Greg Mankiw's blog posts from today are really good. One contains facts and the other is pretty funny. Both are actually simply referring to another articles elsewhere.

Income Tax Fact of the Day

Mankiw posted excerpt from The Tax Foundation article titled Tax Burden of Top 1% Now Exceeds That of Bottom 95%. The article shows that based on IRS data in 2007, top 1% of taxpayers paid slightly more than 40% of total income taxes collected by federal governments. To be more exact, 40.4%!!! For even more comparison, in 1987, the top 1% paid 28.4% of total income tax collected by federal governments. And there are talks from the capitol of additional taxes on the rich to pay for healthcare???? Let me clarify this, I am not rich. I don't even make six digit income. I am middle class citizen, but I don't think it is fair to tax the rich even more. Read the article from The Tax Foundation for more detail.

"They priced it way too high"

This is a very funny video from "The Daily Show with Jon Stewart". Enjoy it.

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Home Crisis Investigation
www.thedailyshow.com
Daily Show Full Episodes Political Humor Joke of the Day

Note: I will continue with my 529 research soon.

Update: I have selected West Virginia Smart 529 Select with DFA Funds. For the conclusion of my 529 series, go to 529 Plan Selection for My Second Daughter

This is the part 4 of the 529 option series. In this post, I will share with you my thoughts on Nevada 529 College Savings plan managed by Vanguard. My hope is by the end of the series, I will choose one option for the younger daughter. Here are the link to part 1, part 2, and part 3.

As with other states that I have mentioned so far, Nevada offers multiple different 529 plans, but there are two that I would consider, uPromise College Funds, which offers Vanguard Funds, or Vanguard 529 College Savings Plan, managed by Vanguard and obviously offers Vanguard Funds. Based on what I see, Vanguard 529 College Savings Plan offers lower expense ratios as long as you don't go with age-based option. If you go with age-based options, uPromise College Funds will offer better options. Since I am willing to manage my own portfolio and rebalance it as necessary, I would prefer Vanguard 529 College Savings Plan, managed by Vanguard.

Here are several important considerations for Vanguard 529 College Savings Plan:

• If you go with age-based options, there are additional 0.44% fees in addition to underlying funds' expenses.
• You can build your own portfolio with multiple different Vanguard Funds available, such as 500 Index, Small Cap Index, Value Index, Total International, TIPS, Total Bond, etc. I really like the option available and the fees are the same with whatever those funds charges. However, one major issue, next:
• The minimum investment for each of those funds are the same as if you invest in Vanguard taxable or IRA funds. If I want to create a portfolio with those funds I listed above (six funds), I would need at least $18,000 to start with, since each funds has a minimum requirement of $3,000. I don't think I have that much money to start with right away.
• One great advantage, since it is managed by Vanguard, I can keep my finance rather simple since I will be using the same account log in ID with my other Vanguard investments (taxable and Roth IRA accounts).

While I like the option, the minimum requirements to create the portfolio I like really hinder my option to create my desired assets allocation. I will have to settle with other funds balanced funds available from Vanguard 529 College Savings Plan, such as Vanguard STAR Portfolio or Vanguard Aggressive Growth Portolio (80% Total Stock and 20% Total International), until a few years later when I have enough to create my desired assets allocation. I would personally rate this option as 4/5. I like the fact that it is managed by Vanguard, with its low expense ratio and the number of funds available, however the minimum requirement for a 529 plan drop the rating for me a notch.

Update: I have selected West Virginia Smart 529 Select with DFA Funds. For the conclusion of my 529 series, go to 529 Plan Selection for My Second Daughter

This is part three of my 529 option series. In this post, I will share with you my thoughts on Nebraska College Savings 529 plan. My hope is by the end of the series, I will choose one option for the younger daughter. Here are the link to part 1 and part 2.

