Filing For Bankruptcy

No, not me. The only debt I have right now is my oppressive student loans (~$88k) which can't be BK'd away. *Bleh*

My sister and I hired an attorney to file Chapter 7 bankruptcy on behalf of my parents. Since my parents have absolutely no assets to speak of, the bankruptcy filing is relatively straightforward and simple. I could've done the work since I'm admitted to practice in federal court, but quite frankly, I'm pissed with my parents for being so careless and apathetic about their finances. (In April, they had $60k in credit card debt and had no clue about it!) My sister made valiant efforts to get my parents (or at least my mother) to sit down to discuss a budget, but they couldn't care less. After four months, my sister managed to get my parents' debt down to $55k! But it's only a matter of time before my father will pass away, leaving a crushing debt that is unaffordable under my mother's Social Security survivor's benefits alone. C'est la vie - - my parents will pay a flat fee of $1,895 + $300 filing fee to bankrupt away their debts. I'm not going to pay this cost for them.

Of course, my sister and I will be doing all of the leg-work of compiling information about my parents' debt, their income, their cost-of-living, etc. And the next struggle will be to get my mother to actually undergo credit counseling. (My dad will likely be exempt due to his dementia.) Since my mother never bothered to learn English, I will probably have to attend with her and translate. Joy.


I'm sorry to be complaining here. But I just can't forgive or fathom my parents' attitude that their financial mess is their daughters' responsibility to clean up.

I Had A Job Interview Yesterday

I made a commitment to my big sis that I will look for a job in Phoenix to help her care for our parents. So yesterday I had a job interview with a prospective employer. The interview went relatively well. But... I may not probably won't get the job especially since I learned that my new boss will be my old boss from 10 years ago with whom I previously did not get along.

I was asked how I got along with my former boss. I danced around the issue and said, "He ran a tight ship and I struggled a bit since I was transitioning from an attorney job to a corporate one. It wasn't all smooth sailing but we're both professionals." But... my former boss may bad mouth me and I may be kiboshed. *Shrug*

Anyhow, before my job interview, I came across an article that said good looking people do better at interviews. Which made me wonder: Do I have an advantage?

Beauty is part subjective and part objective. I've heard that if your face matches the Fibonacci Golden Ratio, you're deemed objectively "beautiful." (Although some scientists have refuted this theory.)

Out of morbid curiosity, I used the formula from this page. I heard that Angelina Jolie has the perfect ratio, so I used the picture below and plugged in her numbers.





And whaddaya know? Based upon my imperfect measurement technique, Angelina still came out with 1.54 out of 1.61 (i.e., a 95.14% Golden Ratio match).

I plugged in my numbers and I got.... 1.389. Very average. Ha ha. I guess I didn't have that great of an advantage based upon my looks. *snicker*

Anyhow, masochistic people can get their own number using my spreadsheet.

Last Will and Testament

My father is dying. He's diabetic, suffers from dementia and currently weighs less than 108 lbs. He recently got his blood test results back and it doesn't look good. With CEA levels of >500 mcg/L, he probably has colorectal cancer as well. My father has opted not to get any invasive testing since he also does not want any treatment.

My father was a passive man with little to no initiative to improve his life. (I say "was," since with his diminished mental capacity, there's no point in criticizing him for what he is now.) He was unemployed for most of my childhood until my mother had to pull some nepotism strings to get him a job. It's no wonder that my parents currently have $60,000 in credit card debt with absolutely no assets.

My father never took much care for personal relationships either. He is estranged from my mother and refuses to speak to or acknowledge her although they live together with my sister. When my sister and I were growing up, he never really took any interest or effort to get involved in our lives.

While driving to Phoenix couple of months ago, I borrowed a chick-lit audiobook called "Best Friends Forever" by Jennifer Weiner from the library. In the book, the main character, Addie, gets bullied by the school jocks who graffiti nasty stuff about her on her driveway. Addie's father helps her scrub off the graffiti and encourages her to keep her wits about her since the harassment will eventually end. This made me sad since I don't EVER recall an occasion that my father consoled me when I was down. For example, when I was in the eighth-grade, my classmates ditched me during a class-outing. I came home crying and told my parents what happened. I distinctly remember my father continued to do whatever he was doing. Typical.

Anyhow, what little effort my father spent in developing a relationship with his family, he spent less with others. He really has no one he can call his best friend, other than his younger brother.

The sad life of my father is reflected in his "Last Will and Testament" that he emailed my sister and me. Below is a translation:

This year in October, I will turn 74 years old. I don't know how much longer I will live, so I am setting forth a simple "last will and testament."

