Money $ Liberty

New site: www.moneyliberty.net

2008-07-24T21:38:00.002-04:00

Hi all. So I took the next step and bought a domain name through GoDaddy. Actually, I didn't really buy it so much as obtained a code for a free 1-year domain name registration.

Anyway, I am going to stop using this Blogger account and start posting my stuff over at:

www.moneyliberty.net

Please come see me at my new home.

How to avoid fees without petitioning the government

2008-07-24T12:58:00.003-04:00

Over at MSN Money Central, Liz Pulliam Weston argues that you should send your comments to the Federal Reserve on their proposed changes to banking rules related to various types of fees and fee calculations.

I'm not going to comment on the pros and cons of the proposed rules themselves. Rather, I'd like to focus on how you can set up a few personal rules that you can follow yourself to avoid having to pay fees like those described in Ms. Weston's article. You'll note that a lot of them have a common solution, which makes it easier for us because it means we only have a few simple personal rules to follow.

Retroactive re-pricing, double-cycle billing, unfair payment allocation and bait-and-switch offers – These practices are all related to interest rates. The best way to avoid finance charges for both high- and low-interest rate credit cards is to simply pay the complete balance every month. If you have a balance that is going to take you awhile to pay down, look for a card with a good 0% balance transfer offer, and then focus on paying that card down.

Arbitrary due times – If you're consistently failing to make a payment by a matter of hours, then something needs to change. Whether sending a check by mail or using an online bill payment service through your bank's website, you should give yourself at least seven business days for the payment to go through. If using your credit card company's site, be sure you know the cutoff time.

If you're having trouble remembering when things are due, there's a great task/reminder service called Remember the Milk that can help. I use it to set reminders for my upcoming bill payments (when I don't schedule them right away), as well as a number of other things.

Mandatory bounce protection – This one is easy: Don't overdraft your checking account. You should always know how much you have in your account and are able to spend. If you don't, then put away the debit card and stop writing checks until you straighten it out.

Charging overdraft fees based on holds – This one is a bit tougher, because it's hard to know when a merchant is going to place an arbitrarily large hold on your account. However, as Ms. Weston says, certain merchants (like gas stations and rental companies) are notorious for this, so when purchasing goods and services from these types of merchants, you should either pay in cash or use a credit card (a rewards card is even better, since you'll earn some bonus cash or points with the purchase) – just remember to pay it off in full!

The bottom line

When it comes down to it, we shouldn't need the government to step in and prevent banks from charging fees that we can avoid by following some personal rules. The rules I've outlined here are nothing revolutionary, and for the most part they are things that anyone who is interested in personal financial freedom should be doing anyway.

What did you do with your stimulus package?

2008-07-23T09:43:00.002-04:00

Hopefully you did something better than what these guys suggest.

For my part, I put the money into a high-yield savings account to put toward 0% balance transfers once they expire.

My 401(k) loan experience

2008-07-23T07:03:00.004-04:00

Jonathon over at My Money Blog has given a straightforward example of how 401(k) loans are not double-taxed. It's an interesting and informative post, especially because it goes against the "conventional wisdom" that people often give with borrowing money from your retirement account.

Anyway, this got me thinking about my own experience with a 401(k) loan. I've alluded to that loan before, but I've never given any specifics. Well, here they are.

Realization of a need

Now, I think I've always been a pretty financially aware kind of guy. I've had at least one savings account for as long as I can remember, and while I only worked during the summers in high school, I've always had a savings mindset. Until I got married.

Now, I'm not blaming anything on my wife. But there are certain, um, concessions that I was willing to make with regard to our finances that I should not have made. Fast forward a few years through a stupid timeshare purchase, a major relocation, some time out of work for my wife after we had our daughter, the purchase of a new home, and one failed home-based business. In November 2005, we realized we had a major problem – specifically about $15,000 in debt, and horrible credit scores.

At that point, we knew we needed some major changes in our financial lives. We looked at various options, but some of them weren't open to us (such as 0% balance transfers) and others simply were not palatable. Finally, with great reserve, I turned to my 401(k), which had about $20,000 in it at the time.

Doing the math

After looking at the numbers, here's what I came up with:

My employer allowed me to take up to 50% of my 401(k) as a loan, a little more than $10,000
I would be paying around $110 per paycheck (so about $220 per month, or $330 some months)
The rate was around 6.25% (I don't recall exactly what it was), the proceeds of which would go into my 401(k)

To me, this actually looked like a very attractive offer. On the pro side:

I was able to pay off a large chunk (more than 2/3) of my credit card debt in one fell swoop
The amount per month to pay back the loan was roughly equivalent to the amount I was paying in minimum amounts on my existing debt
I was "paying myself" the interest, instead of a big, mean credit card company
The payments were consolidated into one bi-weekly payment that came right out of my paycheck, which meant:
- I didn't have to worry about paying multiple credit card bills
- I couldn't make a late payment and incur more fees

There were some cons too:

Freeing up credit card debt meant we might use those cards to incur more debt – we negated this one by canceling a majority of our credit card accounts
It reduced our cash flow by $200-300 per month – but that was money we were putting toward debt anyway
The loan didn't pay down all of our debt – but we were able to reduce the rate on the rest of it to 0% or a very low rate
If I wanted to pay off the loan, I could only pay off the whole thing. I couldn't, say, put an extra $100 toward it each month to pay it off faster.

To me, the pros far outweighed the cons (most of which were otherwise mitigated). My wife agreed, and so we took the loan.

Paying down the debt and long-lasting effects

From November 2005 through May 2007, I paid off the loan with each paycheck. At $220 per month over 19 months, I had paid about $4,180. That year we got a $6,200 tax refund, which I used to pay off the rest of the loan.

(You may note that May last year is also about the time that I started this blog.)

From a stock market perspective, this may not have been the best time to take the loan. The market was rising, which means any capital gains and dividends I might have received on the money I had taken out of my 401(k) did not materialize. I was still making my contributions (in addition to my loan payments), so it wasn't a complete loss.

But in the long run, there won't be much real harm. As Jonathon points out in the post linked about, the "double taxation" that everyone seems to worry about is non-existent except for the interest portion of my payment. I paid maybe a couple hundred dollars in interest over the course of the loan, which will have hopefully 35-40 years to compound. In the long run, I think that I'll still come out ahead with that small bit of double taxation than I would have paying anywhere from 9.99% to 18.99% in finance charges to a credit card company.

So am I saying taking a 401(k) loan is good?

Not at all! In general, I think it's a horrible idea. But I do think that in some cases, it can be a less-bad idea than most people think. In my particular instance, it gave me the opportunity to get out from a metric butt-load of credit card debt with little negative side effects. That let me focus on improving other areas of my financial situation, which has helped me greatly.

Short of paying down a large amount of high-interest credit card debt, however, I think 401(k) loans should not be an option. Here are some things I would definitely advise against buying with funds from a 401(k) loan.

Lower-interest and/or tax-advantaged debt, like mortgages, home equity loans or lines of credit, and student loans
Large, one-time events or expenses, such as weddings, vacations, high-tech junk, and so on
Hookers and blow

Minimum wage employees get 12% pay raise!

2008-07-22T09:40:00.004-04:00

Did you get a 12% pay increase this year? I got a raise, but it nowhere near 12% (though I did get a substantial bonus in March). Given the current economy, though, I'm okay with what I got, knowing that a lot of people I work with did not get even that much.

But if you work for minimum wage, you should be happy on Friday when the federal minimum wage rate increases from $5.85 per hour to $6.55 per hour. That's a whopping 12% pay raise!

As you might tell, I'm no big fan of the federal minimum wage to begin with. For one thing, most states have minimum wage rates that are higher than the federal rate anyway. And while I'm not a fan of state minimum wage laws either, I'm even less thrilled with the passage of politically charged laws that aren't really any of the federal government's business to begin with. At least at a state level, people on both sides of the issue who are locally affected have a better chance to have their voices and votes heard.

Some people argue that the federal minimum wage rate doesn't really matter. For example, this post at Wise Bread says:

Some have argued that a raise in minimum wage would hurt small businesses, but according to a survey conducted last year, only 3 percent of the small businesses they surveyed paid their workers only the Federal minimum wage, and 6 percent paid only the state minimum wage. The remaining 91%, of small businesses already pay their workers more than the minimum wage so there is not much for them to worry about.

Okay, first obvious statement: Just because a small business doesn't currently pay workers at minimum wage, that doesn't mean an increase won't affect them. For example, say a business pays their workers $6.25 per hour – that's above the current minimum wage rate of $5.85, but lower than the new rate of $6.55. The increase definitely will affect such businesses.

Also, there may be businesses that, while they don't pay minimum wage, might tie their employee wages to minimum wage somehow (e.g., starting wages might be 10% above minimum). These business will either have to increase their wage or live with the perception that they are paying less competitive wages than they were last week.

Small businesses will also have to deal with longer term price increases generally associated with minimum wage increases (more money = higher prices). At a time when people are clamoring for lower prices on just about everything from gas to food to iPhones, this is perhaps the worst possible time to be increasing the minimum wage.

Ultimately, though, focusing on how small businesses are affected by minimum wages is simply clever misdirection. According to the Economic Policy Institute's frequently asked questions about the minimum wage:

An estimated 13.0 million workers (10% of the workforce) would benefit from an increase in the federal minimum wage to $7.25 by 2009. Of these workers, 5.6 million would be directly affected and 7.4 million would indirectly receive raises due to the spillover effect of a minimum wage increase.

Since there's no way that 3-6% of small businesses employ 10% of the workforce, there must be some other kind of fuzzy math going on here. The truth is that the majority of minimum wage workers work for big businesses, like Wal-Mart and McDonald's. While these companies are better situated to take the hit of a wage increase, they will still have to make up for the increase by not hiring new people and/or increasing prices. (If you don't like Wal-Mart's [lack of] customer service now, just wait until they have even fewer employees around to do things. On second thought, maybe that's not a bad thing...) Ultimately, neither one is good for the overall economy.

Sob stories that make me sob

2008-07-21T10:02:00.005-04:00

Stories like this one are written in an attempt to make me feel some kind of empathy for the people described. But while I might be sobbing after reading this sob story, it's not because I feel sorry for the people involved – it's because I feel sorry that such people even exist in this world.

That might sound a little harsh, but let me do some proof-texting for you to make a point:

[Some introductory text]

Okay, for one thing, if I were writing a story about somebody not being able to afford meat, I'd probably try to pick someone who didn't have so much meat on their bones. That might be mean, but the people picked here hardly look to me like the poster children for a story about starvation.

Nunez's van broke down last fall. Now, her 19-year-old daughter has no reliable transportation out of their subsidized housing complex in Fostoria, 40 miles south of Toledo, to look for a job.

Nunez and most of her siblings and their spouses are unemployed and rely on government assistance and food stamps. Some have part-time jobs, but working is made more difficult with no car or public transportation.

Um, how about walking? Riding a bike? It's great for your health, and might help you lose a few pounds.

If that's not palatable, then there's a little concept called "car pooling" that helps defray the costs of commuting to work each day. These people live in a complex full of other people who allegedly have the same problems. There should be at least a few people you could ride to work with each day.

Finally, if you're not close enough to jobs to walk, ride or car pool, then move! Sitting on your couch and complaining isn't going to bring more jobs closer to you.

Nunez, 40, has never worked and has no high school degree. She says a car accident 17 years ago left her depressed and disabled, incapable of getting a job.

Okay, so 40 - 17 = 23. I'm assuming Ms. Nunez did not get a high school degree because she dropped out. Say she dropped out at the last minute when she was close to 18 years old (most people graduate high school just before or after their 18th birthday), even though it's more likely she dropped out earlier. Yet she claims to have never worked – why not? What did she do during those five years of adulthood before she allegedly became depressed and disabled and unable to work? Well, apparently she had a daughter at age 21 (her daughter is 19 now according to the story), but a lot of people have kids and continue working, so that hardly seems like a reason to have never worked.

Two bits of advice I'd like to give to Ms. Nunez:

Get your GED.
Stop thinking of yourself as disabled.

Doing both of these things will greatly improve your chances of getting more money by landing a meager job.

The rising cost of food means their money gets them about a third fewer bags of groceries – $100 used to buy about 12 bags of groceries, but now it's more like seven or eight.

Prices fluctuate throughout the country, but this seems low to me. Only seven bags of groceries for $100? Are they using coupons and looking for good deals? Probably not – I've found that many people on public assistance do not. Instead, they complain that they don't get enough money from the government to feed themselves.

So Nunez and her daughter are mostly stuck at home.

...

So they cut back on expensive items like meat, and they don't buy extras like ice cream anymore. Instead, they eat a lot of starches like potatoes and noodles.

Isn't that the definition of "couch potato"? Close enough for government work, anyway.

I'm sure someone will tell me that I'm being heartless and cruel. But it is really hard to feel sorry for someone who is morbidly obese and has the audacity to claim that she doesn't get enough government money to buy food.

A big month for me - positive net liquid assets!

2008-06-20T05:20:00.003-04:00

Last weekend, I updated the spreadsheet where I track my net worth, and I noticed something amazing: I have positive net liquid assets!

As I've mentioned before, I calculate net liquid assets as follows:

Total liquid money (deposit accounts, cash) – total immediate debt (credit cards, home equity, student loans and other debt [but not car])

This is the first month since I've started tracking it that the calculation above has been positive for me, to the tune of about $600. Considering that a year ago my net liquid assets were negative $7,000, I consider that a major achievement.

Of course, that doesn't mean I have no debt. I do still have one student loan and a significant balance on credit cards. But simply knowing that I have enough liquid assets to pay those off immediately if I had to is a great feeling.

Here's my current overall net liquid asset status report:

Deposits: ~$9,400
- ~$3,700 of this is targeted toward paying off credit card debt, once the 0% balance transfers expire. I am now adding about $500 (minus minimum payments) to this amount monthly.
Investments (non-retirement): ~2,700
Short-term Debt: ~$11,500
- Credit Cards: ~7,500
- Student Loan: ~3,900

$9,400 + $2,700 - $11,500 = $600

This is very exciting indeed.

Dodd is full of crap

2008-06-13T19:54:00.003-04:00

Senator Chris Dodd (D-Conn.) recently got caught with both hands in Countrywide's cookie jar in order to get a sweet deal on refinancing his mortgage. He claims he wasn't looking for any special treatment:

"As a United States senator, I would never ask or expect to be treated differently than anyone else refinancing their home," Dodd said in a statement.

Senator Kent Conrad (D-N.D.) is in the same boat. Here's his attempt at ignorance:

"I called (the Countrywide CEO). I said, 'I'm buying this property. Would you be interested in the mortgage?', and he said, 'Yeah. Call these people and we'll take a look,'" Conrad said.

"I did not think for one moment — and no one ever suggested to me — that I was getting preferential treatment."

Come on, do you seriously mean to tell me that you didn't expect to get special treatment WHEN YOU CALLED THE CEO!?!?! If you weren't looking for special favors, you should've walked into the front door of a Countrywide office and spent two hours talking with a retail mortgage specialist, instead of going straight to the crooked top.

I don't buy that either of these guys were clueless about the fact that they were getting special deals. These kind of kickbacks are the most heinous. They both out to be impeached.

Are "professional" panhandlers evil?

2008-06-06T12:57:00.005-04:00

Jim over at Blueprint for Financial Prosperity asks whether his readers give to panhandlers (he doesn't). I don't give to panhandlers, but then there aren't very many in the small upstate town where I live. I doubt I would give to them in a larger area either.

My reason for not giving to panhandlers has nothing to do with the fact that there are "professionals" out there who play on people's emotions for money. Shoot, that type of thing happens in all kinds of industries, not just the panhandling scene. I suppose in one sense, telling an untrue sob story is fraud, and so should be reproached from a moral or ethical standpoint. But on the other hand, I find it hard to believe that most people actually talk at length with the people who are asking for money. People who are willing to put a dollar into a cup without knowing the panhandler's circumstances have no basis to complain later when they find out the guy they gave money to lives in a nice four-bedroom, two-and-a-half bath in a glitzy part of town.

One might also argue that there's a certain performance value to the professional panhandler's schtick. (And no, I'm not referring to actual street performers who play guitar, or do magic, or whatever.) The well-off panhandler has to get into costume and assume a role, just the same as any actor or sales associate. If the panhandler does his job well enough to convince you to part with a few bucks, then I say his performance was worth the capital expenditure on your part.

As an aside that seems somewhat appropriate here, my favorite comment to Jim's post is this one:

There is one exception that stands out in my brain. About 14 years ago, a panhandler approached me and gave me a long pitch about the benefits of giving to the United Negro Pizza Fund. I gave him some money, but made it clear that I was doing so because I was entertained by his pitch.

Anyway, one other point is that professional panhandlers may actually do more good with the money they get than "real" panhandlers who "need" the money. Because when it comes down to it, "need" is a relative term – just because a panhandler actually has no money and could use some good food, that doesn't mean he will use the money to buy food. He might just as easily take the money and buy booze or drugs. On the other hand, the "impostor" panhandler who uses the money to buy luxury items benefits society more, because the money he spends helps keep people in their jobs.

Obviously, this is all a bit tongue-in-cheek. But I think we can all agree that there are some panhandlers out there – both professional and "real" – who will make good use of the money given them, and there are others who will not.

Ultimately, I agree with Jim: Give to charities, but not without doing your research first!

Check out my new stock blog

2008-05-13T10:49:00.003-04:00

Howdy all!

It's been awhile since I've blogged, and I apologize. Hopefully nobody's been anguishing about my lack of posts, and you've all taken some time to catch up on other financial matters that need attending to.

Anyway, to get to the point, my good friend Dave and I started a new blog over at PoorBrotherTom.com. My first post was last Thursday, and it predicted great earnings for Priceline.com (PCLN), which turned out to be true. I love it when I'm right! :)

I posted a new one today about Titan Machinery Inc. (TITN), a manufacturer and seller of heavy-duty farm machinery in Iowa and surrounding states – farm country, in other words! I think this company is going to do very well in upcoming quarters, and I explain why in my new post.

Hope you enjoy the new site. I do plan to continue blogging here from time to time, so please don't take my RSS and Atom feed off your aggregator quite yet.

Thanks for reading!

Deal goal update: March

2008-03-12T16:30:00.003-04:00

Back at the beginning of February, I set a goal for myself to earn $2,000 this year in deal and "found" money – through promotional offers, incentive checks (such as signing up for Chase Payment Protector or various Trilegiant programs), and general arbitrage plays. Basically, to reach my goal that means "finding" about $167 per month.

How am I doing so far? Here's the run down:

	Value	Cost	Net	% to Goal
Completed	$305.00	$96.02	$208.98	10.45%
Pending	$125.00	$0.00	$125.00	6.75%
Total	$430.00	$96.02	$333.98	16.7%

What to do with a bonus

2008-02-09T07:35:00.000-05:00

I found out last week that I am getting a 10% bonus this year, which is really, really cool. I should see it in my next check, and so over the past week I've been thinking about what to do with it.

It really isn't that hard of a decision for me. I could go get a new LCD TV and a wii, or maybe schedule a vacation (what's that again?). But of course, that wouldn't be the responsible thing to do *sigh*.

I haven't given any debt updates recently, and part of that is because we've got into some trouble over the last couple months. Firstly, back in November and December I had to put new tires on both mine and my wife's cars (~$800 total), and then I had another $700 or so of work that needed to be done to my car to pass inspection. On top of that, I bought new MacBook laptops for my wife and I for Christmas, and put them on my 0% credit card. Admittedly, buying the laptops was partly in anticipation of receiving a bonus.

So, essentially I've done what one should never do and spent my bonus before I had it, or even knew definitively that I was getting one. It worked out for me this time, since my bonus should just about cover the outstanding balance on my card (and just in time, since my 0% rate is about to expire). It would have been a very bad situation, though, had I not received a bonus this year, or had it been less than I was hoping for.

Deal goal for 2008: $2,000

2008-02-04T15:56:00.000-05:00

So, I was doing some number crunching and discovered that last year I completed $1,428.95 in sundry deals over the course of the year. Most of that was from sign-up bonuses and in the form of cash (or cash equivalent, such as a statement credit). I also got at least $50 in gas cards, and a free iPod shuffle (Gen 2), which I gave to my daughter.

Since 2007 was the first year I really focused on getting free money, I didn't really have any expectations about how much I would make. I think $1,400 and change was a respectable amount, not having any goals. But I think that with a year of experience under my belt, I can do better.

So this year, I'm setting a goal for myself of an even $2,000 in bonus deals. I've mentioned before that it seems like bank deals are drying up, so it will be a challenge. Plus, I expect that with some markets having officially entered a recession, we might find companies are less willing to hand out money like they have in the past.

It'll be a fun challenge to meet, especially since the closer I get to it, the more money I'll have.

Where to find deals

Bank Deals Blog is a daily blog that posts a lot of great information about the latest deals, including account opening and referral bonuses and the latest and greatest rates. If you're just looking for bonuses and aren't as concerned with the ubiquitous rate updates, I'd suggest looking at the items labeled bonuses.
Fat Wallet finance forum has a lot of great information about finances in general, including where to get free money with bank deals, credit card signup bonuses, and the like.
Slick Deals is geared more toward good retail plays than bonuses, but from time to time you can find some good deals there as well.
Refund Cents e-mail newsletter, the free version, gives good retail deal info as well, often including information about how to make money by stacking store-based deals and coupons. While I don't actually track this type of money-making deal, it's nice to know with a little scissor-snipping you can get some cash you didn't have before.

