Sum Of My Decisions

save money by refinancing with confirming loan + HELOC instead of a jumbo loan

2011-11-20T21:20:00.001-08:00

There is a huge difference cost of the loan and the interesting rate for Jumbo vs Confirming. Here is one example for Schwab.com.

Conforming Loan

Rates as of 11/23/2011	Current Rate¹ (%)	Points (%)	APR²(%)	Monthly Payment² (Based on $250,000 loan amount)
30yr Fixed	4.21 3.94	0.0 1.0	4.262 4.074	$1224 $1184.91

Jumbo Loan

Rates as of 11/23/2011	Initial Rate¹ (%)	Points (%)	APR² (%)	Monthly Payment² (Based on $640,000 loan amount)
30yr Fixed	4.75 4.5	0.125 1.0	4.797 4.622	$3338.54 $3242.79

Lender Institution	Interest Rate	Prepay Penalty	Annual Fee
Schwab Bank	3.99%	No	No

Of course, if you have the cash to buy down to a conforming loan then the decision is pretty straight forward. However, there is another option. You can do "structured financing" and get two loans at the same time. Get conforming to the maximum amount, then get a second HELOC (home equity line of credit) for the remaining balance. Here is the break down to the pros and cons.

Pros:
1) Save money on the interest based on the primary loan
2) Save money on the cost of loan (initial down payment)
3) Save money on the current interest for the HELOC (at this time and likely the next few years, the interest rate for HELOC is lower then 30 yrs fixed)
4) With Schwab - you have 10 years interesting only payment option so you can reduce your monthly payment in case of emergency.
5) With Schwab - you have 10 year for draw period so you can access the paid off principle in case of emergency

Cons:
1) Extra paperwork. This is pretty minor, in case fact, with Schwab, they give you a discounted interesting rate if you applied for the 2 loans other.
2) Exposure to adjustable rate. This is a serious risk for long term, but most of HELOC has per annual interest increase limit, and life-time cap on the interest rate. If you very careful with your cash reserve, this is manageable risk. In fact, depending on how much risk is acceptable, you might want to reduce the fixed loan portion of the conforming loan and increase the HELOC portion to maximum your interest rate savings.

All in the all, the risk is manageable, and the saving is quite significant. My beef is that I haven't been told of this option. I refinanced many properties and many loans. I have used loan advisors with the bank, and 3rd party mortgage "experts". Not once, I been advised to take this option. When I saw the the difference between the jumbo and conforming, I racked my brain to think of ways to take advantage of this difference. I came up with this option on my own and asked around multiple banks to confirm this is indeed a viable option. I won't speculate if the sales agents were taking advantage of me, or if they were ignorant also. For this simple change in the application process, I would save tens of thousands of dollars over the life of the loan.

Either ways, this experience demonstrates one of my core belief. Nobody has your interest in mind except yourself. You must get educated on the key aspects any major decisions you made. You can't fully trust advisers, agents, Realtor, banker, CPA, teachers, etc. You absolutely need to understand and expand your scope of knowledge. You might be able to depend on agents to do the legwork for you. However, you can't trust them to think and look out for your interests in a strategic way.

The 4 classes of knowledge

2011-11-20T02:24:00.001-08:00

A concept made infamous by Donald Rumfeld, but he only identified 3 out of 4. I think of the classes of knowledge as a grid.

Reality: Known and Unknown
Perception: Known and Unknown

Reality vs Perception.
K U
--------
K | A | B |
--------

U | C | D |

--------

Grid A: Known Known : things that you know that you know. e.g. Your name, your address, your mother's voice, 1 + 1 = 2, etc.

Grid B: Known Unknown : things that you know that you don't know. Unless you are a physics major, you know that you don't know Quantum Mechanics, why E=MC^2, or how to proof that 1 + 1= 2.

Grid C: Unknown Known : things that you didn't know that you know. We all have gut feelings that we intuitively know to be true or false but can't articulate. We make unconscious, unspoken assumption and biases. For example, behavioral economics is all about understanding people decision patterns. People would automatically place greater value and preference for things they own, even when they are randomly chosen.

Grid D: Unknown Unknown : In this infinitely interrelated world, where the flutter of a butterfly can influence weather pattern, it's impossible for us to know all the possible dependencies or outcomes of our decisions. We are always faced with unknown unknown.

So.... why are these classifications of knowledge useful? I use these 4 classes of knowledge to execute a strategy of learning and better decision making.

This is very useful pattern for serious decision making. It helps me to think strategically over time about how risky and confident I feel about a decision. I rephrase the 4 classification this way.

Grid A : the facts that I know and confirm to be true. Over time, the objective is to increase the scope of A. However, things changes, new research comes along, what we knew to be true once, changes. It's a constant effort to keep up. The main risk for knowledge in grid A is over-confidence and being obsolete. Take the time to challenge your knowledge and reconfirm.

Grid B : the questions that I know enough to ask. Again, take the time to make a list of questions and people that might be able to help. Longer the list the better. Don't be scared of novice questions and be sure to cross check anything you learned with another source. It's a deliberate process to increase the scope of A by eliminating questions from grid B.

Grid C : Never fully ignore your gut instinct and never fully listen to your gut either. Things are most interesting when there is disconnect. Either way, your rational mind hesitates but your gut says just do it, or vice verse, There is no such thing like a brain in the gut. It's our right hemisphere brain sending strong signals of caution or excitement. The right brain doesn't have capacity for language, but it has the big picture, it understands the inter-dependencies. The right brain communicates through the gut and the heart. It's the feeling when your heart races at 100 beats per minute, It's the twisted feeling in your gut. Either way, until the two parts of the brain are fully harmonized, you must revisit everything in grid A and B. To better understand the disconnect, I try to make a list of biases and assumptions. Try to put your feelings into written words. Biases and feelings are neither bad nor good. It's an important part of the decision process to acknowledge that you have strong feelings and biases and if possible revisit the biases and challenge yourself to change or reconfirm them.

Grid D : Like dark matters in the universe, we can't see them, but we can indirectly measure them if we have enough tools and smarts at our disposal. When we are faced with a new decision, there is a vast amount of unknown. At first new knowledge trickles in slowly then it becomes a rush, especially if you have good mentors and friends and access to professional help. I can't know the scope and size of things in grid D. However, there will come a point when the rate of the new knowledge gained slows down, and there has been multiple confirmation of the same data. Do you know everything you need, probably not. However, you probably know enough to made a good decision and have a backup plan in case your assumption are wrong.

All elements of good decisions are here..
1) see multiple options in non black / white terms
2) harmony between gut, heart, and mind
3) understanding of the risks
4) backup plans for the unexpected

By categorizing knowledge and acknowledging the unknown, you can execute a strategic plan to increase knowledge, eliminate unknown, and achieve the end result of a better decision.

My first ETF purchase

2011-11-20T01:31:00.001-08:00

My emergency cash reserve is too conservative. Given the inflation rate vs interest rate, the indirect loss of purchase power is unacceptable. http://www.bls.gov/news.release/cpi.nr0.htm

I split the cash reserve into 2 parts. The first part remains in an easy to access checking account with ACH transfer setup to quick access. The second part will go to my investment account. I plan to purchase SCHP. The ETF based on U.S. TIPS (Treasury Inflation Protected Securities).

