weekend I ran into a problem trying to perform transactions with my Wachovia checking account. I discovered that an online payment made through a credit card company web site from my Wachovia checking account was returned.

After 3 calls to my credit card's customer service I only had a little more insight into the problem. All they could tell me was that they submitted the transfer to my bank, but Wachovia apparently took the money back and the credit card company couldn't tell me why. I looked at my Wachovia checking account and there was no record of the transaction out or back in, so I assumed that the credit card company had just screwed something up.

However, this morning I tried to make another online transfer through a different web site and this site came back and told me that my routing number appeared to be invalid. Apparently Wachovia has stopped some of their routing numbers because these same routing numbers worked for me 2 weeks ago! (Wachovia apparently has several valid routing numbers as a result of mergers and acquisitions)

This is a very frustrating problem for me because I basically do all my banking transactions online. The worst part is I have already been levied a $35 return payment fee by the credit card company, and probably more are on the way since I have several transactions that I have submitted in the last week.

Arghhh!!!!!! Anyone else have this problem?

Friday, November 11, 2005

I Love Free Steak; The Best Benefit from Living in NC

To me there is one clear cut, above all else, benefit from living in the great state of North Carolina or AL, AL, CT, DE, GA, HI, IN, KY, MD, ME, MI, MO, MT, NJ, NY, OH, PA, SO, TX, VA, or WV. This, above all else benefit, is none other than beer company food REBATES.

No I am not drunk. I am talking about these little rebates offered at various times of the year from beer companies for a variety of food including steak, seafood, turkey, stuffing, gravy, cranberries, potatoes, deli items, pies and many other things. The absolute best part is that these rebates include a clause for certain states that "NO BEER PURCHASE IS REQUIRED". North Carolina happens to be one of these great states.

If you don't know about this, then you don't know what you are missing. This summer I enjoyed several pounds of ribeye and filet mignon all thanks to Miller Lite and Heineken summer meat rebates. All I had to pay for was the sales tax and 3 postage stamps for the rebates. I ended up with $48.35 worth of delicious steaks for $2.08.

Wait you say - this sounds too good to be true. Whats the catch? Believe it or not I haven't found one yet and I have successfully received at least 4 of these rebates. These rebates typically are not for any particular brand food merely categories such as seafood, meat, or turkey.

Last night I was strolling through my local grocery store, and once again, found a promotion for Coors to receive a $10 rebate for holiday-meal classics including turkey, stuffing, gravy, cranberries, potatoes, deli items, and pies with no beer purchase required. I plan to take full advantage of this the next time I go shopping.

Of course as with any rebate, I highly recommend making copies of any material submitted for rebates in case you don't receive your rebate. Now off to your local grocery store and see if you too can take advantage of these wonderful gifts from the great beer gods - err, I mean companies.

Thursday, November 10, 2005

Planning My Annual Giving

Whats the right amount of monetary charitable giving?

This is a pretty touchy subject, not many people talk opening about their annual giving unless they like to brag about giving large donations.

I'll be honest, I have probably been on the small side with my annual giving for the 4 yrs that I have been working. I usually donate some amount to 1-2 charities in IBM's annual Employee Charitable Contribution Campaign and then haphazardly make 1-2 additional donations during the year. One of the main charities I donate to is the Junvenile Diabetes Research Foundation (JDRF).

The one thing I haven't done is much planning on what I want to give annually. For the past 4 yrs my goal has been just to increase my annual giving. It has been unpredictable, and more about the mood I am in when I make a donation then following a plan about how much I would like to give.

I need a rule of thumb at least for the next couple of years that will help me give a set amount that I feel reflects the contributions I want to continue to make to charities. In addition this rule of thumb should not hinder me from reaching my financial goals so I can ultimately donate generous amounts of time helping charities in my early retirement ;-).

I think the best thing I have heard is mms rule of thumb annual giving equal to 1 day of salary. That isn't all that much, but I think it sets a good pace that I can build on as I get closer to my financial goals. However for every $100,000 salary someone makes, we are only talking about a measly $273/yr. If over ones entire life they only averaged 1 day of salary per year in annual giving, we are only talking about .27% of what they earned. I sure hope to do better than that.

I am going to mail a donation for the remaining amount I want to give to the JDRF today (just so happens I got another donation request form them yesterday). This will bring me up to the one day's salary for this year in terms of annual giving.

Now back to focusing on reaching my financial goals so I can focus my time in early retirement to worthy causes!

Wednesday, November 09, 2005

Easy Money:Just earned $5 Starbucks Giftcard

Just completed this survey for a $5 Starbucks gift card. I just went to the survey web site, entered 07661 as Store Code and completed the survey.

Found link on SD. If I get the giftcard I am going to treat myself to a big frappuccino. I love easy money.

Just shaved 23% off my girlfriend's wireless bill

This actually has been on my todo list for awhile, but I had been putting it off since my girlfriends Cingular account is not technically mine so I wasn't sure if I could even get her a discount.

However, yesterday I spotted this link at mymoneyblog that revealed a self service method to apply my corporate discount to my girlfriend's wireless account. Cha-ching! Just saved her $10.35/mo. Not a bad way to start the day.

Nobody should be paying retail prices for cell plans - almost every organization (charity, education, corporations, etc) have some type of discount plan with wireless companies. You just have to find them.

Monday, November 07, 2005

Itching to buy a home

As I have posted before, I have rented my house out and as a result I am renting a room from a buddy of mine. This was done in anticipation that I would be going on a couple temporary assignments for work, perhaps till Dec 2006. However, long story short, I am still in the same area. I also recently found out I will be remaining in the area for my next assignment as well.

