I would have loved to be able to set aside $5,000 in a 529 plan at my daughter's birth for college. If I could have done that I think our college savings plan would be in good shape. However that didn't happen.

The good news is we have already set aside ~$1,000 in 529 plans for her college education thanks to contributions we made before she was even born and at birth. In the grand scheme of things I think that's a really good start, however I know its likely not enough to cover her college education expenses down the road.

I also started an automatic monthly contribution to her 529 plan. I started at $25/month thinking I just wanted to get the regular contributions started. However the more I think about it, right now seems like the best time to make more serious contributions. Her expenses will only go up as she gets older so I doubled our monthly contribution to $50/month. I think that puts us in a manageable position going forward. If our monthly cash flow improves over time we will up the contribution more.

This has real bothered me at times because my expenses on the property have gone up every year (insurance expenses, increased property taxes, repair and maintenance expenses) so the net is I have been earning less and less every year.

The first year I renewed the lease and didn't feel like I needed to make a case of it - the renewal itself would save me several hundred dollars in rerent expenses.

The next year I was busy preparing for my assignment in China and ended up signing a new lease with a couple roommates (from the previous lease) that knew the previous rent so the rent was left untouched.

This past year I was still living in China and rerented the house out while I was back in the US for a visit so I jumped on the first tenant that was interested, but ended up agreeing to reduce the rent back to the rent I had been charging.

This year I vowed to raise the rent. I raised the rent amount by $100/mo on my initial ads. I still got a good response rate, but it was clear that their were other properties on the market that were a better deal. I waited a little bit and started re advertising it for $25/mo less. I finally got some traction, and yesterday I had a pair of professionals submit an application after I agreed to drop the rent another $50/mo.

However - that means I still was able to raise the rent $25/mo. While not as much as I would like, I hope this means that the property has finally hit that medium state where I should be able to continue to creep up the rental rate each year to improve our cash flow.

Its weird, I was able to raise the rent on our second rental property immediately after the first tenants after the rental conversion. However the increase maybe due more to me underpricing the rental to begin with rather than the benefiting from rental market rate increases.

Important notice: Microsoft Money Plus will not be available for purchase after June 30, 2009. All purchased Money Plus products must be activated prior to Jan. 31, 2011.

Im a little ticked that this is going to force me to migrate to a new platform to track my personal finances. I think that is literally going to mean at least a weekend lost in trying to get up and running on something else. I never really loved the software, but we have come to depend on it to track all our transactions and I would be lost without it.

I currently have MSMoney 2007 which I believe is only good for 2 years and will expire later this year. I guess the next question is should I go run out and buy 1 more copy of MS Money to extend the amount of time to make the transition. However according to the Announcement FAQs Microsoft does not recommending upgrading from MS Money 2007 to the latest version before sales end - hmm.

I was reading a newspaper article over the weekend that was highlighting the hidden costs of NC state worker's benefits such as leave accrual. The article indicated that NC offers compensation and retirement benefits that are much better than those offered in the private sector. Case in point, my employer does not allow any leave accrual. All unused leave (vacation, sick, etc) expires at the end of the calendar year if not used.

I find these leave accrual type systems interesting since I have never had the opportunity to participate in one. One the positive side, they offer employees a non-salary incentive that encourages them to stay with the employer (builds up over time) that the employer may not have to recognize the expense in the immediate year. Employees can build sometimes very sizable amounts of leave that give them added flexibility and security that is only a pipe-dream to someone like me who has no opportunity to build up leave like that.

However, they aren't something you can take with you so if your not going to stay in a job long they make work as a disadvantage. While my employer doesn't allow leave to accrue, its sick time is much more generous for brand new employees compared to places with leave accrual benefits. I am not sure which benefit system is best - clearly if you are going to work for the same employer for 30+ years I would much rather have the leave accrual, but I can't see myself working in the same organization for the next 20+ years. Even if I wanted to, things change; I doubt I would even have the opportunity to stay where I am at for that long.

Well as it turns out, after multiple phone calls to the VA Dept of Taxation, they did turn over an account in my name to a collections company. They claim I was delinquent on filing a tax return for YR2003 and the amount was turned over to collections was for amounts they felt I owed. The amount the collection company says I owed the VA Dept of Taxation was $11,033.19. How weird is that - down to the penny and that can't explain to me how that amount is really determined.

