Health care reform - Dave Ramsey's thoughts

I agree that the current U.S. health care system has a lot of problems, and I think everyone should have access to affordable health care, but I don't think politicians and government are the answer. They've proven time and time again that they are inefficient and ineffective at doing things. I don't know what the solution is, but I like Dave Ramsey's thoughts on the issue:

Don't forget about inflation risk

While the stock market has rebounded quite a bit in the past five months, it is still down significantly from its 2007 highs. That makes it an easy target for critics to attack, such as this comparison (via Bargaineering). Some people have attempted to refute these criticisms, however others continue to fuel the fire.

With the run up in value in the mid 2000's, I think people have conveniently forgotten that the stock market can be extremely volatile over the short term. Conservative investment vehicles such as CDs are definitely more appropriate for short term savings, but anyone thinking about using them for long term investing should definitely consider inflation risk.

According to some predictions, inflation may make a strong come back as early as 2010. So if you have a CD earning 2-3% (which is not that uncommon these days), it is quite possible that it will barely keep up with inflation over the long haul.

While my investment allocation may seem aggressive to most people, I think I am actually pretty risk averse thanks to a deep rooted fear of inflation eroding the value of my money. As I have written before, I plan to slowly shift my assets into more conservative investments as I reach closer to retirement age, so that I can reduce my exposure to market risk.

Retirement planning

When I logged into my 401(k) account last week, the retirement forecast tool showed that I am on track to receive $175,000 per year (in today's dollars) during retirement. Of course, this assumes that I continue my current contribution rate until age 65, and remain invested in aggressive (stock) funds.

While motivational, I believe that figure is overly optimistic in my case for several reasons. First of all, I don't want to work--at least primarily for monetary compensation--until I'm 65 . I am hoping to be done with my current career by my 50s, if not my 40s (when my net worth is around $2 million, in today's dollars). I will probably continue working after that, but it will be more for personal fulfillment and health insurance, so I expect my income to drop significantly.

Secondly, I plan to slowly shift my assets into safer investments as I get closer to retirement age. I anticipate that this will have an adverse affect on my rate of return, but it should also shield me from market risk. A lot of baby boomers made the mistake of staying in the market as it dropped over the past few years, and have suffered huge losses in their retirement portfolios as a result. Some retirees have had to come out of retirement in order to survive the economic downturn. I don't want to have to face that possibility.

Finally, I don't think I will require a substantial income to sustain my lifestyle upon retirement, because my wants and needs are rather modest (financially speaking). My top priorities in life are maintaining my health, spending quality time with family and friends, and learning from & teaching others. I don't expect that to change after I retire. With my projected savings, I should have enough investment income by then to do some traveling, pick up a few inexpensive hobbies, and maintain a comfortable living standard.

Anyway that's my plan, and has been for a long time. Could things change? It's definitely a possibility. After all, I'm still decades away from retirement age and if I've learned anything, it's that life can be unpredictable. I guess I'm glad that I'm thinking about this stuff now, and can still change course should I need to. Unfortunately most people don't think that far ahead; they were too busy enjoying the good times during the boom, and are preoccupied with making ends meet during the economic downturn. However, retirement planning is too important to play it by ear, and no one else--not the government, or your financial advisor--is going to be impacted as much as you if you don't make it a priority.

U.S. Government Stages Fake Coup To Wipe Out National Debt [The Onion]

I got a laugh out of this today:

Budgeting...

Liz Pulliam Weston recently published an article in her MSN Money column titled "How much should you spend on...", which talks about the 50/30/20 budget. Basically, the idea is that you should budget 50% of your after-tax income for "needs." "Wants" should take 30%, and the remaining 20% should be allocated toward savings & debt repayment. The article clarifies what kind of expenses should fall into each category.

