Lending Club: Month 2

It  has been almost two months since I started investing with Lending Club.  Here is how they say I am doing:

Not to shabby, right?  Not too shabby, but not as good as it looks.  As you may recall, I started this experiment in July by depositing $1000.00 with Lending Club.  I invested half of it in new loans, in $25 increments, and the other half in notes people were selling on the resale market.  See this post for and explanation of the advantages of each, per my research.  

At this point my Lending Club account is part investment, part experiment and part toy.  I ran out of money to play with so I decided to invest another $1550.00 (so I was over the minimum limit for automatic investing).  Now, some of you can do math, and will look at the graphic above and wonder how to start with $2550.00, earn $22.09, and end up with $2525.75.  Well, here is how.  (you can click on the picture for a better view.

This is one experiment.  You'll see that all the notes on this list have interest rates in excess of 20%.  I bought them all on the secondary market and all are over a year old, and all have perfect payment records.  While there is no guarantee that these borrowers will not default, the risk is quite a bit less than it was a year ago.  Most notes that default do so before month 18, and start showing signs of trouble (lowered FICO score, late or missed payments) before month 12.  Most borrowers holding high interest rate notes with good payment records know they are in demand and if they sell them, they demand a premium.  For this portfolio, I paid the premium, figuring that if I got 20% interest, what did I care what the seller made.  Then I had a loan paid off early, and I lost a few cents on that deal.  I'm going to watch this portfolio for a while.  Nickel Steamroller is a website that crunches the data they get from Lending Club.  They show that, depending on the grade of the loan, somewhere between 25% and 50% of the loans are paid early, though they don't show how early.  If you add the amount in the "payments" column to the "outstanding principal" column, you'll see whether I am ahead or behind for that note after one payment.  Generally speaking, I'm still behind.  

From what I've read, the most accurate way to compute your returns on peer lending is called XIRR.  You have to account for money in and money out and the fact that each note has a different interest rate.  A calculator is here.  Right now it is showing annualized losses on this portfolio of 36.57%.  If I can avoid defaults for a couple of months, that number should improve greatly.  

What about the rest of my notes?  Well, this portfolio is new notes I bought with the first batch of money.  Since I deposited the money July 10, that's the starting date I'm going to use.

If you look at the diagram, you'll see that it lists my weighted average interest rate as 13.6% but when I calculate the returns with XIRR, I only get 6.7%.  Why?  Because it took me almost a month to invest all that money.  Until that time, it sat in a no interest account.  I expect this number to get better before it gets worse.

This portfolio started with $516.95 worth of resale notes.  The nice thing about them is that you do not have to wait an entire month (or more) before getting interest.  If you own it on the day interest is paid, you get the money.  On this portfolio, I have returns of 13.53%.

This is my discount portfolio.  I went looking for notes that were selling at a discount, but which were a year old (about) and had perfect payment records.  I invested $378.57 and got 20 notes.  The yield to maturity shown for most of them was between 4 and 6 percent.  I'm showing a return of 6.08% but that counts the discount as interest.  Also, many of the notes paid their former owner, not me, this month.  It will be interesting to see what happens to that number.  

One question with any investment is "How does this fit into my overall plan?"  Is this for long-term money, or short term?  Is this a safe investment, or risky?  How does it compare to others?  From what I've been reading, my discount portfolio is pretty safe.  The notes are past the time of most defaults, and they were high quality notes to start with.  We like to keep enough cash around for a new used car if necessary.  I'm wondering if putting that money in high quality notes with principal values near $10 would be a good place for that money.  One difference between these notes and stocks/bonds/mutual funds is that these notes throw off a lot of cash (principal and interest).  You can see at the top that I've gotten $97.54 in payments in the last two months.  If all the notes I have pay, I'll get $96.86 deposited into my account each month until one of these notes is paid, or quits paying. If I had more smaller notes, there would be even more cash generated from the same principal.  Between that cash flow, and being able to sell notes, I wonder if this would be safe enough for that money.  The interest sure beats what the bank is paying.  

So, what do you think?  Will I get rich with this?  Should I invest more money; get out while the getting is good, or just watch things a while longer?

