Does anyone actually invest this way?

[gimmethesimplelife]

Something I noticed the other day - I walked into my credit union and the interest rate there on share savings - 0.05%!!! Yes, you heard that right! Amazing as I am old enough to remember getting 7.0% on my money market money in 1990, and I also remember CD's paying 16% in the early 80's! Now I'm getting .05%!!!! Right now I am focused on paying down credit cards and building up savings, which I want somewhere insured and not exposed to market risk - but when this phase passes, I am going to be looking for more that .05% on my life energy!!! You better believe it! Personally I find some of the SRI funds interesting, but I am award that they tend to have high expenses. LOL, can't have your cake and eat it too! Rob

[ljevtich]

Hi all:

I have read the FI 9 Step book at FinancialIntegrity.org and I have read Your Money or Your Life. I am wondering if there is really a population of people who put all of their money into short duration government bonds

Nope, long term 30 year Treasury Bonds

as the strategies seem to suggest. Or did I misunderstand?

Yup, you misunderstood

....and the apparently looming risk of inflation, this seems pretty unattractive. I understand the whole thing about 'inflation' being artificial so you don't need to worry about it, but I beg to differ. The cost of college, healthcare, gas and food are up double digits last year--and I cannot simply ignore any of these.

Basically, I love the 9 steps but the investment model seems too simplistic and puts people at substantial risk of a rise in interest rates.

Thanks,

Yes, I invest the way of the book. I read several books on Bonds to get a working knowledge of it. I want no risk at all. I started with CDs, and as those CDs matured, I switched them into 30 year Treasury Bonds. Those treasury bonds are earning right now anywhere from 4.25 to 4.50. While not great, it is better than the 1% at banks, and better than the -10% with stocks. Quite a few family members lost serious money in the stock market, and while my DH got out before too much was lost, we still felt we were hit. Thankfully we got out before it got too bad. His money is now earning a measly 3.5% but by the time he turns 59.5 we will be able to switch it to a higher return.

I will continue to put money in the Treasury Bonds. The February one will be around 4.5% if not higher and you can buy a 10K bond for 9.5K -right there a discount on the bond. While you can not predict the future, and no one can, I will get back enough of a return on the investment that works for me. Whether or not it works for you is something different. YMOYL explained how to make your life goals be more important that money. To simplify your life and make a living, not a dying.

While you may find in your "financial professional career" that FI does not go with the grain in your profession, it has worked for many people. The most important part about being FI is that each individual does his/her own research and make decisions for themselves, rather than a "professional" making the decisions for them.

Also the talk about inflation - if there comes a time where there is more inflation, then the interests on the 30-year treasury bonds will go up, as seen before. You just buy more bonds to offset the inflation, or you buy less stuff. I have not seen the double digits on food, gas and healthcare, but I have no idea on College.

To each his own.

[Smiling_Knowingly]

Laura,

Your post is the reason I keep coming back for 10+ years... Thank you.

[Jonathan]

The other thing to do, though this takes time, is to go back through your spending and figure out what your personal inflation rate is, then plan for the future using that figure. The problem with doing that is the assumption your circumstances won't change (financial and otherwise).

I see so many people get wrapped around the "I must have 4% return or I'll never match the inflation rate" axle. If they had their own inflation rate to plan with, then they'd know better.

[ljevtich]

The other thing to do, though this takes time, is to go back through your spending and figure out what your personal inflation rate is, then plan for the future using that figure. The problem with doing that is the assumption your circumstances won't change (financial and otherwise).

I see so many people get wrapped around the "I must have 4% return or I'll never match the inflation rate" axle. If they had their own inflation rate to plan with, then they'd know better.

That is so true - knowing your own inflation rate - We just do not see the 3% inflation that is supposedly happening. Our food costs - amazingly, went DOWN last year. In 2009: $6,349.78 for food - regular food, provisions and going out to eat, plus a little bit of farmer's markets. In 2010: $6104.94 with less spent on regular food, more spent on provisions, and more spent on going out to eat (I blame Vegas for that!) No farmer's markets that year too

Housing costs: 2009: $2,616.98 for Utilities, rent/storage, campgrounds, and maintenance on the RV. In 2010: $2,664.81 so went up ~$50

Health insurance is our bane of existence, utterly useless for us as we don't really get sick, but: 2009: $3,526.80 (part of that was subsidized by my DH work for the first 5 months of the year!) 2010: $4,292.84 reflects the full price of health insurance for him that we pay, plus a $800+ dental bill (we do not have dental insurance anymore and so pay out of pocket.) So that one went up $700, but if we were paying the first 5 months, the Health costs would have been less in 2010 than in 2009.

Fuel costs: 2009: $3,949.58
2010: $4,358.68
In 2010 we went back and forth across the USA but did not do that in 2009.

So our inflation costs from one year to the next is hard to figure, but in regular expenses one year from another is such:
2009: $34,681.15
2010: $33,290.92

http://upload.wikimedia.org/math/b/2...4c48dd7a9a.png
So 2010 was $1,390.23 less than 2009, therefore our inflation rate = ((33,290.92 - 34,681.15)/34,681.15)x100%= -4.00%

So at that rate, 4% interest rates are fine for me! It would be like earning 8%! Although I can not really understand 100% - wouldn't that be 1? Anyway our inflation rate is -0.04 or -4% still pretty good.

[chrisganon]

An old friend once told me, if it's too good to be true... it probably is. Diversity in investments yields the greatest boon.