Here are some interesting articles:
1) ETF vs actual bonds: http://explorebonds.com/tips-mutual-fund-vs-individual-tips-bonds
2) perspective on last 3 month of bond activity: http://seekingalpha.com/article/296138-the-changing-landscape-for-treasury-securities-and-inflationary-expectations

Why from Schwab? They have the lowest expense ratio:
IPE SPDR Barclays Capital TIPS 0.18%
LTPZ PIMCO 15+ Year US TIPS Index ETF 0.20%
SCHP Schwab U.S. TIPS ETF 0.14%
STIP iShares Barclays 0-5 Year TIPS Bond 0.20%
STPZ PIMCO 1-5 Year US TIPS Index ETF 0.20%
TDTF FlexShares iBoxx 5Yr Target Dur TIPS ETF 0.23%
TDTT FlexShares iBoxx 3Yr Target Dur TIPS ETF 0.23%
TIP iShares Barclays TIPS Bond 0.20%
TIPZ PIMCO Broad U.S. TIPS Index ETF 0.20%

Why this might be a good decision...

1) Split emergency cash into 2 parts offers a better compromise between accessibility and protection

2) ETFs are easy to trade so I still have good access to the fund in case of emergency.

3) TIPS offers a better protection against inflation and still conservative

4) Good diversification strategy. I don't have anything like this in my portfolio. This move would increase the diversity of my assets.

Why this might be a bad decision...

1) This is an unexplored area for me. My first ETF purchase and first TIPS purchase. I don't have any sense on the tax implication or what kind of risk i'm taking on. This is the risk of the unknown rather than any specific or actual risk.

2) Why not other ETF or bond? Why not gold or any other the investment options? My decision to investigate ETF and TIPS is predicated on my fear of inflation. In a sense my decision was already pre-made based on my fears. So am I really making the best possible decision? This is risk of sub-optimal decision.
3) Is this a part of herd thinking? Recent ramp up in the bond and treasury market seems to indicate that everyone is thinking along the same lines. Am I running of risk of entering the market at a particularly bad time and destined see the value crash right after purchase?

These questions always goes to the core of the blog...
I am the sum of my decisions and the intended and unintended consequence of the decisions

Finally! Street number sign replacement light bulb

2011-10-30T02:40:00.000-07:00

I searched high and low for replacement lightbulb inside the street number sign off my house. I have the lightbulb. Multiple visits to Home Depot and Lowe's always ends up empty handed. Google finally delivered the correct answer..

Eiko 6S6/18V 6W S-6 Candelabra Base

http://www.amazon.com/Eiko-49717-Candelabra-Screw-Scoreboard/dp/B001HXGSJG/ref=sr_1_1?ie=UTF8&qid=1319967084&sr=8-1

Online shipping is best...

game theory - any book recommendation?

2010-08-30T02:54:00.000-07:00

I'm almost done reading the book Against the Gods. The book started really strong, but now I'm really forcing myself to finish reading it. Not sure if the problem is the book or just me. The topic and the explanation seems less meaningful and harder to understand. Any ways, the books is now touching on game theory and its impact on economic theories. The simplified explanation in the book on game theory sounds very interesting.

I'm especially interested in the topic of game theory and SW product strategy / development and personal finance.

Here is the fundamental questions that I use intuition and experience to figure out.

1) I have a fixed time and engineering resources. I have a product development road map 15x compares to my resources. How do I optimize my product outcome to increase the odds of market success?

a) add features x

b) add feature y

c) improve performance

d) fix bugs

2) I have a set of long and short term financial goals, in no particular order.

a) build up cash reserve

b) retirement

c) pay down debt

d) build up capital for my future start-up business

e) children college fund

f) acquire the various insurances.

g) vacation fund

Since my budget is well under control. I have money left to over into one or more of these goals. Which one's are the priority now and why? What is the allocation of funds of each and why?

On the surface the core of these two questions are identical. This an optimization of resource question. However, the deeper view is much more interesting and I hoping game theory will help me break down these steps into patterns that I can use and solve. What's interesting here, is that, this really is a multiple person game. In product management, my counter-party are my engineers, my boss, customers, sales, marketing, and various direct and indirect product competition. Every move that I make, these people are making simultaneous counter moves intended to optimize their own position. I'm in the same team with some but not necessarily with the same value. For example, with sales, I'm on the same team, but we don't have the same value. What I deliver might be highly valued by sales but not valued by engineers (bug fixes.) Or valued by sales but not by existing customers. (new features.) New features give sales new option to go after new customer base while existing customer wants bug fixes and better performance.

Obviously a mix strategy is the way to go. Some new features, some performance enhancements, some bug fixes, etc. But can game theory help me determine which mix would be optimal in under which set of conditions? How I do optimize over the life of the product release (not just the current release?) I would be happy if game theory can help me to clearly articulate and measure the utility of each their winning scenario?

In the case of personal finance, I think the game is actually much easier. My counter-parties are stock market, IRS, and family members. I want to maximize my potential gain, minimal my potential loss, minimize my tax payment, and maximize my utility with my family. I have to optimize based my current employment and expenses situation. Stock market, no one has any control over so it's only a matter of fund allocation and diversification. The tactical details of the allocation, I left to my advisor. However, I'm still the super allocator between all these competing priorities.

this is a rather disorganized post because my mind is so busy trying to apply a new concept to an long term existing problem. So if you know of any good books send more recommendations my way.

Time saving tips: email inbox management

2010-05-27T23:23:00.000-07:00

I'm always trying to find ways to work more efficiently. The key to mental work efficiency is focus. Focus on just one task at a time and group a bunch of things together so I do the same work easily. I made two simple changes to my outlook program and it's helping me to be more productive.

1) Turn-off all the incoming email notification. No icon in the task bar. No beep or message window. Nothing.
2) Setup a incoming email folder and direct all the email where I'm on the CC to that folder.

Not getting distracted by incoming email is a big boost for my productivity. My concentration is not randomly broken by a little icon or a pop-window. I'm still checking my inbox way too much. But, I'm checking my inbox between tasks instead of in the middle of it. When I check my inbox, I only read and respond to emails send directly to me. I don't even read the CC email. My objective is limit myself to read CC email just twice a day. It's not going to be easy, but with these 2 simple changes I definitely feel more focused and productive.

I'm heard rave reviews about the book "Get Things Done". I haven't read it yet. It's on my to read list. I bet this tip would be in there.

pictures from Miramar air show 2009 - blue angels

2009-10-04T05:05:00.000-07:00

The traffic was a nightmare. I left from orange county at 10 and I didn't sit down until 2:45 just in time for the blue angels. I spend 4.75 hr in traffic, walking from the parking lot to show, and waiting for security check before getting in the gate. For 2 hour spend at the show, I spend 7.5 hrs getting to and from the show. That's pretty lousy return on time. However, seen the expression on my son's face when he saw the angels flying for the first time was worth it.

Here are some more amazing picture of the blue angels! here

Enjoy!

refinancing my home loan

2009-09-13T20:45:00.000-07:00

I started monitoring the mortgage rates the end of last year because of the feds economic recovery efforts. The confirm loan rate moved lower very quickly but the jumbo loan never budgeted.

My current loan is from Wells Fargo. It's an excellent program.
- 30 year fixed jumbo at 6.25%
- 10 yrs interest only period
- 0 points

Working as a self-employed consultant at the time, the little extra flexibility is nice. Although I have always paid the principle as if it as a regular 30 year fixed loan.

Here is my criteria of refinance.
1) 30 yr fixed jumbo loan
2) .75 or higher LTV
3) less than 1 year for refi fee payback.
4) new monthly payment should be about the same as my current interest rate.