When I visited Nebraska College Savings Plan website, I was very impressed with the flexibility in the funds selection. The range of Vanguard funds available is one of the best for 529 plans. With Nebraska 529, I can put together portfolio that is similar to FundAdvice.com Vanguard Portfolio with the following Vanguard Funds:

• Vanguard Institutional Index
• Vanguard Value Index
• Vanguard Small Cap Index
• Vanguard Small Cap Value Index
• Vanguard Total International Stock
• Vanguard Short-term Bond
• Vanguard Intermediate-term Bond
• Vanguard TIPS

The differences compared to FundAdvice.com Vanguard Portfolio are no REITs (I wouldn't use Goldman Sachs Real Estate Securities with expense ratio around 1.11%), no further breakdown of International equities and some corporate bonds in short-term and intermediate term bonds.

From the surface, it seems like a great option for me that prefer leaning toward small cap and value equities. However, the management fees sort of chase me away. While each of the funds I listed above has low expense ratios, Nebraska College Savings Plan charge $5/quarter maintenance fee ($20/year) and 0.60% management fees! As I would be starting with low amount of money, that would end up to be a really high fees for the first few years. I always believe in the low cost index fund and the management and maintenance fees sort of offset the low cost, low fees Vanguard funds. For now, I would rate this 3.5 or 4 out of 5. This is sort of strange considering I was OK with the higher fees for the option to invest in West Virginia DFA options. May be I like WV DFA option since I couldn't invest in those funds without going to broker or adviser, yet I could do it through West Virginia 529 plan.

If you like Vanguard and want more investment options where you can pick and choose from more funds, this should be high on your list. This would have rated really high on my list if not for the fees.

Update: I have selected West Virginia Smart 529 Select with DFA Funds. For the conclusion of my 529 series, go to 529 Plan Selection for My Second Daughter

This is the second part of the 529 option series. In this post, I will share with you my thoughts on Ohio CollegeAdvantage 529 plan. My hope is by the end of the series, I will choose one option for the younger daughter. See part 1 here.

Ohio CollegeAdvantage 529 plan is another good 529 plan. It has a really low fees if you opt for Vanguard investment. I can go with Vanguard Aggressive Age-Based Portfolio and for age 5 or younger, the portfolio consists of:
- 80% - Vanguard Total Stock Market Index
- 20% - Vanguard Developed Market Index

This is similar to Pennsylvania Vanguard Aggressive Age-Based option, however it has more international equity when compared to Pennsylvania (85-15 domestic-international proportion for PA). However, I wish they would have use Total International Stock Index since it includes Emerging market, albeit small proportion.

One big advantage for Ohio when compared to other that I have listed so far is my ability to choose the equity option myself. Thus I can build a portfolio with my preferred assets allocation. It would be something like this (Note: I will have to put more thought into the asset allocations if I go with Ohio):
- Age 0-3:

• 40% - Vanguard 500
• 30% - Vanguard Extended Market
• 30% - Vanguard Developed Market

- Age 4-6:

• 30% - Vanguard 500
• 25% - Vanguard Extended Market
• 25% - Vanguard Developed Market
• 10% - Vanguard TIPS
• 10% - Vanguard Income Portfolio (Note: Overlap with Vanguard TIPS, which is fine since I would prefer more TIPS instead of corporate bonds included in Total Bond Market)

The flexibility and relatively similar fees with Illinois Bright Start push Ohio CollegeAdvantage ahead of Illinois Bright Start, at least for me.

Update: I have selected West Virginia Smart 529 Select with DFA Funds. For the conclusion of my 529 series, go to 529 Plan Selection for My Second Daughter

In this series, I will look through 529 plans from several states that I may be interested in. The first one I will discuss is Illinois Bright Start 529 plan.