Upon my death, please notify the following 3 people:

1.) My younger brother,
2.) Mr. K.M. I am the person who nominated him for various positions he currently holds, so I doubt he would object to your notifying him about my death,
3.) The Buddhist Temple in the old country where the family grave is located. Since I have not been making any offerings to the Temple and since you girls are now US citizens, please notify the Temple that there will be no future communications on behalf of the Family upon my death.

When you dispose of my body, you may also dispose all of my personal belongings as you see fit.

I am sorry that I couldn't do much for my family. I understand that I have a small life insurance policy. Whatever is left over from the proceeds, please give to your mother.

It's very sad to see in writing that my father accomplished little towards a fulfilling life. If anything, though, I see my father as a cautionary tale. As a result, I am putting more effort into nurturing my personal relationships. (Hence, the lack of posts.) At the end of the day, I want people to remember me fondly for who I am, not because they owe me a debt of gratitude. Whatever petty issues I have with my family and friends, I need to let them go. As long as I am willing to give more than I get, that shouldn't be a problem.

With respect to personal finances, my father recently gave me some advice:

Last month, my sister an I took our parents to Las Vegas to celebrate Father's Day and my birthday. Since my mother and my father absolutely detest each other, I stayed in one room with my father and my sister stayed with my mother in the other. (How much more dysfunctional can my family be?)

Anyhow, while my father and I were getting ready for dinner, my father looked at a bottle of Fiji water at the mini-bar. My father commented that when he was working in Australia, a co-worker suggested a trip to Fiji and New Zealand. My father said, at the time, he thought that was such a big waste of money and didn't go. He said, "I now wonder whether I should've gone. Now at the end of my life, I think I perhaps I should've taken opportunities when they presented themselves and not be so stingy." Pearls of wisdom from my father. Late, but better than never.

Why Are I-Bonds So Confusing?

The fixed rate of the I-Bonds were announced yesterday and it's 0.2%, down from 0.3% in November. If you add in the inflation adjusted semi-annual rate, the composite rate for the period between 5/1/2010 - 10/31/2010 is 1.74%. Since the prior composite rate was 3.36%, I decided to front-load my planned purchases and bought $300 on April 29.

What's really confusing about I-Bonds, though, is that I really can't compare the current composite rate to APYs offered by banks since the I-Bond rates change every 6 months. Additionally, I noticed something peculiar about my I-Bonds.

I already knew that:
1.) The applicable composite rates are announced every May 1 and November 1;

2.) The composite rates are applied every 6 months from the month of purchase. For example, I-Bonds that I buy in January will have the current composite rate until June 30. (And February purchases will have the current rate until July 31, so on and so forth.) The new composite rate for the January I-Bond will apply between July 1 to December 31. The next composite rate change will take place anew on January 1.

Although that's simple enough, I also discovered that the interest doesn't start accruing until 3 months after purchase.

Using my January 2010 $50 I-bond purchase as an example:

1.) The applicable composite rate at that time was 3.36% and would apply until June 30, 2010. Since it was just announced that the new composite rate is 1.74%, the new rate would apply between July 1 and December 31, 2010.

2.) The 3.36% interest didn't start accruing, however, until April 1, 2010. The I-Bond will continue to accrue at 3.36% until September 30, 2010. The bond will accrue at the new rate of 1.74% between October 1, 2010 and March 31, 2010.

If I sold the I-Bond in January 2011, after the requisite 1-year holding period, I would be penalized 3 months' worth of interest. In this case, I'm wondering if I'll be penalized the 1.74% interest that I will be accruing between 10/1/2010 - 12/31/2010. If so, my January 2010 I-Bond would only have a net effective interest rate of about 1.78% (if I sold after only 1 year). If you take into account that it's exempt from state tax, I guess it still beats the current 12-month CD rates that are available out there.

But still, that's a lot less than the 3.36% interest rate that I thought I was getting. And I may have been better off just sticking my money into my SmartyPig savings account that's yielding 2.01%.

April 2010 Progress Report

I've reached a pretty important milestone in April - my net worth is in the six-figures for the first time in my life! But... does this really reflect my current net worth?


MY DEBT

	Starting Debt (6/08)	Last Month	This Month	DIFFERENCE
Private SL	$49,528.99	$39,111.05	$37,742.72	$(1,368.33)
Fed'l SL	$55,852.68	$53,170.49	$53,034.22	$(136.27)
Car Loan	$9,779.33	$0.00	$0.00	$(0.00)
CC	$13,610.75	$0.00	$0.00	$(0.00)
TOTAL	$128,771.75	$92,281.54	$90,776.94	$(1,504.60)

Still chugging along with my snowball.

