Buy and Hold is my life.....readjust every so often......

GENERAL INVESTMENT APPROACH:
I would like to think that my investment approach is one of "buy and homework" (As Jim Cramer calls it).....but I think it is a bit easier to describe it as a more classic buy and hold.

Every quarter I look at my portfolio and see how it is doing. I do this against what I think the market is doing...and I look at particular items in the mix against each other.

I try not to chase maximum yields, but rather I try to see if the overall blend is performing OK. I tend to leave things along, and perhaps do a small level of "rebalancing" if things are a bit skewed.

But even here, this is normally a once a year activity.


HOW DO I SAVE?:
I do the same for saving...I don't think about it on a daily of weekly basis....I set-up a budget and and allow my savings to simply be an automatic part of my cash-flow. Then I just monitor the items of my budget on say a monthly basis to make sure I don't spend too much and unbalance the apple-cart.

When this works, savings just seems to happen automatically. I don't fret over it. It might not happen in the same level every week, but over the long term it works.

I sort of put it on autopilot.


CASH FLOW IS KING:
Ok...so if all this is automatic, how do I make it happen? What is it that I monitor and adjust?

How keep the whole system described above flowing.....in the black? How do I know my plans and budgets are going along as planned?

Well, I monitor cash flow fairly closely. I find this is the magic lever because that's the place where money is moved.....and is the place where the rubber meets the road. Once I get my weekly spending in line with my budget, I know I'm saving!

The importance of Cash Flow....

These past two months have taught me the importance of having a reserve of money at the ready because at times it is all about cash flow.

That's right, I had a few unexpected bills pop-up last month that centered around the girls trips to school this summer. I thought I had enough money in the bank to cover it all fairly comfortably, but this month the problem came to roost.

You see I had not considered the increased costs associated with the girls coming home. My weekly food bill rose from about $40 per week to over $100. I even saw an increase in my water and electric bill. (I have only one light on at any moment...)

Anyways, the budget I have crafted has very little wiggle room in it. In fact, if I go by the expected expense levels, I am in the hole at the end of the year. (but I have not gotten to things like paying my house and vehicle insurance....things like that will be what drives the account into the red and will require the selling of a longer term asset)

But those have not come due....and the main issue was not that the expenses I came across were totally unexpected....but they were unexpected in that month....certainly all at one time.

Cash flow....the flow turned into a drip....barely enough to feed the need. Thanksfully, I have not had any emergency expenses.....nothing large anyways. I have had a few unexpected things, but that went on the credit card....which only delays the problem until 30 days from now.

I need to build up my buffer again......so I can survive the ebb and flow of money.

I am going to cut back big time where ever I can.....food is the first thing. I am going to try to go a month without buying any food.....basically eat from the cabinets and freezer.

Sound impossible.....not really. I have a number of things in the freezer, and in the cabinets. I might not be eating exactly what strikes my fancy every night....but the checking account will benefit and my fear of balancing the budget week after week will get better. (a small price to pay for lower stress)

Here is a BLOG with good ideas on cash flow. It is written for small business, but many of the concepts are valid for household finance too!

Cash flow is king.....

The Perfect Storm - Checking Account Style (or, it's all about cash flow!)

I suppose I have gotten a pretty good handle on my finances over the past 5 or 6 months, so my charting in spreadsheet and log form has pulled back to a less difficult rate.

Because I have tuned my IRA and stock plan contributions to pretty close to "peak" my contributions, I have to be a bit careful with my cash flow. (my budget supports the expenses, but only if they come in sort of staggered and not at the same time)

As with any budget, you have to be careful with spending since your current savings account is probably higher than you expect given some of the expenses that were "baked in" but that have yet to be realized. (like real estate taxes that hit once a year, or car insurance which is the same)

But once you get the total income / spending budget in balance, you still need to watch monthly cash flow. One of the levers you have to "fix" this is your credit card....not by pushing things off to the point of paying interest....but to decide to pay something now or defer it for a month.

But be forewarned.....you can not defer things for ever.....this is a once in a while way to push payments out.

So the way I do this is to have a mental picture of all my expenses, current and future. I then have an idea of the amount of money I have in the bank, and how money is flowing in and out. (is the total increasing or decreasing over the next couple of months)

If I see a situation cropping up where I am short some money in a month...I might choose to defer a payment by slapping thing so on the credit card. (again, only if I know I will not be creating another "bubble" a month from now when I have to pay that)

Well, everything was going along fine until I ran into an expense I forget to consider. That expense was my own school tuition.

I forgot because "most" of my tuition is picked up by the place I work. But this only happens after I submit my grades. I generally choose to have my tuition bill deferred by the school until after grades are available...as that is as easy to do as giving the school $100 and showing them that the company I work for has a tuition payment plan.

So I did that last semester (about $2600), and the bill is due June 2ND. I then received the bill for this semester, which I have decided NOT to defer....and that is for about $1300.

I had planned on paying for Kristen's field School (about $1800) and Kimberly's summer classes in Copenhagen. (about $9800) with the former being paid by check and the latter a deferred payment of my AMEX card from last month.

I screwed up.....I still have the normal payments like my mortgage and car payment coming due early next month, and now I have to go in and really sharpen my pencil and check on a day by day basis. (to see when my paychecks are going to hit the account and so forth)

In the long term, this is not an issue...my budget is a good one, it is mostly a matter of cash flow. (actually, last month I had planned on needing to take money from long-term savings/investment....but an unexpected profit sharing bonus at work made that requirement unnecessary.....so this really is just a cash flow issue)

I need to perhaps create a cash flow spreadsheet to make all of this easier to track. Cheryl used to do this by simply listing it all out on a month by month basis on paper....I sort of do it in my head now....which is obviously not good enough!