All these condition basically works out that my new interest rate must be at least 1% lower and less then 1.25 of combined point and fees. The LTV ratio is also very important because the falling house valuation. Anything loan below .75 LTV would require additional cash from me. I knew this the area of highest risk so I saved aggressively.

Here is the break down on the new loan. I am refinancing my home loan at Pen Fed credit union. I was referred to them from another blogger Adam Nash : Refinancing? Try Pentagon Federal Credit Union (PFCU).

1) 30 yr fixed jumbo loan
2) 4.875% interest rate
3) 1% origination fee, 0 points
4) .70 LTV
5) 13 month refi fee payback

As soon as I saw the new PenFed rate, I knew the moment has finally come. It's not everything that I wanted. I submitted my application this morning. Let's see if I get approved and the result of house appraisal valuation.

The important lesson for me here is that I worked with the end in mind. I defined my target as clearly as possible. My goal was not to find the lowest possible interest and try to guess how the market will move from week to week. It was a set of clear and measurable conditions. And I didn't lock myself into those condition. I stayed flexible and considered some possible alternatives.

The mental and numeric preparation is the key. In life, you never know when the right condition will come along. You have to do all the preparation in advance. Define the target conditions, know which conditions are flexible and which are fixed. Set aside the necessary resources. Then patiently wait and jump on the opportunities quickly. No need to doubt or second guess. The decision to apply for the loan was made almost a year ago. I only spend about 30 minutes to refresh my memory and double check my math one last time before I pulled the trigger. I'm confident that I have made the right decision. (Of course, it's really hard to see the down side to 4.875% for a 30 yr loan jumbo. )

Living with Purpose and Passion

2009-08-08T06:21:00.000-07:00

One of my favorite blog site recently posted "Defining success". I thought it was a really interesting question and posted the follow response..

It just as helpful to define failure and/or what success is not... I think for some people that is a lot easier because we all have a very strong emotional response to the fear of failure. Where as the positive happiness seems to be much more elusive.

Failure is when I stop listening or seeking good ideas
Failure is when I worry about being right for other people
Failure is when I don't care.
Failure is when I care more about the end result then doing something I believe in.
Success is not a goal and it's not the achievement.
Success is not a process.
Success is not about being right.

Success is the mental and emotional engagement to the attempt to reach the goal. Success is being passionate about trying to reach that goal. I can completely fail to reach the goal and still feel that I succeed. I'm rarely bothered by the fear of failure as long as I'm mentally and emotionally engaged. I can be wrong and I'm wrong often. I'll acknowledge the wrong and try to make it right. I don't need to wait until the end some long process to measure my success. Every night, I can ask myself did I have a successful day. Every moment I can ask myself is the choice I'm making now a successfully one.

I want live a purposeful life (measured by goals and achievements). And I want to live a passionate life (measured by success vs failure). When someone can find a way merge the two, I believe he/she will be on the road to happiness.

when do i get a bail out?

2009-07-22T02:23:00.000-07:00

Here is the latest of government bail out for the auto industry.
http://www.cars.gov/ Car Allowance Rebate System, where people can get trade-in value of $3500 or $4500 for a new car (leased or purchase) when they junk a old fuel inefficient car.

My Honda Accord is now 15yrs old. I figure is finally my chance to get some government bailout money. Turns out, my car is too efficient, I don't qualify. Yet Again.

I should be happy. I have a job, good mortgage, made conservative investment choices, bought a fuel efficient car. However, every time there is a bailout and i don't qualify because I haven't demonstrate sufficient need, it just makes me mad. Oh well... this is why we have a "progressive democracy". We take money from people who have it now and people who will have it in the future to help people who need it now.

This makes me think.. how am I going to treat my children financially?
Am I going to be fair and treat them the same way? Or am I going to be equitable and treat them different depending on the level of need?

must read.. why education matters more than ever.

2009-06-14T23:37:00.000-07:00

Education and technology: Supply, demand, and income inequality

street zip lookup

2009-03-22T02:53:00.000-07:00

Here is an useful service that I discovered today. http://www.melissadata.com/lookups/zipstreet.asp
The service retrieves the list of streets and street addresses for a given zip code.

So how is this useful? When new vendors or clients gives me incomplete or unreadable addresses, or I didn't catch the complete address over the cellphone / answering machine. It's usually pretty easy to get zip code, but the street name might be misspelled. I can verify mailing address via www.usps.com. The problem is when the address look up fails, I had no way to browse similar addresses to see which one might be a match. With this service, it's easy to browse through a list of valid street names for the zip code.

529 college saving accounts

2009-02-18T01:10:00.000-08:00

I have been meaning to research and open a 529 college saving account for the last 3 years. I'm finally going to get serious. I suppose I "lucked out" because I bypassed the big stock drop last year.

My plan is invest as much as possible as early as possible. The tax benefit of Ruth IRA and 529 account is exactly the same. I'm going to redirect my Ruth IRA contribution to the 529 account. Then switch back once I have a decent 529 balance.

Now the only question is which fund family / state plan do I want to invest. If you have a 529 account, would you share with me what you like about your particular plan?

visual guide to the financial crisis

2008-12-29T02:56:00.000-08:00

Wonder how the financial crisis got to our current sad sad state? Wonder no more! Here is a visual "flow chart" that walk-through and summarize the events.

http://flowingdata.com/2008/11/25/visual-guide-to-the-financial-crisis/

In short.. Never under estimate the power of "GREED". History has show over and over again, as long as here is human capacity for greed, we'll continue to have financial bubble that leads to a major crisis.

cheap vs frugal

2008-12-23T01:10:00.000-08:00

It's has been on my to do list to write a blog entry on this topic for a long time. Happily to report that one of my favorite blogger has written just such topic.

http://www.iwillteachyoutoberich.com/blog/stop-being-cheap-and-go-buy-something-valuable-today

If you haven't visited www.iwillteachyoutoberich.com, I highly recommended it.

think you had a bad day?!

2008-12-13T01:48:00.000-08:00

check out the pictures from this blog.
http://brokershandsontheirfacesblog.tumblr.com/

Library Elf - a handy web service

2008-11-18T21:52:00.000-08:00

I just discovered this new web service. If you are like me that needs email reminder for just about everything. This service automatically send you remind of item due date and on hold items at the public library. So stop paying those library overdue fees.

Library Elf

-------------------
Elf is a web-based and email tool for library users to keep track of their library borrowings. Elf is like a personal assistant, whose task is to help with keeping track of what one has on loan from the library.

Designed with the busy or avid library user in mind, Elf is ideal for families with multiple library cards or for individuals (writers, researchers, students, readers, etc.) who have cards from different libraries.

Elf makes it easier to keep track of what's due, overdue or ready for pickup from one or more library accounts. Users have the option to consolidate their library accounts into one account if they wish. This account is checked everyday and email notices are sent when items are coming due, overdue or when holds are ready for pickup. As well, get up-to-date realtime information by browser.

opt out of prescreen credit card and insurance offers

2008-08-27T01:18:00.000-07:00

When I get the mail, the first thing I do is rip up all those unsolicited credit card offers. For the first time, I actually took 30 seconds and read the letter. On the very bottom, I found this gem of information that I never knew about.

To submit your Opt–In or Opt–Out request by telephone.
Please call toll free: 1–888–567–8688

I googled for stop pre-screen offers and found this
news release by www.BBB.org. This news release give the web version of the service : http://www.optoutprescreen.com

I took a few minutes and submitted my requests. You have to print out, sign and mail in a letter to get your name permanently removed from the opt out list. Otherwise, you only get 5 years of opt-out.