Why politics is important in personal finance

2008-01-06T07:58:00.000-05:00

FMF over at Free Money Finance recently posted his thoughts about the importance of religion in personal finance. I don't intend to respond to his post – except perhaps to say that I agree religion can be an important part of one's personal finance, but isn't necessarily required to have a healthy personal financial outlook – but one comment he made has given me impetus to pull myself out of the three-week blogging funk I've been in (maybe I'll blame it on the holidays – yeah, that's it...). Here's what he said:

(I’d argue that political leanings probably do too, but that’s for a different post by a more-qualified blogger.)

Now, it's debatable whether I'm a more qualified blogger, but I'll leave that to you to decide after you read this post.

Please note that while many of the examples and facts I use below are particular to U.S. politics, many of the principles I discuss apply to politics anywhere in the world.

Taxes and personal finance

Every day, legislators at all levels of government discuss ways to make you pay more or less for certain things. Much of this discussion is about taxes: How much to tax people, what types of transactions and income are taxable, what "services" to provide with tax dollars collected, whom to give tax breaks, and so on. Politicians also decide what regulations people and companies have to follow – everything from state-required vehicle inspections to complex federal accounting guidelines – and that costs a lot of money.

Now, of course this affects people differently. But here's the kicker for people interested in personal finance: The more you work to better your personal financial situation, the more impact government taxes and regulations will have on you.

For example, say you've worked hard for a couple years to pay down your credit card debt and now find yourself in a position to start saving for your retirement. You can open a couple different types of accounts, but ultimately your ability to save is hindered by government regulations on the types of accounts you can open, how much of your savings can be sheltered from taxes, when you can withdraw it, and what sorts of penalties you'll pay if you don't do everything correctly (a term here meaning "according to what politicians deem is correct").

All of these taxes and regulations have a much larger impact than most people think. The Americans for Tax Reform estimate that the cost of government taxes and regulations came to approximately 52% of the national gross domestic product in 2007. That means that slightly more than half of the average person's income went straight into the control of politicians.

Keep in mind that taxes on business also affect personal finance. Manufacturers, retailers, service providers and other companies all pass the cost of taxes on to their consumers. When you're buying groceries, you're not just paying for the cost of production plus a meager profit – you're also paying to cover the cost of taxes that have to be paid by the grocery, the distributor, the manufacturer, and even the manufacturer's suppliers. The effect is diluted each step down the line, but it's still there, and it increases your costs. Stockpiling, using coupons and hitting the major sales all help, but they can't eliminate completely the impact of taxing business on personal finance.

Taking the high road just leaves you high and dry

I've seen some people argue that, because it's very hard to change the political climate and individuals have only little (if any) impact, it's better to just ignore politics altogether and focus on bettering your personal financial situation. This makes a certain amount of sense, since people can obviously do very well for themselves simply by becoming disciplined and working to reduce debt while increasing income.

On the other hand, ignoring politics can be detrimental as well. If you had a chance to decrease your credit card APR, you would jump at it, even if it meant doing some unpleasant or hard things, such as dealing with collections departments and credit reporting agencies. But when it comes to reducing one's tax burden, which is likely more detrimental for most people than their credit card debt, some people think it's just something that shouldn't be talked about.

Waxing philosophical for a moment, becoming proficient in personal finance should be something of a journey to personal self discovery. If you ignore the impact of politics on personal finance, you're only hurting yourself by overlooking something that could give you better understanding of yourself and the world around you.

That's not to say we should throw ourselves completely into a particular candidate's political campaign on the hopes that they'll completely change our economy for the better. First of all, it's extremely unlikely that any specific person, regardless of whether he's running for mayor of Podunkville or president of the U.S., will have as much impact as he or she likes to think. (On the other hand, we're still feeling the negative effects of presidents who were in office 70 years ago.) What it comes down to is involving yourself enough to make an informed decision about what each candidate believes and has done in the past. If a politician is saying he will lower taxes as president, but did not lower them during his term of office while governor, then it's quite likely he's either lying or incompetent, neither of which are traits worthy of supporting.

Use your personal finance knowledge to make political decisions

I think it's kind of odd that people so often become "altruistic" when they think about politics. They often make broad statements like "we need free, universal health care" or "we need to fight poverty with everything we've got." Of course, these altruistic statements usually have two assumptions behind them:

Somebody else will pay to provide these services.
Providing these services will not harm us in other ways.

The problem is that people who make these statements simply aren't thinking about the impacts from a personal finance perspective. This is silly, since the money for these services comes directly from you, me and everyone else in the country. Furthermore, historically speaking the government is horrible at managing these types of services (just look at the bankrupt Social Security program), which means the money taken from us is being used extremely inefficiently – a state of affairs that should irritate anyone and everyone interested in personal finance. Finally, the unseen effects are often the worst, such as when the free market is unable to developing new products and services, desired by the people but prohibited by the various arbitrary and "humane" restrictions placed by the government.

I won't touch here on the point of political issues that may seem to fall outside the realm of financial matters, except to say that many of them probably do affect personal finance in one form or another. I'll leave the determination of which additional issues affect personal finance as an exercise to the reader.

Conclusion

Personal finance and politics are very closely related, whether or not some people choose to believe it. It's important to view politics in light of your personal financial goals, and it's also important to use your personal finance knowledge to create a better political arena for you, me and everyone else.

Gifts that save money - or cost more...

2007-12-14T21:41:00.000-05:00

An article at Yahoo! Finance provides a list of 10 gifts that save money. Some of them are great ideas – like the electric oven (hint, hint, for anyone who is looking to donate to a worthy blogger) – but a few are stretches. Here's my take on the more sketchy "money saving" gifts.

Nintendo Wii: Okay, yes, it's true that Nintendo is marketing their latest game console as a potential replacement for the overpriced, over-muscled gym down the street. But it is potentially a money trap too. The Wii comes with various subscription- and purchase-based services that are potential killers to personal finance discipline. Also, video games are expensive. You could just as easily exercise by walking around your neighborhood or, for those of us in colder climes, by shoveling your driveway or that of a neighbor who can't do it for themselves.

Tivo: Tivo requires a subscription, which could be as much as $12.95 per month depending on the payment plan chosen. Perhaps its true that with Tivo you could save time and money by managing your entertainment better, but it might also become another subscription service that you can't afford. You might even be tempted to upgrade your cable to more channels, and there's the chance that being able to record anything at any time means you end up watching more TV in your free time, thus becoming less productive.

Final thoughts

The other items on the all seemed like they actually were likely to save money. Then again, is that really the purpose of a gift – to save them money? I suppose in one sense it is, since gifts are usually things that the recipient wouldn't want or think to buy on their own. So in a sense, gifts that save money are the proverbial gifts that keep on giving. And when you give a gift that saves money to a person who isn't normally concerned with saving money, you can feel satisfied knowing that you helped make the world a little better by reducing wastefulness.

Musing on my own laziness and lack of consistency...

2007-12-14T21:13:00.000-05:00

Well, it's been a week since I last posted. Why is it that whenever I start getting into the grove of posting regularly, I somehow seem to derailed. Anyway, I logged in to respond to a comment on my post about the myths of "free, universal" health care, and figured I'd better do a real post. Coming up shortly...

Here's why you'll continue paying more for energy

2007-12-07T11:53:00.000-05:00

From the latest Investor's Business Daily:

The House, on a 235-181 vote, passed a Dem-backed energy bill that would eliminate $13.5 bil in tax breaks for oil companies and requires automakers to boost fuel efficiency 40% by 2020. The bill, which also includes $21.5 bil in tax incentives for development of renewable energy, faces a filibuster in the Senate and a Bush veto threat.

So, let me get this straight: Giving tax breaks to a profitable companies that provide energy (and jobs!) to many, many people in the U.S. is bad, but giving tax breaks to unprofitable companies that employ few people and develop unproven technology is good. That's just messed up.

I'm not saying I like the special tax breaks given to big oil. Government shouldn't be playing favorites when it comes to industry. But given that I don't like the taxes to begin with, I find it very hard to blame the oil companies for taking advantage of a freebie. Besides the government gets more money per barrel of oil than oil companies do. So all this talk about removing tax breaks from oil companies is really just politicians pandering to the public so they can sap even more money from productive business.

I'm also not saying that I dislike alternative energy sources. Renewable, sustainable energy is clearly something that we need to develop if we are going to continue living the way we do now. But if giving special privileges to one set of companies is bad (and I agree that it is), then giving special privileges to their competitors is just as heinous.

A radical solution

Now, call me crazy, but it seems to me that if the government just got the hell out of the way and let the free market work, individuals and companies might actually come up with a solution to solve the energy crisis. Instead, though, we waste billions of dollars every year arguing about whether cars should get 36 or 37 miles to the gallon, whether we should ban incandescent light bulbs, which industry should get more tax breaks than the other, and so on.

If there is any legitimate function of the government, it would be to regulate industry. Unfortunately, people often misinterpret the word "regulate" to mean "whatever the government wants." But the word is more accurately defined as "to make regular" – i.e., to provide a consistent set of rules for all to play by. Taxing some individuals and companies more than others is inconsistent, and so is turning the rules of taxation on their head so that the opposite individuals and companies start paying more than they did before. It's also destructive.

I think that's what most politicians are going for. They won't say it, of course, but think about it this way: If there were no "problems" to "solve" then they'd have a heck of a hard time justifying their exorbitant salaries and benefits, not to mention their per diems. So they create problems by meddling in affairs better left by businessmen and investors, like the best way make money from various forms of energy.

You'll be paying for a long time to come

I don't know if this energy bill will pass or not. My sense is that it will get changed before it gets to Bush's desk. Or he might veto it, in which case our elected officials will spend millions more in tax dollars arguing about whether the amount of tax breaks should equal $19 or $21 billion. In the end, the oil companies will take a small hit and the alt-energy companies will get some sort of additional incentives. Which will really end up being another tax on you, since both sets of companies will pass on the tax in the form of higher prices to consumers.

Go government!!

Productively pissed off

2007-12-05T14:12:00.001-05:00

What do you do when you're pissed off? Do you let your anger become a debilitation, or do you find a way to redirect your energy into something constructive?

It may be that you do a little of each. I've found that often times, when I get upset by something with my job (which seems to be happening frequently, lately), I have to get up and walk away from my computer. When I'm in my office, that usually means I go down the hall and get a soda or something, which is bad. When I'm working from home, though, it usually means I do something that actually needs doing, like putting in a load of laundry or shoveling the driveway.

Or maybe write a blog post. (Pause for thoughtful consideration.)

When I get irritated with my wife, on the other hand, I tend to tune out completely and watch TV or log on to the computer for some mindless browsing. Ultimately, I guess when I'm angry, I just want to find a way to escape from whatever it is that's making me angry. In my office, it means doing something completely outside the realm of work, and about the only thing available is food and soda (my office is in a large building offset from a highway with no other buildings nearby). At home, however, I can turn away from my computer and do something domestic, making me feel like I've left work behind for the time being.

It would be nice if I could find a way to become productive in those situations where my escapism does not have a constructive outlet. Anyone have any great ideas?

Drained

2007-12-03T13:53:00.000-05:00

This post has nothing to do with personal finance....

Have you ever had one of those days when you are just absolutely drained? Today is one of those for me, and it's not even done yet.

I know I haven't posted much in the last week or so, but I have a couple posts in progress. It's snowing heavily tonight, so I likely will be inside and not doing much. Or shoveling.

How much is your blog worth?

2007-11-27T21:15:00.000-05:00

JLP of All Financial Matters notes that Engadget and Gizmodo were valued at $30 million and $50 million, respectively, according to a recent article in Fortune. JLP then figures his blog is worth a cool quarter mil based the number of visitors he gets in proportion to these uber-popular.

Using this method, M$L is worth a respectable $1,350. Okay, so I won't be selling it off and moving to a small Caribbean island any time soon. I prefer the $5,000 suggested by Dane Carlson's method, but it's based on outdated data, so probably not too accurate.

Valuation of any kind of business (including blogs!) is a tricky and subjective task. Of course, it doesn't really matter until you find someone who is willing to pay you for it.

Know how your company makes money

2007-11-26T10:52:00.000-05:00

I work for a multinational financial institution, and earlier this year it posted a series of videos on its intranet describing how the company makes money. While I don't know that I learned any new facts from the video series, it was very interesting to see the company present a simple – and frank – communication showing at a high level why it operates the way it does.

This sort of awareness is very important, I believe, for both employers and their employees. Employers benefit by ensuring that their employees understand the reasons behind some of their policies, procedures and other guidelines. Employees benefit by understanding where their paycheck comes from as well as understanding how to please their employers by doing things that increase revenue while avoiding things that decrease revenue.

Unfortunately, not all employers see the benefits of explaining how they make money to their employees. Perhaps they assume the employee already knows, or perhaps they figure it's more trouble than it's worth. Likewise, not all employees care to know, especially if they are in temporary or wage-based position.

How does your company make money?

If you don't know how your company makes money, then you should ask your employer and/or manager to take a few minutes and explain it to you. It probably won't be any great mystery, and you might be surprised at the simplicity of the scheme. If for some reason your employer or manager is not able or willing to share with you how the company makes money, or if it seems overly complex, you might want to look for another job.

Ultimately, there are really only a few ways that a company can make money.

Product sales – Sales are the primary source of revenue for many businesses. Products can include raw materials, finished products, real estate, or any other tangible asset or commodity. Simply put, to stay in business a company must sell things for more than they cost to make or obtain. I would include licenses, for things like software and trademarks, in this category.
Service fees – Some companies specialize in providing specific services, and others develop services to complement the products they produce or sell. Fees for services can range from simple flat fees to timed-based fees to service contracts that describe numerous fees for various levels of service. Fees typically are established to cover the costs of providing a particular service as well as provide a reasonable amount of revenue; however, sometimes fees are punitive as well, assessed by companies to try to prevent customers from doing things that are costly or undesired (such as checking account overdraft fees).
Interest income – Companies often put operating cash into a safe, liquid account that earns interest, such as a money market account or some type of cash-equivalent like treasury bills. Other companies, such as financial institutions or even retailers that do in-house financing, earn interest on money lent out in the form of loans or lines of credit.
Investment income – Companies can sometimes increase their earnings by investing, just like individuals do. While an "investment" can be a loose term, typical investments could include the purchasing of companies (in whole or part), commodities not used in production, or even debt securities such as other companies' bonds. Capital expenditures could also be considered investments.

Again, it's not rocket science, but it's nice to know that making money is theoretically very easy.

Working for a financial institution, my company relies primarily on service fees and interest and investment income. Depending on how you define a "product" versus a "service," it may generate some product sales as well.

What about you? How do your bills get paid?

Psychology of 0% interest rates

2007-11-25T21:39:00.000-05:00

First, hope all my regular readers (yo, Dave!) had a good Thanksgiving. I didn't intend to be silent over the last several days, but we ended up staying over at my in-laws' house on Thursday and Friday nights, and then on Saturday I was doubled over with a stomach bug.

Anyway, two things have gotten me thinking recently about the psychology of interest rates:

Noticing that my recently acquired Citi Driver's Edge card does not have an introductory 0% on purchases
A post by No Credit Needed about how he paid off debt early, which included the instruction to not obsess over interest rates

The danger of 0% rates

To the discerning and disciplined consumer, 0% balance transfers can be a useful tool. They give you an opportunity to drastically reduce fees while giving you some extra time to pay off your debt.

But something else happens when you refinance your credit card debt at 0%: It removes the immediate pressure to pay the debt. A positive, and even high, interest rate can be a good incentive to pay down the debt. When the interest rate is lowered or eliminated, even for a time, thoughts like the following can creep into your head:

I have a whole year to pay this card off; I can just make the minimum payment now and catch up later.

It's better to put this large purchase on my 0% card and earn interest on the cash, instead of paying cash up front.

I can always get another 0% balance transfer if I don't pay it all off in a year.

There's nothing inherently untrue or morally wrong about these statements. They are very speculative, however, and could end up protracting debt reduction and payoff plans. There's no guarantee that you'll be able to pay more in the future, that you will be able to keep the money you set aside for a large purchase, or that you will qualify for another 0% balance transfer. If you find yourself thinking these thoughts, or similar, nip them in the bud as quickly as you can.

The tough part is that credit card companies want you to think this way. They hope and expect that in six or twelve months – whenever your balance transfer offer runs out – that you will still have a significant balance on your card so that they increase their own bottom lines. They'll send you all manner of reminders about how convenient your 0% rate is, with easy ways to access your line of credit such as with convenience checks and online balance transfers. Don't give in!

Plan to avoid 0% psychology traps

The best way to avoid these sorts of psychological traps is to create a debt reduction plan and stick to it. I created a plan to reduce my debt drastically by the end of 2008, and for the most part I've been able to stick to it. A few things to keep in mind when developing your own debt reduction plan:

Commit to paying off a set amount each month, as your budget allows. The easiest way to do this, I've found, is to set up direct deposit into a high-yield savings or checking account so that the money is separated immediately. If you don't have direct deposit through your employer, or you cannot split your deposit between more than a couple accounts, you should be able to set up a recurring transfer through your bank's online banking.
You might consider doing a variation on the balance transfer arbitrage play by paying just the minimum each month while keeping the rest of the designated pay-off money in your high-yield account. However, you must keep this money in an account separate from your regular account. Otherwise, it could become very tempting to use it for something else, or you might find that an accounting error leaves you with less than you thought you had. When your balance transfer rate comes to an end, you can then pay off the remainder in one lump sum, and knock off a little more than you might have been able to originally (since you will have earned interest on the portion you saved throughout the year).
If you think you can do so responsibly, continue to use other credit cards to earn rewards and manage your finances easier. However, be sure to keep the cards used for purchases separate from the cards used for balance transfers. Lock your balance-transfer cards in a safe to avoid any temptation or mistakes.

What happened with my Citi Drivers Edge card

I alluded earlier to a mishap with my Citi Driver's Edge card. Don't want to leave you hanging, so here's the basic story.

I applied for the card back in my August app-o-rama. I thought it had included a 0% introductory rate on purchases, but it turns out the 0% rate was good on balance transfers only.

For the first couple months, this wasn't a problem because I paid off the balances in full. But then we had to get new tires for my wife's car. It was an unplanned expense, and as such I knew it would take a couple of months to pay it off. I had decided to put it on the Citi Driver's Edge card to get a few extra points. I paid off half the balance almost immediately, leaving the rest for the next month. When I got my statement the next month, I saw that it had a 13% rate and I had a few dollars in finance charges. I paid it off right away, but I'll probably get dinged again this month because according to the terms of the card, the grace period on purchase finance charges won't be reimplemented until I pay off the balance in full for two statement periods in a row.

Of course, this was my own fault for not checking first to make sure that the card actually had a 0% rate on purchases. I made an assumption, and it hurt me.

The self-destruction of a local screen printing business

2007-11-20T13:09:00.000-05:00

It's a sad story of expectations and undeserved feelings of entitlement.

My wife is the president of the parent-teacher group at our daughter's school, and each year the group sponsors the purchase of "spirit wear" where students and parents can order clothing emblazoned with the school's mascot. As such, last year my wife did some research into who could produce the clothing. She preferred to go with a local vendor, and in asking around found out that the uncle of one of the children in our daughter's class owned a screen printing business.

But she heard rumors that this guy did not do a quality job. She decided to give him an opportunity to present his estimates to the PT group, along with a couple other vendors. He didn't show up, and the group decided to go with another vendor (who ended up being quite a nightmare in his own right, but that's a different story).

So, a year goes by and here my wife is once again ready to get the ball rolling for this year's spirit wear order. One day, while talking with the principal of the school, she has a conversation that goes something like this.

Principal: T.'s uncle asked me why we didn't go with him for last year's spirit wear order, and wants to know if he has the job this year.

My wife: He didn't get the job last year because he never gave us the information we asked for. Why would we choose him if we don't even know what his prices are, how long it will take him to order and print the clothes, and the other details we need to know.

My wife decided to try and give him another chance and tells him that if he can get the info she needs, they will consider going with him this year. The information was due by the last meeting, and the guy never provided anything to her.

So the other day, one of my wife's friends (J.) tells her that she's still waiting on an order from this guy for her son's peewee football clothes. Peewee football ended in October. And of course, parents paid up front, which means now a lot of people are pissed.

And yet, when my J. talked to the guy, he seemed to think that he was completely in the right. He even brought up the issue of the spirit wear (J. is the treasurer of the PT group), and starts reaming her out because he didn't get the job. He said he deserved it because he was a parent of someone who goes to that school, and so he should've had first dibs.

I just don't understand this sort of attitude. How does someone do crappy work and yet still expect to get business when he can't even bother to answer simple questions like: How much is it gonna cost? What sort of business owner is this who can't even bother to show up for a half-hour meeting to get potentially a few thousand dollars in orders? Not a very good one, I've gotta say.

And yet, he is still in business. Either he has no repeat business, or he does just good enough of a job to make him better than one or two others. But that's no way to run a business.

