Under pressure from newspaper articles uncovering congressional expenses, Nancy Pelosi announced that congressional expsenses would be published online beginning August 31.

It turns out that the date has been pushed back to mid-November due to “concerns” about security and support. I don’t quite follow the security claim, which wasn’t discussed in the article I read in today’s Wall Street Journal. The support issue lies in the expected server demand that will result from the expenses being made available to the general public.

That said, I think I know the real reason for the delay, which is mentioned in the article:

As a result of the delay, the first claims to be posted online will cover a period in which lawmakers were aware that their expenses would be made public in this way.

Interesting…

Regardless, I think the making of expenses easily-accessible to the public is a start. Let’s just hope they are accurate and not jaded by some loophole that allows certain expenses to escape mention.

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I’ve written a lot lately about finding balance. It’s important to save for the future, but how do you balance that with enjoying today? Each of us has to address that question in our own way. A reader named Max wrote to share his own dilemma:

I’ve been working as a web designer since I was 18. I made a few financial mistakes in my early days: leased a car for four years, bought a couple of motorcycles, spent money on Stuff that had no value. I’m 25 now and I’ve owned a condo for four years. I was lucky to buy it really cheap and only have $100,000 mortgage left to pay.

Things have changed in the last two years. I’ve traveled a lot. I’m constantly increasing my knowledge and working on new business ideas. But I don’t have the time to do anything about it because I’m always working…to for pay my condo.

Fortunately, I have no debts other than the condo. I have $5000 in savings. My total expenses are about $1700/month and I make about $2600/month. I made some calculations and I can easily bring my expenses down to $1000/month if I didn’t own the condo.

After working as a web designer for nearly seven years, I’m sick of it. I want out. I want to bartend a couple nights per month and travel the rest of the time. Actually I’d be happy just traveling and doing any kind of work outdoors: bartending by the beach, teaching motorcycle riding classes, gardening, surf instructor…

Would it be wrong to sell my condo (I could get $160,000), take the profits, and go travel the world? Do a few side gigs here and there and enjoy life while I’m still young? I don’t have kids. I’m not married, no girlfriend. No car, no debts other than mortgage. I’ve been wanting to live in Australia, California, Japan. I’m sick of cold winters in Maine.

I’m also scared to just “save money” eternally until I’m too dead to enjoy it. I don’t understand the point of saving my money and working to pay my bills when I can just cash in now, take as much time off as I want, and still get by on a small salary doing work that I really enjoy — outdoors, where the weather is great.

I need advice, and my parents keep telling me to keep my “good” job.

This is an interesting question, one that many GRS readers wrestle with. The good news is that Max is in fairly good shape financially for this stage in his life. He has $5000 cash and $60,000 in equity in his condo. He has no debt. He has no ties.

Based on this, I think there’s a balance to be found. I’m sure many folks would recommend simply finding another job, moving from Maine, and pushing forward with a sedate (but safe) life. And there’s value in that. At the very least, Max should stay away from debt.

But at the same time, I can’t help but remember my friend Sparky. Sparky didn’t have $60,000. His wealth was more like $6000. But when he was Max’s age, he packed up and traveled the world for five months. Sparky loved it.

Because he was not burdened by Stuff, Sparky returned to a financial position similar to the one he’d left. He didn’t have a mortgage or other debt. His core savings and investments were still intact. He lived for five months without an income, it’s true, but he spent exactly what he budgeted, and he had the experience of a lifetime.

Max has an opportunity that may never come again. How many of us at age 40 can simply pack up and travel the world? How many wish we could? (I do!) Knowing what I know now, if I were in his position I would sell the condo, put half of the money in savings, and then use the rest to travel on the cheap. I might even take a job in another country and live there for a while.

When I returned to Maine (or to Texas, or wherever), I’d start again from scratch, either as a web designer or as something else entirely. Maybe go to school. I’d use the remaining condo money to jump-start my life, to stay away from debt.

Along the way, I’d read The Razor’s Edge, Vagabonding, and The Art of Non-Conformity.

This advice may be counter to what you’d expect from me. I’m a huge advocate of saving and investing early. But I think Max already has a good start, and he has a chance to pick up something even more valuable than home equity: He has a chance to build life equity.

What would you do in Max’s situation? Would you travel the world, too? Or would you parlay the good financial start into a stronger foundation for the future? What advice can you offer Max?

Programmer photo by evhead. Photo of Japanese garden by One man’s perspective.

