Taking Stock of my Personal Finances

Market Losses

Several bloggers have been posting about the effects of the recent rickety stock market on their finances and giving advice. I am appreciative of this, it helps to see how others are faring — I might learn something. So it is time for me to do the same and perhaps you may pick up something of use. Today for the first time in months I checked the status of my retirement account. For the last three years I have been invested in the 2020 Lifecycle Fund (L Fund) which, according to the Thrift Savings Plan (TSP) website, works like this:

The L Funds provide you with a convenient way to diversify your account among the G, F, C, S, and I Funds, using professionally determined investment mixes that are tailored to different time horizons. Your “time horizon” is the date (after you leave Federal service) that you think you will need the money in your TSP account. Because it is important for each L Fund to maintain its target investment mix, the TSP will automatically rebalance each L Fund daily. Then, each quarter, the investments in each L Fund will shift to a slightly more conservative mix. In addition, experts will review the investment mixes periodically to be sure they are still appropriate.

So the L Funds include a mix of all available funds:

• Government Securities Investment (G) Fund.
• Fixed Income Index Investment (F) Fund.
• Common Stock Index Investment (C) Fund.
• Small Capitalization Stock Index Investment (S) Fund.
• International Stock Index Investment (I) Fund.

As you can see I am well diversified. In the recent stock market declines the G and F funds held steady while the C, S, and I funds took a pounding. For the quarter ending 30th September I had a loss of $16,663.71 which also includes money contributed. Not bad. But from 1st October to 9th October I had an additional decline of $31,665.27. So even a diversified account is getting hammered. When the roof falls in it takes about everything with it. However, it is not all bad news. For 2006 the L 2020 earned 13.72% and in 2007 6.87%. As of yesterday those earnings approximately equal the losses.

Other Funds

I recently reported on Prosper where I now have 34 loans earning an average of 17.5%. While the stock market is causing grief throughout the land with seven days of triple digit declines, my Prosper loans serenely cruise along with not one point of return disturbed. Of course I plan for defaults but I haven’t had any yet.

Where to put one’s petty cash? I have mine earning 6.01% in rewards checking accounts at Coulee Bank and 5.01% in Lee County Bank and Trust (the rate was reduced from 6.01% today). I’ve not understood why more people don’t take advantage of a FDIC insured rewards checking account that pays this high of an interest rate. Of course I also have a local bank and credit union.

My Plans

My plans now are to the leave my L Funds as they are and continue to contribute the maximum amount. As soon as the stock market settles down there will be a flood of money coming back into stocks. Then we will see a number of triple digit increases.

I plan to wait a few weeks and watch how Loanio progresses and either invest some money there or in Prosper. I will look around for another bank to replace Lee County Bank and Trust. I think the minimum rate for a rewards checking account should be 6%, considering the monthly requirements that are demanded.

As far as spending is concerned I will continue as normal. What is normal? For me it is conservative but not spartan. That’s about it — business as usual. And if you’ll excuse me for tonight, I have a retirement fund I want to check again.

Update

1 Mar 2009 I did indeed leave the L funds as they are and continued to contribute the maximum amount. Recently I put new contributions into the G fund. Loanio and Prosper went into “quiet periods” so I put money into Lending Club instead. Lee County Bank dropped their rate to 3% so I joined my local Deseret First Credit Union to earn 5%. I continue to spend as normal, which wouldn’t even bring a mouse out of recession.