Small businesses especially have to cater to the needs of their customers much more than medium and large business. We put up with incompetence and rudeness at Wal-Mart because we can buy things for less money. In this age of the ever-expanding internet, you can find dozens of screen printing businesses online that offer more variety at comparable – or maybe even cheaper – prices. The local guy has to provide something more, and it should start with common courtesy.

Carnival of PF update and a nod to Financial Trends Matter

2007-11-20T02:03:00.000-05:00

My post about changing the banking system hit a good tastebud in the mouth of Moolanomy, who is hosting the Carnival of Personal Finance #127 - Wonders of the World. As usual, the carnival has a lot of great posts in it, so please go on over and check it out (unless you just came from there, in which case please check out my own site before you return :o).

Also, I wanted to give a shoutout to fellow Blogspot blogger David of Finance Trends Matter, who linked to my post warning about the secret motivations of charitable incentive programs. He's got some interesting posts as well, so please check them out.

The Googlification of modern society: Maybe it ain't so bad

2007-11-20T00:30:00.000-05:00

As a company, Google just doesn't seem to be able to stop its own growth. Not that it wants to – why would it? But a part of me wonders if it's not starting to act like a giant black hole that will soon suck all aspects of life into its dark and hungry maw.

I say this knowing that I myself have become almost completely agooglimated (royalties owed to me by anyone using this term!) by the sheer variety, quality and convenience of Google's pantagruelian (why does Gargantua get all the props? And yes, I do realize that I just missed out on the perfect opportunity to coin googantuan) product suite. All asides aside, I absolutely love what Google has done for me: Specifically, that it has made many of the things I want to do simpler. Here are a few ways it has helped me.

Search: The flagship product, Google's search engine, also happens to be my most used. I use it all the time from Firefox's address/location bar, and it's my first resource for general information. Rarely do I not find something interesting and/or useful (regardless of whether it's what I was looking for) when searching with Google.

Gmail: Google mail was a godsend. Or at least a googsend (no, I won't stop coining these horrible neogoogisms). Since college, I had been using Angelfire as my free online e-mail provider of choice, but they got out of the e-mail biz in 2004, right about the time Google mail was in beta and only available through much-coveted invitations. After trying out my ISP's e-mail for awhile (I didn't like being tied to my service provider), I decided to snag the first gmail invitation I could lay my hands on. I haven't looked back a day since. Gmail rocks in so many ways – excellent clean interface, easy searching and tagging of e-mails, downright snazzy spam filter, POP retrieval of e-mail from other servers, and many other features that the best desktop e-mail software wishes it had. And hey, even if you do like your desktop software better, you can always use gmail's POP or IMAP features.

Blogger: Blogger is one of those things that got sucked into the singularity that is Google, and it couldn't have been a better acquisition. I'd tried out Blogger awhile back when my now-defunct home-rolled blog had, well, gone defunct. But it was an awful experience. I'm quite impressed though with the updates that have been made, including the vast improvement on the Blogger template/layout system. I mean, here I am, right now, using it. That's freakin' awesome.

Documents: I was a bit apprehensive when I first started using Google Documents. I use Microsoft products for work (don't have much of a choice), and Open Office generally for personal use. The first time I used Google Docs was when I wanted to share a spreadsheet of stocks I was analyzing with my friend Dave. I was quite impressed with the sharing features and some convenient Google-specific functions, like lookups of stock info through Google Finance. The documents can be a little slow at times, but the autosave and revision backup features are stellar.

Books: I do a lot of volunteer work for Distributed Proofreaders, which is a volunteer-based feeder of books into Project Gutenberg, the world's first free electronic library. When Google first launched their book project in conjunction with a number of university libraries, there was a lot of hesitation and even some outcry that important old works were being given to Google for a pittance, and that the mean, bad, private company was making tons of money off public domain works. Also, at first the quality of the books weren't the best, but they are starting to improve. And they have lots of great stuff that just isn't available elsewhere.

Reader: I've recently (in the last month or so) become a huge fan of Google's Reader application. For awhile, I've searched and searched for a good way to manage the very large list of blogs, news and and other frequently updated sites that I like to peruse. But the problem is I had a list I'd use at work, and a list I'd use at home, with no real good way to sync them. Which meant that I was constantly reading things over that I had already read, or would add a feed to one and not the other. Google Reader solves that by being available to me from essentially anywhere I have a net connection. And there's some cool ajax interface trickery as well, which is always nice.

Adsense: Due to the terms of service, I'm not supposed to point out the fact that my site has adsense ads on it, so I've deleted this paragraph. Suffice it to say that adsense is a great way to make a few cents doing something I love: Spouting off about money and freedom.

Analytics: This is perhaps one of the coolest tools for anyone who has a website. With a fairly simple bit of javascript added into my template, it tells me a number of cool statistics about my visitors (yes, I do have some!) like what sites they came from, what search terms they used to get here, which of my posts they read and so on. Don't worry though, it's all anonymous – except for that one dude in Singapore who's really into my post about recycling being profitable. The best part is, I have the reports e-mailed to me, so I don't even need to remember to visit the analytics site.

And a few others: I've also used Google Checkout, Google Calendar and Google News, but not nearly as much as the products I've listed out separately above. Google Checkout is okay if you can get a good deal, but it's not really any easier to use than any other site's checkout. Google Calendar is handy, especially if you use it with a service such as Remember the Milk, but I just don't put much on my personal calendar. Google News I likely use a bit more frequently, but only if I'm looking up a specific story. I use Google Reader to get most of my daily glut of news.

Some services I don't use

I do think Google is great, but there are some services I just don't use. For one, I much prefer Yahoo! Finance over Google Finance, though that's perhaps more out of habit than any real difference in quality. My portfolios are already set up in Y! Finance, and I have no real motive to set them up again in Google.

I also hear a lot of talk about how cool Google Maps is, but I just don't get the excitement. I suppose they're alright, but cartography isn't really my thing.

Google owns YouTube now (black hole gettin' bigga'!), so it seems kind of silly to me that it keeps its Videos product around. Perhaps at some point they'll merge. I like YouTube, but I spend my time on other sites.

And likely many others.

Parting thoughts

Quite frankly, I will likely never buy Google stock, because it seems way overpriced to me. But then, I dig their products a lot, so maybe I'm just being dumb. Either way, Google has done wonders for my productivity (not that I'm that productive), and providing quality services at a reasonable price is the epitome of the free market. What's not to like.

Hail Google!

$30 for doing a Nielsen rating diary isn't nearly enough

2007-11-17T20:23:00.001-05:00

When the Nielsen Ratings company called me a few weeks ago to ask if I would keep a diary of the television shows I and my family watch during a one-week period, I thought it would be kinda cool. I've always complained that the shows I like to watch tend to get taken off the air pretty quickly. This would be my chance to finally have some input into that process.

Plus, they told me I'd get $30 for doing it. Bonus!

Two days into the process, though, I'm finding it rather cumbersome. There are some shows I really like, and it's not a problem for me to write them in the diary, since they are also the ones that I want to get good ratings. But there are other shows which I watch, but aren't really ones I would be hearbroken over if they were taken off the air. During these shows, I often have the laptop with me to browse blogs and other sites, or sometimes I do various chores while watching, such as fold laundry, clip coupons, and so on. These shows tend to just slide through the background of my consciousness without me even realizing it. I guess that says a lot about how much of a habit watching TV has become for me.

The trick is to write down the info right as I'm watching the show, but that draws my attention away from whatever else I'm doing. And by the time I actually get into the habit of writing down the shows while I'm watching them, I won't need to do it anymore for the Nielsen Ratings – though, perhaps it wouldn't be a bad idea to track my TV watching for a month or longer. Might discover something.

One last tidbit: They sent me the $30 in cash, which I thought was a little strange.

Freebie zen from FatWallet

2007-11-15T07:12:00.000-05:00

This post in FatWallet.com's freebie forum made me chuckle out loud:

FREE 3M Novec Fluorosurfactants

Whatever that is... go Here

You gotta love the freebie mindset: I don't care what it is, so long as it's free. That this person took the time and energy to post a link to a free object, despite his or her own ignorance about the usefulness of said object, is an orchestral testimony to the power and grace of the double-entendred free market.

By the way, 3M's site clears up the confusion:

3M™ Novec™ Fluorosurfactants–a water–soluble, low–odor, general purpose nonionic fluorinated surfactant.

Happy fluorinated surfactorations!

Warren Buffett needs to keep his 40-billion-$ mouth shut

2007-11-14T20:37:00.001-05:00

Is anyone but me sick and tired of hearing Warren Buffett give his opinion about how much other people can pay in taxes? Not everybody has gajillions of dollars, and even if they did, that's no reason for the government to take half of it (or more!) when you die.

His latest comments are being propagated by MarketWatch:

A progressive and meaningful estate tax is needed to curb the movement of a democracy toward plutocracy.

What kind of effing malarky is that? It doesn't even make any sense, and here's why.

1. A plutocracy is a form of government where rich people rule. Government is the only entity that claims the right to tax. If The Goal™ is to prevent or overturn a plutocracy, then giving the government more money is exactly the wrong way to go about doing it. The proper way to avoid plutocracy would be to let private individuals proscribe accumulated wealth to their heirs.

2. We don't have a democracy, and we never have. I don't even want a democracy, because BS like taxing people to death (and then even more after death) is the result. Our constitution was supposed to help avoid this kind of baloney.

3. Warren Buffett is the biggest hypocrite in the world. He makes all these claims about how people should have to pay taxes and the like, but his whole life he's made barge-loads of money on the principle of deferring and avoiding fees (including taxes) as much as possible. Then, he goes and donates it all to the Bill and Melissa Gates Foundation, avoiding even more taxes. Don't get me wrong, I don't have a problem with his actions, but for him to spout off about other people needing to pay more is absolutely ridiculous.

4. Buffett then goes on to say, "exemptions and other measures could be used to ensure that the estate tax doesn't hit farmers, ranchers and other small business owners" (MarketWatch's paraphrase, not necessarily Buffett's actual words). Firstly, ranchers and farmers aren't necessarily small business owners – agriculture is big business, maybe not on the level of oil, but still in the multi-trillion-$ range. Furthermore, agri-business gets loads of subsidies already, so why they get special consideration on the death tax? Why should any small business owner, for that matter? They shouldn't: Everyone should get the same exemption, defined as not having to pay any estate tax.

I have a lot of respect for Warren Buffett's prowess as an investor, but it really simmers my bacon when I hear him saying that people don't deserve to keep what they've earned. If he wants to give his money to the government, let him do so. But there's no reason why he should be telling people I owe the government too.

Can we really change the banking system?

2007-11-14T09:32:00.000-05:00

Market Watch reports that the Treasury Department wants to solicit ideas about how to change the banking regulatory system, and they offer a few suggestions of their own about which parts may be flawed.

My own assessment is that the whole thing is flawed and ought just be chewed up and spit into the nearest garbage can. Right from the outset, our current central banking system was doomed to benefit the people who ran it, not the customers. (There's an excellent book titled The Creature from Jekyll Island that details how the current federalized banking system started.) But being a practical libertarian, I would be content to make some small changes.

Please note that I do work in the banking industry, and some of my suggestions are likely influenced by my job. But I'm also a banking consumer!

Changes I would propose

1. Get rid of savings account transaction limits. Section 2 of Regulation D provides descriptions of the various types of deposit accounts that banks can have. I think it's silly that this level of specificity needs to be dictated, but I'll gloss over most of it. The part that really irks me is the Reg D.2 (d)(2), which states consumers can have no more than six "covered" transactions – i.e., checks, ACH transfers, and so on – from their savings deposit account in single month. Regulations rarely have explanations behind why they are implemented (they really should...), but since Reg D is all about depository requirements, presumably this asinine detail is supposed to help institutions keep enough money on hand to meet depository requirements. However, in practice, it doesn't do any such thing, since transactions such as ATM withdrawals, teller withdrawals and other certain transactions are not covered by this limit. Basically, it just becomes a hassle that people have to work around, and it generates needless fees and account conversions for even more inconvenience.

2. Allow interest on demand deposits. Reg Q has two purposes, the first of which is to prohibit paying interest on "demand deposit" accounts (AKA, checking accounts). "What?" you ask, "but I get interest on my E*Trade Max Checking, ING Orange Checking, or other similar high-yield checking account. Shoot, most checking accounts offer some pittance of interest, even if it's a joke." And that's exactly my point. This provision of Reg Q is an unnecessary encumbrance leftover from the 30s. Banks get around this joke of a regulation today, and they will continue to do so in order to find ways to attract more customers. A number of bills have been introduced to the Senate in recent years to eliminate Reg Q, but there's been no real progress. Let's get rid of it now.

3. Get rid of non-interest premium limits. The second purpose of Reg Q is to determine the amounts and frequencies of premiums that are considered non-interest income. This is, of course, primarily for tax purposes – god forbid someone get a $25 premium and not pay $5 of it to the government. (The rate for interest income is generally 20%.) Ideally, we would not be taxed at all on interest income, but that's probably a bit too hopeful for this round of changes. Anyway, a quick look at the Bank Deals blog will show that banks rarely stick to the $10 limit, and for the most part people assume that bank promotional bonuses are going to be taxed. Eliminating this requirement will mean banks won't have to keep track of different levels of promotions (under $10 vs. over $10).

4. Allow electronic payments for online gambling. The Unlawful Internet Gambling Enforcement Act was passed about thirteen months ago, and is the biggest crock of donkey dung that I've ever heard of. It's yet another step in the unfortunate trend toward regulating the internet. Now, the Treasury Department is looking to add a Reg GG to implement regulations based on this heinously invasive piece of legislature. Now, don't get me wrong, as someone who is intensely interested in personal finance, I believe that gambling is the worst form of spendthrift. But there's no reason to keep people from doing it if they want to – just like if someone wanted to throw thousands of dollars down a storm drain, they should be allowed to. As for the risk of allowing people to run up thousands of dollars in gambling debt, that should be left up to the lending institution. Government shouldn't step in to make "good" decisions for others, individuals or institutions alike.

Note: The Treasury Dept. and Fed are soliciting comments separately on the proposed Reg GG. More info on the How to Comment section below.

5. Get rid of "community reinvestment" requirements. This is a pipe dream that would take an Act of God (and no, I'm not deifying congress here), but I strongly believe that the Community Reinvestment Act (CRA) – which is regulated in part by Reg BB – does much more harm than good. Take the recent subprime mortgage mess, in which billions of dollars were loaned out to people who could not afford them. This type of risky lending is actually encouraged by the CRA, because the CRA requires lending institutions to show that they have a "record of helping to meet the credit needs of its entire community, including low- and moderate-income neighborhoods." In other words, to give more (or larger) loans to people who can afford them, banks have to give more (or larger) loans to people who can't. This is plain silly.

6. Stop discrimination by requiring lending "disclosure." Reg C is the enactment of the Home Mortgage Disclosure Act (HMDA), passed in 1975. I actually like parts of this regulation, because I think it is important to have access to information. It is one of the few areas where I think government has a legitimate purpose and why I am not a complete rational anarchist, though perhaps I could be persuaded that this sort of information could be made available in an anarchist society. Anyway, the part that I don't like is §203.4 (b)(1):

A financial institution shall collect data about the ethnicity, race, and sex of the applicant or borrower as prescribed in Appendix B of this part.

Honestly, what do these traits have to do with lending money? Absolutely nothing. Credit should be extended based on one's financial considerations, not on silly geographical and genetic characteristics. There's no really good reason to collect this data, except to abuse it.

Final thoughts

If I dug for a few more hours through the regulations, I'm sure I'd come up with tons of additional comments. But like I said before, I think the whole system is flawed. If we can't scrap it and start over, I think fixing the parts I outlined above will be a good step in a long journey toward the right direction.

How to comment

To submit comments to the Treasury Department, do the following:

Visit Regulations.gov.
Scroll down to the "Search Documents" section on the home page.
Complete the fields as follows:
1. Select "Documents with an Open Comment Period" (should be selected by default).
2. Select "DEPARTMENT OF THE TREASURY -- ALL" from the dropdown list.
3. Select "ALL DOCUMENT TYPES" (default).
4. Select "Document ID" and then enter the following ID, depending on which item you want to comment on:
  - TREAS-DO-2007-0018 – General comments on regulatory policies (comments accepted through Nov. 21, 2007)
  - R-1298 – Comments specific to Reg GG (comments accepted through Dec. 12, 2007)
5. Press "Submit".

Let me know what comments you make!

Money education: Give your kids a paycheck

2007-11-13T14:01:00.000-05:00

Over the long Veteran's Day weekend, we hosted some good friends, Dave and Charlene, who have a young son E. During the course of our visit, we got talking about various financial issues. The conversation moved from our own daughter's recent accumulation of debt to teaching young kids about money. Dave and Char outlined a system that they've developed to help educate their son about money.

Positive incentives work: Pay your kids

Basically, the system Dave and Char use is simply this: They give E. a weekly paycheck of $5. The requirements to receive the full payment include:

Completing specific tasks, such as making bed, helping with dishes, etc.
General cooperation throughout the week

Not completing the required tasks/chores, or not being very cooperative, can result in reduction or even elimination of E.'s paycheck for that week. With this system, even at three years old, E. has shown that with this system he is able to comprehend that:

How you do things is as important as what you do
Money isn't a guarantee – you have to earn it!
Buying things with your own money can be fulfilling
You have to pick and choose what you want to buy – or save to buy more

Tweaks

In general, I think this is a very good way to start very young kids thinking about money concepts. However, my older daughter is six, so I've been thinking about using a variation on a theme to help her learn even more.

Use a "base pay" concept that adds together the intangible or hard-to-quantify habits and attitudes we would like her to develop, such as being cooperative when getting ready for school or bed, doing various one-off tasks with minimal complaint (hey, kids are kids), and so on.
Develop a payment schedule to complete various chores or tasks, such as making her bed, cleaning up her room, feeding the dog, etc.
Allow for bonuses to be given for extra duties performed, or even for performing assigned duties without being asked/reminded or for being exceptionally cooperative and pleasant, etc.

Primarily, in addition to teaching my daughter the same lesson's Dave and Char are teaching E. (listed above), I want to teach her that:

Doing more than what is expected can lead to increased compensation
Doing less than expected can lead to decreased compensation
You can choose to do more or less, and get paid correspondingly
Developing good habits lead to better returns

There are probably other lessons embedded in there, but you get the idea.

How do you teach your kids? What thoughts do you have toward improving this scheme, or modifying it as children grow older?

I just saved a bunch of money by modifying my Geico insurance coverage

2007-11-09T12:07:00.000-05:00

I haven't looked at my car insurance policy in awhile, so when today I got my notice that my policy is being renewed, I took a few minutes to look over it. Glad I did, because I just decreased my insurance costs by 4%.

Basically, I eliminated two items:

Emergency Roadside Assistance: Weighing in at about $5 per six-month policy term, this was a AAA-style coverage that brings gas or tows your ride if you breakdown on the side of the road. Since I already have AAA, which offers other features as well, there's no reason to pay for this service.
Rental Reimbursement: While this might come in handy if we ever totaled our car, it probably isn't necessary. We have two vehicles and could work something out. Worst case scenario, I can work remotely if I have to (as I am doing today, because my daughter is sick) so my wife can use the car. canceling this saved me a hefty $15 each six-month term.

When's the last time you looked at your policy?

Most people don't know their savings interest rate

2007-11-07T13:11:00.000-05:00

My eyes caught a London Stock Exchange article that stated most people don't know the interest rate on their savings accounts. I thought, Is this really news? Most people don't take stock of their finances at all, so not knowing a detail like an interest rate doesn't really surprise me.

I don't really know the rates on all of the accounts I own. Part of the reason is that I open some of my accounts only to get the promotional bonus, and I only keep enough funds in that account to meet whatever requirements necessary to avoid fees. Also, some accounts I don't use for savings purposes, but for other convenience reasons, such as for online bill pay or to transfer between other accounts.

But I do keep tabs on a couple of my accounts. In particular, I keep an eye on the rate offered by AmTrust Direct, which is where I keep most of my money at the moment. Right now, I'm getting 4.822% APR (the 5.36% advertised on their site is for 90 days only), which isn't horrible considering everyone else has gone down with the recent Fed rate cuts. For both my E*Trade MaxChecking and NetBank MMA, I'm getting 4.0% and 4.19% respectively.

I've noticed, though, that it's not always easy to find interest rates. For some accounts you can find it listed somewhere on your statement, and for others you have to dig around the bank's website. This certainly doesn't help the situation.

Credit card foreign transaction fee settlement updated

2007-11-05T16:28:00.001-05:00

In case you don't know about it, earlier this year a number of the major credit card issuers settled a lawsuit claiming that they were charging too much on foreign transactions made with a credit card. Anyone who made a foreign purchase with a credit card between February 1, 1996 and November 8, 2006 could be eligible for a refund of part of the foreign transaction fee.

However, in order to make a claim, you had to know when you traveled and be prepared to back up your claims by checking your credit card records. Now, it seems that they have done away with this provision, and no longer require you to have specific records (i.e., statements) to back up your claim. The FAQ on the settlement site states:

Do I need to provide any documentation with my claim?
You do not need to attach bank or credit card statements to your claim. However, by submitting a claim you are representing under penalty of perjury that all information provided is true and correct, that you have not submitted more than one claim form and that you are the primary card holder on the accounts included on your claim.