I told them I didn't understand why this was in my name as I had moved out of Virgina in 2001. While the representative didn't know all the specifics they claimed it was just likely due some flag on my federal tax return such as a VA address. They recommended I fax a copy of my 2003 Federal and NC state taxes to the VA Dept of Taxation for review.

I was quickly able to locate a copy of my 2003 returns (amazingly I had an electronic copy handy) and went ahead and faxed them to the VA Dept of Taxation.

I got a call back from someone at the VA Dept of Taxation claiming that Virginia still considered me a legal resident of VA even if I had moved to NC in 2001 and that they believe I owed back taxes for 2005 and there was a current review for 2006. I thought it was ludicrous and said that was impossible - I moved to NC in 2001, I work in NC, my primary residence is in NC.

However the VA Dept of Taxation had a record that identifies me as the co-owner of a car in Virginia. It is true - there is a car that I am listed as co-owner (with my father) in Virginia. How does this make me a legal resident of VA? Just because you own property in a state doesn't mean you are a legal resident - does it?

I sent a letter to the VA Dept of Taxation asking for an explanation as to their legal residency definition and what criteria is established to determine legal residency. We will see what they come back with.

Sounds to me like I am caught up in some government bureaucracy or wild goose chase by VA Dept of Taxation to boost revenue.

• All credit card debt (except current month's purchases) is in the form of 0% APR balance transfers earning interest in my savings accounts. We paid off the last of our 0% balance transfers in January. The well has dried up for now, but we are ready to take advantages if any offers come our way.
• We track our real estate properties according to our cost basis (with the exception of House #3 which we may be selling soon).
• Our lives changed forever as we welcomed Baby 2million to our family. Im still in shock as we adjust to our new world. Blogging has been lighter than normal, but Im slowly getting into the swing of things
• I got contacted by a collections company saying I owed back taxes in Virginia for YR2003 even though I moved to NC in 2001. It scary to think about - how do you know any of the states you don't live in think you owe them income taxes? I don't think there really is way to be sure another state doesn't believe your obliged to pay income taxes in their state unless they contact you.
• Investment gains are still looking good for May- the markets have gone up significanlty over the last 3 months.

You can see my previous monthly net worth updates here.

Its still a work in progress, any feedback is appreciated and may be incorporated into future monthly reports. The only equity investments not covered are:
1) my 401k which is invested in institutional index funds through my employer that I haven't found a tracking symbol for.
2) investments roughly worth less than $500, simply because I don't have the time and energy to keep up with them. I am thinking I will sell these off at some point and add the proceeds to my current investment portfolio because they are too much work to track.

May Highlights:

• May was another positive month with strong gains.
• We have now beaten our benchmark in 5 out of the past 6 months.
• New investment buying pretty much ground to a halt as equity valuations are quickly dimishing the attractive options I see. In the last 3 months our portfolio has grown 22+%. That kind of rise gives me a lot of pause on throwing fresh capital in the market.

May 2009 Investment Report:

Its still a work in progress, any feedback is appreciated and may be incorporated into future monthly reports. The only equity investments not covered are:
1) my 401k which is invested in institutional index funds through my employer that I haven't found a tracking symbol for.
2) investments roughly worth less than $400-$500, simply because I don't have the time and energy to keep up with them. I am thinking I will sell these off at some point and add the proceeds to my current investment portfolio because they are too much work to track.

April Highlights:

• April turned out to provide a terrific upswing on top of the big gains in March. For the 2nd month in a row, our benchmark and our portfolio posted the best returns since I started tracking our monthly return over a year ago.
• Our portfolio did not beat our benchmark this month, but the difference is pretty much a rounding error - given that we have beat the benchmark for the last 5 months, I'm still pretty happy we our current portfolio returns.
• Dow's aquisition of Rohm & Haas closed at the beginning of the month, netting us a very nice return on our small investment. We netted a 35.2% return on our investment in 4 months. That would be over a 150% annualized return - not bad! Turned out to be a very good investment, but hindsight is always 20/20.
• We made a couple other small incremental investments this month including Pfizer, Conoco Phillips, KBW Banking Index with the Rohm & Haas proceeds.