The www.bbb.org news letter also indicated 2 other services for reducing junk mail and emails.
1) https://www.dmachoice.org/MPS/proto1.php
2) http://www.dmachoice.org/offemaillist.php

I'm going to try all these services. It would be so nice to reduce the volume of junk mail.

Should you buy a home now?

2008-08-08T23:07:00.000-07:00

here is a recent LA Times article : Should you buy a home now?

Here is my take on this question. Buying a home is fundamentally a lifestyle question. It's a burden of love. Buying a home brings it's own set of stress and pressures, but it might be all worth while if it's a burden carried with love.

1) Have you found a home that you love and can imagine living there for 30 years?
2) Can you expect to live in the house for 10 or more years?
3) Have you got a financing that you can afford and a plan in place even if you and/or your spouse get laid off for 6 month to 1 year?
4) Are you ready to deal with all the hassle of home ownership : yard work, repairs, upgrades, HOA, and neighbors?
5) Do you expect the mortgage interest rate to go even lower?

I consider these things the right questions to think about when purchasing a home. There are some wrong questions to consider when deciding to purchase a home or not.
1) What is the biggest / best home that I can afford?
2) Is the housing marketing price going lower?
3) When will the value of the home go up?
4) Will I save a bunch of money on taxes?

Let me explain why I think these are questions to ask.
1) Have you found a home that you love and can imagine living there for 30 years?
Besides marriage, buying a home is probably the biggest commitment you'll have to make in your life. You are tied down to a huge financial burden, and not flexible to move to another part of country for career. You better be ready to commit to a home that the whole family will love.

2) Can you expect to live in the house for 10 or more years?
No one can predict what's going to happen in 10 years, but this is a good bet if you have a stable job. The transaction cost of selling a home is huge, easily 5% to 10% of the selling price. Not to mention the stress it brings.

3) Have you got a financing that you can afford and a plan in place even if you and/or your spouse get laid off for 6 month to 1 year?
Don't commit all your cash into the down payment. Some people stretch and take on all these financial risk that they can't handle when times gets rough. You need the cash reserve for repairs, layoffs, medical issues, and all the other financial risks that can happen to any one at any time. Again, a home is a financial BURDEN and risk. Go in with your eyes wide open.

4) Are you ready to deal with all the hassle of home ownership : yard work, repairs, upgrades, HOA, and neighbors?
You home is your castle, but you neighbors and HOA really cares about how you live (at least how the house looks on the outside.) Be ready to deal with that hassle.

5) Do you expect the mortgage interest rate to go even lower?
You probably noticed this is the only timing related question. All the questions so far has been about emotional commitment or financial planning. You can do that any time, even in a down market. Most people forget, for the life of the loan, you pay more in mortgage interest than the home itself. The house market price might go up and down 10 or even 30%. That is SMALL potatoes compared to the total mortgage interest paid! One percent point change in the mortgage interest makes a big difference in the total cost of the home. Check out any mortgage calculator. Here are some number I just ran:

1) $500,000 mortgage, 30 years fixed at 7.00%. At the end of 30 years, interest paid will be 697,544
2) $500,000 mortgage, 30 years fixed at 6.00%. At the end of 30 years, interest paid will be 579,191.

And that's assuming you keep the loan, if you refinance frequently the number only gets worse.

So why are these the wrong questions to ask about a buying a home.
1) What is the biggest / best home that I can afford?
Real estate brokers, mortgage agents and anyone in the real estate business often asks this. They will say a home purchase is biggest / best investment of your life so make it count and get that dream home (even if you can barely afford it). When I purchased our first home, we had the income for a house twice as expensive. Everyone pushed us to get a bigger home in a better area. Sure, we we would have made more money consider the real estate run up. But we loved our 1st home, it was just perfect for us at the time. Even with the house purchase, we still managed to invest in 401k, and saved money to started a business.

2) Is the housing marketing price going lower?
This is an important question, but not while deciding to purchase a home or not. The purchases price is actually only a part of your total cost of ownership of a home. Adding insurance, property tax, mortgage interest, utility cost, repairs, cost of sale, the purchase price is less than 50% and it's not even the single biggest item. However, this is an important question for price negotiation. If you think the housing market price is going down then you'll make your offer appropriate to that market risk. It's the same when the market is going up. When the market is going down, people prefer cash to house. Buyer doesn't want to give up cash and seller is willing to reduce value to get cash. Just the opposite when the market is going up. You can decide to purchase a house in a down market, as long as you negotiate with that risk in mind.

3) When will the value of the home go up?
I never understood why California had such a huge run up on housing prices. It was completely out of portion to rental cost, cost of living, inflation, wage, etc. I just wanted to build out my equity in a little place that I can call my own. I don't want to pay rent forever. If you want something that will go up in value, then you should invest in stock, bond, mutual funds, and other securities. The mantra of modern financial planning is diversification. If you stretch to buy a big home then you are sacrificing diversification and making this big bet that the housing value will go up. Not very smart, instead, buy a smaller home, make sure you have a diverse set of securities, real estate, and income streams. You'll be well covered in any market condition.

4) Will I save a bunch of money on taxes?
I like tax deduction just as much as the next guy. Tax deduction is icing on the cake. I'll alway try to maximum my tax deduction but it's not smart to make big purchases because of the money you might save. Sure, you might save 40 cent for each dollar spend in mortgage interest. But you still have to spend that dollar first. In case of layoff, you don't have have 40 cent tax deduction but you still have to spend that dollar.

In summary, I don't think there is a good time or a wrong time to buy a home. What's important is that you buy the home for the right reasons and make the necessary plans to manage the financial burden.

Wow, this blog entry turned out much longer then I expected. I really enjoyed writing and thinking about it.

lower your property tax - part 2

2008-07-29T00:11:00.000-07:00

The county has approved my request for lower property valuation. I saved a lot for money for a bit of research and a quick call to my Realtor. It's terrible that my home is worth less than my purchase price, but I'm not going to focus on that paper loss. We love our home and plan to be here for a long time.

Even though the stock and housing markets seem really bad, I try to stay calm and find some method to make it work for me in a small way. Saving on property tax recovers than 1% of my property value loss per year. But, it's something.

The same goes for the stock market. At the beginning of this year, I redirected all my new retirement contribution to money market fund instead of mutual funds. I went against my financial advisor's advice, and probably went against every retirement investment book recommendation. Only time will tell if this was the money right decision. Right now, I feel so much better knowing that a small part of retirement is safe in this turbulent times.

I believe that simple act of staying involved and thinking calmly will help me to make better personal financial decisions.

Alaska Vacation Part 2

2008-07-27T03:10:00.000-07:00

I would like to share with everyone some of nice scenic pictures that we took on the vacation. I really need to upgrade camera memory to a couple of 8 gig compact flash. So I wouldn't have to lug around a laptop next time. :)

Here are some highlights. You can find the rest of the pictures here

how to scrap dynamic web pages

2008-07-18T23:18:00.000-07:00

If you need to collect dynamic html data from websites without programming, your options are pretty limited. Excel has a web query tool. There are a few 3rd party tools. You alway had to write up a bunch of regular expression searches and match rules. It's a major pain and not very flexible.

I found this amazing new startup web service. It's truly awesome. www.dapper.net. The web services allows a non-programmer to enter some sample URLs. The site extracts the html pages. Analyze the common data and layout. Then user gets an easy to use web tool to select which data elements to be extracted. It's as simple as clicking on the fields that you want. No programming, no regular expression, just point and click.