In addition, all claims are subject to audit and you may be asked to provide additional information to support your claim. Please keep proof of your eligible transactions until your claim has been processed. By submitting a claim, you authorize your bank and the settlement administrator to provide and share information to verify your status or claims.

So, basically, while you don't have to have documentation, it helps to dig it out if you plan on making a claim.

Learn more and make claims at www.ccfsettlement.com.

KeePass: Easy-to-use password manager for your financial accounts (and more)

2007-11-02T17:49:00.001-04:00

For a long time, I've used a program called Keyring for Palm OS on my Sony Clié. It's a really good program that has served me well, but a few months ago I decided that my pockets were starting to get really full what with my Clié, a cell phone, keys, USB drive, money, my new Creative Zen Vision W, and various and sundry other items. I didn't want to start carrying a purse, so I figured it was time to trim down some of the accessories I was carrying.

Since I only ever use my Clié for password management, to read e-books, and to play mahjonng or sudoku from time to time, I figured it was probably time for me to give it up. I could easily give up the games, and I could even do without e-books for the time being, but before I could get rid of my Clié completely, I needed to find an easy, portable way to manage my passwords.

Requirements

What I needed specifically was a program that:

Encrypts the entire record, not just the passwords and usernames. Some programs only encrypt the passwords, and that is not sufficient, since I typically store sensitive info in the notes (like account numbers, answers to security questions, and so on)
Allows arbitrary/configurable categorization of passwords into groups and sub-groups
Could be run easily from a USB key without leaving traces on the host computer, so that I could access it from wherever I needed
Has a linux port that could read the same database file, without having to do annoying (and potentially lossy) database inports/exports
Doesn't cost any money

KeePass fit, and I'm happy

After searching a bit and trying a couple different programs, I eventually landed on KeePass Portable, which is a slightly modified version of KeePass Password Safe. It met all of the criteria I outlined above, including having an available linux port called KeePassX, which could read the same database as the Windows version. I've been using KeePass for a few months now, and it's quite handy.

The one inconvenience is that, since it's run off my USB drive, there's no way for me to access my passwords (and other data) it if I don't have a computer handy. Shouldn't matter in too many instances, since 99.9% of the time I would only need to access the info when I'm online, but if I happen to forget my USB key and go somewhere, or if it's lost and I don't have immediate access to my backup, then it could be an issue.

Here's a screenshot of KeePassX (which looks very similar to KeePass). Enjoy.

Sketchy charitable incentives catch the eye of Millionaire Mommy Next Door for Carnival of PF #124

2007-11-01T11:59:00.001-04:00

Another carnival update: My post about bewaring who benefits from charitable incentive programs has been added to the The Trick or Treat Edition of the Carnival of Personal Finance (#124) hosted by The Millionaire Mommy Next Door. This issue truly is full of financial tricks and treats. Take an hour or two to browse through, if you've got nothing else to do.

Carnival of Money Stories #32 attracted by Petty Greed...

2007-11-01T11:48:00.000-04:00

Happy to announce that my story of How petty greed translates to more fees was added to the Carnival of Money Stories #32, hosted by The Baglady. There are some other good lessons to be learned from the stories in this week's carnival, so if you haven't read through it already, check it out.

Schools teach children how to get into debt

2007-11-01T11:13:00.000-04:00

This is more of a rant than anything, but I'm quite irritated with the whole topic.

As a libertarian, I have no great love for public schools, but my wife and I can't really afford to send our older daughter to a private school. (Our younger daughter goes to a private day care though.) Now, I have yet another reason to hate public school: It is teaching my daughter that going into debt is okay if you want something right now, and that everybody deserves a free lunch.

We give our daughters breakfast every day, and we pack them lunches most days. Sometimes we give them money to buy lunch, but we're trying to teach them that there's value in brown-bagging it.

Recently, though, we started noticing that our older daughter did not want to eat breakfast in the morning. We thought perhaps she just wasn't into breakfast, so we tried to get her to eat something when we could, but didn't try to force her if she didn't want something. If she was hungry, we felt, she would eat.

Then we started noticing that her lunches were coming home half-eaten, or sometimes even completely untouched. We asked her about it, and come to find out, she has been buying lunches on credit at her school. Last week, we got a bill from the school cafeteria for $25.50 – that's on top of the $15 we sent in at the beginning of the school year plus the handful of times we gave her cash to cover the lunches we had allowed her to buy.

Come to find out, head of the cafeteria told my wife that our daughter has been buying breakfast almost every day, and she buys lunch more often than not. My wife questioned the cafeteria head about why they would let a six-year-old child rack up that much debt. School lunches cost about $1.50, and breakfast costs $1, which means to rack up $25 in debt she'd have to be buying breakfast and lunch on credit every day for two full weeks. We know she didn't buy both meals every day, which in my book is even worse, since this has obviously been going on for some time.

Even worse, the cafeteria person said that they would not take any measures to prevent our daughter (or any other child) from buying meals on credit – even if the parents request that they do not allow it. As a parent, this infuriates me. My daughter is six years old and at school to learn, but what lesson is this teaching her? Basically, that she can suck off the teat of public welfare anytime she wants, and she won't be penalized for it. Mom and dad get stuck with the bill.

I understand not letting children go hungry, believe me, I do. But it's infuriating to know that the school will let children go into debt out of sheer negligence to even ask if they've already eaten breakfast, and without letting their parents know until at least a month later when they've racked up a bill.

We spent a good amount of time the last couple days talking with our daughter about the importance of eating the meals we provide and not simply buying food from the cafeteria because her friends do, or because she forgot her lunch bag in the classroom, or whatever other reason she might give. We also are going to send in a letter to her teacher outlining that we expect her to help us ensure that our daughter eats the lunches we provide. We'll see what comes of it.

What about you? Has anything like this ever happened with you or your children? What did you do about it?

Debt Update - Oct. 2007

2007-10-31T05:38:00.000-04:00

Well, I didn't do a debt update in September, and now it's the end of October and I'm past due for that update as well. I waited to do the September update because a number of balance transfers had taken place that affected my credit card numbers. Additional notes below.

Percentages in parentheses indicate month-over-month changes. Percentages in the far-right column indicate total change since September.

Debt	15-Aug-07	15-Sept-07	15-Oct-07	% Change
Mortgage	$60,813.72	$60,718.98 (-0.16%)	$60,623.85 (-0.16%)	-0.31%
Car	$14,526.91	$14,334.38 (-1.33%)	$14,204.68 (-0.90%)	-2.22%
Student	$4,702.94	$4,657.40 (-0.97%)	$4,611.56 (-0.98%)	-1.94%
Credit Card	$6,815.54	$8,066.89 (+18.36%)	$7,274.03 (-15.09%)	+6.73%
Total	$86,859.11	$87,777.65 (+1.06%)	$86,714.12 (-1.77%)	-0.17%

Notes

All my credit card debt is currently at 0% thanks to my August app-o-rama and subsequent balance transfers. Refinancing cost me $150 in BT fees, or about 0.02% of my total credit card balance in August.
Credit card values are adjusted to account for approximately $5,600 in funds I have set aside in high-interest accounts. This is in accordance with the debt repayment plan I outlined in a previous post.
The numbers in September are affected partly by balance transfers that were in process after my August app-o-rama.
The overall increase in credit card debt is partly due to having to purchase new tires for one of our cars. I also bought some Patriots tickets for my wife's birthday.

Beware who benefits from charitable incentive programs

2007-10-27T10:12:00.000-04:00

I got an e-mail today from TradeKing describing a temporary referral program in which TK would give $100 to Toys for Tots for each referral. It got me thinking about other similar philanthropic incentive programs I've seen, like:

Citi's promise to plant a tree on my behalf if I sign up for online statements (i.e., discontinue receiving paper statements)
Suntrust's offer of a $50 gift card or $100 donation to the charity of the customer's choice, upon opening a checking account and making purchases with the linked debit card
Bank of America credit cards that give a portion of the rewards earned to charitable causes.
Various companies like Dannon and Campbell's that make contributions to breast cancer research for each cup of yogurt or can of soup they sell.

I'm sure that there are many others. But I have to wonder: How well do these programs really work?

Companies obviously benefit

The value of these programs for companies is obvious. In addition to attracting a certain subset of customers who have a penchant for charitable thoughts, they get to write off the amount of the donations for tax purposes.

For example, if TradeKing gets 5,000 referrals during the time it offers this donation, that's a cool half-million dollars it can exclude from its tax payments – which means that whatever money it makes off trade commissions and float is icing, since it would have to pay taxes anyway. That's a much better prospect than offering $50 directly to the customer – who (if they're like me) may just extract it once whatever hold period is over – because if they give the money to the customer, they're starting out in the hole.

Citi's tree-planting setup is likely even better. It probably doesn't cost that much to plant a tree, especially since Citi partners with the Arbor Day Foundation which is able to keep costs low by relying on volunteers (their page here says planting is done by the Girl Scouts). Like TradeKing, whatever Citi actually donates is simply moved from the tax line of their accounting spreadsheet to the donations line, and everyone gets to feel good about it. Plus, it's undoubtedly cheaper for Citi to provide statements electronically online than to go through the expense of printing paper statements and paying postage to send them to the customer.

In addition to the direct financial benefits companies receive above, these high-profile charitable programs are certainly good public relations and can generate a lot of goodwill.

So, I can certainly understand from a company's perspective why they would want to offer these types of charitable incentives. But do they actually work from a customer perspective?

What does the customer get?

In each of these instances, the customer may get the feeling that they have helped some cause they care about. This is good for something, I suppose, but in reality they've just helped some company fiddle with its income statement and increase its tax writeoff. It's rather self-deceptive to think that by signing up for a checking account, or referring a friend to a brokerage service, or stopping paper statements, you are doing anything real to make the world a better place.

Now, that may sound a bit harsh, so let me mitigate it a bit and say that it is marginally better for companies to make donations to charitable organizations than to pay an equivalent amount of money to the government in the form of taxes. But my point is that, overall, companies generally have a specific amount of money set aside for donations anyway, and it's unlikely that programs like those described above have a major impact on that amount.

In some instances, it might even be harmful to those individuals who sign up for services or purchase products just to support a charity. For example, someone might use their Humane Society credit card more often than they should, justifying additional purchases because they are supporting a good cause. Or they might spend more money buying brand-name soups and yogurts, when they could buy generic brands much cheaper. In cases like this, the companies' marketing campaigns have worked, because they have successfully convinced customers to buy more of their product and passed on the cost of its charitable contribution (which weren't really costing them anything anyway).

That's not to say that you should never buy a product or enroll in a service that offers a donation to charity as an incentive. If you need, or even just want, that product or service, then it's perfectly fine to get it. But you shouldn't let emotions evoked by cute puppies and threats of global warming dictate your spending habits.

Donate deliberately

I don't want anyone to think that I'm bashing charitable contributions. Besides the tax benefits for individuals, it is extremely important for people to donate to causes they believe in. Anything that can be handled through donations from private individuals to private charities is a plus in my book. It helps keep the government out of our pocketbooks, which ultimately gives us more liberty, and I'm all about that.

But please, please, please, when you decide to donate to a charity, do so deliberately. Don't expect ancillary donations, made on your behalf by some corporation with a multi-billion or trillion dollar net worth, to be done in your best interest. Sit down yourself, figure out your finances, and see how much you can give to the causes you care about.

How petty greed translates to more fees

2007-10-25T15:02:00.000-04:00

I made a boo boo.

I've several times mentioned the AOR I did back in August, and the subsequent refinancing of all my credit card debt with a plan to pay it off by end of next year. I've implemented this plan in a couple different ways:

I have about $5,700 in funds extracted through balance transfers, sitting in a money market account earning ~5%.
I'm diverting approximately $400 per month to my E*Trade Max Checking account, from which I will make my monthly payments.

The plan is perfect, right? Indeed, it seems so to me. But alas, perfect plans can be implemented imperfectly, and that happened to me recently.

Here's what happened. I made payments from my E*Trade account on two cards (Citi Business and WaMu). However, I chose to make the payment for my Discover card from the Discover Web site so that it would post before the due date (Discover posts payments the day you schedule it, not the day it clears).

Then I did something really stupid. In the time between when I scheduled the Discover payment and the time the payment posted, I realized that I had a rather large buffer in my E*Trade account. I didn't think I needed such a large buffer, and I decided to transfer some of it to my higher-rate AmTrust Direct account. Unfortunately, I forgot about the pending Discover payment, and ended up transferring more than I should have. The Discover payment bounced.

Here's the financial damage I incurred:

$25 insufficient funds fee (E*Trade)
$35 returned payment fee (Discover)
$77 in back interest with revocation of my 0% balance transfer offer (Discover)
$39 late payment fee (Discover)
Another $25 insufficient funds fee (E*Trade) – more on this later

So, by miscalculating how much I should keep in my E*Trade account by less than $25, I incurred $201 in immediate fees. Plus, I negated my balance transfer offer rate of 0%, which means I would incur high Discover interest charges on a ~$4,000 balance (assuming I didn't pay it off right away, which I could've as I had $5,700 in BT arbitrage funds that I could've dipped into had it been necessary – but I'm getting ahead of myself).

Introspection

I was very upset about this, as you might guess. The punishment seemed to greatly outweigh the crime, but when it came down to it I was more upset at myself than at E*Trade and Discover. Sure, I think their fees are a bit excessive, but I knew what could happen. Even if I didn't know the exact amounts involved, I knew that there would be penalties for insufficient funds in my E*Trade account, and I knew that there would be fees from Discover if I missed a payment or had a payment returned, with the possibility of losing promotional rates and having to pay back interest.

But I didn't understand how I had been so dumb. I don't know what led me to think that less than $100 in my E*Trade account would be a sufficient buffer. (Yes, the payment that bounced was for less than $100.) I could only chalk it up to greed, thinking that having a few extra dollars in an account paying less than 1% more APY on my savings would add up to something. Of course, if you do the math, it doesn't really make that big of a difference: $500 (the amount I transferred out) only yields $5 per year on a 1% differential in APY. For that extra $5, I accrued $201 in fees.

How I recovered (mostly)

The only thing to do at that point was to call both E*Trade and Discover and see if a good sob story would at least let me recoup some of the funds.

Before I made any calls, though, I made sure to transfer enough money back into my E*Trade account to cover the Discover payment. Working out the ACH hold times, I would still be late with the payment, but I figured that if Discover at least saw I had attempted to rectify it quickly, they'd be more likely to grant my request. Plus, based on past dealings with credit cards, I've learned that they usually aren't willing to deal if you have an outstanding payment.

I called E*Trade first. I noticed that they had charged me for two insufficient funds fees on two different days, and I was curious why. Even with the first insufficient funds fee, my account balance was positive because the Discover payment had not gone through, so there should've been no reason for a second fee to have been charged. But ten minutes of talking with a CSR got me nowhere. So I just asked that they research the fees. The CSR said they could only be researched one at a time, so I said fine, research one and then research the other. She told me that if I wanted to research the second fee, I'd have to call back after I received the decision for the first fee. *sigh*

I waited over the weekend to call Discover. The timing of the payment (and transfer to cover the payment) was a bit tricky, and I wanted to give it a few days for everything to post. When it did, I called and talked with a surprisingly pleasant CSR. After explaining what happened, and mentioning that I had put in place a buffer in my checking account to ensure future payments don't get returned, he pretty quickly refunded most of the fees and reset my 0% balance transfer offer. The only fee I ended up having to pay on Discover was the $35 returned payment fee – everything else was refunded.

The next day, I logged into my E*Trade account and saw that they had refunded the first $25 insufficient funds fee. So, I called them up and talked with another CSR about the second fee. I learned that the refunded fee was actually the second one, and that they had refunded it due to "bank error." I asked if the other (first) fee could be researched as well, and after a bit of hassle, he finally agreed to submit it. Today, I logged in, and it appears that fee has been refunded as well.

Conclusions

Don't be greedy.
Keep a buffer in the accounts you use to pay your bills.
Set up a good tracking system for managing your balance transfers.

Designing the perfect(ly diversified) ETF

2007-10-23T19:30:00.000-04:00

According to a story at Market Watch, Clear Indexes LLC is giving some college students a opportunity to design a new ETF. In addition to bragging rights and the euphoria of designing a successful product, the winner will receive $4,000.

Unfortunately for me, the contest is open only to students enrolled in Columbia University, New York University and Lehigh University. However, despite my ineligibility to participate in the contest, seeing this notice got me thinking about what type of ETF I would like to see that isn't out there already.

Looking at the existing glut of ETFs available, though, it's not an easy task. There are already ETFs that follow all sorts of indexes including the Dow and S&P indices, as well as indices for large cap companies, small cap companies, commodities, natural resources, currencies, and so on. There also are sector ETFs and geographical ETFs and socially conscious ETFs and ETFs for "vice" companies, etc., etc. And if that doesn't suit you, there are even short and double-short ETFs. It seems like there's not much that isn't tracked by an ETF.

What's missing? The asset-diversified ETF for lazy people

But despite these many-indexed ETFs, it seems that there is something lacking that should be particularly suited to the ETF idea. While ETFs are great at allowing you to pick and choose your diversity, I think that the financial institutions creating ETFs are missing a great opportunity to give people an asset-diversified offering.

Some might claim that there are already diversified ETFs out there, and on an "the English language is unspecific" sort of way, they'd be kinda right – if you consider ETFs that follow indices like the Russell 2000 as "diversified." To really get a diverse holding on an asset-based level, though, you'd have to do some ETF jiggery-pokery like what's explained in this Seeking Alpha article.

Quite frankly, most people who are looking for an easy way to have a diverse portfolio probably don't want to bother buying anywhere from six to twelve different equities. Plus, with more than a couple ETFs, commission fees start to add up with anyone looking to invest using a dollar-cost averaging plan. A truly diversified ETF offering would help lazy people who just want to sock their money away, and maybe add to it every other paycheck or so, without having to worry about a watchlist of ETF symbols and racking up commission fees.

How to diversify

When I first started seriously looking at my investment opportunities, I read a great book by the late Harry Browne titled Fail-Safe Investing: Lifelong Financial Security in 30 Minutes in which he describes a "permanent portfolio" designed to help protect and (moderately) grow funds in any sort of economic environment. To do this, you simply invest your money in four separate asset classes:

Stocks (via a broad-market index fund, such as the S&P 500)
Bonds (preferrably long-term U.S. Treasury bonds, or high-grade corporate bonds)
Gold
Cash (in the form of short-term U.S. Treasury bills)

Browne suggested equal weights of each asset class, but some research has shown that keeping an equal mix might not be the optimal way to diversify (see this 2006 InvestmentU article on the topic). Regardless, the idea of asset diversity has its merits, and making this type of investing easier is, in my opinion, where ETFs can really help the average Joe.

Of course, you could emulate the permanent portfolio (or some variation of it) with as few as four existing ETFs. Here's an example:

Stocks: SPY or IVR to track the S&P 500
Bonds: TLT
Gold: IAU or GLD
Cash: SHY

But again, you run into the hassle and expense of buying and selling four equities instead of one.

Anyway, suffice it to say that if I were creating an ETF, it would be some variation of this mix.

What about you?

What ETF would you create?

"Assessing political contributions..." added to 123rd Carnival of Personal Finance

2007-10-22T09:41:00.000-04:00

My post about Assessing whether you should contribute to a political campaign was added to the 123rd Carnival of Personal Finance, hosted this week by The Dough Roller. Take a look at some of the other great posts that were included in the issue.

So, am I making a political contribution?

2007-10-20T09:19:00.000-04:00

This is a follow-up on my previous post about assessing whether you should contribute to a political campaign. I realized this morning that I never provided a conclusion as to my own personal assessment.

Before I do, though, I want to note that my previous post is apparently my most popular one so far. It's received 12 Diggs as of now, 1,000% more than my previous highly dugg post – could this be the start of a following?. I've also submitted my previous post to the Carnival of Personal Finance.

Anyway, I recently received a state property tax rebate worth a few hundred dollars. After looking at the criteria I listed, I've determined that I am able to use about half of it to contribute to a political campaign:

While I have credit card debt, currently it is all financed at 0%, and I already have a plan in place to pay off most of it by the end of September next year (when most of the 0% offers end). Also, we are not living beyond our means at the moment, and the rebate was unexpected, so we were not relying on it to pay for something necessary or desired.
The candidate I am going to donate to is one of the few carrying no debt.
My candidate also has a solid grasp of what's going on with our country, has ideas about how to fix them, and has strongly supported those ideas in the past, both in word and deed.

With that, I will be donating approximately $250 in the near future to Rep. Dr. Ron Paul. It's only about 10.8% of what the government graciously allows me to donate to my preferred candidate, but that's okay because it's all I can afford at the moment.

What about you? Have you donated, and if not, will you? What criteria did you use to determine whether you would donate?

Assessing whether you should contribute to a political campaign

2007-10-19T20:21:00.000-04:00

The presidential campaign season is upon us, and that means the media outlets are talking all about campaign financing (and a little bit about the candidates' issues and platforms). It might even get you thinking about whether or not you should give money to you favorite candidate.

As I've recently started thinking about giving money to a specific candidate, I thought it might be a good exercise to analyze such a contribution as I would any other investment. After all, I do expect a return on my investment – a freer country, more economic opportunity, etc. So it only makes sense that I should go through the rigor of making sure my investment is worthwhile.