April 2009 Investment Report:

I have been wrestling with where to put our monthly cash flow. Its smaller now than it was when we had 2 incomes, but we still have a regular amount each month to "put" somewhere.

Obviously our emergency fund (basically the $30k that sits in our interest bearing checking account) is a currently an area that we are trying to grow. However, I keep thinking about inflation. I believe the government has embraced a lot of tools to help the economy recover including mechanisms that will ultimately encourage inflation.

If higher inflation is on the horizon, how do I prepare?

Resist the urge to stuff all our monthly savings into our emergency fund. We agree that we need to regrow our emergency fund, but diversifying our monthly cash flow across savings and investing is still important.

The economy crisis has presented mountains of investments opportunities and now is the time to be thinking of embracing reasonable investment risk. There are a number of stock investments that look (to me) to provide a great long term return on our investment compared to sticking the money in a savings account or debt repayment.

I also have to continually remind myself that accelerating debt repayment is not necessarily the best move either. Given our debt load and our reduction to 1 full-time income this is an area that makes me a bit nervous. I would probably sleep a lot easier once one of the 4 mortgages we currently pay are retired. We currently have enough cash flow to cover our monthly living expenses, allocate ~$500 to a major purchases and still save money - fine for the short term. However long term we need to retire some debt in order to increase the options and flexibility we have going forward. If we focused all our monthly free cash flow on one of our mortgages we could potentially retire the mortgage in the next 3-5years. However with higher inflation, it may make more sense for us to keep the debt in place and use that cash flow elsewhere.

In the near term we have been focusing on continuing our monthly contributions to stock investments. Our thinking is once we no longer see such compelling investment opportunities we will shift focus to debt repayment.

Pre-Birth Baby Expenses
Forget all those people talking about saving for college education, etc - even before the baby arrives we have made a significant investment. We could even argue that at least part of our recent home purchase and car purchase were due to us expanding our family, but we will ignore that for now.

Here is a sample of the baby expenses we had before the baby even arrived. We had so many small expenses they aren't all included, but ones I could identify I have included:

Ofcourse a lot of these expenses are personal decisions my wife and I made about how we wanted to prepare for our baby. Everyone's mileage will vary, but in the beginning I didn't even realize what we would be purchasing in preparation for our baby.

Highlights for April

• All credit card debt (except current month's purchases) is in the form of 0% APR balance transfers earning interest in my savings accounts. We paid off the last of our 0% balance transfers in January. The well has dried up for now, but we are ready to take advantages if any offers come our way.


• We track our real estate properties according to our cost basis (with the exception of House #3 which we may be selling soon).


• We moved another $1,500 from House #1 HELOC (3.25%) to pay down House #2 30yr fixed mortgage (6.5%). We have now pulled $3,000 from the HELOC to accelerate the payoff of the higher interest mortgage.


• My wife and I have started tracking our big ticket purchase list and tried to throttle our spending to help manage our cash flow.


• Our monthly return was help by a $2,158 tax return received this month including the recovery rebate credit. I'll post more on our tax returns shortly.
• Investment gains are looking good for April - I'll update our investment snapshot and post it in a few days for the April breakdown.

You can see my previous monthly net worth updates here.

This person called me at work right before 5pm. At first I was laughing because I thought it was a joke, but it suddenly got very seriously for me when the told me my SSN and that they had been trying to contact me for the past several years. I am sure these are the typical collection agent tactics but they did everything they good to make me panic and ask what I could do to prevent this.

The first think I did was ask why I hadn't heard of this before. The response was they had been trying to contact me for the past several years. They had sent regular mailings to me and none were returned so I should be aware of the amount in collections. I assured the person I had never heard of this prior to the phone call, but it didn't really get me anywhere.

I then assured them this was a mistake that I had been living, working, and paying taxes in North Carolina since 2001 so this was some sort of mistake. I asked for some documentation that would explain what the $11,033 was for so I could clear it up and she said it would take several weeks to provide that information to me - not before the deadline for the meeting they were having to start the garnishment of my wages. She only offered to me that I could fax my 2003 Federal and NC state income taxes to the collection company within the next 24 hours to see if that would help.

