AskDong

I paid my electricity bill this month and was shocked by how high it was. It was well over $100. My electricity bill has tended to average between $40 and $70 since I moved into the apartment. Normally I wouldn’t think about a high electricity bill in the summer given air conditioning use. However, this summer I decided that I would try to avoid installing the window AC unit if I could. So far this summer, the heat has been bearable and I felt good about my lower electricity consumption. Working in the energy industry, I cheer hot weather and AC use as it adds to the company and my personal bottom line. At the same time personally, I think excessive air conditioning on peak electricity days is one of the least environmentally friendly actions there is out there. If more people really knew how much more expensive electricity is during peak energy days, they might rethink their electricity usage. Unlike winter heating, air condition is luxury for most people not a necessity.

So, it was quite a shocked when I got my bill. First thing I did was call NStar (the local utility). The woman who answered my call was ready to dismiss me as another unjustified complainer until I told her that I didn’t put in my AC unit. Her demeanor quickly changed for the better. She proceeded to tell me that could get someone out to my apartment in about 3 weeks between the hours of 8 and 12. I took it.

Serendipitously, that night when I got back home, my neighbor came down to my apartment and asked if I could check my circuit breakers. Apparently some of his outlets tripped and believed that those outlets were connected to my circuit breakers, and vice versa. I quickly checked my breakers, and sure enough two set of breakers had tripped. I flipped them back on, and my neighbor was good to go.

  A close approximation of what my building looks like 
I live in an old brownstone that once was very nice residence for some affluent family a century ago. Today it’s a 4 different apartments. Apparently much of the wiring from it’s days as a single family residence. I learned from the neighbor that ten years ago, they tried ripping out the old wiring and rewiring the place appropriately as 4 different units. The electricians were able to rewire 90% of the building, but the remaining 10% required demolishing walls which was deemed cost prohibitive. As a result I have breakers that control a few outlets on the 3rd floor, and the 3rd floor has a breaker or two controlling the 1st floor. More importantly I’m paying for electricity I’m not using. On the most part I imagine the give and take is relatively equitable, but not this summer. I’ll take the issue up with my landlord, but I’m not sure exactly how much he can do. The money itself doesn’t bother me too much, but the fact I can’t get any measured feedback of my energy conservation does.

GoldnSilver writes about her recent bachelor party dilmenna and how she decided to pass on attending even though she’s a bridesmaid. Given that the party was going to be an excursion to Las Vegas, she is more than justified in choosing not to go. Having been to Vegas just last month, I know a weekend in Vegas can easily run over $1000. My personal experience with Bachelor Parties have run the gamut of inexpensive to fairly lavish. However, I’ve never attended one that I either didn’t want or couldn’t afford to be at.

Location	Num. of Parties	Nights	Flight
2	Atlantic City	1 Night	No
1	Foxwoods	1 Night	No
1	Cape Cod	2 Night	No
1	Montreal	2 Night	No
1	Puerto Rico	2 Night	Yes

The Montreal and Puerto Rico affairs were more expensive given that they were more like Bachelor Party weekends versus a single night out on town, and Puerto Rico even more so because of the flight. I’ve had a great time at every bachelor party that I’ve been to regardless of the location because of the opportunity to spend time with friends some whom I rarely get a chance to see. I’ve also been very lucky in my Bachelor party experience that I’ve walked away from the casinos in the black 4 out of 6 trips, and on one trip particularly positive.

Weddings are often already quite expensive given the potential travel, and hotel costs. Adding the bachelor or bachelorette party to mix can put the total bill for someone else’s wedding well in the excess of $2000 if you’re in the wedding. I think as friends we all want to celebrate both the nuptials and the last nights of singledom for our friends. The question is, what’s appropriate? 

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I tend to make annoucements about blog updates on the weekend. I guess this is mostly because that’s when I have time to update my blog. That and given that most people read on the weekdays, it’s a good time to slip in post that’s not really personal finance related. No real major updates other than I’ve finished writing my About section which I decided to break into three parts given the length. I may continue to flesh it out as my life develops. Sadly enough, it’s pretty dull reading after age 26 or so.