I won't focus on a specific candidate below, but I will take a moment to mention that, if I contribute, the candidate I will contribute to is Republican Ron Paul. Please take a moment to check out his platform – it should be no surprise to you that I support him, given the stated purpose of this blog. (Let me state for the record that I am not a Republican myself, although I had contemplated registering Republican to vote in the primaries; however, I missed the deadline for my state.)

Anyway, let's look at how to analyze your presidential contribution.

Do I have money to contribute?

Okay, this is Personal Finance 101 kind of stuff, but determing whether you have the money to spend is the most important step of analyzing any expenditure. And it's a pretty easy thing to assess. Here are some guidelines:

If you don't have the cash money on hand, don't make the contribution.
If you have money but also have high-interest debt (greater than 8%, in my opinion), you should use the money to pay off your personal debt.
If the contribution will potentially hurt your near-term finances (ability to pay mortgage/rent, buy food and clothes, etc.), don't contribute.
If it requires you to dip into targeted funds (emergency, retirement, etc.), don't contribute.

So, to sum up those guidelines in one sentence: You should only contribute if you have enough leftover, spendable cash to do so. Likely, this will determine how much you can contribute (maximum is $2,300 according to federal campaign finance guidelines).

What is the politician worth?

This question is the same question you'd have to answer when buying any investment. Just like you wouldn't want to buy the stock of a company that is hemmoraging money, you should check to make sure your preferred candidate is solvent and not throwing the green stuff around like a trust fund baby.

One good resource is Open Secrets Presidential Election page, which gives a breakdown of the finances of the two corporate parties' candidates, including:

How much money each candidate has raised and spent in the last quarter
How much money each candidate has raised and spent overall
How much cash each candidate has on hand
How much debt each candidate has accrued

I'll let you make your own conclusions based on the data. For my own part, I prefer candidates who don't spend more than they have – if they can't control spending now, why would they when they are president? On the other end, the candidates who have raised the most money are more likely to be spendthrift as well and throw money away on silly expenditures, so I probably wouldn't vote for them with my dollars either.

What is your expected return on investment?

Would you open a savings account or CD without knowing the rate? Would you buy a stock without having a target price at which to sell? Hopefully not, and likewise, you shouldn't give money to a politician without having some realistic expectations.

I don't necessarily mean you have to be confident your candidate will win a primary or even the election. But if you're giving money away, you should be relatively sure that if your candidate wins, he or she will deliver on promises made during the campaign.

Of course, it's impossible to know what will happen, but there are some things you can take into account:

What is the candidate's record of supporting the issues you care about?
What is the candidate's record of supporting the issues you don't care about?
How broad and deep is the candidate's knowledge about issues?
How often does the candidate actually address issues other than his or her pet issues?

And so on. Of course, these are less than perfect predictors of what the politician will do, but at least it will force you to think through what your expectations are.

Final thoughts

You should treat political contributions just like any other purchase. Be deliberate with your expenditure, and don't decide to spend money right after a debate. You might regret it later.

Are easy-money deals drying up?

2007-10-04T23:26:00.001-04:00

Is it just me, or does there seem to be fewer "free money" deals these days? And for the deals that do exist, it seems like you have to do more to get less.

I don't have any hard objective data, but taking a look at the deals mentioned on the bonuses page at Bank Deals, it seems that there are fewer straightforward deals now than there were a year ago.

I suppose part of the issue may because I've taken advantage of so many deals over the past year or so, I am no longer eligible for other deals. For example, I have accounts at Citi, HSBC, Wachovia, etc., which means that I can't participate in any new-customer deals for these banks. As I start consolidating and closing these accounts, I will eventually become eligible for deals again, but some of the accounts I plan on keeping open, like the Citi account, which I use as a sort of hub account.

Anyway, my deals spreadsheet is looking pretty lean, and I'm getting the itch to glean some more free money from somewhere. If anyone has any good ideas, let me know. Meanwhile, I'll be scouring Bank Deals, Fat Wallet, and Slick Deals for some easy money.

My first stock split

2007-10-02T09:25:00.000-04:00

Today I experienced my first stock split: Simulations Plus (SLP). I figured I'd write up some of its effects on me and my finances for anyone who wants to know what it's like from a newby perspective.

The Mental Effect

I know that, theoretically, a stock split makes no difference to the fundamental value of the stock: I own twice as many shares, but they're (initially) worth half the value. Nevertheless, it seems to me that there's a certain euphoria about owning twice as many shares of a growth stock¹ as I did yesterday.

Furthermore, it seems that the company feels a stock split is favorable for a number of reasons. In the press release announcing the split, the Chairman and CEO of SLP said, "We believe that increasing the number of shares in the public float is likely to increase liquidity and narrow the typical trading range for our stock, although there can be no assurances that either of these will happen." Increasing liquidity and reducing volatility are generally positive outcomes, and I think this will make SLP an even better investment than it was previously. (Note that this is not a buy recommendation.)

The Account Effect

Of course, the obvious effect is that I now have twice as many shares than I did before, which means my initial cost basis is lower.

Oddly, though, Zecco doesn't show my cost basis correctly. I don't know if it's bug in their system, or if because the split was issued a stock dividend it will take a day for the dividend to reflect. Essentially, they're showing my initial cost basis as about $0.40 higher than my own calculations. I suppose that's fine with me, though, because when I do eventually sell SLP, having a higher cost basis will show less of a capital gain – and therefore, I will have to pay less taxes.

The Fundamental Effect

Of course, nothing has really changed fundamentally with the stock. While I don't recommend a buy at this point. With a PE of 33, the stock is trading a hair higher than the industry average of 30. In the beginning of September, SLP recently announced very favorable preliminary results for its fiscal year and fourth quarter, which ended in August (a full, audited report should come sometime in early November, if history is an accurate predictor of such things), with fourth-quarter increase of 28% over last year's fourth quarter and an annual revenue increase of 50% year-over-year.

The Technical Effect

I'm not sure how much impact the split has on the technical aspects of the stock. Recently, SLP formed a really ugly cup with handle pattern and had a 3-day run-up of 25% or so, hitting a new all-time high. Then it dropped like a rock, losing nearly all of its recent gain. Hard to say how much of that was due to the split vs. normal volatility in the stock. It's kind of in a state of limbo now, and the split just happened today, so it will be interesting to see how, if at all, the technicals will change.

Footnotes:

1. Investor's Business Daily recently listed SLP as one of the top 10 stocks in the health industry.

Zecco changes free trade offer: 10 trades per month, $2,500 min. balance to receive free trades

2007-10-01T10:31:00.001-04:00

I just got an e-mail this morning from Zecco stating that they are making two big changes to their free equity trade offer. These changes are effective immediately for accounts opened on or after Oct. 1; for accounts opened before Oct. 1, the changes will be in effect on Jan. 1, 2008.

The number of free trades allowed per month will be 10 (currently 40)
In order to receive free trades, you have to have at least $2,500 in your account.

For traders who exceed 10 trades per month or who have less than $2,500 in their accounts, trades will cost $4.50 apiece.

They claim that this change is to be able to bring more features and "to level the playing field for the self-directed investor." But I think Zecco is being disingenuous. Taking a look at each of these new features, I find it hard to believe that any of them really "level the playing field" for individual investors. Here's the list of features they are planning to offer, with my take on each one.

Significant investments in the number of service representatives and training. Okay, when did customer service become a "feature"? Is it just me that expects Zecco should already have enough trained and competent service representatives to provide the services it claims to provide? Not having these things would be a bug (if we were talking software), and is something that ought to be fixed. Diminishing the value of my account by 75% or more so that Zecco can give me a level of service I expect from them in the first place is rather disheartening.

Addition of 3 and 4 legged options strategies so you can trade butterflies, condors, and more and Release of a sophisticated options analytics platform. Okay, perhaps I'm just extremely inexperienced when it comes to trading, but adding complex options features doesn't seem like something that would "level the playing field for self-directed investors" since most self-directed investors probably do not trade options anyway. Furthermore, since option trading is not free ($4.50 per trade plus $0.50 per contract), shouldn't this feature pay for itself without having to reduce the number of free equity trades?

Access to ZeccoShare, the ground-breaking investor social network at zecco.com. This is an interesting one. The e-mail goes on to explain, "Independent of Zecco Trading, ZeccoShare lets you share your brokerage holdings, trade history and performance anonymously, and view the same of others." So, if it's independent of Zecco Trading, why is it being funded by a decrease in Zecco Trading features?

My final thoughts

It's likely the decrease in the number of free trades won't have much impact on me. In both September and August, I made two trades per month at Zecco, and I made only six trades total among all of my brokerage accounts during that time. I'm not likely to become much more of an active trader for awhile.

Nevertheless, I do envision a time when the number of trades I make per month might exceed 10. Perhaps I would never reach 40, but I would like to have some kind of buffer. Why Zecco felt the need to decrease the number of free trades by 75% is nuts. Cutting it by 50% to 20 trades per month would likely save them boatloads of money to implement new features, while giving people something of a buffer to play around a bit more.

On a final note, it's possible the $2,500 limit will hurt me. At the moment, I have just under $1,000 in the account. If I have to, I would be able to transfer some funds to the account to just sit there so I can continue receiving free trades, but I would be receiving a lower interest rate than I'm getting in my current accounts.

NetBank closes; I make $150

2007-09-30T03:57:00.000-04:00

Okay, I just went through a rather bizarre experience, and it's left me feeling a little like Indiana Jones when he retrieves his hat from underneath that slow-moving, heavy stone door at the beginning of Raiders of the Lost Ark.

A couple months ago, I decided to take advantage of NetBank's perpetual Drugstore.com affinity deal by opening a new checking account with $500 and a new money market account (MMA) with $1,500. I had heard that NetBank was being acquired by EverBank, and there was speculation in places like the fatwallet forums and the Bank Deals blog that once the acquisition was complete, such deals would be a thing of the past, so I figured I oughta take advantage of it while I could.

The deal required me to keep the funds in each account for 30 days, and then I could transfer out most of it while keeping the accounts open for six months to avoid an early closure fee. During that period, I also needed to keep $500 in the MMA to avoid monthly maintenance fees.

Fast forward 30 days, and I receive my $75 checking bonus no problemo. A couple weeks go by, and I notice that I still haven't received my second $75 for the MMA. So I write NetBank a nice little note through their secure messaging facility on their site, inquiring as to when I will receive the second bonus. A week goes by, and then another, and I hear nothing. In the interim, I discover that the EverBank acquisition deal had been dissolved, and after talking with my friend Dave, I figure I ain't gonna see that second bonus. So I transferred the money out, except what I need to avoid monthly fees, and planned to wait out the remaining months before I could close the accounts.

Then, this past Wedneday, I get an e-mail from NetBank confirming that I had met the requirements for the MMA bonus, and that I should see the bonus post on Friday. I have to admit, I felt even better receiving that e-mail, having written off the bonus in my own mind, than I think I would've had I received it at the same time as I received the checking bonus.

But I forgot to check my balance on Friday (busy day at work, and no time to do it at night), which wasn't a big deal since it's the end of the month and I would be updating my deposit account records soon anyway. And then today, I got quite a shock while reading through a backlog of personal finance blog posts.

BankDeals was reporting that yesterday the FDIC announced NetBank was going the way of the dodo.

Dear and fluffy lord!! I didn't even bother to read the whole thing. I immediately went to NetBank.com and saw the FDIC announcement on their homepage. However, I was still able to log in, and so immediately I did so. Sure enough, I did receive the MMA bonus. Sweet! As I mentioned in the comments to the BankDeals post, it appears I helped to squeeze the last drops of blood from that rock.

Unfortunately, after doing some digging around, it looks like some of NetBank's features have been disabled, like the ability to transfer the remaining funds out of my accounts. I'm not too concerned. NetBank rates weren't the worst, and except for the bonus, most of the funds were going to stay put for the next four months anyway. ING is now the owner for all of NetBank's deposit accounts, and I'm guessing something will happen before four months are up. I'll start worrying if I don't hear anything by the new year.

In the meantime, I'll ponder the amazing luck of being able to salvage a few planks from a sinking ship.

AOR final results

2007-09-14T22:23:00.001-04:00

Yes, the complete results are finally in! I got my final card this week, the Pulaski Visa with a $7k limit. I also have an addendum to the AOR: On Sept. 4 I applied for the Sony Rewards card (issued by Chase) and received a $6k limit. I got the card to take advantage of a deal for a cheap Sony eBook Reader.

In total, I received a credit line increase of $34,300, which is a hair shy of 100% increase. Not too shabby.

My credit card debt is now completely financed at 0% for a full year. In addition, I plan try my hand at some balance transfer arbitrage to help pay the full balance off by the end of the year.

Yay!

Now may be a great time to start investing in ETFs

2007-09-01T11:20:00.001-04:00

On Thursday, PowerShares Capital Management announced that they have received regulatory relief from certain SEC limits for all of their exchange-traded funds (ETFs), specifically from Section 12d-1 of the Investment Company Act of 1940. As their press release explains:

Under Section 12d-1 of the Investment Company Act of 1940, investment companies are prohibited from acquiring more than 3 percent of the total outstanding voting stock of another investment company, investing more than 5 percent of their total assets in a single investment company, or investing more than 10 percent of their total assets in two or more investment companies.

There are still some restrictions for companies who want to invest in PowerShares ETFs (see the press release), but ultimately this could be some great news for ETF movement over the next couple of months as institutional investors move money into these funds.

Here's my thought: While most ETFs generally follow the ups and downs of a specific sector or index, in a lot cases these ETFs are the most convenient – or even the only – way for many individuals and institutions to invest in those areas. With varying volatility in the markets, fund managers and board members may be looking to reduce risk and take advantage of selected sector trends by investing even more of their capital in ETFs, and this relief lifts one restriction that previously may have prevented some institutions from doing so.

If (and it's a BIG "if") institutions start increasing their percentage of investments in ETFs, over the next few months that could mean that ETFs in general will outperform the sectors and indices they intend to follow. In other words, if you get in now you could take advantage of some gains in ETFs that will be partially due to increased demand for those securities.

Of course, this would be a short term play. In the long run, ETFs are likely to continue performing relative to their sectors and indices.

So, what to buy?

Even if ETFs do better than their respective indices and sectors in the short run, there's no guarantee you'll make a profit buying any old ETF you run across. Dropping 5% vs. 7% is "doing better" – but of course you'd still want to shy away from any loss. We're looking for better gains.

My initial thought is that the ETFs following broad market sectors and indices will be affected by this the most, since institutions are more likely to buy into them as large scale, less risky investments. And frankly, I think we're about done with all the recent correction business, but what do I know?

My friend Dave thinks pseudo-short ETFs also would do well, since most institutional investors have limits on their ability to short stocks – but PowerShares doesn't have any of these types of ETFs (yet).

If you have any thoughts, please a comment.

Added PF Blogs blogroll

2007-08-30T00:18:00.001-04:00

PF Blogs is a personal finance blog aggregator, and they're having a "deal" of sorts for anyone who wants to try out their Friends of pfblogs service. Basically, if you add their javascript-generated blogroll, you get three months free as a "Friend", which gives you:

an attention-grabbing gold star, highlighted entries, and premium listing in our blogrolls. In addition, you will receive gratuitous thanks from those who spent time and money developing pfblogs.org.

See full Friends benefits here.

Frankly, I don't know if I would keep the service. The $60 annual "donation" seems kind of hefty to me. Also, I don't get why the monthly ~~fee~~ donation is only $4.99, which works out to $59.88 for a full year, and is less profitable I'm sure because of PayPal fees.

But I may change my mind when I see how many people are referred to my site over the next three months. Dangit, now I gotta think up some interesting posts. ;o)

My debt reduction plan through 2008

2007-08-29T23:14:00.001-04:00

I was just browsing through the posts of the 102nd Carnival of Debt Reduction and came across Paid Twice's post about his debt reduction goals from now through 2009. I'm not quite as ambitious: I'll settle for a goals through 2008. Likewise, my goals are not nearly as ambitious as well.

Basically, I'd like to eliminate all of my credit card debt and half of my student loan debt by the end of 2008. That basically means paying down $9,200 in 16 months, or $575 per month.

The good news is, all of my credit card is financed at 0% through September next year, thanks to my recent, surprisingly successful app-o-rama. Furthermore, most of my student debt (~85%) also is financed at 0% indefinitely, so long as I continue to make minimum payments on a regular basis.

So here's my idea: Instead of throwing $575 per month at all my debt, why not make minimum payments and sock the rest away in a high-yield account, such as at AmTrust or Apple Bank for Savings or even E*Trade Complete Savings? Then, when my 0% transfers are up, I will be able to pay off a large chunk all at once, even a bit larger than I otherwise would have.

The trick, of course, is setting aside the money. I think I can do it.

I hereby deem my first AOR a rousing success

2007-08-26T19:48:00.001-04:00

Got some more results on my recent app-o-rama over the weekend. In addition to the cards previously mentioned, I received a CitiBusiness PremierPass card with a $4,000 credit line. I wasn't expecting this one, so I was pleasantly surprised when I got the card in the mail.

One bad bit of news is that I also got a notice from Bank of America saying that while I was approved for a $5,000 line on my new Bank of America Rewards American Express card, they lowered my existing WorldPoints card by an equivalent amount (to $10,000). It makes no nevermind to me, though, because I still get the $50 bonus and 0% on purchases and balance transfers for 12 months.

The underwriter's still out on my Pulaski application.

I made two balance transfers, for a total fee of $75, so now my credit card debt is financed at 0% for a year. About $2,700 of that is on my new CitiBusiness card, which means it won't appear on my personal credit report – which should help credit score recover quicker.

My total credit line increase with this AOR so far is $12,300. I still don't know how much my WaMu Visa will be.

TextPayMe referrals - $5 bonus

2007-08-26T19:07:00.001-04:00

There's a new SMS-based payment service called TextPayMe. I probably won't use the service, but I did sign up for the $5 referral bonus sent to me by a friend. If anyone is interested, send an e-mail to moneyliberty (@) gmail [d0t] com with the words TextPayMe referral in the subject line. All I need is your first name and e-mail address.

App-o-rama update

2007-08-22T18:29:00.001-04:00

I checked the status of my Bank of America American Express card application today and saw that I was approved for a $5,000 line. Nice.

Pulaski sent me a notice asking for some income verification information. I've submitted this by fax, so hopefully I will hear a result in the next day or two.

I looked all over for a Citi application status page online, but could not find one to check on the Business card. Not a huge deal, but I'm curious to know where I stand.

With the BOA Amex approval, I've received an additional $13,300 in confirmed credit lines so far. I still don't know how much the WaMu line is, so it will be at least another $500 more (though, hopefully higher...).

My first (micro) app-o-rama

2007-08-21T23:52:00.000-04:00

I was on vacation half of last week, and I spent part of the day on Wednesday putting together my first credit card app-o-rama (AOR). I first learned about the process in the FatWallet forums where a number of people share AOR experiences and even provide advice about how to make the most out of the process. Here is a recap of my own.

Why am I doing an AOR?

Two reasons, primarily:

Balance transfers: As noted in my latest debt update, I have about $6,600 in credit card debt. Approximately 60% of that is currently financed at 10.25% APY, and while the remaining 40% is currently financed at 0% APY from a balance transfer deal I did a year ago, it is soon about to go to a non-0% rate (not entirely sure what the go-to rate will be). Since the easiest way to get a 0% balance transfer deal is to apply for a new card, I'm applying for several in the hopes that one or two will come through with credit lines large enough to accommodate my balance transfer needs.
- While I would like at some point to take advantage of balance transfer arbitrage, that is not a consideration for this AOR.
Lower utilization percentage: One of the factors that affects credit score is utilization of revolving lines, measured as a percent of outstanding balances to available credit. More available credit lines will have a long-term positive effect on my credit score. (In the short term, my credit score will be hurt by the number of inquiries on my report as well as the lower average age of my credit accounts, but I'm okay with that.) This will ultimately give me better credit offers in the future.

Plan of attack: What cards to apply for

I identified six cards that I for which I wanted to apply. Here's a brief overview of the cards.

Card name	Balance Transfer details	Rewards
CitiBusiness Card	0% for 12 mos., no fee	Citi ThankYou
Discover Open Road Card	0% for 12 mos., 3% fee with $75 cap	5% cashback on gas
WaMu Visa	0% for 12 mos., 3% with $75 cap	No rewards, but free FICO score based on TransUnion report
Pulaski Bank Visa	0% for 6 mos., no fee	no rewards
Bank of America Rewards American Express	0% for 12 mos., 3% fee with no cap	WorldPoints, plus $50 bonus after first purchase
Citi Drivers Edge Card	0% for 12 mos.	6% on gas for 1st year

What I got

I set up all the applications and then clicked through them as fast as I could. Here's a breakdown of my success:

Immediate approvals:
- Citi Drivers Edge Card – $2,300 line
- Discover More (instead of Open Road) – $6,000 line
Delayed approval:
- WaMu Visa – (unknown line amount)
Pending:
- Pulaski Bank Visa – Asked for income verification documentation
- Bank of America Rewards American Express – Got a message that my application required additional review. Have not heard from them as of today.
- CitiBusiness Card – Got a message that my application required additional review. Have not heard from them as of today.