Effectively, you can convert any dynamic website into a XML data source. Next, you can take that XML data source transform it into RSS feeds, google map, and lots of other formats. Meshup made SUPER simple.

On the otherhand, it's all black magic. I have no idea how it works. It take a few tries to find good samples pages and selection blocks. I want to extract 10 fields. For a while, it works on one page, but not another. After about few hours, I randomly found a set that seems to work well and I consistently got all the data fields. I don't really know why. The explanation is quite sparse, terrible documentation.

A startup with real powerful technical promise.

alaska cruise

2008-07-18T23:08:00.000-07:00

My family and I just spend a wonderful week on a cruise to Alaska. It was my first cruise vacation. Amazing trip. Seeing the glaciers and whales up close. Being in southern California for so long, it's hard to imagine the remote green wilderness that still exists and I can enjoy that view from all the comforts of a cruise ship. There were times where I can see from the endless line for trees that just goes as far as the eyes can see. Simply amazing.

Vista and Linux/Samba

2008-06-16T20:35:00.000-07:00

I was having a heck of a time trying to connect Vista to my Linux Samba share. I tested connection in my XP vm env and it worked just fine so I knew this must be another one of the Vista security enhancements. Found this article on how to disable the "enhancement". This problem is not just to Linux. Samba is very common utility for NAS drives, Linux, and other network file system to inter-operate with Windows.

here is the full article

here is the work around solution.
----
Click "Start -> Run." Then, type in the Run field: "secpol.msc." That will bring you to Vista's security policy system. Once there, use "Go to: Local Policies > Security Options" and then find "Network Security: LAN Manager" authentication level. Once there, change the Setting from "Send NTLMv2 response only" to "Send LM & NTLM -- use NTLMv2 session security if negotiated."

remote support / web demo software

2008-06-02T23:39:00.000-07:00

Originally, this entry was suppose to be detailed review of 3 different remote desktop / presentation / demo software packages. However, I haven't made time to write anything so extensive. Here is the quick and dirty summary.

- GotoMeetings Pro : well integrated into IM, outlook, and other desktop applications. Con : heavy install, Windows only. Most expensive.

- GatherPlace Pro : Java based and support multiple platform. Web based or very small desktop footprint. Con : not so easy to use.

- TeamViewer Pro : FREE for non-commerical use. Easy to install. Con : windows only, limited to 5 users.

I like teamviewer the best so far.

I'm shopping for a new credit card

2008-05-22T00:12:00.000-07:00

I have been using Citibank American Airline mileage cards for a really long time. However, I just got a major reality check. Airline mileage points are not what it use to be. I tried to use the points to fly to Seattle. It was impossible to get anything reasonable. Even with anytime upgrade (which is twice the mileage points) The best they could do was fly from LA to Chicago to Seattle which added 6 extra hours to the trip. Crazy. Someway, somehow, someday I'll use up my mileage points but I'm NOT going to collect points any more and I'm not going to pay the annual fee for this credit card.

So, I'm shopping for a new credit card. Lots of sites out there
http://www.bankrate.com/
http://www.credit.com/

Here is my favorite. Just a simple list, continuously edited and updated by other users.
www.fatwallet.com

Where I found this interesting card.
http://www.emigrantdirectmastercard.com/
Put $10K into the savings account to earn 1.4% cash back on the purchases. 1.4% cash back is very good consider most card only provide 1% so this card has 40% better rate of return. However, their savings annual interest rate is 2.75% compared to 3% in my INGDirect savings account.

I fire up MS Excel and use Goal Seek feature. I found that I need to spend $6,500 per year to break even if I move my money and use this card instead of going with another basic card that gives 1% cash back.

Savings $10,000
2.75% 3.00%
$ 275.00 $ 300.00 $ (25.00)

Cash back $6,250
1.40% 1.00%
$ 87.50 $ 62.50 $ 25.00

Is the card worth the hassle of moving my money so I can earn a highly cash back rate? Clearly not. But I'm glad that I took few minutes to run the number.

Marketer are smart. They know how to create a package to make the products more interesting. It's genius to package a savings account and a credit card together and make it sound good. However, it is up to the smart consumers to understand then undo the math to figure out the actual cost and benefit.

installing vista .. part 2 (should have used a VM instance)

2008-05-20T00:05:00.000-07:00

Did I mention this was a waste of time. It seems that the softwares that I need is not compatible with each other in Vista. Both claims Vista support but installed together causes the blue screen of death.

So, I'm building an VM instance with XP guest OS and installing the software inside. Voila, it's working fine. I should have done this in the first place and just live with semi-corrupted OS. At least my VM instance would have been portable.

Yes, I'll have to take a performance hit using a VM instance, but no BSOD. What a lovely choice.

On Vista, I have noticed just one improvement. Vista Media Center recording seems to be better XP based MC. And the close caption is working properly. There.. I said it. The one improvement in Vista.

BTW.. a friend that did go over to the Mac side is urge me to do the same. So, is there a VM instance so I can run Mac OS on the PC? I would love to try it and see.

I upgraded to Vista .. against my better judgement

2008-05-18T02:20:00.000-07:00

My main development system is corrupted beyond recovery. I tried my old ghost images, but the system corruption must have been around for a while. I can't seem to install .Net Framework 3.5 and I can't uninstall any .Net application. Unfortunately, I have to install this for a new development gig.

So, here I am. 2am in the morning, installing Vista and restoring my files. What a waste of time. Honestly, I can't understand how "non-tech" people can put up with this crap. Make me want to switch to Mac just to see if it's really better on the other side.

Vista install is going okay. I didn't get any "blue screen" of death, but I had hard-reset the computer a few times already because it seems to hang for 10 minutes trying to install some hotfix. Upon my initial install, I had to install another 55 critical "updates".

I'm sure this is an old story, I'm just another techie complaining about the same old problems. This time, I swear I'm going to keep my main system as clean as possible. Keep as much application as possible inside a VM instance.

I'm really sick and tired of this annual ritual of rebuilding my OS every year.

Vonage or Not to Vonage

2008-05-15T04:04:00.000-07:00

I have been using Vonage for 3 or 4 years now. I'm really sick of it. I can't fax out, the lister often gets a strange echo during conference calls. I have made multiple calls to customer support. The people are friendly enough and tries really hard, but can't seem to get the problem solved.

However, there are some really cool features with VOIP. Virtual Numbers, and SimulRing are two features that I don't want to give up. It's very useful for my business.

What should I do? Switch to another VOIP? Give up on VOIP? Any solutions to these problems?

signed up for Microsoft Live - SkyDrive

2008-05-14T03:14:00.000-07:00

I have been an xDrive user for years. For a long time, I actually paid the annual subscription fee to get 5 gigs of storage space. I personally didn't really care that xDrive was acquired by AOL until they made me give up my old account. Forced me to sign up for an useless AOL email address. Now, I can't even upload files any more. There are just too many choices, I don't want to bother with finding out why my upload is failing.

Today, I got a "spam" email about Microsoft Live SkyDrive. I just signed up, I'll use it for a few weeks and write about my experience here.

Batch extraction and conversion of PDF to txt and jpg

2008-03-31T23:07:00.000-07:00

I found this great open source tool to extract the text and images from a pdf file. The tool provide a set of command line utilities to extract various components out of the pdf. There is a Linux and Win32 version of the tool.