Regardless, I am really itching to buy my next home. I really miss all the projects (I know it sounds crazy). I really enjoyed enhancing and improving my first house and it turned out to be a good long-term investment for me.

So if I decide that I am ready to purchase my next house, what I am looking for? Well I have the same area that my 1st house is located in mind because 1) I am familiar with area, 2) I would like to continue living in the area, and 3) I had good success improving, then renting my 1st house out for a positive cash flow. However, if I find a good opportunity somewhere else, I would probably take it. To me the most important thing is finding the right property for the right price.

I am concerned about the housing bubble. I don't think housing prices in the are have skyrocketed like they have in other areas which I think is a positive, however prices have still gone up, and I want to make sure I am getting the best value for my dollar - it would be hard for me to spend $25,000-$40,000 more for basically the exact same house I bought 3 yrs ago.

As a result I am starting to focus my attention on shoring up my credit score, raising cash for a down payment, and cleaning up my financial profile incase I need to start hunting for a mortgage.

Friday, November 04, 2005

A Topics Index of 2millionblog

This is my first attempt to improve the organization of topics for 2millionblog. I think this will serve as a great guide for any newcomers. I plan on updating this post once a month by filing new posts under their respective topics.

If its your 1st time visiting 2millionblog, please check out this list of the most popular posts or find a topic of interest below:

Index of Posts by Topics
-Monthly Net Worth

-Personal Finance
-Money Savings Tips/Easy Money
-My $2 million Net Worth Goal
-Rental Property

-Info about Credit
-Administrative Items

Thursday, November 03, 2005

An Update on Improving My Credit Score

Last week I found out my credit score was lower than I expected as a result of taking advantage of multiple 0% balance transfer offers. You can find out more about this at mymoneyblog's overview of how to play the 0% game.

At the time I had 4 0% balance transfer balances:
-Bank of America Balance:$13,030/Limit $13,200; [99% borrowed]
-Citi Balance $16,980/Limit $17,500; [97% borrowed]
-HSBC Credit Card Balance $5810/Limit $7500; [77% borrowed]
-GM Card Balance $200/Limit $2,300. [9% borrowed]

Here is what I have done over the past couple of days to boost my score:
  • inquired about bumping credit limit on the BofA card, but required credit inquiry so I declined
  • consolidated my 2 Citi cards (other was unused) to boost my limit on my Citi balance transfer (which will make the % borrowed go down)
  • paid off GM card balance transfer
  • paid $4000 to HSBC credit card
  • paid $500 to BofA card balance transfer
  • paid $355 to Citi card balance transfer to bring % of limit borrowed to < 90%

Here is my credit card picture as of now:
-Bank of America Balance:$12,530/Limit $13,200; [95% borrowed]
-Citi Balance $16,600/Limit $18,500; [89% borrowed]
-HSBC Credit Card Balance $1810/Limit $7500; [24% borrowed]
-GM Card Balance $0/Limit $2,300. [0% borrowed]

Out the 4 balance transfers I have paid off 1, and hope to finish paying off the 2nd card this week. I also reduced the other 2 BTs from (99%, 97% to 95%, 89% respectively). I also estimate my overall percentage borrowed has gone from 47% to 38%. I am hoping that these actions are enough to bump my score back into the lower 700s in the next month or so.

As you may have guessed I am sensitive about my credit score because I am contemplating buying another house. I am just thinking about it so far, but incase an opportunity presents itself I want to make sure I can take advantage of it.

Why bad credit does double damage

This article seemed timely for me in a bad sort of way. It lists the fallout of a bad credit score.

Nothing really surprising, although I just got my auto insurance bill and couldn't believe how much my premiums jumped. I suspect this is more a result of moving than my credit score. My premiums went up 20% ($40 for 6 mos) from moving from one side of town to the other. I am beginning to think insurance companies should provide a color coded map so you know which areas are going to cost you the most in insurance premiums.

Wednesday, November 02, 2005

October 2005 Net Worth Update (+$1,790)

Here's my net worth update for October as of 10/31/2005. My 2nd worse month of the year, but in large part due to the market heading south and the significant price drop in Pfizer. I am closing in on my EOY goal of $205,000 and hope to make it with a big push in December with some patent bonus money that may be awarded.






Cash & Equivalent

$ 6,605.26

$ 4,101.22

$ (2,504.04)



$ 35,975.47

$ 34,680.74

$ (1,294.73)



$ 39,776.90

$ 39,134.34

$ (642.56)


Roth IRA

$ 19,582.31

$ 19,377.94

$ (204.37)



$ 64,657.09

$ 66,062.41

$ 1,405.32


Stock Option

$ -

$ -

$ -



$ 25,497.05

$ 28,972.42

$ 3,475.37


Home Equity

$ 40,127.99

$ 40,303.00

$ 175.01


Other Assets

$ -

$ -

$ -


Receivable (Payable)

$ -

$ -

$ -


Reserve Funds

$ -

$ -

$ -



$ (39,144.25)

$ (37,764.02)

$ 1,380.23


Tax Liability

$ -

$ -

$ -



$ 193,077.82

$ 194,868.05

$ 1,790.23


Highlights for October:
-Finished paying off my car loan to my parents
-Started paying down 2 out of 4 of my 0% Balance Transfer offers since I found out my credit score was taking a small beating
-My net worth suffered from a significant drop in Pfizer stock price towards the end of the month.

-Stock Investments for October (Outside of 401k & ESPP):
$1150 in Pfizer DRIP
$250 in Duke Energy DRIP
$350 in Vanguard Roth IRA (Windsor II fund)