Lending Club: One Month Later

One month's performance is not enough on which to completely evaluate a new investment; however, it is a good time to look back at what I have, what I have done, what I would do differently and how the investment has performed (especially when compared to what was expected).

As you may recall from past posts, I invested $1,000.  That money was able to be invested on July 10.  Today is August 10.  I invested $500 in brand new notes,  using a variety of criteria I had read in various blog posts, along with some "this looks good to me".  I have notes at varying levels and basically I'm trying to see how this all works.  I took me until the end of last week to get all $500 invested; several of the loans I had picked ended up not being funded and the money was put back in my account to re-invest.  My final result is shown below:

You can click on the picture for a better view, and you'll see that the average weighted interest rate is 13.6%, but that I have loans rated A-E.  At this time I have received no payments and no one has defaulted.  At the end of one month, this $500 has paid me nothing, though interest has accrued.  First payments begin today, and continue through September 6.  

I used the other $500 to buy resale notes.  I bought many of them at a premium--more than the outstanding principal and accrued interest--on the theory that the seller had absorbed the early default risk on the loan and that by the time I bought it, that risk was noticeably less than it was at the origination of the loan.  I also lost $10.16 buying notes that were in grace period (late but not too late) and then loosing my nerve and dumping them before I lost all my money.  This portfolio also has one note I just bought for $22.22 which hasn't made it over from the trading platform yet.  The final reason this portfolio isn't over $500 is because spare cash (right now $0.83) isn't in any portfolio.  Still, you can see that in the last month, this portfolio has paid me $5.16 in interest, and has returned $23.67 of my principal to me.  I've reinvested that money in more notes for this portfolio.  If you ignore my stupid mistake that cost me $10.16 and just look at the other $489.24, then math shows I earned 12.65% annual interest on that money.  However, due to the premium I paid for those notes, I'm in the hole right now--I still have $11.60 to make up before I break even.  On the positive side, I have received payments from all the loans in this portfolio but four, and they aren't due until this week.  So far, no bad payers.

I've continued to read about Lending Club and Peer-to-Peer lending and I decided to invest another $1500 so that I can try some of their automated tools that are available to those whose accounts are over $2500.  If I've caught your interest and you want to invest $5000.00 or more in a new IRA with Lending Club, leave a comment with your contact info and I'll send you an invitation that gives you a $25.00 bonus.

Lending Club: How to Sell Notes

Used with Permission

One question I believe it is important to answer about any investment is "How do I get rid of it?"  You never know what life will bring, or how the investment will do and if you don't know how to get out of an investment you may hold it too long or, to put it another way, you may not have your money where you need it when you need it.  With Lending Club notes you can get your money out in two ways:  withdrawing the monthly payments or selling the notes.

Each note hopefully has payments made each month.  You can either reinvest these payments or withdraw them.  While withdrawing the payments is the slow method to liquidating your investment (depending on when you invested and in what, it could take up to 60 months); it is simple and, assuming your borrowers don't default, you will get out of the investment what you bargained for when you bought it.

There is a secondary market for the notes as well, and that is the focus of this article.  Once you are logged into your Lending Club account, you will see a link for a trading account.  That will take you off Lending Club's site to a site by Folio Investors.  

Logging into the secondary account:

This is a screen shot from the front page of my Lending Club account.  I'll talk more about what the numbers mean in another post.  You'll see that I circled the link to the Trading Account.  If I click, I am brought to this screen:

The circles show that you can buy or sell notes.

Selling notes:

If you want to sell a note, whether it is because you no longer believe that note is a good investment or because you just want to get your money out to use for other things, you have to decide how to price that note.  Folio is going to charge the seller a 1% commission on the sale, so at the least, if everything is going well with the note, you want to start by asking at least 1% more than the principal value (which will be shown to you on the "Sell" screen.  (click screen shots to enlarge)

This screen shot shows the beginning of my list of notes.  If you click on it, you will see how much I spent for the note (and yes, right now there are some for which I may have overpaid, but we'll see), the interest rate, the outstanding principal, how the borrower's credit rating has changed (or not) since the inception of the loan, the payments I have received on the loan, and when the next payment is due.  All I have to do is click the box next to the loan I want to sell (and in this case, I'm not selling, just showing you how to do so).