Ooooooh and I'm almost at the next milestone of going below the $90k mark. I'm also *this* close to paying off one of my private student loans that I took out to pay for my living expenses while I studied for the bar. This basically means that I'll be paying off my living expenses (rent, food, entertainment, etc.) from 1998 in 2010. *Shaking my head in disgust.*

Anyhow, reduced my debt 1.63% from last month. That's pretty good, right?


SAVINGS

LAST MONTH	THIS MONTH	DIFFERENCE
$8,883.55	$8,970.12	+$86.57

The savings I report here is with respect to my emergency fund savings only and does not include my future spending earmarks. I fell short on my monthly target to save $100 into my EF. Oopsie. Don't want to sound too defensive, but I had to pay boatloads of money in taxes this month (Federal $788 and State $2,318). But.... I'll also admit I over spent this month too. :-(


MY "X"-FUND

LAST MONTH	THIS MONTH	DIFFERENCE
$24,272.43	$24,344.25	+$71.82

My "X"-Fund represents a part of my recent windfall that I'd set aside either as an emergency fund or a down-payment for my first home. Either way, it's money that I don't intend to touch unless it's for necessity or reinvestment.

I didn't put any extra money into this fund in April, so the increase represents the interest I accrued in my Everbank account. Sadly, the promotional 2.71% APY came to an end in March. From here on forward, I'll only be accruing ~1.26% of thereabouts, so I'll probably only earn about ~$30/month or so. Sucks.


MY ROP (LIFE INS) FUND

LAST MONTH	THIS MONTH	DIFFERENCE
$0.00	$660.00	+$660.00

Long story short, I'm pretending to pay myself an additional $55/month for a "hypothetical" return of premium (ROP) term life insurance policy. (I'm basically trying to "earn" back the term life insurance premiums through interest and investments.)

I've set aside $660 ($55 x 12) for this year's premium into my SmartyPig account that's earning 2.01% APY. But starting in June, I'll invest my hypothetical $55/month ROP premium into my IRA. Or I may buy savings bonds. Or I may just save or whatever.

Anyhow, my gamble is that over the long haul (i.e., 30 years, or during the period of time that I am paying for my life insurance premium), I can earn enough to cover the premiums paid. At this time, I'm estimating that the benchmark I need to beat is 3.98% APY.

Since I'm curious how this experiment will turn out, I'll be reporting about my returns/losses monthly. I've created a new category for "life insurance" in my net worth chart to map my progress.


MY NET WORTH

LAST MONTH	THIS MONTH	DIFFERENCE
$98,184.22	$105,514.01	+$7,329.79

I made it into the six-figure club!!! Hurray!

But my excitement is tempered by the nagging question of whether I should even count my 401k and my IRA as part of my current net worth, especially since I can't touch the money (without penalty and ungodly taxes) for another couple of decades.

If I omit my 401k and IRAs, my net worth is... -$43,285.19. Ugh. If that number ain't demotivating, I don't know what is. I'll continue to include my retirement accounts in my monthly net worth, thank you very much.

The breakdown and the history of my net worth can be seen here.

My DIY ROP Life Insurance Policy

As you know, I'm currently in the process of purchasing a $500,000 term life policy for the benefit of my sister, who has recently taken in my parents. I had my medical exam last Friday and Accuquote just confirmed that it received my application. I'm told the underwriting process takes about 4 to 6 weeks, so I should be getting my policy by my next birthday. (Gaaaaaah. I share the same birthday as Michael Vick?? Ugh.)

*Ahem* I digress.

Assuming that my health exam results are "excellent", my annual premium for a basic term life policy should be $595, or about $50/month. I was also quoted $1,250/year, or, $104.17/month for a Return of Premium ("ROP") policy.

ROP policies will allow term life insurance policyholders to recover all or part of their premiums paid over the life of the if they do not die during the stated term. Basically, with an ROP policy, I'll be paying an insurance company $104.17/month now, to get back $104.17/month 30 years later. (By my calculation, the yield on the additional ROP premiums would be about ~3.98% APY over 360 months.)

Any claim that the net cost under an ROP policy is zero, ignores opportunity costs or illiquidity. More importantly, the additional premiums are wasted if the policyholder does die during the term.

This site gives an objective explanation of the pros and cons of ROP policies. But ultimately, I think the most compelling argument against the ROP policy is:

"Why Shouldn't I Get ROP Term Life Insurance?

The main reason people don't get ROP term life insurance is that it costs more. It can cost up to three times as much as term life insurance.

Some financial advisors also suggest that if you can afford ROP life insurance, then you should consider getting regular term life insurance and investing the difference."

Although I'm convinced that the ROP policy is not worth it, I'm intrigued about getting a "refund" of my premiums. I wondered whether I can DIY my own ROP policy?