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Related Articles at Get Rich Slowly:

• Daily Links: Best Job in the World Edition
• Ask the Readers: Can College Students Save Money?
• Daily Links: Non-Conforming Happiness
• How to Save for the Trip of a Lifetime
• links for 2007-01-13

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I promised to follow-up on the features of the Citi Forward card after getting mine, and am finally getting around to it. Read on to see how you can get a $100 gift card and also 3.45% cash back with this card at restaurants, Amazon.com, and more.

Sign-Up Bonus

New cardholders get 6,000 bonus ThankYou points after $50 in purchases made within 3 months. In addition, you get another 5,000 points for choosing paperless statements within 3 months.

The 11,000 bonus ThankYou points showed up promptly. I signed up for paperless statements immediately, and received the 5,000 points on my very first statement. I made the required $50 in purchases during the first month (showed up on the first statement), and received the 6,000 points on my second statement.

5x ThankYou Points

This card works off the same ThankYou points system as many other Citibank cards. 10,000 points = $100 gift card at stores like Sears, Macy’s, Staples, Old Navy, Gap, etc. 12,700 points = $100 towards a student loan or mortgage payment. 14,000 points = $100 prepaid Visa credit card. 14,500 points = $100 statement credit.

What makes this card unique is that you get 5 points for every $1 you spend on books, movies, music, and at restaurants. On everything else, you get the plain vanilla 1 reward point for every $1 spent. No annual fee.

5x Rewards at Restaurants
Again, at 1 penny per point with gift cards, getting 5x points is like getting 5% back when eating out. Even if you convert to straight cash, that’s still 3.45% cash back at restaurants (5/1.45). Or 3.57% back if you are okay with prepaid Visa card, which I am since they are usable anywhere that takes credit cards.

I have gotten my 5x rewards at fast food restaurants (McDonald’s), chain sit-down restaurants (Chili’s, etc), and also mom-and-pop places.

5x Rewards at Amazon.com
I can also officially confirm that Amazon.com is considered a bookstore. This is true even if your entire purchase (or any of it) did not contain books. I made one purchase with books, and one with only electronics, and got 5x points for both. So you can indeed get 3.45% cash back at Amazon, or 5% back in the form of gift cards.

The 5x points show up separately under the “Bonus Points by Category Earned” on your online statement:

I can also confirm it works at Regal movie theaters. I have this card stored online at my Amazon account so I don’t forget, and it’s in my wallet marked for restaurants only. Makes it easy to track my dining-out budget!

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It’s Free Money Friday! And just in time for the upcoming 4th of July celebration is a cash back offer from Discover for your holiday travels.

Discover is offering 5% cash back on the following categories July through September, 2009:

• Gas Stations
• Hotels
• Theme Parks
• Zoos
• Bookstores

How to Get Your Cash Back

1. Sign up for the Discover Get More program.
2. Pay using your Discover card.
3. Earn 5% cash back on up to $300 in purchases from July through September.

Discover Get More Details

Total Cash Back. Obviously 5% of $300 is only $15. But it’s $15 you didn’t have before, so why not take advantage of it?

Sign Up Required. To be eligible for the promotion, you must sign up first. When you login to your online account at Discover, they’ll let you know if your Discover card is eligible for the promotion.

Get More Calendar. Discover changes the 5% cash back categories each quarter. I like to check it each quarter to see what the new deal is.

Discover Cards

Don’t have a Discover card? Here are some of the most popular cards with My Dollar Plan readers:

Discover® More(SM) Card

more info

Discover® Motiva(SM) Card

more info

Miles by Discover® Card

more info

Discover® Open Road(SM) Card

Written by Madison

Click here to leave a comment on this article.

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Emerson Electric Co., a diversified global technology company, engages in designing and supplying product technology and delivering engineering services to various industrial and commercial, and consumer markets worldwide. The company operates through five segments: Process Management, Industrial Automation, Network Power, Climate Technologies, and Appliance and Tools. The company is member of the S&P 500 and the S&P Dividend Aristocrats indexes.
Emerson Electric Co.has paid uninterrupted dividends on its common stock since 1947 and increased payments to common shareholders every year for 52 years.

From the end of 1998 up until December 2008 this dividend growth stock has delivered a negative annual average total return of 4.90% to its shareholders. The stock is down over 50% from its 2007 and 2008 all-time highs.

The company has managed to deliver an 8.40% average annual increase in its EPS between 1999 and 2008. Analysts are expecting an increase in EPS to $2.35 for 2009 and $2.20 by 2010. This would be a decrease from the 2008 earnings per share of $3.11. The economic crisis is currently affecting the St. Louis based company, which recently announced a 25% decline in orders for the past three months. Emerson Electric does expect to restructure its operations in order to make them more cost effective. In addition to that the relative diversification of its revenue sources by continents and five major business segments should soften the fall in earnings. Another positive for the company is the fact that it focuses on new product introductions, which could add greatly to profitability. Strategic acquisitions could also add to the bottom line as well.