If you compare this screen shot with the prior one you will see that I am trying to sell the top three notes.  The columns on the right side of the screen are the ones I can manipulate.  I can either choose an asking price or a mark-up/discount.  In this case you can see by looking at the original list of notes that I am trying to sell a note with an interest rate of 12.69% that has remaining principal of $13.29 and that has a borrower whose credit rating is higher now than when the loan was originated.  I am also trying to sell two $25.00 notes, one at 18.99% and the other at 12.99%,  Once I add in a 1% mark-up to the first two notes, their yield drops to 10% and 17.2% respectively.  That yield takes into account not only my mark-up but also the Lending Club commission of 1% of all payments collected.  For example purposes, I listed on of the $25.00 notes at a discount, so you can see that the yield is still below the stated interest rate.  If I was serious about doing this, I'd hit the "Submit" button and those notes would be available, at that price, for a week, unless they were purchased, or I decided to keep them, or I decided to change the price.  

How much should I ask for the notes?

That depends on why you are selling, how badly you want to get rid of them, and how much work you want to put into this process.  As I am writing this, there are 99,419 notes for sale.  If I want mine to sell, I have to make it attractive to someone who is searching for a note to buy.  I'm going to do a post later on buying notes, but suffice to say that most investors want to make money and the way you make money in this investment is by getting a high interest rate and by avoiding defaults.  If those searching for a note to buy perceive yours as helping them meet that goal, it will sell.  Otherwise, it will sit.  In the cases above, my first note might get someone's attention--10% isn't a bad yield and the borrower has been making regular payments for some time and his credit rating is better now than when the loan started. The first $25.00 note might sell, or it might not.  There is no payment history, so the new lender knows nothing I don't. The interest rate is high, which is a plus, but if you are in a state that allows it (some states don't allow you to purchase new notes), you can buy one like it at face value on the Lending Club site.  Some people buy notes strictly with the idea of reselling them at slightly more than a 1% mark-up to people in states that don't allow direct purchase.  If a note has a borrower whose credit rating has decreased, you aren't going to be able to get as much as one where the credit rating has increased.  Poor payment habits also decrease the resale value of the notes, and good payment habits over nine or ten months can increase it since lenders see default as less likely at that point.  In short, the law of supply and demand prevails.  If your notes aren't selling you have the choice of keeping them, or lowering the price.  

Which notes should I sell?

Again, that depends.  Some people make money buying and selling notes.  They (obviously) try to buy notes they consider underpriced, and to sell them for more.  I read one blog post in which the author said he puts his notes up for sale every month after they pay interest.  He always marks them up to what he calls a "make me sell it" price and figures that if people want to pay it, he is glad to take it.  That sounds like too much work for me, though I have sold a couple of notes at a profit.  

Some sellers are trying to raise cash.  My guess is that the easiest way to do that is to sell high interest loans that have a good payment history.  You may even be able to get a premium for them.

Some sellers are trying to dump loans they are afraid will go bad and offer them at discounts so as to attract bargain hunters.  

Knowing that I can get at least part of my money out of an investment in relatively short order is important to me and the trading platform gives liquidity to my Lending Club investment.  

Buying Notes on Lending Club--New or Old?

So, you've been reading my posts about Lending Club, and now you want to try it.  What do you do?  First, you have to open an account at Lending Club.  Next, you have to send them money.  While there is no minimum balance requirement, new notes cost at least $25.00.  Lending Club recommends a minimum investment of $2,500 to decrease volatility.  I chose to use $1,000.  It takes about four days after they receive your money for it to be credited to our account and ready to invest.

Used with permission

New Notes or Old?

The first thing you have to decide is whether to buy newly issued notes or notes from the resale market.

Advantages of new notes:  

• You get the highest interest from the new notes, unless you are willing to take a chance on a note that someone considers a problem.
  
• The information you have on the borrower is fresh, and has been checked by Lending Club.
  