Illinois Bright Start 529 plan is considered one of the best 529 plans by several publications, including Consumer Reports. It is managed by OFI Private Investments, Inc., a subsidiary of OppenheimerFunds, Inc. The investment options include funds from Oppenheimer, Vanguard, and American Century. Illinois Bright Start offers two approaches, the Index strategy and Blended strategy. The index strategy, as the name suggests, consists mainly of Vanguard funds, except for the use of Oppenheimer Institutional Money Market Funds. The blended strategy combined index funds from Vanguard with Oppenheimer funds. As an investor that believe in index investing with low costs or expense ratios, I think the index strategy is the way to go. Thus in this review, I will focus mainly on index strategy.

Several key information:

• There is $10 annual maintenance fee for the index strategy portfolio (Vanguard portfolio options).
• The expense ratio for the Vanguard portfolio options is really low, ranging from 0.20% to 0.22%.

My main comparison in term of assets allocation will be for age 0 to 3 years. For Illinois Bright Start Age-Based Index Strategy Portfolio, the investments include:

• 63% - Vanguard Institutional Index Fund
• 9% - Vanguard Extended Market Index Fund
• 18% - Vanguard Developed Market Index Fund
• 10% - Vanguard Total Bond Market Index Fund

Personally, I would have prefer to have no bond fund at this point, but I can accept 10% bond fund. I can look at it as the buffer. In term of international fund, I would have rather have Total International Index Fund or take some % toward Emerging Market fund. Of course that would probably increase the expense ratio and make it more risky. It seems like 529 is setup to be less risk averse, which is fine and probably good for most people.

Initial look into this option, for my purpose, I would rate it 4.5/5. I really like the LOW expense ratios and the use of Vanguard. I also like the additional exposure toward mid and small cap through Vanguard Extended Market Index Fund. Note recent problems with Illinois Bright Start with Oppenheimer fund (search on Google for "Illinois Bright Start investigation"). However, since this index strategy, while managed by OFI, it invests mainly in Vanguard funds, I am not too concern about it.

I have two daughters, one is currently 2.5 years old and the other is less than 1 month old. For the older daughter, we have 529 plan in my state (PA) 529 Invesment plan, managed by uPromise with Vanguard funds. The expense ratio on those is relatively higher compared to other 529 plan, but there is advantage of using PA plan in the future for financial aid purposes, if needed.

But since PA is one of the few states that give tax deduction for investment in other state 529 plan, for the younger daughter, I want to do more research in the 529 selection. I have several options, but I will share my process online.

• Pennsylvania Direct Investment - nowU Pennsylvania 529 Investment Plan. If I choose this one, I will be able to manage both daughters 529 plan in one account, thus simplifying my financial management. And if I choose this, I will probably go with Age-based Aggressive Option, which for 5 years or younger, the fund will be Aggressive Growth Portfolio. This portfolio invest in 85% Vanguard Total Stock Market Index Fund and 15% Vanguard Total International Stock Fund, with combined expense ratio around 0.70%. While I think those two funds are good, I don't like its assets allocation. I would prefer more international and more learning toward small cap value fund. Thus the reason I am also interested in the next option.
• West Virginia - Smart529Select. There are several reasons I like this option, but the main reason would be the access to Dimensional Fund Advisors (DFA), which is usually available through Financial advisors only. FundAdvice.com, one of my favorite financial websites, thinks that DFA is better than Vanguard. The expense ratio is relatively low too. If I go with Age-Based Portfolio, for child age 0-3, the portfolio consists of DFA Emerging Market Fund (5%), DFA International Core (20%) and DFA US Core Equity 2 (75%) with total expense ratio around 0.76%. I really like the higher allocation toward International equity and also the addition of Emerging Market when compared to Pennsylvania's nowU 529.
• I will also research in more details the options from Illinois, Ohio, Nebraska, Nevada and others that several websites listed in their top 5. As I mentioned earlier, Pennsylvania tax payer can deduct money invested in other states 529 plan, up to $13,000/year/beneficiary (or $26,000 for joint filler).

I know a lot of other personal finance blogger have detailed their research into 529 plan, but may be there is something you can learn from me or if you happen to be a reader living in the Commonwealth of Pennsylvania, it may relate better to you.