Then I started to think about if this was legitimate. I asked for proof that they were who they said they were - she assured me she was, but she couldn't provide me with a contact person from the VA government. I would have to find that out on my own.

Needless to say my mind was racing through the night as I tried to understand what this meant. I scoured the Internet and learned a lot about debt collection. It turns out a lot of people who have never lived in VA have had this same experience.

I did find this site that had a sample letter I could send the collections company to dispute the debt and give me 30 days to figure out what was going on.

This morning I called the VA Dept of Taxation Collections dept as soon as they opened. I was connected to a much friendly person that did confirm for me that they believed I owed them back taxes for YR2003 and it was likely because of some information from my federal tax return. This person recommended I send them my federal and state income tax returns for YR2003 and that would suspend the collections process and followup in a couple days to see if everything got straightened out. I felt a lot better while talking to the Dept of Taxation in VA - and quickly forgot about chewing them out for making this bogus claim to begin with.

I went ahead and faxed my income tax returns to the VA Dept of Taxation. Hopefully that will be enough to straighten out this mess.

When we first made an offer on the house, my wife and I agreed to put in the offer, but her agreement (between the 2 of us) was contingent that we replace the carpet in this bedroom. The carpet throughout the rest of the house is of neutral color, the carpet in this bedroom is an unattractive pink color. While the condition of the carpet is good, my wife really does not like the carpet color.

I have been more reluctant about replacing the carpet thinking we can overlook it, but its been very important to my wife so its been high on our big ticket list. We started pricing carpet and had a estimated cost of $659.20-$720.40 depending on the measurements they company takes and the final carpet selection.

However, its still a lot of money for flooring. My wife mentioned that maybe we could just cover the floor with a large piece of loose carpet or even a rug to neutralize the floor color. Initially I dismissed it thinking it would only be a quick fix - my wife would quickly be back on getting the floor addressed permanently.

However, my wife continued to nudge this idea and agreed that we would be able to defer the carpet replacement for at least a couple years (until we are ready to replace all the carpet). Once I heard this I encouraged her to find a rug and we would try it out. Once we actually replaced the carpet, the rug would be moved to one of our other rooms with hardwoods.

My wife found a neutral color rug for $202.29 (after-tax). We laid it out and it takes the pink color out of the floor - there is about a 2 foot border around the rug of the carpet, but it doesn't overshadow the room. We are both very happy with the results. My wife's concern about the color of the carpet has been neutralized and Im very happy that we can reduce the expense to a much smaller amount - a win-win for both of us. We have effectively deferred $500 of spending for at least 2-4 years.

We now have a list of these big ticket items we are tracking. We are managing our monthly cash flow so that we can allocated ~$500 towards these items. We have already prioritized these items through lots of talking and tried to allocate something to every month of the year. If something unexpected pops up (like our recent car purchase) then we may have to shift things around to account for it. Big items like rebuilidng our emergency fund are spread across many months and intermingled among other important purchases for us.

Take a look at our 2009 Monthly Big Ticket Allocation List (at this point):

Month	Big Ticket Item
Jan-09	Timing Belt Replacement (car)
Feb-09	Glider Rocker
Mar-09	Wedding Album
Apr-09	Emergency Fund
May-09	New Carpet for Bedroom
Jun-09	Emergency Fund
Jul-09	Wedding Album
Aug-09	Emergency Fund
Sep-09	Emergency Fund
Oct-09	UnAllocated Purchase
Nov-09	Emergency Fund
Dec-09	Christmas Presents

The gain for us is this exercise manages our spending on big ticket items to be more inline with our cash flow. However, depending on how bad we want/need something the wait can be agonizingly slow.

The key for me is we recognize this list will never disappear - once things get scratch off, new spending priorities emerge. By making a concious decision to allocate a certain amount of monthly cash to it allows us to logically determine how important things are to us and managing things in a maintainble form. If the list gets too backed up we may need to think about how we free monthly cash flow to it, but I hope we can continue to manage our big spending wants/needs to 6-8 purchases per year.