•  The biggest interest payments come at the beginning of the loan so fees are less in proportion to what you receive.  What I mean by that is that Lending Club takes 1% of every payment made by a borrower.  Most of my $25 notes pay me about 85 cents per month, meaning that Lending Club takes about a penny.  If it is at the beginning of the loan, much of that 85 cents is interest; toward the end of the loan only a few cents is.  If the interest portion of the payment is 70 cents, you've paid 1/70th of your income to Lending Club; if the interest portion of the payment is only 5 cents, you've paid 1/5 of your income to them.
  
• You can  use automatic tools to invest.  Lending Club has tools you can tell the type of note you want, and whenever there is enough spare cash in your account, the computer will buy you another note.  If you use this tool, Lending Club is a passive investment; without it, as your account gets bigger you will spend a lot of time searching for and selecting notes.
  
• You can open an IRA.  For whatever reason, resale notes are not allowed in an IRA account.

Advantages of resale notes:  

• They cost less.  If you have a limited amount of money to invest, you can get more resale notes than new ones.  The more notes you have, the less one default will affect your returns.
  
• You can see a payment history.  In general, the longer a borrower has been paying without a problem, the lower the chance of a default.  I've read that there are basically three reasons borrowers default: 1) Fraud--they never had any intention of paying back the loan.  These borrowers typically make no payments, or at the most, one or two payments.  2) They bit off more than they can chew.  The bottom line is that unless life goes perfectly and this note is the priority, the borrower can't afford the payment.  This borrower shows a pattern of late payments, missed payments etc. and these problems generally show up in the first year.  3) The borrower has a real crisis in life--a layoff, a breadwinner in the hospital, a natural disaster--and who knows what else, but the bottom line is that something big happened and now the borrower's financial status is changed.  Unfortunately that can happen at any point in the loan's life cycle.  While you cannot predict the crisis, Lending Club's statistics show that most defaults happen, or at least get started, in the first year of a loan's life.  If you purchase a loan older than that, you've eliminated much of the default risk--and the seller realizes that and generally asks a premium price.
  
• You can buy them no matter where you live.  Some states do not allow the purchase of new notes, but do allow the purchase of resale notes.  Don't ask me why.
  
• They put your money to work faster.  I'm writing this on July 26.  My money was ready to use on July 10.  As of today, I still have $100 of the $500 I put toward new notes that is not invested, and which is therefore not earning me anything.  The fact that I am willing to invest $25 in a loan does not mean it will positively be approved, or that the borrower will make the decision to accept the proffered loan if it is approved.  As a result, I've had several loans that I chose not be completed.  If that happens, the money goes back into my account to be reinvested.  Until everything is complete, no interest is earned. If the four notes that are in process all go through, they'll start earning interest in a few days.  If one or more do not, then it will be almost a week more before that money starts working.   As of today, I've been paid $1.11 interest on my resale loans and nothing on the new ones (first payment isn't due for 30 days).  The $500 I put toward resale notes has been fully invested for over a week.  

Meeting with the Financial Planner

In my opinion, there are two reasons to pay someone else to do something:  1) I am incapable of doing it, or at least incapable of doing it was well as the person I am hiring or 2) I don't want to do it.  Our decision to hire a financial planner was based a little bit on both.  As I mentioned in the first post in this series, the death of my father along with some other things going on in life have reinforced the idea that retirement is not that far away.  Further I now have a bigger pot of money to deal with at one time than I ever have before (my inheritance).  We have always managed our own investments and at one time we (particularly me) kept up with the world of personal finance.  I COULD do it alone I think, but looking at my portfolio performance lately, and looking at things I've read in the last month or so, it was pretty obvious that I had not been keeping up with things, and it was costing us money.  We decided to give a professional a try, and decided to use our CPA, as noted in the original post in this series.  Last week we had our second meeting with him.  The first was a no-obligation sales pitch about why we needed financial planning services and why our CPA was the person we should hire.  We also discussed fees--a percent of the assets under management.  By the second meeting, we had decided to hire him, so it was time to get to work.