Ruminations

Overall, I'm pretty happy with my results so far. I was somewhat surprised at the Discover line I received. I already have a Discover card, so I wasn't really thinking that I would get that card. Plus, the credit line is large enough for me to immediately transfer the debt financed at 10.25% (at $75, the transfer fee is 1.875%, which I can deal with – better than 10.25%).

I would've liked to have received a higher limit on the Citi Driver's edge card, but $2,300 isn't bad. Plus, I already have a $2,600 limit on another Citi card, so I probably can work some magic transferring line amounts between the two cards.

I'm stoked about the WaMu card because they give you free monthly credit scores. Beats paying for the service.

If I get the Bank of America Amex card, that would be nice, especially if it's large enough to transfer my current 0% financed debt. That way, I can take advantage of the $50 offer to help pay some of that down.

I don't necessarily expect to get the Pulaski Bank Card. That was something of a whim application. But you never know. Also, I won't be too disappointed if I don't get the CitiBusiness card.

Affects on credit score

I had planned to track my credit score both before and after the AOR, but something was screwy with the service I tried to sign up for and I was not able to get a score immediately before the AOR. The last score I have is a FICO of 707 on 7/26, nearly three weeks before the AOR. Hard to say what it might've been on 8/15. I have no idea what it is now. High 600s maybe....

Discover pulls through: Returns $16.71

2007-08-20T11:13:00.000-04:00

A couple weeks ago I complained that Discover took $16.71 in accrued cashback bonus from me because my account had been dormant for a little while. I wrote them a message through their secure messaging on their website asking to give it back to me. Today, I received my statement and see that I received $16.97 in cashback bonus this month, but I only put about $200 on that card (and most of that was gas, which has a different cashback rate and is a separate line item). Doing some quick math, I found that I earned approximately $0.26 on my non-gas purchases, which means I got $16.71 in some other cashback method.

I haven't received a note back from Discover, but I now have enough to redeem $20 of cashback bonus. I'm going to apply it directly to my balance and then pay $20 extra on one of my other cards. Good deal.

Debt update: August 2007

2007-08-15T19:11:00.001-04:00

Well, it's time for my monthly debt report for August.

I have to say, I'm a bit embarrassed posting this, and you'll see quickly why.

August 2007 Debt Update
Debt	15-Jul-07	15-Aug-07	% Change since July	% Change since May-07
Mortgage	$60,908.07	$60,813.72	-0.15%	-0.46%
Car	$14,721.33	$14,526.91	-1.32%	-3.49%
sub	$75,629.40	$75,340.63	-0.38%	-1.06%
Student	$4,793.30	$4,702.94	-1.89%	-2.29%
Credit Card	$6,619.20	$6,815.54	+2.97%	-10.33%
sub	$11,412.50	$11,518.48	+0.93%	-7.21%
Total	$87,041.90	$86,859.11	-0.21%	-1.92%

Notes

Yes, you read this right: Our credit card debt increased nearly 3%. We had a number of expenses related to birthdays, but we also went out to eat more than we should've. Unfortunately, the ratio of 0% vs. non-0% financed debt is leaning more toward the latter than it was last month (about 40% of the total is 0%, and 60% is non-0% financed).
The rest of my debt repayment is going along nicely as it was before. It's just sad to see how quickly progress can be erased by lax discipline with credit cards.

Updated: Fixed a small error in my credit card calculation (hadn't taken into account a payment that I made yesterday). Changed the notes slightly.

Recycling saves you money

2007-08-13T11:40:00.001-04:00

I'm not a greenie by any stretch of the imagination, but I do like to think of myself as somewhat practical when it comes to saving money. Therefore, even though I might not be inclined to recycle because people try to guilt me into, I do concede that recycling can be a smart financial move.

Here are a few examples of how I've saved money with recycling.

Fewer garbage bags – Our city provides curbside pickup for recyclables, and a few months ago the city even gave every household two big blue bins to help with that endeavor. Now of course, I am forced to pay for this service through my taxes, but that's no reason not to take advantage of it. Anyway, I've become quite dogmatic about making sure my family separates recyclables from trash. The amount of recyclables we put out each week easily would fill up at least one large kitchen garbage bag, and possibly two. Since most weeks we use about two large kitchen garbage bags for our trash (not including the several smaller baskets we have in our bathrooms and bedrooms, which we line with plastic grocery bags), that means we're saving one-third to one-half of what we might otherwise spend on garbage bags.

Note on garbage bags: Our collection service doesn't actually require that garbage be bagged – it only has to be "properly contained" such as in a barrel. Of course, not using bags for household garbage could get messy, since it includes anything from food to – well, use your imagination. But it's handy to be able just to chuck stuff into a barrel when cleaning out your garage or basement. If you're bagging everything before tossing it out, check with your city's Works Department (or whatever they call it in your neck of the woods) or the collection contractor directly to find out if you can save some money on bags.

Cash back for returned beverage containers – I live in a state that has a container deposit law for carbonated beverages. I'm not generally favorable of these types of programs because there are hidden costs to taxpayers and businesses, such as the requirement for stores to pay employees, rent machinery, manage funds, etc., to administrate the redemption process. However, on a personal level, I typically get more money out of the system than I pay into it, since I pick up bottles and cans I see on the see on the sidewalk, etc.

Incidentally, I heard a story on the radio recently that mentioned only about 23% of refundable containers typically are not redeemed. In California, that translates to $250 million per year in forfeited deposit money (they didn't give statistics about other states). Which is to say, people are paying a pretty significant tax without even knowing it. And that means 77% of containers aren't being returned, which to me seems to be a failure if the point of the program is to encourage recycling.

Other Opportunities

Scrap metal and other commodities – If you have, say, spare aluminum rods lying around or are remodeling your house and have to rip out a bunch of copper piping, you can always take it to your local scrap metal recycler and get a few spare bucks.

Investment opportunities – There are a number of companies that specialize in recycling, such as the scrap-metal recyclers mentioned above. Note that the recycling industry is still fairly new, from an investment perspective, so you might not be ready to take on the risk involved with such investments. However, if you are willing to take the risk, a few companies worth looking at might be Appliance Recycling Centers of America Inc. (ARCI), Metalico, Inc. (MEA) and Metal Management, Inc. (MM).

Disclosure: I own shares of Metalico. However, none of the stocks mentioned specifically above are an endorsement or recommendation for purchase. You should always do your own analysis and be aware of each company's uniquely potential risks and rewards before purchasing shares.

Baby boomers, Social Security and the gray ceiling

2007-08-08T18:56:00.000-04:00

My good friend Speedo sent me some thoughts about baby boomers, Social Security and the "gray ceiling." He requested my thoughts; I asked if I could respond by blog, and he agreed, so here it is.

For those who think that personal finance blogs should stick to personal finance and not politics: Sorry. Social Security is a Big Deal™ when it comes to personal finance, and the fact that it's mired in political debate doesn't change that.

The Issue: Baby Boomers "Retiring" while Working

Speedo wrote (links added by me):

This week's issue of Newsweek contains Robert J. Samuelson's second article of the year to talk of the impending issues facing Social Security. He has already had an article this year that talks about what ridiculous percentage of the federal budget is composed of entitlements. Already 40%, entitlements could reach 75% of the federal budget by 2030 if nothing is done. As we all know, nothing is exactly what is being done. He also states ... that taxes will be increased from 30 to 50 percent or budget deficits will quadruple. The purpose of his article is to suggest that think tanks tackle the issue of aging baby boomers and social security.

My first thought is, dang, it's nice to see someone in mass media who seems to "get it." After reading these two Samuelson articles, I am downright hopeful that at least a few greedy baby boomers might actually see the light and realize that forcing their own children and grandchildren to fund their retirements is completely insane. How they don't see it coming back to bite them in the ass is beyond me.

Some think tanks have started to tackle the issue, including CATO (mentioned specifically by Samuelson) with their Project on Social Security Choice, but I agree that there isn't nearly enough talk about it. It's the biggest single expense of the U.S. government, and most of the people running for the top spot barely take two breaths to discuss it.

The Crux: Younger Workers Pay for Rich Old White Guys to Play Golf

Speedo continues:

I'm assuming right now that you can be collecting a pay check and a social security check once you hit benefits age.

This assumption is essentially correct, according to How Work Affects Your Benefits (SSA Publication No. 05-10069, January 2007), which says "If you work and are full retirement age or older, you may keep all of your benefits, no matter how much you earn." If you take early benefits and earn more than a certain amount, some benefits are withheld, but you start receiving full benefits once you reach your full retirement age.

The problem with this is that "working retirees" should not get both the fruits of their labor and welfare. The initial intent of Social Security was to ensure that people would be able to at least subsist when they got too old and/or or too sick to work. It was never meant to be passive income to let rich old white guys "redefine retirement." Which apparently means playing golf and going on cruises and whatnot, if you believe that guy from Law and Order who does the TD Ameritrade commercials.

It really chaps my ass that old white guys get to play golf on my dime, and I mean that literally. More than 5¼¢ of every dollar I make goes directly to retiree beneficiaries, and my employer pays another 5¼¢ (self-employed individuals pay a full 10½¢). How'd I get that figure?

The standard Social Security tax rate is 12.4% (6.2% each for employees and employers, or 12.4% for self-employed individuals), which means I would presumably take home that much more each paycheck if the government didn't take it up front.
According to Understanding The Benefits (SSA Publication No. 05-10024, May 2007) "85 cents of every Social Security tax dollar you pay goes to a trust fund that pays monthly benefits to current retirees and their families and to surviving spouses and children of workers who have died."
$1 * 12.4% * 85% = $0.1054 or 10½¢

The Gray Matter: Hogging all the good jobs

Speedo gets fired up now, and who can blame him?

That is complete BS considering a large portion of the baby boomers are continuing their careers into an advanced age and contributing to the gray ceiling phenomenon. You can't have it both ways. Either get over yourselves and mentor the younger generations into prosperous positions or get the hell out. If you're expecting us to pad your retirement with an extra tax burden, then don't limit our earnings potential at the same time.

I completely agree with this sentiment. Now, don't get me wrong, I have no problem with old people, even rich old white guys, working. But when they collect Social Security, that's just crazy. I mean, freakin' Warren Buffett collects Social Security – "I get a check for $1,700 or $1,900 or something every month. I'm 74. And I cash it." – and he doesn't seem bothered by it, despite his claim that he's taxed too little. How absurd!

Okay, so not everyone is as rich as Buffett, but people who work over 65 earn about $67,000 per year according to PayScale, which isn't shabby. And of course, many of the jobs these people hold include those we all aspire to – CEOs, presidents and senior executives and whatnot. But we can't get to them.

So what do we do?

The Fix Part 1: Cut 'em off

Here's Speedo's answer:

A twofold approach would work best at fixing social security. First, how much social security you receive should be dependent upon how much money you have (savings), and/or are receiving (pensions) while collecting. What? That's not fair? Well suck it up folks, life's not fair. Life's not fair for the younger generations you want to screw out of a chance at economic prosperity. You've been telling generation Xers and Yers life isn't fair since they were little, it's time you dealt with it too.

Why is it that when anyone suggests reducing or eliminating Social Security benefits, people get all defensive and say that the government owes it to them? As I've mentioned before, the government runs many kinds of welfare programs that only some people are allowed to benefit from, even though taxes to pay for them come from the public coffers. For example, I can't benefit from WIC for a number of reasons, including that I'm male, not a child and make too much money. But for some reason people seem to think that Social Security is akin to a savings account, from which they should be able to withdraw as much as they put in.

So let's cut 'em off. Or at least ~~some~~ most of them.

Anyone who has paid into the system and who makes more than the poverty level – not just from their job but including other income such as other government benefits, investment earnings, interest, pensions, annuities and capital gains – should not get Social Security benefits. You don't like it? Give up your job, and then you can start collecting benefits.
Those who have paid into the system and earn something below the poverty level should receive only as much as they need to bring them up to the poverty level (as long as it isn't more than they normally would receive anyway). Don't like it? Get a better job – it's what the rest of us have to do.

Yeah, it's heartless and cruel, but then so is making someone pay a 10% tribute the rest of their lives so you can play a few extra rounds of golf and hire a pool boy.

The Fix Part 2: Let us opt out

The second prong of fixing social security would be allowing the generations that have nothing to do with keeping politicians in office who haven't done a damn thing about fixing it to opt out. Since when has the government been more efficient at using my money than I have? Just think Baby Boomers, treat the future generations decently and maybe it won't lead to a string of retirement community arsons around the country.

There's no reason why Social Security should be mandatory. Anyone who wants to should be allowed to opt out of it and fend for their own retirement. Of course, that means giving up any claim to future Social Security benefits, including anything I've paid into it so far, and I would be okay with that since I don't expect to receive them anyway. Having an extra 6.2% per paycheck would rock, and presumably companies would be able to apply their portion to more compensation and direct benefits for their employees.

What we don't need is some "private account choice" managed by the government. Or any other cockamamie plan that still basically has the government handling things. Because we'd just end up in the same situation as we're in now.

Of course, what we really need is someone willing to even bring up the issue for national debate. I'm glad that Samuelson, and probably others, are starting to address the issue. Hopefully it open the door to make things better.

Does not watching TV make you more productive?

2007-08-08T07:50:00.001-04:00

I glanced at a Yahoo! Finance article this morning that claimed you would save well over a million bucks by not watching TV – for the rest of your life. It's an interesting article, and I encourage everyone to read it for some insights about both the upfront and "hidden" costs of watching TV.

But it did raise my dander up a bit toward the end, especially in the sections related to commercials and "opportunity costs."

Commercials: The claim is that the average person spends an additional $200 per year for every hour of TV he or she watches, because the commercials entice you to buy that product. The example they given is that if you watch 4.5 hours of TV per day, you will spend $6,300 more each year than if you don't watch TV. I'm not arguing the figures, but I'm not convinced that watching TV is the cause. Rather, it's more likely a symptom of a larger issue of people not being able to properly budget their lives, whether it's money, or time, or any other commodity. The person who cuts out (or down) their time spent watching television is more likely to already realize that he needs to better allocate his resources, and that probably has more to do with how much he spends per annum than watching TV does.

Opportunity costs: I hate it when people claim that your time is worth so many dollars an hour. You see these arguments all the time, that by stopping X you're saving $Y. This example is at least "conservative" because it assumes your time is worth at least as much as the Federal minimum wage, but that's as arbitrary number as any since really your time is worth (in dollars) exactly as much as that amount of time brings in, whether you're watching TV, gardening, reading or doing any number of other things.

Okay, say you stopped watching TV and started gardening: If you had a garden before and you were paying someone to weed it for you, then sure, you're saving money; however, if you didn't have a garden before, then now you're spending money that otherwise would not be spent for seeds, soil, weedkiller, plant food, trowels, gloves, and any number of other things. If it's a vegetable garden, maybe it will pay off in providing enough food for you to cut down your grocery bills, but it's not given. And if it's a flower garden, then you're simply doing it for entertainment and aesthetic reasons, which are likely the same reasons you were watching TV. So what are you really saving?

Furthermore, there's no reason why you can't be productive while watching TV. I frequently do necessary activities that don't require a lot of thought, such as cutting coupons and blogging ;o), while watching TV. Sure I could save money and perhaps time by doing those things without watching TV, but there is value in entertainment. Taking control of your personal finances means being able to afford doing the things you like to do, and if you like watching television, and can afford to do so, that's okay.

Final thoughts: Cutting TV means nothing if you don't do something productive

Now, I'm not claiming that people should watch (and pay for) TV in every circumstance. Obviously, you can indeed save money, and possibly earn more, by cutting out all the television in your life. But my point is, "not watching TV" itself will not really save you that much in the long run, and if you cut out your TV without replacing it with something else productive, you're not really benefiting yourself much anyway. And there will be other costs for any activity you choose to replace it with, so think long an hard about what your real goal is by cutting out television. If you just end up buying PC games and spending hours on the internet playing team StarCraft or Savage or something, then you probably haven't saved much.

All in all, I probably do need to cut back on the amount of TV I watch, especially since I've recently complained about not being more productive.

List of freebies

2007-08-06T07:38:00.001-04:00

There's a mediocre article today at Yahoo that purports to tell you where to find the best freebies. The first section tells you that you can get some free music at a few sites. *Yawn* The rest of it doesn't get much better.

I guess the info in this article is good for those who don't regularly read financial blogs, but it's rather basic for anyone who has done any kind of internet (or other) research about freebies. So, to supplement this meager article, here are a few of my own fav freebie resources.

Fat Wallet Free Stuff Forum – These freebies are a bit more tangible. Members of the Fat Wallet community constantly post information about freebies that you can get mostly online. Most are samples of products that you have to sign up for at a company's website; other freebies include things like coupons for free items, etc.

The MotherLoad Blog – Amy of MomAdvice.com writes a daily blog, which includes a weekly Freebie Friday post. There's some overlap between the items she lists and what you can find at the Fat Wallet forums, but since I don't always have time to browse Fat Wallet, I find the Freebie Friday posts give me a good list of the best samples.

Free After Rebate – If you don't mind spending a little up-front money, then this site is for you. Free After Rebate gives the skinny on all kinds of items that are (ahem) free, or quite cheap, after rebate. Lately, they seem to have mostly software, but usually it's software-in-a-box, not just downloads, so you may feel like you're actually buying something. It also seems that recently a lot of the items listed have significant shipping charges, which doesn't necessarily mean they're a bad deal, they're just not always "free" in the strictest sense.

Where do you go for your freebie fix?

The modern American dream: Turning hobbies into something more

2007-08-02T22:54:00.001-04:00

We all have hobbies. Here are a few of mine:

Getting free money!
Reading and writing (more than just finance blog posts, too!)
Helping out at Distributed Proofreaders
Giving out free e-books formatted for handheld devices at Plucker Books
Playing guitar

Some people are able to take their hobbies and turn them into something more. I don't mean obsessions, although that happens. I mean people who actually make a profit, and perhaps even a living, by doing what they love to do.

Unfortunately, I have not yet seemed to be able to take that extra step. Oh, sure, I made $1,000 in 10 months from various online deals, but that's pocket change and not something that I could really do full time – likely because I'd just get bored of it, but also because probably I would eventually run out of deals.

Part of my problem is that I'm just not dedicated enough to put the amount of work required into taking my hobbies to the next level. Maybe I was wrong before: Maybe to make money from a hobby, you do have to turn it into an obsession. Although I've done much better on this particular hobby (Money $ Liberty, that is) than some of my other ones, my history is not stellar. Take Plucker Books for example: Disregarding the frequent server outages and other things that pull the site down from time to time, the biggest issue is that I simply haven't taken the time to build it into the mass-media conglomerate that it could potentially become. Why? Well, probably 'cause I'm lazy. Or maybe it's because I have no balls.

When it comes down to it, trying to turn a hobby into a money-making machine is just as risky, perhaps riskier, than buying stocks off the OTC BB. I think part of the reason why I haven't done more with Plucker Books (or related ideas I've had) is that I just don't have the cojones to put any money into it. Because if I did, then I'd actually have to get off my ass and do something. (Actually, I probably wouldn't even need to get off my ass, which I guess just goes to show how lazy I really am.)

Oh well, I didn't intend for this to become a self-flagellation post, but it has. Likely I won't do much about it. Hobbies are fine, in and of themselves, but it would be great to turn a hobby into something more, something that lets me make lots of money and be happy doing it. I guess that's the modern American dream, ain't it....

Lower taxes may not mean more giving – but it does mean less taking

2007-08-01T17:59:00.001-04:00

This post is a response to two posts from Free Money Finance. Please read them before reading my comments below.

I'm not targeting FMF, as I've seen these types of comments elsewhere. But since he mentions the whole "taxes vs. giving" issue, I'll use his posts to launch my own commentary.

It really ticks me off when people correlate taxes to charitable giving. Firstly, it's never clear to me what people consider "giving"; I assume they mean donations made to "nonprofit" organizations as defined under U.S. tax codes, which leaves out a whole subculture of giving that includes individual gifts (or no-interest loans) to friends or family members and social functions such as benefits that help people pay for health costs. But what really gets my dander up is the implication that because I'm not giving enough (whatever "enough" is), I deserve to have my money taken from me.

FMF is right in agreeing that taxes are paid, not given – just like ransom is paid, and not given. People can argue all they want about it being payment for a service, but when it comes down to it, I can choose whether to obtain phone service or cable service or any number of other services available on the market. However, I cannot choose which services my taxes pay for, and many of those services I'm even disqualified from taking advantage of because I earn too much money.

Furthermore, many of the so-called "services" provided government aren't even services – such as the handouts of cash-money to foreign countries because they happen to have a lot of people who have AIDS. And don't even get me started on military spending.

Finally, let's not forget that after military spending, the largest single federal expense is Social Security, which is quite literally robbing Peter to pay Paul (who previously was robbed to pay Mary – who was simply robbed). Oh, right, Social Security is how we protect our elderly, except for the fact that IF THE GOVERNMENT HADN'T TAKEN THEIR MONEY IN THE FIRST PLACE MAYBE THEY COULD'VE TAKEN ADVANTAGE OF THE 10% ANNUAL STOCK MARKET GAINS!

Taxes have nothing to do with giving. They only have to do with taking. Regardless of what people would do if taxes were reduced or eliminated – spend it, save it, pay down debt or give it away – without taxes you would have much less theft.