I think a lot of people (particularly those with lower incomes) would probably find it difficult to make it on that kind of budget. And prior to refinancing my house from a 10 year loan to a 30 year fixed mortgage, I wouldn't have been able fit my expenses into those guidelines either. However, here are what my monthly expenses look like now:

I estimated some of the above values based on historical spending, but overall it's pretty spot on (I deliberately lumped food into the "wants" category because I know I spend more than I have to in this area). So this tells me that I currently have an excess net of 29% after needs/wants/savings, which I am using to bolster my emergency fund. It also tells me that in order to meet the 50/30/20 budget and maintain my current lifestyle, I need to bring in at least $60,000 a year after-tax. This seems a bit high to me, however the good news is that I can survive on about $32,000 a year after-tax if I stop saving and cut my diet to rice & beans, before I have to start selling assets or dipping into my emergency fund.

I am definitely appreciative of the fact that a lot of families live on less than $32,000 a year, and I know I am in an extremely fortunate position. That said, the majority of my expenses are related to housing, and if I were to downsize I could live on significantly less.

Please note that I do not actively budget per se. I priortize saving by having my retirement contributions deducted from my pacheck, and most of my recurring bills are paid automatically via billpay. What's left stays in my bank account, and I make purchase decisions based on actual need and return on happiness, rather than some preset number that I've allocated beforehand. This has worked well for me in the past, and as mentioned in one of my favorite finance articles, it means that I am no longer relying on training wheels for my savings habits:

"What does that mean in terms of money management? It means I learned how to spend what I needed and save the rest. While “tricks” of money management assume that you are incapable of controlling yourself, that if you have money, you will spend it, taking off the training wheels means facing up to your own ultimate responsibility for your finances. It means facing up to the fact that you are a conscious, reasoning human being who can choose to spend or not to spend. It also means learning that once you have the true necessities covered, enjoying your life has remarkably little to do with how much money you spend." - Holly Ordway, Spending Wisely

My workout routine - part 2

In my previous post, I described the cardio portion of my gym workout routine. Before I get into the remaining details of my workout, I want to talk a little about gym etiquette. The rules that I observe as most frequently violated are:

1. Bring a clean towel and wipe up after yourself. No one likes to use a machine that's drenched in someone else's sweat. I use a towel not only to wipe up my sweat, but to also act as a barrier between my skin and potentially germ laden equipment. In addition, it's probably a good idea wash your hands (or use hand sanitizers) before and after your workout.

2. Don't hog equipment. Be courteous of other gym members; their time is as important as yours. That means not dawdling at a machine chit chatting or texting, especially if the gym is busy. If you're doing multiple sets on a machine, allow people who are waiting to hop on if you take long rest breaks between your sets.

3. Rerack weights after you're done with them. Don't assume the gym staff will pick up after you. Return your weights to the rack after you're finished using them, so that other members don't have to go hunting for them.

Those are my personal biggest pet peeves. About.com has some other good tips on the subject.


While there's some uncertainty regarding the timing and benefits of stretching, I perform stretching exercises to improve my flexibility, and because it feels good. I use a stretch trainer which makes it easy, but here's some information and slide show from the Mayo Clinic for doing it manually. I stretch for about 5 minutes after cardio, and before weights.

For my strength training, I utilize a circuit training program using primarily weight machines. As stated in my previous post, my goal is to stay lean and toned, not to get big and bulky like professional bodybuilders, so this method works well for me. I try target all the major muscle groups, and the machines at the gym make it easy to perform the exercises safely. I perform one set of 15 reps per machine, and set the weights to reach exhaustion on the last rep. To eliminate rest periods and shorten my workout, I alternate between upper and lower body exercises. Here's what my circuit routine looks like:

• seated row (trapezius/upper back)
• seated leg curl (hamstrings)
• biceps curl (biceps)
• leg extension (quadriceps)
• chest press (pectoralis)
• ab crunch (abdominals)
• shoulder press (deltoids)
• back extension (lower back)
• tricep extension (triceps)
• leg press (gluteals)
• lat pulldown (latisimus dorsi)
• ab curl(abdominals)
• seated fly (pectoralis)
• calf extension (calfs)

Since I've been working out at the gym for a long time now, I have been adding additional, more advanced exercises at the end of my workout to further define certain body areas (abs, arms, chest). These include:

• hanging leg raises (I do them slowly for maximum effect)
  
• unassisted pull ups
  
• push ups
  

I'm pretty happy with the results, and I feel that 3 hours a week at the gym is not a huge time drain at all.