What I Wanted:

In order to evaluate the performance of any professional, you have to decide on your goals.  Me, I want to be so rich I can buy whatever I want whenever I want and I want to be able to give lots to charity.  Ok, that's not realistic--I'm not Bill Gates and no matter how good my financial adviser, there are always going to be things I can't afford.  Seriously, though, I had several goals before we met with the adviser:

1. I wanted to know if we were on track for retirement at or above our current standard of living, given our current income, current savings rate, and current expenses (particularly the three two-legged expenses that live in our house).  
2. I wanted to know if we could save less and spend more--or if we needed to spend less and save more.  While I certainly want to save for the future, I don't want to be one of those people who lives in little better than poverty, only to die with a huge nest egg.  
3. I know our investment portfolio is not doing as well as the market and our funds have low Morningstar ratings.  It it time to move them into something better and I wanted help with that.
4. The funds we have were winners in their time.  Unfortunately, that time is past, and probably has been for some time.  I need someone to keep an eye on the funds and know when it is time to say goodbye.  I could do that myself--Morningstar ratings are readily available but the reality is that I haven't done so, and the paperwork involved in moving IRA money from one fund family to the next is a nuisance.  
5. I wanted help with asset allocation.  I keep reading that people my age should not be fully invested in the stock market--that we should have bonds and other investments as well.  I don't know a lot about those options, but I do know that the mutual fund I own that has a lot of bonds in it is not performing well.  That doesn't exactly encourage me to buy more.
6. I have a special needs son. I need to make sure he is taken care of when we can't do it any more.  
7. I'd like to minimize taxes, both now and in the future.

Were My Goals Met?

We have only met with him those two times, and plan more meetings.  All is covered in the fee of a percent of our assets under management.  At this time, I'll tell  you this about meeting my goals:

1. We aren't there yet.  He has said they have a program where they input your goals, your income and your savings and then tell you if you are on track, and that we will get to that.
2. This is pretty much in the same place as #1.
3. He got copies of all our investment statements, asked about our savings and what I'm expecting from my Dad.  We are keeping our Roth IRAs where they are since we are happy with their performance and giving him the other investment accounts to re-invest.  He works with a company that advises him about mutual funds and which develops model portfolios based on risk tolerance.  Also, he got the list of available funds into which we can invest our 401Ks and will advise us on which to choose as part of our overall portfolio. 
4. That company also watches those funds and pulls people out if managers change, performance lags or their needs change.
5. He agreed with me about bonds, even before I mentioned I wasn't crazy about them.  He said that in his opinion, at least at this time, the returns weren't worth the risks.  He had barely heard of peer-to-peer lending but thought it sounded interesting.
6. He suggested seeing an attorney to set things up for my son, but did mention that we might want more savings than many people in our economic bracket, specifically to leave something for my son.
7. He is going to take a look at our assets and our tax situation and see if there is anything else we can do.  Specifically, he is going to run the numbers on converting our IRAs to Roth IRAs.  Also, he agreed with me that living on the portion of my inheritance that I have already received, and socking away as much of my paycheck as possible in my 401K for the next six months was a good move (even though it means less money for him to manage and charge for).

Only time will tell whether we get our money's worth from him, but I figure that if we get the advice I'm seeking on #1 and #2, that's worth a year's management fee.  After that, he'll have to convince me either that he is making us more money that I would or that dealing with all of this is more trouble than I want.

Do you have a financial adviser?

Lending Club: How I Invested My Money

If I wanted to learn about investing in the stock market, I would go to one of many websites where you can enter a portfolio.  I'd "give" myself a sum of money to spend, "invest" it by picking stocks or funds on a particular day, and then, after entering my hypothetical portfolio, watch it for a several months and compare it to both published indices like the Dow Jones and S&P and to what I could do with the money elsewhere.  Unfortunately, I couldn't find a way to invest in the Lending Club with play money.  Fortunately, I recently inherited a nice sum of money so risking $1,000 on something I knew nothing of a few weeks ago didn't sound quite so unreasonable.