The command line is very easy to use
Extract Text
pdftotext [options] []

options includes:
-layout : maintain original physical layout
-htmlmeta : generate a simple HTML file, including the meta information

Extract Images
pdfimages [options]

This extract all the images as as Portable Pixmap (PPM), Portable Bitmap (PBM), or JPEG files. However it doesn't convert any PPM or PBM files into jpg. You'll need a separate utility for that.

book : The Top 10 Distinctions Between Millionaires and the Middle Class

2008-03-18T23:04:00.000-07:00

The Top 10 Distinctions Between Millionaires and the Middle Class

I admit to reading this book without buying it. It was quick read that I finished while "browsing" in the bookstore. It's another one of those books that claims finance is mainly a psychological problem. If people change the way they think and feel about money, all their money problem will be solved. I don't agree with that assumption. Never the less, I thought the book made some good points. The first and the only distinction that I remember was "time and money". 5 classes of people from very poor, poor, middle, rich, and very rich thinks about money with very different time horizon. The very poor worry about money day to day level. The time frame gets longer for each class : week to week, month to month, year to year, and decade to decade.

I totally agree that too many people in middle class makes big purchases because they are sold on a payment plan that fit their "monthly" budget : car, big screen tv, boat, rv, etc. These people will probably be stuck in middle class forever. If you want to get any where in life and money you have to make long term plans and execute on your plans.

To me the core problem is education about the cause and effect of money. The money spend is gone forever and money in my pocket is going to worth a whole lot more 10 years from now. Would I rather spend $10,000 now or let it grow at 5% interest then spend $16,470 in 10 years from now. Every purchase is different, but I alway run that mental check. Now or Later. The other half of that is having goals for things that you rather be spending the money on 10 years later. Bigger house, junior's college education, travel around the world, retirement, etc.

fed cuts interest rate again..

2008-03-18T22:46:00.001-07:00

I can understand how this cut helps people with debt, but all these cuts are killing my saving interest earning power. I can't find any CDs, money market accounts that pays a decent interest rate. Every time the Feds cuts the rates, my ING Direct interesting earning rate drops. The best money market account rate I can find is from Country Wide Bank around 4.5% a few weeks ago. While, I know that my money is safe in CWB, however I don't want to support the company that is partially responsible for all the mess that we are in now.

Any way you look at it.. The government will be eventually be bailing out lots of businesses and individuals. It's only a matter of time. The good guys that play by the rules gets to pay for other people's sins. What is the lesson from all this mess? Don't trust anybody with your money. Not the government, not the banks, and definitely not any sales people.

why I do my taxes twice

2008-02-18T03:05:00.000-08:00

I always get a funny look when I tell people that I do my tax twice. Yes, I do my own tax. Yes, I pay an accountant to do it again. How much tax you pay is a function of how much you know about the tax system and rules. Consider that between state, local, federal, and sales taxes, I don't have any solid numbers, but we can guess at 25% to 30% of your money goes to the government to be spend on your behave.

Every year between Jan to March, I'm not working for myself or the company, I'm working for the government. Luckily for us, U.S. system of tax has incentive for certain type of activities. Just like a bonus from the company for doing the right thing. IRS gives some money back to you for doing the right thing. Unlike the company bonus, where the boss is responsible to determine how much you deserve. IRS is NOT responsible to give back your money, you have ask for it. In the extreme case, you have to prove what you ask for is true, through an audit. Filing your tax forms is just like writing your annual review. You want to show off your activities for the maximum impact because in tax rules what you do is as important as why and how you do it.

Back to the original question, why do I do my taxes twice? Because I want to learn from the professional without spending years on a degree. I just want to learn the important points that applies to my situation. I do the taxes my way as well as I can. Then I take it to the accountant so he can do it again as well as he can. The difference is where my knowledge was lacking. I'm not paying the accountant to do my taxes, I'm paying the accountant for his knowledge and training and take the time to teach me. With that knowledge, I can do better planning for the upcoming year.

why I use Quicken (part 3) - finish your taxes faster and maximum your deductions

2008-02-18T02:27:00.000-08:00

Here are the first 2 parts:
Part 1)why I use Quicken

Part 2) end of the month Quicken activities

I'm almost done with my taxes! Every year, my taxes gets more and more complicated and the number of forms get higher and higher. I suppose, in some strange way, that is a good thing. I rather be paying taxes than not. Yes, I still do my own taxes. Yes, I pay an accountant to do it over again.

Quicken help me to organize my spending records so it's much easier to figure out my expenses and deductions for tax. All through out the year, I mark the business related income and expenses. By this time of year, I ran an income / expense report in Quicken, exported the data to Excel. I do a bit more data clean up in Excel and then the data is ready to for TurboTax. I never really liked to TurboTax import from Quicken feature, it's alway too much or too little. It's much easier to organize the data in Excel.

To maximum your deductions, you have to track every single business related transactions. Quicken helps you do that a little bit at a time, through out the year. Instead of trying to go through a box of receipts and trying to remember the reasons afterward, when you're in a hurry to meet the deadline. Never a good idea to do thing last minute, especially bad when lot of money is involved.

use google spreadsheet for lightweight database

2008-02-15T19:51:00.000-08:00

I saw this on Adam's blog and thought it was just too cool. I had to tried it out. Took me a few minutes to signup for a Google account and create a new spreadsheet and form. I send out the test forms to myself and got the email right away. Of course, the next obvious thing is to see if I copy the html over on the blog entries would the form still function. You can help me test it.

you can find the posted results here
http://spreadsheets.google.com/pub?key=pEoPYbHZTXf3qOVlLwT3DJA

----

task tracker

help you track the weekly tasks done and the number of hours used.

powered by Google Docs
Terms of Service
Additional Terms

lower your property tax

2008-02-15T09:43:00.000-08:00

Now is the now to review the value of your property to see if you are paying too much property tax! There is a good chance that you are paying too much. Talk with your real estate agent, let them know you want recent comps, especially the foreclosure sales. This way you can gauge if your home value has gone below the 2008 property assessed value. Then check the website for your county property tax assessor. There should be a form to partition for temporary adjustment of the property valuation.

Here is the forms for Orange County, CA:
http://www.ocgov.com/assessor/forms.asp
look for "Request For Informal Assessment Review"

The deadline for OC is March 30 so don't wait too long.

what have I been reading.

2008-02-09T23:45:00.001-08:00

I never actually spend that much time reading blogs before. Now that I started a blog, I spend much more time reading other people blogs. It's incredible. I don't think I'll ever buy another magazine again. There are just so much incredibly well written, insightful, clever, funny, and expertise blogs. Of course, I feel a bit of pressure to increase the quality of my entries (part of the reason for the delays in publishing new entries) .

Here are some articles and blogs that I quite enjoyed on some wide ranging topics.
http://earlyretirementextreme.com/2008/02/ecological-capitalism-and-consumer-capitalism.html

http://www.ericsink.com/Career_Calculus.html

http://www.iwillteachyoutoberich.com/blog/

http://www.predictablyirrational.com/?p=136&date=1

Finally, my identity shows up on the 1st page of Google search.

2008-01-27T16:44:00.000-08:00

I admit that I have been vainly trying to get my name on the first page of Google search result ever since I started this blog. When I started this blog, my name showed on Google via LinkedIn around page 10. Over the last few weeks, I have added a bunch of entries to my LinkedIn profile. I link this blog to the profile and vice versa.

Today my Linkedin profile is entry number 2 for "ricky chang" on Google search result (with and without the quotes around the name).

I don't really know what this proves. I have a valid net identity? What's the bigger philosophical question here? I worry about that another day, today I'm number 2.

Why car makers hate me.