Oh well.....live and learn!

The loss of income after a passing

I feel a little funny talking a lot about money and cash flow after my wife's passing, because this isn't really what I spend my time during the day thinking ab0ut. In fact, it really has not been on my mind at all.

But last night a friend of mine came over and we were just talking. At one point he asked if everything was going to be OK financially. My first comment was, I'm not worried about things like that. Everything will work out.

Well, I honestly believe this will be the case, but he hit me with a couple of thoughts that I honestly had not considered. Even though my salary was considerably higher than my wife (she being a new teacher), her salary was not insignificant at all.

In fact, he pay was about 30% of mine...which means that in an instant, our household income will be dropping by 25%.

Lucky for me, we have been savers all our lives, and we have never been the kind of people to live on the edge of debt. Our cash flow was always pretty solid, and I'm not saying I will not have to make any adjustments.....I will certainly have to. But we were on a pretty good savings trajectory and with some hopefully minor cutbacks and readjustments, I should be able to stay in the black. (albeit at a significantly slower savings pace)

Cheryl and I never calculated all this down to the penny, but we did consider all of this when we decided how our will would be set-up, and how much insurance we would carry.

I was the one heavily covered because the family really depended on my income. Thank God the kids are now older because we very much depended upon Cheryl staying home with the kids....not for monetary reasons, but because we felt this would offer the best foundation we could give our kids as they grew up. (most of our goals and moves were done to optimize the opportunity for our kids....and that will continue to be the case)

Life is complicated....and death can really complicate things if you have not considered that possibility. I thank God that Cheryl and I had thought a bit about this and had a decent plan.

As I said before....create a will, and think about whether you really need insurance!

My latest wrestling with our home finances.....

I thought I would just post some of the finance thoughts and things I have been pondering these days. I have not written as often as I had in the past, so you may not have followed our families situation.

My wife passed away just before Christmas last month, so quite frankly, money has not been anywhere near the top of my priority these days. Not that it isn't important, but as my dad used to say..."Money doesn't make the world go around, but it sure greases the wheel."

But let's face it, taking care of my daughters and family affairs is top priority....because blood is thicker than money. (ok...so I did a mash-up on a couple of old sayings....you get the guist)

But I have to admit that I can't just "forget" money....neither Cheryl nor I were born with a silver spoon in our mouth....and life isn't free.

Neither Life nor Death Are Free:
So here are a couple of things that have come up that you might never have considered. First, passing away isn't inexpensive. Even if you have some form of insurance, it is at least a cash flow problem. Simple services and burial costs between $10,000 and say $13,000....and the cemetery plots up here in NH are actually quite reasonable. (my wife and my plots costs $750 per site with a cost of another $750 to "open" the site for burial...but remember this cost pays for upkeep of the cemetery forever. Even inexpensive when you consider it "by the acre" :-)

The funeral home arrangements were about $9300. (I don't think that is too personal to disclose) I never looked into these costs, but I guess I wasn't surprised by any of them. Then there were all the costs for various ceremonies and participants. (no, I will not itemize those....but they include donations to the priest, church, organist/singer, and other people who worked along the way...all donations, but customary)

But back to that comment I made about the NH funeral plots being inexpensive..... my cousin who came up from Florida for my wife's funeral, and he wants to be buried with his parents in Woburn Mass. He took a ride over to size it up and get a price for cemetery plots. (Not my idea of a fun time....but he wants to have all his ducks in a row so that he doesn't impact his mate when he passes away...hopefully many, many years from now)

Anyways....the plots there in Woburn cost $2200 each! (Both are Catholic Cemeteries too!) I knew land was cheaper here in NH, but that sort of difference is crazy.

So I suggest everyone at least consider how their passing will impact the remaining family members, and either set money aside or have some level of insurance.....I suppose that is a tough thing to consider, but it doesn't have to be. We talk about health and auto insurance and we clearly never want to use it just the same.

Short Term and Long Term Planning:
Besides this cash flow crunch, I have also been starting to think about my youngest daughter's desire to transfer to another college. Cheryl and I had a financial plan worked out where we have saved money to help our daughters get through college, so this is a topic we have discussed many times.

My focus now is around Kristen's desire to go on for her PhD.....and believe you me, I am thrilled that she understands the value and wants to do that! (My dad warned me not to stop my education because it would be tough to get back to it...and I have to say, my dad was 100% correct!)

So I'm not so much stressed about Kristen transfering (I am taking a week off from work to take a grand tour of a few colleges on the east coast with her soon)...nor am I too worried about her leaving $30,000 in scholarship money behind at Hofstra, since I do want to support her and Kim to the fullest. As we talked about this the other night, I realized that I just moved my investment portfolio on to a more "conservative" tack. (I am worried about our economy, the falling dollar, and the housing bubble....but you know I worry a lot less about it when I don't pay attention! the old saying is right-on: "Ignorance is bliss!!!")

So I guess I need to add one more item to my massive "to-do" list....to again look at our long term financial plan for everything and re-balance it given a slightly higher (and longer) cost of college.

But like I noted earlier....I have my priorities....and unless the market is crashing down around my ears, I have more pressing priorities at the moment.....like my kids! The finances can wait until they get back to school and I get back to my empty house. (not actually empty at the moment with both my girls and my mother in-law here right now :-)

I hope this sort of BLOG entry isn't so boring or "frightening" as to turn people off....please bear with me as we get through our family problems. I will attempt to keep all my posts at least tangentially related to personal finance...and perhaps bring up topics like this that some may not even consider thinking about. (but will probably unfortunately affect every one of us at some point in our lives)