Update: I have selected West Virginia Smart 529 Select with DFA Funds. For the conclusion of my 529 series, go to 529 Plan Selection for My Second Daughter

Several of my co-workers know that I am really into personal finance topic. They know that I keep telling them to continue to invest their money in low cost index funds even as the market is going down. I told them that they need to buy low and sell high, not buy high and sell low....

Anyway, one guy told me that his adviser suggested that he puts some of his money to hyperinflation fund. He thinks US is going to reach hyperinflation period since the Fed has been printing money crazily. While I agree that Fed has been printing too much money, I don't agree with investing in Hyperinflation fund. I think he should just keep investing in diversified low costs index funds. But I don't have any proof, thus naturally, I go to FundAdvice.com to see if they have anything regarding inflation and what to do with it. And this is why I love FundAdvice.com, they have an article that I am looking for. FundAdvice.com - Inflation, politics, history and investments. If you want more detail research, check out FundAdvice.com - Inflation: Will your investments protect you? It is rather long, but really details.

As I believe, proper diversification and asset allocations has proven historically to help protect the risks of high inflation or even deflation. Of course there is no guarantee based on historical results, but I think it is the best we can do.

Consider this as disclosure about myself. I am a believer in index style investing. I invested almost all in index funds, primarily through Vanguard. To be more detail, I tried to follow Fund Advice model portfolio. My wife and I put most of our retirement money in Vanguard Roth IRA, following Vanguard Tax-Deferred Model Portfolios from FundAdvice. We also have taxable investments with Vanguard, again following FundAdvice's Vanguard Tax-Managed Model Portfolioo. I will disclose more information about our investments in the future.

As with the case with most people, I used to invest in individual stocks. I have lost quite a lot investing in individual stocks. I have also ventured to options, again while I make some, I lost quite a lot too. Then I moved to ETF, but I found the temptation of tinkering with my investment all the time, thus ended up with paying a lot of commissions and beat the purpose of keeping the investment costs low.

I don't invest in real estate, other than my own home with we own fully without mortgage. We paid it off two years ago, considering that I am only 30 years old at this time and my wife is 33 years old, that is quite an accomplishment.

I think that is enough disclosure about myself and I also don't want to bore you too much with information about myself.

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Welcome to Mr. Bee's Money Chronicle. I am starting this blog to share my thoughts on personal finance and money matters. Why do we need another personal finance blog? Don't we have enough already? Surely, we have enough personal finance blogger out there. I admire a lot of them for their thoughts and I have learned a lot from them. I am not trying to replace them. I love this topic and I think I may be able to share some additional information with you. Beyond that, I think I can learn more by writing and from comments. Writing forces me to research the topic. Your comments, and hopefully critical comments, forced me to think even more and could make me realized about my mistake.

Who is Mr. Bee?  Why would anyone want to listen to Mr. Bee?
Mr. Bee is a 30 years old married man with two daughters.  Mr. Bee works for the Commonwealth of Pennsylvania.  Mrs. Bee used to work before the birth of first daughter.

If Mr. Bee is just a simple state worker, why would you want to listen to his thoughts on personal finance?  Well, at 30 years old, we have paid off our mortgage (house value around $150,000), and have a net worth north of $425k (as of Sept 2009).  Both of us didn't make six figures salaries (even though the combined salaries prior to Mrs. Bee decided to stay at home was more than six figures), but yet with proper focus on savings, investing and live below our means, we are on our way to financial freedom.  In addition, being a state employee, if I stay long enough and finish my career with the state, I am hopefully will have pensions (nothing is guaranteed of course with the current condition) and also be eligible for full health benefits.  WOW, full health benefits!!!  Health care will probably be one of the major expenses when you reach retirement age.

I will share how we reach this point and how you be on your way to financial freedom without the need to make six figures salary to reach financial freedom.

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* Photo of the bee by Aaron Escobar™'s