2008-01-27T02:13:00.000-08:00

I don't actually know if they hate me, but I'm not the typical driver or buyer. I think the car industry would collapse if more people have my experience.

I brought only one car in my life so far. I have been driving my 94 Honda Accord for almost 14 years. I was out of college, working my very first full-time job at Microsoft. The Honda was my first big purchase. I got it brand new and I paid for it all up front. With more than 170,000 miles, the Honda is going great. I still get around 28 mpg. Not bad for a 14 year old year, compares well with some the real world mpg of the Prius.

Thinking back about my purchase decision. Here is the list of my intended consequences.
1) no debt.
2) drive it for at least 10 years.
3) great mileage.
4) family friendly.
5) environment friendly

I'm very happy that my intended consequences were right on the money. However, the best part is that I would be doing the exact the thing for the next car. My budget would be bigger, the meaning of family friendly is not vague notion anymore, and there is a new technology that redefined the meaning of environment friendly. The details would change, but the goals would be the exact the same. With a bit of luck, maybe I can drive my second car another 14 plus years.

The only remaining question is when should I buy a new car? I have came up a simple financial formula to answer that.... in the next blog entry.

Get a refund for your diamond purchases

2008-01-26T03:46:00.000-08:00

This seems to be for real. I spoke with my jeweler, and he's making a claim. Here is the website : https://diamondsclassaction.com/

File an online claim here: https://diamondsclassaction.com/secure/Instructions.aspx?AC=yes

Why not take a few minutes and fill out a claim. The deadline is May 19, 2008 so don't wait too long.

Must step through every line of code

2008-01-23T09:19:00.002-08:00

The interactive debugger is probably the one of greatest invention for programmer productivity. It's right up there with high level languages, and OO design. You don't realize the importance until you had to give it up. Few years ago, I had to do some very low level C / assembly programming. I'm talking about no RAM, no OS, only 64 8 bit registers for memory, and 4k of ROM. Interactive debugger would have been a dream come true, heck, I would have happy with printf. Instead, I had 8 little flashing LEDs that I had to count. Crazy.

All good developers know that they should execute through every line of code they write. The code is working only when I see it working inside a debugger. Seeing is Believing.

One of my favorite programming practice is to set the breakpoints as I write the code or when I review the code after it's finished. I don't set the breakpoints on every line, however I set it at the beginning of every branch in the code. As each breakpoint kicks in, I verify the code is correct then clear it. After a few execution of the test codes, I visually see all the uncleared breakpoints. Any uncleared breakpoint shows where my test cases are inadequate. How awesome is that!

Using this technique ensures that I have stepped through every line in the code. Uncovered missing test cases. Performed all the positive and negative testing. This is made possible because of a integrated IDE and interactive debugger. Interactive debugger is truly one of the greatest invention for programmers productivity.

comments required!

2008-01-22T13:39:00.000-08:00

Got a nice feedback the other day from a client. They had a code review of my work and they appreciated the level of comments in the code.

I'm a die hard fan of comments in the code. There are two common arguments against comments in code.
- code should easy to read
- comments becomes out of date to the code (more stuff to maintain)

These arguments has some merit. Code should be easy to read, meaningful variable names, etc. But that's not an excuse for not commenting the code. Good code is not a substitute for good comment. Good comments made good code great.

Comments do become out of date to the code, and it's confusing when the code is different from the comment. Still, it's good information about why the code might once behaved as the comment indicates.

My programming style:
I comment all the functions, decision points, and logical blocks; no need to comment every single line. The important thing to comment is the purpose of the block. The code itself should explain the how the task gets done and comments indicate the intended purpose. It's quite tedious to go back and add comment afterward. It's much easier to write all the comments first then write the code. This extra step helps me to think clearly about the logic of the function and plan out the work that needs to be done. When I write the comment, I'm not concerned about the variable names, structure, efficiency, optimization, memory usage, variable type, or million of little things that a programmer thinks about when coding. The comments focus purely on correctness of the logic.

p2v is cool

2008-01-12T02:47:00.000-08:00

Enough about Quicken and finances for now. Time to talk about something geeky that I did recently that solved a real problem.

My laptop died over the holiday after 3 years of abuse from me. The timing was not bad, there were some great laptop deals floating around. I finally settled on a Toshiba with Microsoft Windows Vista Home Premium pre-installed. My first reaction was to reformat and install XP Pro right away. However, I decided to give Vista a chance before blowing it to bit heaven. My dilemma is now how do I migrate all my applications to Vista when most of the applications were not compatible or untested. Then I came across VMware Converter and VMware Player. The idea is so simple it seems far fetched. I will convert my old laptop physical image to a virtual image then run it inside Vista as a guest OS. At least that was the theory. I was not expecting it to work.

To my great surprise, just about everything worked liked a charm! I borrowed a laptop from a friend, swapped in the my hard drive and booted up. Then I installed VMware Converter my desktop computer, and pointed it to the laptop. The converter worked its magic over the network which took about 4 hrs and created a 30 gig image file. In the meantime, I installed VMware Player on Vista. I copied over the guest OS image on to the new laptop. It boots up and I'm in. It was amazing! It just worked, no configuration, no additional setup, no tweaking, nothing! It just boots. Now, I have my old laptop running inside my new laptop. I used bridged networking for the guest OS. Basically, I have two laptops running off a single hardware. I spend the next few hours testing network connectivity, various applications, etc. I only run into one issue. QuickBook didn't like the change over. The licensing data was lost and wouldn't run. Some kind of copy protection data got lost in the conversion.

I has been running this setup up for about 3 weeks now. Vista has found its place so I will keep it around. The guest OS is running great with only a minor performance hit. I need to upgrade my laptop's hard drive to 7200 rpm to get better performance.

Technology that works. Gotta love that!

earthquake insurance

2008-01-09T18:03:00.000-08:00

Another friend asked me if I have earthquake insurance and why. I thought that was a very good question too. Definitely, one of those financial education and planning type of question that I like to discuss here.

Here is my reply:

Yes, I buy earthquake insurance for my personal home and but have a high deductible. Here are 3 reasons why..

1) I believe that if you are prepared for the worst then the karmic odds of the worst happening is reduced. In part, I'm just worried. You never know when the next big one is going to hit, but it has been a long time since the last big one in SoCal. I know that the history of earthquake doesn't predict the next one but I can't shake the feeling another one might be around corner.

2) I doubt the math would ever make sense to buy insurance but I can't afford not have the insurance in case the worst happens. Suppose there is a major quake and your house is damaged / destroy. I still owns the mortgage and HELOC, but no place to live and not enough cash reserve to rebuild. I can't get money to rebuild because I can't get a new loan. No house that I can sell. I can't sell the the land to cover the mortgage and HELOC.

At this point, I'm bankrupt. GAME OVER. I'm living on the streets. A likely scenario that my house is only partially damaged in a major earthquake and my deductible is too high to collect. I'm only protected from bankruptcy.

3) I buy because earthquake insurance is expensive. I know that sounds quite silly. The way I look at the situation is that if risk of earthquake is low then the premium would be low. The insurance companies can sell a lot insurance to a lot more people if the premium was lower and they can make more profit. The risk is high therefore the premium cost is high. I believe that insurance company are 100x smarter and 100x the knowledge compared to me. They probably have a team of Ph.D.s running risk models. If there enough competition between various earth insurance companies, then the price should be reflective of the risk. Not like auto insurance where service actually matters to some people because we all regularly deal with auto insurance. The expected service is not a factor in my decision, only premium cost vs. coverage.