The Return on Equity has increased over the past decade from 22% in 1999 to 27% in 2008. The reason for the increase is managements implementing capital efficiency initiatives after a string of acquisitions. Rather than focus on absolute values for this indicator, I generally want to see at least a stable return on equity over time.

Annual dividends have increased by an average of 7% annually since 1999, which is slightly lower than the growth in EPS.
A 7 % growth in dividends translates into the dividend payment doubling every ten years. If we look at historical data, going as far back as 1982, Emerson Electric Co. has actually managed to double its dividend payment every nine years on average.
Despite the expectations for lower earnings and revenues for 2009 and 2010, I believe that the dividend payment would not be affected. The worst that could happen is that dividend growth slows down for the next two years, before resuming its 7% annual rate of increase. Despite being regarded as a cyclical company Emerson has raised distributions for over half a century, so a recession should not create a steep shift in the company’s dividend policy.

The dividend payout ratio remained below 50% for the majority of the past decade. The only exception was the 2001-2003 period, when profitability suffered from the economic downturn at the time A lower payout is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.

Currently Emerson Electric Co. is trading at 13 times earnings and yields 4.00%. I believe that Emerson Electric Co.is attractively valued at the moment. I would be looking forward to adding to my position there.

Full Disclosure: Long EMR

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I was looking over our financials this morning and calculated that our total household debt (including our mortgage) to income ratio is .81. By this time next year—assuming we make no purchases on credit—that number should be around .75.

I’m pretty happy with that number—especially when I hear that the average household’s ratio is around 1.3 (or 130%).

Remember, to get the ratio, you simply divide your total debt by your annual income (use gross income for simplicity’s sake).

So…

What’s your total debt to income ratio?

I’m thinking it would be relatively low for AFM readers since you guys seem to be on top of your finances. But, I’d still be curious to know (if you’re willing to share the information)

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Money can’t buy happiness. Or can it? The TierneyLab blog from The New York Times recently conducted an informal survey. Based on Spent: Sex, Evolution, and Consumer Behavior, a new book from Dr. Geoffrey Miller, readers were invited to:

List the ten most expensive things (products, services or experiences) that you have ever paid for (including houses, cars, university degrees, marriage ceremonies, divorce settlements and taxes). Then, list the ten items that you have ever bought that gave you the most happiness. Count how many items appear on both lists.

Yesterday’s TierneyLab column examined the responses. The results are fascinating. Things appearing much more often on ‘expensive’ lists than ‘happy’ lists include:

• children
• marriage ceremonies
• divorces
• taxes
• most cars
• boats

Items that were on far more ‘happy’ lists than ‘expensive’ lists included:

• meals with friends
• alcohol
• bicycles
• pets
• hobbies
• adult education
• church and charity
• books, music, artwork
• quality beds

And, finally, there was some overlap where things were both expensive and fulfilling. These include:

• houses
• higher education
• travel
• electronics
• certain vehicles

Obviously, these results are not scientific in any way. But they’re interesting.

For myself, I was hard pressed to list ten items on each side. I just listed six or seven. Believe it or not, my Mini Cooper makes both lists. So does our current home. (If I had paid for college, that would have definitely made both lists; I was fortunate to attend on scholarship.) Other than that, though, there’s not a clear relationship between money spent and happiness received.

Dr. Miller offered a brief analysis of the survey results, noting a handful of trends, including:

• For many, there is an overlap between expensive purchases and happiness.
• Many people — including myself — find that paying for experiences is more likely to bring happiness than buying physical Stuff.
• Many commenters emphasized the value of thrift in daily life so they could afford to spend on the things that mattered.
• Some people noted that the act of saving money for the future brings them happiness.

If you find this topic as interesting as I do, I recommend you read the full post, which contains a lot of additional information and a fuller analysis. Also, the comments on the article are quite good.

[TierneyLab at The New York Times: When money buys happiness, via e-mail from Robin B.]

—
Related Articles at Get Rich Slowly:

• Ten Steps to Greater Happiness
• links for 2007-06-14
• One Uncle’s Advice About Money
• Daily Links: Compound Interest, Web Income, and Happiness
• Is It More Important to Be Rich or to Be Happy?

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You may have heard the term “three-legged stool”, taken from the idea that a stool needs three legs to maintain balance. (Photographers use tripods, no duopods or quadrapods. Even a four-legged chair will likely wobble.)