I split the $1,000 into two pots; the first I used to buy 20 newly issued notes, the second I used to purchase 37 notes on the secondary market.  Here are my results:

If you click on the pictures  you can see them better.  In short, I bought the new notes at face value so I got 20 of them at $25 each for a total of $500.00.  The resale notes were generally bought at a slight mark-up.  Also I decided to gamble with small portion of the money and bought some discounted notes that were in grace period (late but not so late as to incur late fees).  I then decided I didn't have the stomach for gambling so I sold them, losing $10.80 in the process.  If you add the $10.80 to the price of my notes and add the cash still in the account, you get to $500.00 for the "used" portfolio.  The question I'm going to explore over the next year is whether peer-to-peer lending is a good idea for me, and, if so, whether I do better with new notes or resale notes.  

The Lending Club: My New Toy

Most of the time when I mention products on this blog, it is because I was given a review copy or some other incentive to do so.  In this case, the only incentive is the hope that search engines will pick up this post and grow my readership, so my ad revenue increases.

Used with permission

One thing I learned about when reading financial planning and investment blogs was peer-to-peer lending.  Basically, this is a process whereby investors loan money to people seeking unsecured personal loans.  It is a process that cuts out what we consider the normal middleman on such an occasion, the bank.  The borrower, who must have a good credit rating, applies at the website of the peer-to-peer lender (I use Lending Club; Prosper is the other big name).  After whatever quick review is done, I'm guessing by computer, the loan is listed on the site, with the listing giving some information about the borrower, the amount desired, and the proposed interest rate.  At that point investors (the lenders) can agree to lend money to the borrower, and they do so in increments of $25.00.  In other words, you may want to borrow $25,000.  I (and other investors) decide whether we think lending you money is a good investment, and then decide how much to lend  you--and the most common amount for small investors is the minimum, $25.00.  The loan goes through the underwriting process, and the information on the application is checked for accuracy.  Once everything checks out, and once enough people have committed to the loan to provide the funding requested, the loan is issued (and they are not guaranteed to be issued; at least a third of the loans I have selected have not been issued, either because Lending Club decided not to complete the process or because the borrower decided not to do so.  I've read that over half the applications are rejected).  At this point Lending Club takes a commission from the borrower, so the full amount of the loan is not disbursed to him/her.  The attraction for borrowers is that these loans, at somewhere between 7.14% and 25.99%, have lower interest rates than credit cards or other sources of unsecured loans.

The borrower is required to set up an automatic payment from his/her bank account to Lending Club.  Lending Club receives the payments monthly (we hope) and then disburses the money, minus a 1% fee, to the lenders.  For lenders, the attraction is a higher rate of interest than is paid by the banks.  After reading about this process and reading a bunch of blogs and so forth about peer-to-peer lending, I decided to give it a try as an investor.

With any investment, you have to look at the risk vs. the reward.  The main risk with peer-to-peer lending is that the borrower will default and not pay all or part of the loan.  Since the loan is unsecured, Lending Club's recourse is limited.  According to historical data (which you can download and crunch to your heart's content), the average interest rate on their "A" rated loans was 7.73%, however the average rate earned on "A" rated loans, after factoring in defaults and fees was 5.34%.  You can see all the data here. There is some "interest rate" risk--risk that interest rates could rise so the "high-paying" note you are holding could turn out to be low-paying compared to what is currently available.  Still the risk of that is lower than with a bond because instead of all the principal being repaid to you at the end of the loan term,  you get a small amount back every month.  The final risk is a liquidity risk--the chance that you won't be able to get your money when you need it.  Lending Club isn't the place for money you may need within a couple of days.  If you need your money within a week or two, you may have to sacrifice some principal to get it, but there is an active secondary market for the loans, so you should be able to get most of  your money is a relatively short time.  I'll talk more about that secondary market in another post.

After reviewing all the information I could find about Lending Club, I decided to become an investor.  Since that time, I have spent a lot of hours "playing with my money" and I decided I would blog about my experience.  Stay tuned for further posts in this series.