Today, I’m just hoping that the Police Concert I’m going to at Fenway doesn’t get rained out. It’s pouring in Boston today

If you follow at all the stock market, this week by all measures has been a terrible week. Unless things drastically change in the next two days, I expect my net worth to take a major hit for this month. I have another 15-18 days before I take another snapshot of financial health, so there’s some time for the markets to recover. Unlike some other personal finance people, I’m not exhaustive budgeter. I don’t track my spending to the dime. The one thing I do is to take a snapshot of where I stand financially every month at mid month. The stock market has treated me well since I’ve started logging this information in October of 2003. The S&P 500 has returned 45% overall in that period or about 10% annualized – a very solid return.

While it’s certainly disappointing to have my net worth decrease by a few thousand in the matter of days, it’s in the end not all the meaningful.  Nothing has changed since last week and today.  The companies in which I hold shares are still the same.  They are as good or bad as they were before. In general I’m not trying to speculate with my equity holdings. I hold them because I believe in the long run health of the economy and the long term prospects of a specific company.

Right now, I believe there are indeed reasons to be concerned with the state of the U.S. Economy and equities market.  I’ve been leaning bearish for the last 9 months or so. I believe the Housing market still has further to fall. The state of the credit market is in state of flux – it looks like the financial markets are ready to ask for higher risk premiums once again. Just as mortgage lenders have made it to easy for unqualified borrowers to borrow too much money, larger financial players have made it too easy for corporate borrowers to borrow too much money at too low a rate. These two things are very much related given that most mortgages end up being repackaged securitized as MBS (Mortgage Backed Securities) and CDO (Collateralized Debt Obligations). Personally I’m not sure what real difference between MBSs and a CDOs are. I would think MBSs would merely be a subset of CDOs. In addition credit derivatives have allowed financial institutions to trade the credit risk associated with any debt separately further lowering the risk premium.

Personally, I don’t feel that financial innovations such as CDOs and Credit Derivatives are a bad thing, but Wall Street like a kid in candy store probably ate a little too much. It will take time for things to shake out, but in the long run I do believe the economy will come out OK, and these derivatives with have a proper place in institutional portfolios. This may take a year or two, but I don’t see anything like a repeat of the 70s. And, I like Bill Miller am happier when the market is down . Let the buying begin.

There is always some debate about what should be include in one’s net worth. These are the accounts I include.

Assets:

• 401K Account
• IRA Accounts
• Brokerage Accounts
• Checking Accounts
• Savings Accounts
• Real Estate

Liabilities

• Mortgage
• Students Loans
• Credit Card Balances
• Deferred Tax Payments

What I purposely don’t include are personal possessions including my car. I don’t have an expensive art collection or such so my personal belongings are probably worth less than 5,000 including the car when all totaled up. There are two reasons why I choose to not to include personal possessions. In general the value of personal possessions are scattered across a wide range of items, making it difficult to easily liquidate everything. So if I were to even mark everything at fair value, it’d be highly unlikely I’d be able to get fair value for the items in short amount of time. The other and more important reason I don’t include personal possessions is purely because they are personal items I don’t own furniture as a financial asset. I don’t buy jewelry (actually I don’t buy jewelry at all) thinking that I might resell at later date. I could make the same argument for my home (if I actually lived in it), but given the sizable value tied up in a home, it’d imprudent not to include it at all especially since the mortgage is included as a liability. However, I do believe it’s important to mark the value of real estate conservatively. I’ve marked my condo at cost even though it’s increased some in the 4 years since I’ve brought it. I think it’s best to update real estate values up only when there’s more than 10% increase or decrease. Anything less than that is really speculation on what the property will sell at.

Personally much of my net worth is tied up in my retirement accounts, 401k specifically. While I account for the deferred tax liability, I don’t account for any prepayment penalties that I might incur if I needed to access that money. In the future I might further discount the value of my 401k, and IRA accounts by whatever penalty I might incur to access the money. The more I think about, the more I think I should. Back when I wasn’t fully vested in my 401k, I didn’t include the unvested portion if my net worth calculation. In effect I’m not fully vested in my 401k and IRA until I turn 59 1/2. I plan on waiting till that age, but I should value the account at what’s actually available to me at my current age by including the 10% penalty as an additional liability.