Old Three-Legged Stool of Retirement

Traditionally, the components of the three-legged stool of retirement have been presented as Social Security benefits, Pensions, and Personal Savings (401k, IRA, and other assets).

image via Michigan.gov

This is partially supported by data from the Social Security Administration:

image via Pbs.org

The Qualified Retirement Plans slice combines pensions, 401ks, and IRAs together, making it hard to see the breakdown. The Other Assets include income from other investments like capital gains or dividends from taxable accounts and real estate. We observe that a quarter of all income in retirement is still from working for a paycheck.

Shaping Your Own Retirement Legs

These are just averages, and each of us will have their own path to retirement. If you’re planning on retiring early, you won’t have Social Security yet. For people born after 1960, the full retirement age for benefits is already 67, and expect it to rise even further the younger you are. I think some form of SS will still be around when I’m 70, but who knows.

1. Flexible, reliable, part-time income
We already saw that lots of people over 65 still work. Even though I want financial independence early, I’ve also come to realize that I’ll never stop working. Ask yourself what are you really going to do in retirement? In addition, I think it would be stressful to stare at a big pile of cash and think to myself - “Crap, I hope this lasts for 30+ years!” Maintaining a part-time job and the related skills would help my cashflow, and also ensure that I could return to the workforce if disaster strikes.

I would want a part-time job that could provide some socialization and a sense of improving your community or helping others. Most of my imagined jobs involve teaching, coaching, sporadic technical consulting, or something tourism-related. It can’t be 9-5, and I’d want to be able to take months off at a time. This won’t be easy to find, so I need to start developing more “fun” skills as well as personal relationships now.

2. Personal Savings: Accumulate 30 times annual (non-housing) expenses
Without a pension or Social Security, you’ll need to live off your own savings. If you invest in a balanced portfolio of 60% stocks and 40% bonds, studies have estimated that you can have a “safe withdrawal rates” of about 4% per year. By being a bit more conservative than that, this means accumulating 30 times your annual expenses.

For example, if your annual expenses are $30,000, then you need to save $900,000. This is a very general rule of thumb. Taxes are tricky, but if your income is only $30,000 per year, you won’t be paying very much income tax. Check out the historical effective tax rate over a past 25 year timespan:

image via krusekronicle.typepad.com

For reference in 1995, to be in the bottom 50% (safely in Q1/Q2) your adjusted gross income had to be under $31,000. And this even includes payroll taxes of about 9%, which you won’t have to pay on investment income. The result: very low taxes (possibly under 5%) if you keep your expenses down! Which brings me to…

3. A Paid Off House
I don’t think everyone needs to own a home. However, I happen to enjoy many of the intangibles of owning a home, I love my house and neighborhood, and plan on staying here a while. The cost of this leg can vary widely, from a $1,900 house in Detroit to… where I live, so choose where you want to live carefully.

Financially, owning a home protects you from future inflation and rising rents. You are still subject to property taxes and maintenance costs.

In addition, not having to pay rent means you need less income from savings, reducing your needed nest egg in #2 above. You also pay less taxes. Withdrawing additional money from an IRA, for example, will mean subjecting them to your marginal tax rate, which could be 25% or higher. So to pay $750 in rent, you’d have to withdraw $1,000. Not very efficient.

So there, you have it, my three-legged stool. Yours may be very different - you may like renting, have a pension, own investment property, or have some other sources of income. I still worry about health insurance, but I’m still hopeful that some positive health care reform will occur that will create affordable health insurance for individuals under 65 not covered by an employer group plan.

* You can read more about the last two legs in my related post A Quick & Dirty Plan To Reach Financial Freedom.

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In yesterday’s blog post, we discussed how people feel about the financial institutions they work with. It’s easy to determine the mood of consumers through surveys, but how can you know where you stand with your financial institutions? Of course they all say that they have the best interests of their customers in mind. But actions do speak louder than words, and the actions the banks, insurance companies, and brokerage firms that you work with can tell you a lot about whether they’re more concerned about you or about their bottom line.

The bottom line is important, and institutions need to be profitable to continue to operate and keep shareholders happy. Most institutions are struggling to return to profitability, but some are taking those struggles out on their customer base. There are several areas to watch for to get an idea of how your financial institution feels about its customers:

Fees: Fee revenue has always been important to financial institutions, but some are increasing fees to offset losses in other areas to the detriment of their customers. Some companies have added new fees, such as penalties for too much activity, too little activity, or a failure to maintain a minimum balance. Others are simply playing hardball with customers, less willing to forgive fees or extend grace periods than they used to be. Customers don’t like to be nickel and dimed by financial institutions, but many are counting on fees to solidify their financial position.

