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Stuff about personal finance

ESPlanner – Figuring out life insurance, retirement and more

How much life insurance do we need? How much do we need to save for retirement? How much do we need to save for our daughter’s college education? These are basic financial questions and they are unanswerable because they require perfect (or at least reasonable) knowledge of the future and as the song goes “the future is not ours to see”. But, regardless, we still have to muddle through. So this is where the program ESPlanner can be helpful, if you understand what it’s doing and what it’s limitations are. Below I explain how our family uses ESPlanner primarily to figure out how much life insurance to get but also as a spot check for our retirement and college savings plans. [Note: Updated on 12/23/2014 to account for switching to ESPlanner Plus]
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Where to stash emergency cash?

In this article I explore the options for places to stick my emergency cash. This is cash I need in case things go ’bad’ for us. So my primary concern is safety. Below I walk through the options and discuss how I handled things. Since I am not a financial expert and don’t play one on T.V. your mileage may vary.
[Original - 11/27/2011, Updated - 9/3/2014 to add Floating Rate Notes]
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Life and long term disability insurance

I have a wife and a family and in case something happens I need to make sure they are protected. ’Something’ however can range from death (which is relatively easy to plan for) to long term disability (which turned out to be a nightmare to plan for). It is tempting to think that my work insurance is sufficient, but what happens if I ever leave my employer? Who says that my next employer will have as generous insurance offered on as good terms? What if I want to do my own start up? I really don’t want to be out in the insurance market at an older age trying to get life insurance. The same logic applies for disability insurance but times two due to its complexity. So I need to put protection in place now. This article walks through how I did it.
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To rent or buy a house?

Should we rent or buy a house? A fairly quick and easy rule of thumb is (Price of a new home)/(monthly rent for equivalent home*12). As Dean Baker argues if the result is 15 or below then it makes financial sense to buy, otherwise renting is cheaper. For those who want more control over the calculations see the New York Time's rent vs buy calculator. My own settings for the calculator are give below.
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Social Security is doing fine

One of the discussions I have with friends that most seems to confuse them is when I say that Social Security is in great shape. They take it as an article of faith that Social Security is doomed. Now while I've long argued that Social Security will end up means tested this isn't because the system doesn't work or is running out of money, it's rather my own belief in how politics will play out in the country. But regardless Social Security is doing fine now and into the foreseeable future. Salon recently had a reasonably simple article that explains why things really are fine and provides links to more in depth information for those who care.

Books I recommend on personal finance

A friend of mine at work asked me to recommend books he could read on personal finance. I decided to publish my list and reasoning for anyone who is interested. I think the first two contain information that everyone needs to know. The rest adds important details but I think can be read based on interest. Read More

How much will it cost to send our daughter to college?

The short answer is that we don’t know. And before someone says ”what about the 529 prepaid plans?!?!” (which I will discuss in a future article) please keep in mind that those plans only track instate tuition fees and so don’t cover expenses like room and board, books, etc. So bottom line is - we don’t know, in fact, I would argue, we can’t know. The guiding light of finance being ”the future’s not our’s to see.” So I’m going to guess. My guess, assuming our daughter goes out of state for college in 15 years and attends college for 4 years is that our total bill (tuition, fees, room, board, etc.) at the end of her undergraduate education will be $320,000 in 2010 dollars. Oy. Read More

Asset Location for College Savings

Asset location is not so much about what investment to buy as where to locate it. A typical asset location problem is - do I put money in a taxable account or a tax exempt account? In the case of saving for college there are at least four different ways to save money for college that have some kind of tax exemption. Below I explore the five options (taxable and various tax exempt ones) that I could find and explain why we settled on using a 529 savings plan. Read More