Don't know how to get rid of foreign change? Try a parking meter!

2007-07-31T10:34:00.001-04:00

I heard a bit on NPR this morning about New York City selling 500 pounds of foreign coins harvested from parking meters throughout the city.

The Department of Transportation, which makes about $90 million from parking meters annually, has collected bids for the foreign coins and plans to announce the best offer Monday.

About a decade ago, the agency decided to sell foreign coins it collected because it was impractical to exchange them for U.S. currency. In previous years, selling the coins has netted the department between $2 to $4 a pound.

This got me thinking: What a great way to get rid of foreign change. Okay, I know what you're thinking – doesn't that screw over the city? Let's see.

According to the article, the most common coin used is the obsolete Greek drachma (GRD). According to this site, the most recent, non-commemorative 1-GRD coin, minted between 1988 and 2000, is approximately the size of a dime and slightly heavier. At 2.75 grams, it would take about 166 GRD to equal a pound. In 2000, when Greece converted to the euro, the drachma-to-euro exchange rate was fixed at 100 drachmas = 29.35 eurocents, or about $0.40 USD. After doing some math, 166 GRD is equal to about $0.48 USD, which means that the NYC DOT is getting up to $4 for $0.48 worth of foreign pocket change – about a 733% premium!

(If older 1-GRD coins, which are about the size and weight of a nickel, are used the premium is closer to 900%, since they're getting the same amount of money for fewer coins.)

Ok, so that's how much the DOT gets for the coins now, but how much did they "lose" (or rather, not gain) from not collecting US coinage? Well, let's do the math: Assuming a drachma gives you equal time as a dime, 166 dimes would equal $16.6. Ooh, ouch – so that means the DOT ultimately loses about $12 per pound of drachmas ($0.072 per coin), not including the time and money it takes to sort and store the extra coins. For the older nickel-sized drachma coins, the DOT loses about $1 per pound ($0.01 per coin), which is much better but still a loss. Stated another way, at 500 pounds, that's anywhere between a $500 and $6,000 annual loss on these coins.

Now, before you start feeling bad for the poor city guv'mint, let's put that into perspective. As noted above, NYC DOT takes in $90 million in meter revenue per year, and compared to that, $6,000 is (excuse the pun) pocket change. Plus, it may just so happen that some people pay more into their parking meter than is actually used (and some people pay less, so essentially that may be a wash – but keep in mind that tickets handed out by meter maids tend to cover the latter, whereas the former is a nice bit of icing for the city budget).

Okay, so I'm not saying I think you should use foreign coins in parking meters, because that's probably illegal and I wouldn't want someone to go to jail because I encouraged them to do something silly like that. But if you happen to need a few minutes to run into the store or whatever, and all you happen to have on you are a few drachmas, I wouldn't worry too much about it.

Credit report and score oddities and updates

2007-07-27T00:03:00.001-04:00

Here are a few recent personal experiences related to credit. Just the facts.

Round-robin reporting

I've noticed that one of my student loan providers updates the account information at the credit agencies in a round-robin fashion. That is, one month it updates Equifax, the next month it updates TransUnion, and the third month it updates Experian. I have no explanation for why they do it this way. Perhaps it's cheaper. All of the history is available on each report (up to the last reported date), so apparently they do provide all of the info, just on a staggered basis.

Odd 9-point score drop

I've started a free trial of MyFico's Score Watch, which gives me my FICO score based on my Equifax report. In the last week, my score dropped nine points, and I tried today to figure out why. Basically, the only difference I can find is that my total revolving credit balance increased by $52 (an insignificant increase in overall utilization percentage), and the number of revolving accounts carrying a balance increased from 5 to 6. I'm guessing that the second piece is the more influential change, but it's rather a larger decline in my score than I would've thought.

Credit line increase approved

A few months ago I had requested a credit line increase on one of my credit cards through the issuer's website. The disclaimers said specifically that the request would not result in a credit inquiry ("hard pull"), and it did not. However, initially I was declined, because at the time I had a collection account listed on my report. Since then, the collection account has been removed, and so I sent a letter to the credit agency requesting that they resubmit my corrected report to the credit card issuer. I also sent a letter asking the issuer to review the updated report and reconsider my line increase request. They did, and I just got a letter today notifying me of a $1,200 increase to an even $15,000 line. Okay, so it wasn't much, but it only cost me $0.86 in stamps and no hard pulls.

Discover stole $16.71 from me

2007-07-20T01:42:00.001-04:00

So, about a month or so ago, I noticed on my credit report that I still had a Discover account. I had stopped using it a couple years ago when my rate went way up for undisclosed reasons.

Anyway, because Discover is running a 5% cashback bonus on gas this summer, I had used the reactivated card when we went out to Ohio for a family reunion to gain a few cashback dollars on my account.

So, today I got a notice in my e-mail that my Discover statement was ready. I logged in to look at it and I noticed something odd in the cashback bonus section.

Redemptions This Period -$16.71 FORFEIT - Inactivity $16.71

What!? That's bizarre. I thought cashback bonuses couldn't expire. I had a strong urge to learn more about it, so I deftly navigated over to my research tool of choice and googled: discover forfeit cashback

Long story short, it turns out that Discover cashback bonuses don't expire – but they can be forfeited. I found the Cashback Bonus FAQ and read:

Q: Does my Cashback Bonus ever expire?

A: Your Cashback Bonus never expires as long as you use your Card. However, if your Account is closed, is in default or is inactive for longer than three years, you may forfeit some or all of your rewards. Log in to the Account Center to see the Cashback Bonus Terms and Conditions for additional information.

So, I read the terms and found:

If an Account is inactive for 36 consecutive months, any amount of $20 or more in accrued Cashback Bonus awards will be paid to the Cardmember as an Account credit in $20 increments. If the $20 minimum or an increment of $20 thereafter is not reached, that amount will be forfeited. If an Account is closed for any reason, any Cashback Bonus awards in the Cashback Bonus Account will be forfeited.

So the question is, has it really been three years since I used my card? It's possible, I guess. Discover doesn't have any of my old statements online, but they do list the last payment date – or rather, the month and day: November 13. What year, I have no clue. Let's see, November 2006 would've been 8 months ago; November 2005 would've been 20; November 2004 would've been 32 – could it really have been November 2003? I suppose. But I don't think so.

Why not? Because back in 2004 I took out a loan from my 401k to pay off a bunch of credit cards. (Off topic: Taking a 401k loan is not a move I recommend, looking back, but that's another post.) Likely, I paid off the card with the funds from that loan, and haven't touched it since.

Of course, I could confirm this by going upstairs and finding my statements from that time period, but it's 1:40 a.m. and my wife's sleeping. She probably wouldn't appreciate me rummaging in our filing cabinet for any amount of money.

In the meantime, I'm shooting off a message to Discover customer service asking why they stole $16.71 from me.

Pop money ethics: Part 2 – What do you need to disclose when selling a home?

2007-07-18T13:51:00.001-04:00

Shortly after I started this blog, I decided to provide some commentary about a joint survey/quiz performed by CNN and Money Magazine, which contained questions related to money and ethics. Here are my thoughts on question 2.

Question 2:

You are selling your home. Your neighbor, who works at City Hall, tells you about a project that would make your neighborhood more attractive, but would lead to a $25,000 assessment. Would you tell prospective buyers?

Yes, I would tell them (60%)

No, I would not (40%)

What is it with these questions? Apparently, Money Magazine's editors are obsessed with government and how it screws us over with money.

The ethicists said:

There are many things sellers can keep to themselves, but a real possibility of a five-figure assessment isn't one of them. So unless the neighbor is an unreliable gossip or there's a reason to believe the city council is only toying with the idea of putting lines underground, the sellers are obligated to explain the situation to serious would-be buyers. After all, you can bet those sellers would want the person they buy their next home from to be just as forthcoming.

Ok, so here's my question: Why are individuals responsible for letting other individuals know about what some local government might or might not do?

I'm not saying sellers should lie or otherwise try to deceive their customers. However, I don't see any reason why a house seller has to tell the buyer about a potential city program that might increase the house's tax assessment. For one thing, if such a program were to happen, it would be public record, and buyers could easily call city hall to ask about any such programs. In fact, any serious buyer should do that anyway (or hire someone, such as a lawyer, who could find out stuff like that). Furthermore, as a buyer I would want to talk with my potential neighbors to ask about the neighborhood, schools, and other topics of interest. Likely, such information would come to light during those conversations.

Now, don't get me wrong, sellers do have a contractual (and, therefore, moral) obligation to warn buyers about potential problems with the actual property. If the basement fills up with water when it rains, that's something the buyer ought to know. (Of course, caveat emptor still applies here, and all buyers should hire professional inspectors to help them discover such things.) But there's a big difference between disclosing the current condition of the property and trying to predict how local government meddling might affect the future value of that property. Making predictions about future value is rarely a seller's legitimate concern, and you should be wary of any seller who claims to know how much a house will be worth in a year or two.

As to the last sentence, "golden rule" ethics are fine for Sunday School lessons, but for adults participating in complex transactions like buying a house, they simply aren't enough. Regardless of how much information you might share with a potential buyer, when you buy your own house, you'd better be prepared to obtain independent confirmation of everything the seller tells you. Remember that different people have different values, and you might not want other people to treat you the same way they like to be treated.

Previous Questions

Pop money ethics: Part 1

My first entry in the Carnival of Personal Finance

2007-07-17T16:16:00.000-04:00

Sweet! My entry into the 109th Carnival of Personal Finance, which was posted over at the Mint blog yesterday, was accepted. The post I entered was Are you ready for an unpaid leave?.

To those who are visiting my site as a result of the carnival, welcome! I hope you enjoy reading what I've written. Stick around and let me know what you think, even if you disagree.

For those who don't know, the Carnival of Personal Finance is hosted each week by a different blogger, who collects posts related to personal finance and shares them for all to enjoy and learn from.

Here are a few posts I enjoyed from this week's carnival:

Canceled Oldest Credit card from The Finance Buff – Contrarianism can be a good catharsis, and this dude shows how "conventional" wisdom sometimes ain't so smart.
Credit Card Bonus Chasing and Your Credit Score from fivecentnickel – I actually had read this before the carnival, and it was quite thought-provoking as I've been planning to do a credit card app-o-rama within the next month or so (the process and results of which I will post here, of course...).
I Don’t Do Credit Card Arbitrage from Advance Personal Finance – It's good to know some of the dangers, but I still plan on doing arbitrage at some point (part of the reason I'm planning an AOR)

I plan to submit more posts in the future. Enjoy!

The myth of free health care (and other things)

2007-07-16T14:39:00.000-04:00

So, yesterday I got into a, um, discussion about health care with a friend's wife. She's from New Zealand, and she had made the claim that health care in her home country is free. I had to object.

Don't worry, I won't get into the politics we discussed. But I did want to investigate some of the myths that people seem to have about "free" services provided by the government and how they affect personal finances.

Myth #1: Government can give things away for free

Um, no, it can't. Everything the government does is paid for through taxes (or levies, fees, tariffs, etc., which are just other names for taxes). Governments can't even spout their gibberish for free, since every word spoken or written by a politician has to be jotted down by paid staffers, sent to government printing presses and distributed for the world to be able to read their blather.

With regards to services, such as health care, education, etc., while they may not require direct payment, they are hardly free. They are funded by taxes – income tax, property tax, sales tax, school tax, "sin" taxes, import/export tariffs, government lotteries (YES! lotteries are taxes) and so on. But because the source of funding is separated from the spending of those funds, people seem to act as though this money comes from nowhere, even though they know better in the backs of their minds.

Where it becomes personal is that, for every dollar taken and spent by government, that is a dollar less that individuals have to spend on their own financial matters, including to purchase their own health care, insurance, education, etc. Frédéric Bastiat has a great chapter about taxes in his essay titled "That Which Is Seen, and That Which Is Not Seen" which explains the issue well.

Myth #2: You pay less in taxes than you would for health care

I had someone actually use this argument on me, and I was speechless. Not because I didn't have a response, but because I was surprised that somebody actually believed it.

For a certain subset of people, this is undoubtedly true. It's quite possible that over the course of my lifetime, I will pay less in taxes than I will pay in health care. But there is no way this can be true for many people. In fact, in a nationalized system, it would be impossible for this to be true for everybody. The ratio of health care expenses to taxes are dependent on a number of factors, including salary, how sick you are, how expensive it is to treat your sicknesses, and so forth. To have a system that breaks even would require some people to pay more while other people pay less.

This myth is really a reformulation of the myth that government is somehow more efficient than private enterprise. It has been shown, time and again, that government never does anything efficiently.

On a personal level, even if I did benefit by paying less in taxes vs. health care, there's the ethical problem of making somebody else pay for my health care (since the difference would have to be made up by someone else's taxes). Why should I not be responsible for my own health, and others be responsible for their own?

Myth #3: Government can control the costs of health care

Government may be able to regulate price, but it can never control costs. Again, referring to Bastiat's "That Which Is Seen, and That Which Is Not Seen," for every price control the government implements, there are a number of unintended consequences.

First, when you limit the amount of profit available from any given endeavor, you necessarily limit the number of people who wish to pursue that endeavor. In terms of health care this means that by instituting price controls, you limit the number of doctors, nurses, technicians, administrators, investors, researchers, and so forth. And likely the ones lost will be the smartest ones, who will go into some other field where they can use their knowledge to earn more money (if only to pay back their school loans).

Furthermore, the loss of these people will result in things like longer wait times (because there are fewer doctors), fewer new drugs and medical techniques (because there are less companies willing to spend time researching them), and lower standards of care (because providers have to rush from one patient to the next). These things all contribute to lower value of the care received, inversely increasing the costs to the individual.

Myth #4: You have an obligation to help others who cannot pay for their health care

In reality, the only financial obligations I have are to myself and those who I have agreed to be responsible for, including children (inherently, I believe) and possibly my spouse, friends and other family.

Now, don't get me wrong: I do believe it is good to help out others who are in need, but only on an individual level that requires you to analyze the situation. I've attended benefits for people hurt in accidents or who have developed sudden illnesses. I've also donated to non-profit organizations that help fight poverty and illness in third-world countries. But these were individual choices, not choices made by politicians grandstanding for their own causes and lobbyists.

Myth #5: Arguing against "free" health care means I like the current U.S. system

Heck no! I think the current U.S. health care system blows. It's riddled with special-interest lobbying, government interference and silly bureaucracy. It sucks and needs reform.

But I don't get how people who acknowledge the problems now come to the conclusion that government should have more control over the health care system instead of less. The government can't even effectively take care of the limited number of people on medicaid, medicare and any number of state plans that are available – how the heck would they manage if they controlled everyone's health care? It's just not logical.

Take charge of your personal finances!

Personal finance – whether it relates to health, education, saving, investing, or whatever – is just that: Personal. Nobody will watch out for your interests better than yourself, and handing over your personal financial obligations to the government never will put you in a better position than you can achieve on your own.

Debt update: July 2007

2007-07-15T21:55:00.000-04:00

Well, it's time for my second monthly debt report. Hard to believe it's been a month already, but it has.

Note that last month's numbers were a bit off. I had done them in a hurry, and I had forgotten to take a few things into account (no need to go into details...). I've added a column to the table below to provide a more accurate report of the May snapshot.

Also, I've decided to regularize my updates to report the status of my accounts as of the 15th of each month. No particular reason to choose this day, except that it seems a good one.

Finally, these figures do include two payments that have not yet actually posted to my credit card accounts. They should post Monday.

July 2007 Debt Update
Debt	15-May-07	15-Jun-07	15-Jul-07	% Change since June	% Change since May
Mortgage	$61,095.59	$61,002.02	$60,908.07	-0.15%	-0.31%
Car	$15,052.82	$14,889.64	$14,721.33	-1.13%	-2.20%
sub	$76,148.41	$75,891.66	$75,629.40	-0.35%	-0.68%
Student	$4,813.30	$4,857.99	$4,793.30	-1.33%	-0.42%
Credit Card	$7,600.71	$6,935.60	$6,619.20	-4.56%	-12.91%
sub	$12,414.01	$11,793.59	$11,412.50	-3.23%	-8.07%
Total	$88,562.42	$87,685.25	$87,041.90	-0.73%	-1.72%

Notes

I paid down another 4.5% of my highest-interest debt – credit cards. Yay! I possibly could have paid more, but we went to a family reunion out in Ohio in late June/early July, and gas is expensive these days.
I have about a year and three months left on one of my student loans. It's getting to the point where I'm wondering if it would be more worthwhile to just pay it off, but the only way to do that would be to lessen the payments on my credit cards, which would be dumb since my CCs are at a higher interest.
It's really, really nice to see these numbers going down this fast. It goes to show how simply creating a tool to help you track your progress can really motivate and make you feel like the goal of being debt-free (or at least, mostly debt free) is obtainable.

$1,000 in bonuses in 10 months

2007-07-14T23:43:00.000-04:00

About 10 months ago, I started a focused approach to taking advantage of various deals and promotions offered by companies, mostly financial institutions. I didn't really know what to expect, but I knew that some people made a decent amount of extra cash from such bonuses.

This week while updating my tracking spreadsheet, I realized that I have reached a milestone. In approximately ten months, I have received over $1,049 from various bonus offers and similar deals. In addition to time spent filling out online applications and completing other tasks (such as making trades or diverting some of my direct deposit money), receiving this sum cost me a mere $21.14.

In honor of this accomplishment, I would like to highlight a few memorable deals.

ShareBuilder – $170 ShareBuilder frequently offers bonuses for opening new accounts, and I took advantage of three of these promotions last winter for a total of $150 in cash and gift cards. Plus, I received $20 for initially enrolling in ShareBuilder through eBates. Because the deals required me to make a trade, I purchased shares of PowerShares Water Resources ETF for the same amount as each bonus I received. With dividends and capital appreciation, the amount is now worth about $225 (+24%).

Hedge Street – iPod Shuffle ($79 value) + $0.10 Hedge Street specializes in futures trades, and I have to admit I thought long and hard about this one before I did it. Fortunately, someone posted a little howto in the FatWallet forums showing how to spread the trades for minimum risk. The bad news is, I did it wrong; the good news is, because I did it wrong, I actually made $0.10 on the trade. Booyah! I had intended to sell the iPod on eBay, but after two scam attempts, I decided just to keep it, and I now use it regularly.

Obopay – $85 Obopay is a payment service whose signature feature is that you can send payments using cell phone text messages. For a time, they were offering a $25 signup bonus. Because they allowed customers to sign up for three accounts (so long as they were associated with different phone numbers and e-mail addresses), I was able to receive this bonus three times. In addition, I used my first account to refer the other two with a referral bonus of $5 each. I closed my Obopay accounts in mid-June because they talked about raising the fees.

Bank accounts – $390 Banks frequently offer bonuses for opening new accounts and referring other customers. Not much more need be said.

What's in store for the future?

Now that I've built up some momentum, I'd like to set a goal for the next year. I think it would be reasonable for me to aim for $1,500 in these types of bonus deals between now and the end of July 2008. As of now, I have about $450 already started in pending deals ($370 of that the criteria has already been met, I'm just waiting for the payments), which puts me on a good footing.

But I will have some difficulties, as I now have bank accounts already open with many of the big financial institutions that offer the best bonuses. Also, the conditions for deals seem to be getting more complex, with companies more frequently requiring longer commitments, larger deposits, direct deposit, debit card usage, and/or other qualifying actions.

So, here are some things I need to do to meet my new goal.

Search out more local deals. I've received some flyers for bonuses from local banks and credit unions, but have yet to take advantage of them.
Close accounts I'm not using, so I can take advantage of future deals for new customers. (Many banks consider you a new customer if you haven't had an account in six months or a year.)
Look for other types of deals, such as credit card bonuses, trial services, purchase deals give me more cash back than I paid for, and the like.

Let me know if you have any tips on good deals, and I'll post them here. Also, here are some sites that I use regularly to look for deals.

Are the benefits of municipal bonds offset by higher taxes?

2007-07-13T23:37:00.000-04:00

I know a few people who swear by municipal and state bonds because their interest is non-taxable. However, recently while reading some more info about munis, I had to wonder if the benefits of this tax-free income isn't offset by higher taxes elsewhere. Check my logic on this and let me know what I'm not taking into consideration.

For the most part, municipalities issue bonds because they don't have the money now to pay for the capital projects they want to perform. For example, bonds commonly are issued to raise money to build or repair schools. Instead of saving up over a number years to pay for the expense, the municipality takes on some debt so that its citizens can benefit now and pay later (somewhat akin to a person taking out a mortgage to buy a house).

Of course, going into debt means that at some point that debt needs to be paid back. Fortunately, municipalities have a revenue stream – i.e., taxes and fees. Ideally, the municipality will be able to pay back the debt plus interest using the taxes and fees it generates on a regular basis.

But of course, the ideal case is never the actual one. What happens many times is that municipalities have to increase taxes to pay the debt. Sometimes, the increase is planned and included in the vote held before the bond issue, but other times the city council (or whomever) may not realize until later that they grossly underestimated their revenues and now need to jack up taxes to pay for their shiny new high school – which may already be in disrepair. And higher taxes usually mean higher prices for goods.

Of course, the city can always try issuing more bonds to pay off the old ones, just like you could apply for a new credit card when your first one is maxed out. But eventually, the city has to pay the debt back or go broke. And that means higher taxes.