On a side note, by the same logic, I buy a small amount of universal life insurance. Death is for SURE and the insurance company for SURE will pay and therefore the premium is very high. On the other hand, 5 or 10 year term insurance is cheap for my age but the odds of me dying in that time frame is very low. I know most people don't recommend universal life insurance but I went against the common logic. (Perhaps an entry for the blog if people are interested.)

In summary, my reasons for buying earthquake insurance: It makes me feel better, protection against bankruptcy, and betting with the house instead of against the house. In my sometime overly active imagination, there is a universal roulette ball rolling and I hope it never lands on the "00" but just in case, I'm covered for the financial worst case scenario.

Software Architecture Lifespan

2008-01-05T03:15:00.000-08:00

Okay, I want to coin this new term.. "Software Architecture Lifespan"

This idea has been in the back of my mind for many years now. I have worked in big companies, startups, and startups that grew into middle-size companies. I have seen lots of software grow and change. It gets tweaked and tweaked and refactored and refactored until it could bear no more then finally, it gets rewritten. I use to think this is bad, that somehow software engineering as a science and discipline has failed. Now, I actually think this is a very useful and practical exercise.

I would now argue that rewrite is not an failure but a sign of maturity in the business and technology. It should be a key requirement for any application development strategy and product roadmap plan. Instead of being a painful business and organizational crisis, it should embraced. One of the software architects job should be to plan for the various major architectural changes and all the rewrites involved.

The technical team should in tendum with the product team to develop a product roadmap and an architectural roadmap. The product roadmap defines a set of functionality and level of performance necessary to achieve a business goal and customer requirements. The architectural roadmap will parallel the product roadmap. This set of features can be easily and efficiently implemented using this set of architecture. As the business and software matures, a new architecture is needed to better manage the new set of functionality and requirements. Each architecture has a fixed lifespan where it's optimal for certain conditions, then it's gracefully put aside and a new generation will step in. Each generation of software will have its own "Software Architecture Lifespan".

Recently, I used this concept in a technical evaluation for a client's software. The client wanted to assess if a rewrite was necessary. Instead of providing direct yes or no, I took their product roadmap to the existing architecture and demonstrated its strength and weakness, and show how the architecture must evolve. This method allowed me to be specific, I can show the architecture has a lifespan of maybe an year then an rewrite would be highly recommended. Since the timefrae is only a year away. They should start planning for the rewrite now so some of the new components can use the new architecture and minimize the future rewrite cost. And we know where the existing architecture is effective, they can still plan for rapid development of new features to keep up with customer demands.

I have another personal example how of this model is useful. The client was an early stage startup with a big business plan. They wanted all these bells and whistles in the software. They wanted this sophisticated J2EE, N-tier architecture that can scale to hundreds of thousands of users. I blunted told them that's silly. I wrote the software using PERL and MySQL in about 3 weeks instead of the 6 to 9 month they budgets for. This was over an year ago, the business is growing nicely but has not even come close to maximize the capacity of the current system. The major advantages of the current system are it's easier to change, and easier to hire people to do the work. I saved them a TON of money.

search on Google for the title and subtitle of this blog and the results are very surprising.

2008-01-03T01:19:00.000-08:00

I just did a search on Google for the subtitle "I am the sum of my decisions and the intended and unintended consequences of the decisions". There is only 1 hit. The Google search the title "sum of my decisions" got 6 hits.

The results was very surprising to me. Only 6 hits for the title and only 1 hit for the subtitle?!? When I created the title and subtitle of this blog, I certainly didn't try to create something unique. I just want to make a statement of personal conviction for my blog. So the fact that there is only one entry is a big and pleasant surprise. The second aspect of the surprise is that Google has already indexed it. I guess since blogger is run by Google, they would indexed it asap, but the turn around seems quite fast to me.

Perhaps as more people start reading this blog, the usage would spread. That would be the best and biggest surprise of all!

end of the month Quicken activities

2007-12-30T01:36:00.000-08:00

Why do I use Quicken?

It's end of the month. This is when I do most of my Quicken activities. Download all the electronic statements, review all the paper statements. Dutifully download or enter each transaction into Quicken. I place each transaction into the appropriate category. I keep all my receipts so I cross reference each receipt that with the bank statement. (More on keeping receipts later, most people think it's weird but let me tell you, your business is what your receipt so alway keep all your receipts!) Finally, I reconcile each bank statement and make sure all my incomes and expenses are tracked. It take me about 4 to 8 hours over a few days. 4 to 8 hours a month just for bookkeeping. Ugh.. that sounds like a lot and what do I get out of all this?

First, a sense of accomplishment. This is not a minor task, but it's a task that I do every month. To me, it like a badge of honor, a small and quiet one. It should not be a big deal but just something that needs to get done.

Second, I know where my money is going. Honestly, I'm ALWAY amazed at how much I spend at the end of every month. Let me tell you, I'm a pretty careful guy when it comes to spending. Many people would call me frugal in the polite sense. Not quite a cheap ass but definitely working all the angles to get a good value. I have a good head for details, but I alway surprised by the total amount. I can recall many transactions but the total amount is much higher then I expect. This was an early and important lesson for me. You can't trust your instinct on the total spending. Many people wonder where did all their money go. I don't know anyone who can guess their total monthly spending and get it right. I think people tend to forget the common every day spending like coffee, lunch out, grocery, and electric bills. We tend to remember the special sale or unusual spendings. Therefore our mental map of our spending habit is just completely off base. (My random musing is leading to an interesting idea for me.. I should do some research on that idea. )

Third, I know where my money is coming in. This is the most important part. This is the big picture. I have multiple sources of income from real estate rentals, salary, consulting, and other businesses that I manage. Every month, this is where I know if I achieved my desired savings rate or not. I don't keep a budget because I don't want to be a slave to my spending. But I want to plan and save for my future goals. So every month, my focus is always on where is the money coming in and how I can expand the existing sources or acquire new sources.

Back to the original question, 4 to 8 hours per month spend on bookkeeping. The end result is an conscious awareness of the state of my finance. I think that awareness is well worth the price in time. An awareness is nice, but I have not show how Quicken actually affect my decisions. The awareness of my finances is only the first of many many steps necessary to make solid plans.

That will be a topic for another blog.

why I use Quicken

2007-12-29T04:51:00.000-08:00

A friend asked me 'why do you use Quicken?' I have been an avid Quicken user since 1997 and I make no secret about it. At first, I thought the question was why I use Quicken instead of Microsoft Money or some other software. Pretty soon, I realized the question was really why I track my spending and to what level of details I track it. I spent a lot of time on Quicken in the last 10 years. Granted, the activities have evolved and become much less time consuming than it used to be. The core of the question is very valid. Has Quicken actually impacted any decisions that I made in my life? If so, why and how. If not, why wasting my time.

My first reaction was a defensive justification and a quick attack back, which also made me realize that I'm quite emotionally attached to the subject. I'm going to start a series of blogs exploring the emotional and practical details of tracking my spending and its impact on my life.

what does the title means to me..

2007-12-29T04:25:00.000-08:00

I am the sum of my decisions and the intended and unintended consequence of the decisions. Life is filled with everyday choices that we make, most unconsciously and quickly forgotten. Other are ongoing themes that we are constantly evaluating and re-evaluating. Because we learn from the decisions and the impacts are long lasting, some of my personal themes are financial planning / education, software engineering, technology, and starting your own business. So this blog hopefully will evolve into an dialog of my present self to my future self and along the way... all the readers that stop by and share with me your experiences.