Confession: Although I have enough money to pay this year's premium, I just realized that I don't have enough room in my monthly budget to pay for subsequent years' premiums. In order to pay for my life insurance policy, I'll need to reduce my monthly student loan payments from $1,478/month to $1,373/month (for the "pretend" ROP policy), or, $1,428/month (for the basic term life policy).

My Plan: I immediately set aside $595 for my basic life insurance premium and an additional $660 for my hypothetical ROP premium for this year. I created a sub-account in my Smartypig account (2.01% APY) specifically to park my "pretend" ROP premium. I also adjusted my budget by reducing my SL payments to $1,373/month. I plan to save and/or invest the additional $55/month "pretend" ROP premiums.

I can already hear the trolls - - "The extra $55/month is better spent paying down your ginormous student loans!! You're such an idiot. No wonder you got yourself in such a horrendous financial hole." And quite frankly, I can't argue with the trolls, since they're right. My private SLs have an APR of 3.547% and are likely to go higher in the upcoming months. But I want to point out that I banked this year's "pretend" ROP premiums from my future spending earmarks, not from my emergency fund or future student loan payments. So I don't want to hear how paying down 3.547% APR is better than banking at 2.01% APY. I get it. I really do.

And I've decided to proceed with my DIY ROP plan because I'll still be able to pay off my private SLs in 2 years with or without the additional $55/month. (Even at the reduced $1,373/month payment, I'll be paying over 3 times the minimum monthly payments owed on my private SLs and over twice the minimum monthly payments on all of my SLs combined.) But the biggest reason why I'm doing this now is because I highly doubt I'll remember to start setting aside my "pretend" ROP premiums several years down the road when I payoff my SLs.

Although I parked this year's "pretend" ROP premiums into a savings account, I intend to dollar cost average my future monthly hypothetical premiums into my Fidelity non-deductible IRA account with commission-free ETFs. In essence, my gamble is whether my "pretend" ROP investments can match or beat 3.98% APR, or even 3.547% APR.

Only time will tell...

Happy With My New Fidelity IRA

On February 3, 2010, Fidelity Investments offered commission-free trades on 25 iShares ETFs. As a small investor and a die-hard, dollar-cost averager, this intrigued me. My biggest obstacle to dollar-cost averaging ETFs was brokerage firms' commission fees. Even at low-commission fee Scottrade, I would need to buy $700+ of any one ETF in order to limit my commissions to 1%.

If I had $700+ to invest monthly, I wouldn't care too much about brokerage commission fees. But alas, since most of my income is going towards paying down student loans and my 401k, I don't have that kind of money to play with invest. (Some day, though, some day.)

Anyhow, I was happy to see that Fidelity was offering TIP commission-free. (I currently have 10 shares of TIP in my Scottrade accounts.) I was even more excited that EEM (MSCI emerging market fund), IVW (S&P500 growth fund), LQD (investment grade corporate bond fund) and EMB (emerging markets bond fund) were also offered commission-free. I was sold.

Traditional v. Roth?
I chose to open a Traditional, non-deductible IRA. Although I expect my 2010 AGI to be below the $105,000 - $120,000 threshold, it may not be if I get laid off at the end of the year and am given my lump-sum severance. In order to avoid the headaches of a potential re-characterization from a Roth to a Traditional IRA and coverting it back to a Roth, I just chose to open a Traditional IRA and convert it a Roth next year.

Open Account With $2,500 or $200/month?
Since I intend to dollar cost average over the year, I chose the SimpleStart IRA process which waives the usual $2,500 minimum investment in lieu of $200 monthly automatic contributions.

I chose to invest $220/month and keep the rest of the money in my numerous "high" interest-bearing savings accounts. Fidelity offers an FDIC-insured, deposit sweep, but it's currently earning 0.10%. That's pretty much close to nothing.

DRIP Feature
I've currently elected to invest solely in income funds in my IRAs to create a source of tax-free, passive income stream in my retirement. I figure that since I'm not presently investing much money in my IRA (in comparison to my 401k), I'm not sacrificing that much potential growth for safety.

For the first two months, I bought couple shares each of LQD and EMB. They both pay out about $.40/share in dividends per month. I was delighted to learn that my Fidelity account also has a DRIP feature which would reinvest my dividends into the ETFs. (I don't think my Scottrade accounts have this feature.)

With the DRIP, I earned an extra 0.005 share of EMB and an extra 0.004 share of LQD and should be getting more at the end of the month. Woo hoo!!

All in all, I'm happy with my new Fidelity account. I'll be the first to admit that the iShares ETFs aren't my first choice, but if I want to dollar-cost average, this is currently my best option. If I can find additional monies to invest, I'd also eventually like to add growth fund ETFs into the mix. My 401k is woefully lacking in growth funds and this may be a great way for me to diversify.