My workout routine - part 1

So I promised to document my gym workout routine that I've been following (and tweaking) for the past 10 years. My fitness goal was simple: to become and stay physically fit, which to me means excellent cardiovascular health and strong muscles & bones. Looking built was not a factor in my motivation--in fact I'm not a fan of the bulky bodybuilder look at all. I prefer being lean and toned, and am proud to say that I can still fit into my old college clothes from the early 1990s (without sucking in my gut either!). My body fat level has stayed in the 6-8% range for the past several years, and although my diet has a lot to do with that (which I plan to blog about), it has exceeded my expectations.

Anyway, here are the details of the workout program that I've developed, via my own research and experimentation, and it has worked extremely well for me, but may not be for other people. As always, beginners should check with their doctors before starting any form of exercise if they are extremely out of shape or have medical conditions.

I used the following criteria in mind when choosing activities to include in my workout:

1. Safe. Above all else, I wanted to minimize the risk of injury. For me, that means no running (since it tends to be hard on the knees, which I want to preserve as I intend to be mobile for a very long time), and using machines instead of free weights. While machines offer a limited range of motion compared to free weights, the risk for injury is also far less, so it was a trade off that I was willing to accept. Also, I've never used steroids, drugs, or supplements, as I wanted to achieve my healthy results naturally. Again, the focus is on my health rather than how I look.

2. Effective. I wanted activities that emphasize the three key areas which I consider to be crucial for my well being: my cardiovascular system, core muscle groups, and bones. So the exercises that I selected had to offer a direct benefit to those areas.

3. Efficient. I enjoy the results I obtain from working out, but I didn't want to turn into a gym rat to get them. If it takes longer than 3 hours a week, I would probably lose interest in any exercise program. Currently, I go to the gym 3 times a week, for about an hour per visit. I usually go every other day (Mon/Wed/Fri or Tue/Thu/Sat, depending on the week), giving my body a day to rest between gym visits.

My workout currently begins with 30 minutes of cardio (though recently it has been extended to 35 minutes to reach the 400 "calories burned" mark--at least according to the exercise equipment that I'm using). Some say that doing cardio after lifting weights makes for a more effective workout. I've tried doing it both before and after using weights, and haven't noticed a huge difference. Lately, I prefer to just get the cardio part over with as I enjoy the resistance training more. Alternatively, you could do cardio and strength training on different days, but that means more trips to the gym, and I'd prefer to keep that to a minimum.

I do cardio primarily on the exercise bike and elliptical/crossramp trainers, alternating between them as I get bored with one. I like these machines because they offer safe, low-impact, and effective cardiovascular workouts, although sometimes I will do a brisk walk on the treadmill, play racquetball, or swim for a switch.

When I started doing cardio workouts initially, I couldn't do more than 15 minutes at a time--and at a pretty low intensity level at that. However, I stuck with it, and very slowly increased my time and intensity level. I didn't set specific goals though, because I didn't ever want to feel bad for failing, which may cause me to quit altogether (I've gone through several workout partners that stopped going to the gym once they suffered setbacks, and I didn't want to have that happen to me). Any time that I can make it to the gym--even if I end up doing a light or partial workout--is a victory in my book. It prevents the feeling of guilt for missing workouts, which in my experience also keeps a lot of people from sticking to a fitness program because they feel that they can never make up for lost ground.

Cardio is all about keeping your heart healthy, and to that end I've started using a heart rate monitor to help keep my heart rate in the anaerobic zone, or 80-90% of my maximum heart rate. I find that I sweat a lot when my heart is working that hard, so I always make sure I drink plenty of water to stay hydrated during and after my workout. However, I deliberately avoid energy drinks because of dental health concerns.

In my next post I will go into the second half of my workout program, which includes stretching exercises and muscle training.

Note: I've been hearing a lot of buzz about interval training lately, and some people claim that it's better than cardio. The key is to do what works for you. My workout has worked well for me, and that's all that really matters. If at some point in the future I stop getting the results that I want, then I'll change my routine.