Getting Our Financial House in Order

At different times in your life you start to look at different things. With my Dad passing away and with me having to wind down his financial affairs, I've taken a look at our finances and done some reading on financial planning, retirement planning and the like. Since my blog is called This That and the Other Thing, not RAnn's Book Reviews, I'm going to write about some of my thoughts and findings. I'll also admit that this series of articles is a shameless attempt to get search engine attention and attract readers to my blog.

Used with permission:  https://www.flickr.com/photos/that_chrysler_guy/8418926757/

There is a lot out there that didn't exist a few years ago.

I used to really keep up with the financial world.  I read Money magazine, books on personal finance and the like.  I kept up with how our investments were doing, compared them to the funds Money was recommending,  and made changes when necessary.  Then life (and three kids) got in the way.  In the last few weeks I have realized that I don't know what an EFT is, much less why they are a very popular product today.  I had never heard of peer-to-peer lending, much less invested money in it.   While I track our portfolio on AOL, I didn't realize how many websites would analyze that portfolio and tell me what was wrong with it.  I didn't know there was a place that you could buy portfolios of stocks related to a theme, even if your theme is "I like them", and basically create your own mutual fund, paying only one commission for the whole "Motif", not one per stock.  

We really aren't going that badly.

I've run a variety of retirement planning calculators across the web and most show us on track to meet our retirement goals, but not way ahead of them.  That's a good thing because unlike many of our peers, we are not spending the last decade or two of our working life as empty-nesters.  My husband will be seventy when my baby graduates from college, and our financial goals include Catholic high school for her (probably about $10,000/year for five years---high school starts in eighth grade here) as well as college.

Photo used with permission:  https://www.flickr.com/photos/120360673@N04/13291209304/

We are on the downhill slide toward retirement, really.
I remember when I started my current job.  I had an eighteen month old baby.  That baby is now twenty-two and over six feet tall.  By the time I started this job, I was no longer the youngest person in the office; not by a long shot.  Still, I was part of the young crowd.  Now the young secretaries, and even some of the young lawyers call me "Miss R___".  At some point I realized I wasn't part of the young crowd and now I know I'm one of the older women.  When we used to look at retirement planning we were in the "long term" investor group, the one that had time to recoup losses.  Now we are in the "Approaching Retirement" group, even if I am still chaperoning fifth grade trips.  The day I leave the office for the last time will be here before I know it.

We decided, at least for now, to get professional help.
I believe there are two reasons to hire someone to do a job for you:  1) you need it done and you don't want to do it more than you want the money it will cost you to pay someone to do it for you or 2) the person you are hiring can do a job better than you can and it is something you need done.  I'm not sure which reason applies here, but we have decided to get professional help.

I generally do our taxes.  I don't particularly like the chore, but the reality is that my husband and I are both employees who get W-2s at the end of the year from our employers.  Our investments are in mutual funds that send us tax forms yearly.  Our house is paid for, so itemizing deductions just doesn't work for us anymore.  In other words,  I don't need anyone to do our taxes, usually.  However, over the last  year we've spent a good bit of money on my autistic son and reading what I could, I thought maybe we could deduct that, but I wasn't sure.  Time to call in a pro.  We have a friend who is a CPA and he used to do our taxes when my husband owned a business.  Since I don't believe in asking for professional advice without paying for it (and I doubt my friend would offer such advice) I had him do our taxes this year, and like any good businessman, he tried to sell me other services, in this case financial planning.  I had been thinking about looking for someone so I was receptive.  I did some research and found that his rates were competitive (a percent of our portfolio) so we decided to give it a whirl.  After a year, if we aren't happy, we'll make a change, but at this point in our lives, I think it would be useful to get someone to take a look at what we have and where we want to go, and make sure we are on track to get there.

This is the first in a series of posts.  In  upcoming weeks I'll be writing about my experiences with a new type of investment, what I thought about our financial planning session, and whether we really are on track.  I'll also muse about the "now" vs. "later" spending conflicts, and look at our budget (or lack thereof) and whether using one can help us direct our finances to better meet our goals, both long term and short.

I'd love to talk retirement with you, my readers.  Do you have investments beyond your 401K and garden variety mutual funds?  How did you pick them, and why?  Do you use a financial planner (or have you been burned by one)?  Do you think you are on track for retirement?