Service: Many financial institutions have had to cut back dramatically on personnel in an effort to cut costs. Unfortunately, reducing employees can also have a negative impact on customer service standards. Customers are experiencing longer lines, greater periods of time spent on hold when calling for help, and generally dealing with employees that are under more stress than usual. As banks and other institutions continue to adjust to change, those with good customer service will stand out above their peers.

Lending: It’s one of the basic building blocks of many financial institutions, but many aren’t willing to discuss new loans or the refinancing of old loans with their customers. With unemployment on the rise and homeowners struggling to make payments, many are looking for solutions with lenders. Some are willing to work with borrowers and are helping people to take advantage of lower interest rates. Others have essentially frozen their lending operations, clearly worrying more about protecting their earnings than assisting their customers.

Financial institutions have been through a serious storm over the past several months and many have not survived. Where they go from here depends on many factors, but few are more important than the way they treat their customers.

Tags: banks, fees, lending, Service

At the end of 2008 I was invited to participate in a passive stock-picking contest between several US and Canadian bloggers. The goal of the competition was to select the four best stock ideas from each blogger. The rules did not allow active buying and selling, which means that once you select your picks; one can’t go back and change them. Check out my original post for the rationale behind my picks.

Contests are a tricky thing. Most participants might choose riskier stocks, which could go higher much faster if the market was bullish, versus higher quality issues, which have lower volatility. Thus observing investors making bets without having any funds at risk, is not the same as putting your money where you mouth is.

The companies I selected were representative of four high yielding sectors- real estate, energy transportation, utilities and tobacco. Despite the high yields, the dividend payments seemed sustainable enough even during the financial meltdown. The average yield on the four stocks mentioned below is 6.88%. The riskiest stock of the four seems to be Realty Income (O), since real estate is one of the hardest hit sectors in the US. Kinder Morgan (KMP) and Con Edison (ED) are pretty much utility like investments, while Phillip Morris International (PM) should do fine in a crisis, as smokers find it tougher to quit.

Realty Income (O) engages in the acquisition and ownership of commercial retail real estate properties in the United States. The monthly dividend company ended 2008 at $23.15 and has distributed $0.85 in dividends so far this year. At the current price of $21.92 the investment is underwater by 1.64%. This dividend achiever, which has consistently increased its distributions several times/year since 1994, currently spots a very attractive 7.90% yield. Check out my analysis of Realty Income.

Consolidated Edison, Inc. (ED), ended 2008 at $38.93. At the current price of $37.42 plus the $1.18 in dividends collected during the first two quarters the investment in this provider electric, gas, and steam utility services has lost 0.85%. Currently this dividend aristocrat yields 6.30%. Check my analysis of Consolidated Edison.

Kinder Morgan Energy Partners, L.P. (KMP) owns and manages energy transportation and storage assets in North America. One of the largest master limited partnerships in the US has generated a total return of 16.33% in 2009, one third of which came from this dividend achievers generous distributions. The units of this partnership currently yield 8.30%. Check my analysis of Kinder Morgan.

Philip Morris International Inc (PM) manufactures and sells cigarettes and other tobacco products in markets outside of the United States of America. The largest publicly traded manufacturer and marketer of tobacco products closed 2008 at $43.51/share and has paid $1.08 in dividends in 2009. At the current price of $43.62 the investment is up by 2.74%. This dividend growth stock currently spots an attractive 5.00% yield and recently announced its expectations to return some $9 billion in cash to its shareholders during 2009 in the form of dividends and share buybacks.

Overall my picks gained 0.70% year to date. If you add in dividends, the total return was 4.10%. Check out the performance of the other bloggers year to date returns in the table below:

Rank

1 Four Pillars 48.83%

2 Intelligent Speculator 43.32%

3 The Wild Investor 41.45%

4 Where does all my money go 28.72%

5 The Financial Blogger 13.29%

6 Million Dollar Journey 4.76%

7 Dividend Growth Investor 0.70%

8 Zach Stocks -3.09%

9 My Traders Journal -11.36%

S & P 500 +3.16%

I would like to emphasize the fact that successful dividend investing is a long-term process. I strongly doubt that a time frame of less than 15 years is indicative of whether the performance of the stock picks above is sustainable or not. Having a diversified portfolio of at least 30 individual companies from several sectors, sizes and locations is essential in order to be diversified and avoid taking unnecessary risks. Check out the Best Dividend Stock for the Long Run list, which is a good addition to today’s post.

Relevant Articles:

- Best High Yield Dividend Stocks for 2009-1Q Update…

- Best High Yield Dividend Stocks for 2009

- Best Dividends Stocks for the Long Run

- Best International Dividend Stocks

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