Another alternative is to ask for a bailout from the state or federal government. Of course, this just means that less money goes to other programs, and it likely can cause an increase in taxes at those levels. Also, municipalities might end up using state or federal money intended for something else to pay back bond debt, which while it might not directly increase taxes, it means fewer services are being provided with the tax dollars received, lowering the effectiveness of your tax dollars.

All this is to say that if you live in a city that issues bonds, you may be getting a raw deal. And if you are buying bonds from cities elsewhere, you might not be making out quite as good as you thought you were, because even though interest income from the bonds is tax free, you may end up paying higher overall federal and state taxes.

Of course it's a complex issue, and there's no simple answer. But be careful to consider all of these additional pieces of the puzzle when looking to buy bonds. Be sure to ask yourself questions like the following:

How does the city propose to pay for this debt?
If increasing taxes and fees, am I part of the group that will bear the burden?
What are the likely secondary effects of those increased taxes and fees?
Would it be easier (and therefore save me time and money) to just buy a corporate bond for which I have to pay taxes?

UPDATE: There's a great article on Lew Rockwell's site titled Property Taxes, Retirement Promises and Municipal Bonds by Gary North that provides some more analysis of issues related to municipal bonds.

Weedkiller, and other ways to profit from increased carbon dioxide

2007-07-12T10:18:00.000-04:00

National Public Radio's Morning Edition aired a story this morning about how more carbon dioxide in the atmosphere could mean an increase in the size and proliferation of weeds like dandelions and poison ivy. Ever the optimist, I immediately thought: What companies make weedkiller, and how can I buy into them? Right after that came the thought: What other products are we going to be using more of in a higher CO₂ environment?

Well, with more weeds growing everywhere, there are going to be a lot more bugs, which is good news for investors because a lot of companies that make herbicides also make insecticides. And of course, there are all those "alternative energy" efforts going on now, but that's kind of boring. But hey, since there will be more water covering the earth's surface (you know, because the polar ice caps will melt), do you think maybe there will be more boats? Perhaps not, if there indeed will be more hurricanes, as some folks predict.

If weeds fare better as CO₂ increases, won't other plants also do well? I wonder how specialized REITs like Plum Creek Timber will fare when their forests grow bigger trees faster. Seems like a great opportunity to me.

One thing I won't be investing in is companies that make coats. I feel sorry for the Burlington Coat Factory and London Fog – they'll likely go under.

Of course, as more CO₂ is injected into our atmosphere, you can rest assured that the government will ~~interfere~~ take measures to protect our environment. That means things like more regulations for cars, including changes to gas and catalytic converter efficiency standards. Scrap metal recyclers will probably become a big deal here, too, since it's a lot cheaper to melt down existing metals than dig them out of the ground. And hopefully they'll use bio-waste to fuel their smelters – how do I get into cow poop?

The best way to add foreign currency to your portfolio

2007-07-12T07:38:00.001-04:00

I gotta admit, I'm a lover of exchange traded funds (ETFs). Ever since I bought shares in the PowerShares Water Resources (PHO) fund last year as part of a ShareBuilder promotion, I've been a convert. I've added to my position several times since my initial purchase, and I'm up 18% collectively since last September. (This is not a recommendation to buy PHO now, just a historical look at my own purchases and a testimony to my conversion.)

Recently, as I've read about the further demise of the U.S. dollar, which continues to decline in value compared to many of the world's other top currencies. True, it hasn't reached the hyperinflation that the Zimbabwean dollar has recently seen, but it's not for lack of trying. The U.S. central banking system hemorrhages money like a femoral wound, and there's no sign of shutting down the presses anytime soon.

(Incidentally, I don't really think that other countries' central banks are doing anything different. It's just that we 'Mericans seem to have perfected the prestidigitator's art of pulling money out of thin air slightly faster than most other countries, and therefore we get to don the title of "The Illustrious Money Makers" whereas the wannabes elsewhere are entitled only to use the adjectives "Great" or "Amazing.")

Sorry, enough political blather. My point is that from a financial perspective the dollar is dropping, which means that while I've gained 18% over the nine months or so that I've held PHO (15% of whose holdings is in foreign countries, I might add), I've really gained somewhat less because my dollars don't buy quite as much as they use-ta-did.

So, naturally, when this realization made its way through my thick skull, I turned to ETFs to see which of them might release some of the pressure of the G-forces caused by the dollar's plummet. Fortunately, SeekingAlpha has a handy-dandy Currency ETFs and ETNs page that list the major players, making my research a whole heck of a lot easier.

There are a whole host of specific-currency ETFs, but that doesn't seem to cut it for me. While I think the dollar is likely going to continue down generally, I don't feel competent enough in my FOREX abilities to play it against any particular other currency. So I will eliminate all of those along with the PowerShares DB US Dollar Bullish Fund (UUP) because, well, I'm not bullish on the dollar. Let's take a look at the two that are left.

PowerShares DB US Dollar Bearish Fund (UDN)

From the fund's description at Deutsche Bank, UDN is based on the Short US Dollar Index Futures Index

The USDX® futures contract is designed to replicate the performance of being ... short the US Dollar against the following currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona and Swiss Franc.

Sounds good. Looking at the returns, however, they are less than exciting. The 1-year and 5-year returns are up there at 11.5% and 9.9% respectively, but the 10-year return is 4.4% – which you could match or beat with a good CD offer.

Details about the index tracked by this fund are available here.

PowerShares DB G10 Currency Harvest Fund (DBV)

Again, from the Deutsche Bank fund description page:

Seeks to track the Deutsche Bank G10 Currency Future Harvest Index™ by (1) entering into long futures contracts on the three G10 currencies associated with the highest interest rates, (2) entering into short futures contracts on the three G10 currencies associated with the lowest interest rates, and (3) collateralizing the futures contracts with United States 3-month Treasury bills.

Now that sounds very interesting. Strictly speaking, this isn't a bet against the dollar specifically, but in a way it's better because if the dollar is doing well the fund is bullish (long) and if the dollar is doing badly it's bearish (short). And looking at the returns, the strategy seems to work, with an average 10-year return of 11.15%, and higher returns in recent years (8.4% since inception).

You can view details about the index this fund tracks here.

My final thoughts

Based on past returns, clearly DBV is the better choice. And, I think fundamentally it is sounder as a long-term currency play. While I am currently bearish on the US$, I'm not sure I always will be, and it's quite possible that UDN will drop like a rock. DBV seems to take this into mind by playing on both the strengths of strong currencies and weaknesses of weak currencies.

I'm not sure I will buy either one, but if I do, it will likely be DBV. As a parting thought, you might be interested in this article at SeekingAlpha.

Are you ready for an unpaid leave?

2007-07-11T07:19:00.000-04:00

On Monday, Pennsylvania Governor Edward G. Rendell enacted a "furlough" – that is, an unpaid leave of absence – for more than 24,000 nonessential state employees as part of a budget dispute. Disregarding the politics of such a move, I wonder if any of these people were prepared financially for such an immediate loss of income.

Fortunately, the PA budget dispute was resolved in a day, and all the workers are back to work. But the situation could very easily have lasted for a month or longer (you know how politicians are...). Would you be prepared for a sudden long-term, unpaid leave? What can you do to protect yourself in such an event?

Start an emergency fund. Do you have a cache of cash to pay the bills for at least a month? If not, you should start building your savings now. If you have no immediate (i.e., credit card or other short-term) debt, I'd recommend even saving enough to pay two-months' worth of bills.

Reduce expenses now. If you don't already, take a look at your spending habits now while you still have an income. If you start shopping frugally, get rid of unnecessary services (do you really, really need digital cable?) and take your time to research large purchases. Not only will you save money to help build your emergency fund, but if an emergency comes you will be better prepared for the belt-tightening foisted upon you.

Stay insured. If you have an extended medical leave, you will not only possibly lose your income, but you will also start incurring huge expenses. Some employers carry short-term disability insurance, and many let you purchase long-term disability insurance for a few bucks per month.

Keep your resume up to date. If your job is such that you are subject to a sudden unpaid leave at the whim of somebody else, then perhaps you should look for something a little more stable. Sure, a lot of people don't know until it's too late that their job may be in danger, but if you keep your resume current and are confident in your abilities, then you will be much better prepared than the majority of people.

Stock Doubling: Is it possible to turn $500 into $1 million with penny stocks?

2007-06-30T07:00:00.000-04:00

Disclaimer: This post is in no way an endorsement of the Stock Doubling project, its related Web sites or of any stocks recommended on those sites.

About a month or so ago I stumbled across the Stock Doubling blog. It's a very interesting project: Basically, one guy is trying to see if he can pick at least one stock per year that will double. If successful, With a starting capital of $500, that means he will reach $1 million in 11 doubles (approx. 11 years).

The biggest problem, of course, is finding investments that will double. And of course, to do that you need to find small companies on the way up, not only in profitability but also in the minds and hearts of investors. That's not necessarily an easy task.

I won't give a history of the project – you can read that for yourself – but initially, it has been successful. Depending on your outlook, the guy running the project is either amazingly skillful or amazingly lucky, as his first four picks have doubled in less than the one-year timeframe he has set, turning the initial $500 into $4,000. His current pick is up about 33%, and the company seems to be doing well with more contracts coming in all the time. But I wonder if this is a trend that can continue to scale.

Because, of course, the small companies you have to buy to get the stock to double are the ones that are the most risky and have the lowest-priced stocks. While it's likely that a few thousand dollars aren't going to affect the price of even these "penny" stocks much, what happens when this guy starts investing $128,000+ in small companies? At some point, you're either going to have to start picking larger companies, which means they will be less likely to double, or your own purchases will start affecting the stock price significantly.

All in all, though, I like the guy's approach. He seems to do a thorough analysis of each stock, as he explains in a couple different posts (and more in-depth in a non-free "e-book" titled Before it Moves). And he doesn't make any claims to be able to reach his goal. He notifies his blog readers regularly about updates, and discloses his expectations about how things like earnings announcements will affect the price. I'm not ready to sink in a lot of money in this project, but I may start looking a little closer at his picks.

Epilogue, describing the slaying of the second beast, and providing closure to my tale

2007-06-27T22:50:00.001-04:00

When I got home, I had an item in the mail from TransUnion. The package contained a letter informing me that the investigation was complete with the following result:

COLLECTION AGENCY #XXXXXXX DELETED

Thus, my quest is complete. Shearing off the tails of the slain beasts, I had them stuffed, mounted and placed in a file labeled "Credit Reports" in the cabinet next to my bed.

In which a collection item is successfully removed from my Experian credit report

2007-06-27T18:03:00.001-04:00

(Don't you just love Dickensian titles?)

Wherein I am hospitalized and the woes arising from my indisposition

Nearly two years ago now, my appendix burst and I had to go to the hospital for an emergency appendectomy. I spent four days in the hospital and another week or so at home. About a month later, I started getting calls from the hospital saying I owed them $1,400 for the pleasure.

At the time, my wife was not working and our youngest daughter was less than a year old. I explained this to a kindly young lady in accounts receivables, made a small initial payment and set up a plan to pay $25 per month on the balance. The maiden was very nice, and said the hospital's only request was that I increase my payment amounts after a few months as I was able.

An account of collection and how it came to be reported

Fast forward a few months. In August 2006, I missed a payment, so in September I sent in two payments together. However, they didn't arrive until after the payment date, which put me 30 days late from my August payment. In that short period, the hospital sent my account to a collections agency.

Unfortunately, I was not as wise then as I am now. The collection agency, gross and uncouth fiend that it is, called my home and spewed its poisonous, loathsome spittle at my wife. She fied! them and told them to call me at work or on my cell phone, and hung up. However, they caught me one day when I was working from home, and after a very heated discussion with the wretch on the other end, I did two things that I have since learned you should never do:

I admitted that the debt was mine.
I agreed to make payments.

The depths of debt, and a description of the unfaithfulness of lesser men

Over the next few months, through the Christmas season, I paid high tributes to this collection agency, a rotten and unyielding slaveowner. Then, in February, I paid the balance of it off with part of a bonus I received.

And then, whence I believed that I had been delivered from the heavy yokes encumbering me for six months, I discovered that the collection agency had reported the account to two of the three most fearsome credit beasts in the financial world: Experian (EXP) and TransUnion (TU). Ooh, I was enraged. I tore my clothes and poured ashes on my head, after which I had to wear sackcloth (or something purported to be sackcloth). The worst part is that they didn't report it when the account initially arrived on their doorstep – they reported it after I had started paying them.

So in March I called that vile collection company and, using honey-like tones and sychophancies of all manner, I confirmed that they had received my final payment and that my account no longer was in arrears. With a full strong voice, I then relayed that the company must send word to the credit beasts and clean the scent of my blood from their claws. The collection agency's page said the beasts would be notified immediately, and that their appendages would be well washed by the following month. Yeah, right; a month later, both my EXP and TU reports not only still showed the account, but it indicated a balance of nearly $500.

Wherein I begin a quest of reparation and face sundry dangers, pitfalls and fierce beasts

So, I searched far and wide to see what champions I could raise to my cause. A friend pointed me to the CreditBoards.com forums, which has an amazing amount of information about how to fix and improve your credit. I found a sub-forum dealing specifically with medical collections, and started reading.

Boy, was I impressed. I had never realized, until those weeks I spent scouring the CreditBoard forums, how many laws there are relating to the proper reporting of medical- and credit-related information. Being a libertarian, I generally don't think that more regulation is a good thing, but I have to tell you, when I saw the legal tactics described (and presumably used) by some of the boards' members to improve credit scores, I was duly impressed.

So, armed with the knowledge and experience of those who had successfully fought collection accounts before me, I prepared to head off to do battle with the credit reporting agencies, collection agency and, if necessary, that bastion of high medicine, the hospital itself.

To TransUnion I wrote the following letter:

Dear Credit Union,

My name is Curtis Surname, and my Social Security Number is 666-66-6666.

I am sending this dispute certified mail #XXXX XXXX XXXX XXXX to ensure that you receive it.

Specifically, I am disputing account #XXXXXXX on my report #XXXXXXXXX dated DD/MM/YYYY.

Please advise me as to the name and address of the creditor, the date and type of service, and to whom the service was provided.

If you can obtain this information, I also would need the name of the person providing this data, and the manner in which it was provided in order that I may pursue additional legal remedies.

Sincerely,

Curtis Surname

While TransUnion staggered, dazed and blinded by my stunning assailment, I thrust my hard, cold blade at Experian, using their online dispute mechanism to demand similar verification of this same account. I was not as sure that my blows against Experian would result in victory, as it was seemingly a much too easy process. However, I had nothing to do but wait for a response.

Wherein the second of my foes is fallen, and the first remains but in weakened form

My dispute to TransUnion arrived two days after I sent it, and the following day my Experian report displayed a small bit of text next to the disputed item: "This item currently under investigation." During the next 35 days, no change occurred.

And then, suddenly, this morning, I received a short e-mail from auto.notification@experian.com stating simply:

The results of your investigation of information in your Experian personal credit report are now available for online viewing. For your protection, please review your results online within four days of the following date: 06/27/2007

Swiftly, and with much fear and trepidation, I followed the instructions provided to access my updated report. I scrolled down to see a blesséd little message that read:

COLLECTION AGENCY Account Number: XXX.... Outcome: Deleted

There was much rejoicing in the halls of my office.

During which we arrive at the conclusion of this particular tale, but without a final resolution, leaving you perhaps feeling unfulfilled, yet hopeful

And now, I have faith that simply time and patience will deliver unto me the second of my fearsome, yet mortal, enemies, giving me at last a radiant triumvirate of credit scores each above 700.

Are financial blogs making the market efficient?

2007-06-26T12:20:00.001-04:00

Kent Thune, a.k.a. Financial Philosopher, has a post containing, um, "evidence" that financial blogs are making markets more efficient. Basically, his argument goes:

The number of blogs has drastically increased over the last few years, and the number of financial blogs have increased faster than other types of blogs.
We are in an unusually orderly bull market.
The first is a major cause of the second, on the grounds of efficient market theory.

I am less than convinced for several reasons.

What makes a market efficient? I'm not a great proponent of the efficient market theory. For one thing, the idea that a price is "fair" is relative for stocks as it is for anything else. You might not be willing to spend $3 for a bottle of Mountain Dew at a theme park, but if I don't get my green caffeine fix, I'm likely to go mad and start punching little kids in the face, so I think it's worth it. Likewise, you might think that Google is a company that can do no wrong and at $500 it's a value play, whereas I might think you're crazy.

In addition, the fairness of a stock price is relative to its expected performance, which involves a lot of prediction. Sure, you can tally up current assets, multiply that amount by a safe expected return on investment to come up with some future price, and thereby determine whether the stock is worth buying. But that's still something of a prognostication game (and you should be wary of taking stock tips from anyone who claims to be Nostradamus).

But don't technological improvements (like more financial blogs) make the market more efficient? Um, not necessarily. Because while technology might be improving, there's no guarantee about the quality of the information being distributed. The information might not be bad (i.e., incorrect or harmful) information, but it might not be any better information than you can get anywhere else. A lot of the information I've read on stock-related financial blogs is the same information that that you get at The Motley Fool or similar sites.

Furthermore, not all information, even good (useful, ingenuitive, thought provoking, etc.) information, bandied about by financial blogs is of the "making markets more efficient" variety. Yes, it's good on a personal level to read things like "13 ways to tackle your credit card debt" and "my monthly net worth statement" – but that kind of information isn't really what's going to sustain a long-term bull market. (Yes, I suppose it could have some secondary effects, like giving people more money to invest in the market, but simply having more money to invest does not mean it will be invested efficiently.)

So what is the relationship between financial blogs and the current bull market? Coincidental, in my opinion. Markets are notoriously like Greek gods – finicky and prone to strike you with a lightning bolt on a whim. If there is a direct relationship, I would tend to think that the bull market is the cause of there being more financial blogs (because people would want to share, and tap into, the success), and not the other way around. What will be interesting to see is when this bull market ends whether there exist the same proportion of financial blog growth.

Don't get me wrong. I don't mean to imply that there is no value to financial blogs. Hey, I write one myself! :) But I find it very difficult to believe that financial blogs have any, even moderate, influence on the market.

Reducing day care costs in the summer

2007-06-26T10:02:00.001-04:00

After our mortgage, day care is probably the single highest recurring expense we incur at the moment, and during the summer months when we have two kids in daycare instead of just one, our daycare expenses will actually surpass our monthly mortgage payment – principal, interest, escrow and PMI included.

So, obviously at the top of mind are ways to bring down expenses associated with daycare. This can be a tough thing to do, because while you want a good value, you certainly don't want to just stick your kid in any old dive you happen across. You want to make sure both you and your child(ren) are comfortable with the atmosphere and feel secure knowing that your offspring will be playing and learning in safety.

Here are a few things to keep in mind when looking into daycare that might help you keep costs down.

Dependent care flexible spending accounts – Many employers offer tax-advantaged flexible spending accounts, and one type of account offered is for dependent care. Check out if your employer offers them, and if they do, take advantage of them immediately. Dependent care accounts allow you to deduct up to $5,000 per year from your paycheck before taxes to use for things like child care, day camp (but not sleepover camps) and other sorts of care. Also, depending on your employer's policies, you may be able to sign up for dependent care account outside of your annual benefits enrollment due to certain "life events" (birth, marriage, loss/gain of medical coverage, etc.). Note that there are some restrictions on how the the money can be used (such as the camp distinctions above), and you may have to do a little more record-keeping since you won't be able to claim the amount paid out of a dependent care account on your taxes (but you would be able to claim amounts paid over that).

Plan your vacations – Many daycare providers will make you pay for their services regardless of whether your child is present or not. However, in many cases providers will give you a certain number of days/weeks per year that you don't have to pay so that you can plan vacations and such. Be sure to read through your daycare provider's contract to understand their policy, and be sure to submit a vacation schedule to them in advance (many providers require at least two-weeks' notice).

Ask for flexible work hours – If you work for a company that allows remote access or "telecommuting," or if your job doesn't require strict "business" hours, you can work out shorter daycare hours. If you have a spouse, you might even be able to work out a system where one of you goes to work little later and the other leaves a little earlier, reducing the number of hours your kids spend in daycare while giving you more time to spend with your family. You might also be able to work out a deal where you are able to work longer hours some days and shorter hours (or even not at all) on other days. One thing to keep in mind, however, is that daycare providers may charge more for per-hour for part-time children than for full-time children, so be sure to check your providers' rates before making any permanent changes.

Ask a friend for help – Daycare providers, like people, come in all shapes and sizes. Some of the best, and most flexible, providers are simply friends who happen to like watching children. During the school year, one of our friends, who has a couple children of her own, watches our daughter after school. We pay her five dollars a day as a nominal fee (to cover snacks and the like), and she never charges us late fees or anything else (though we do give her a little more if school lets out early or something). This is great because 1) it's cheap, and 2) we know our daughter is getting loving care and having a great time.

Look for openings in specialized care facilities – There are a number of child care providers for children with special needs. These centers have highly trained staff, and often they are subsidized by state and/or federal funding. However, frequently they are not able to fill all of their openings with special-needs children, and they will open those slots to the general public. Even if you don't receive a subsidized rate, you can rest assured that your child is receiving top-notch care at a comparable price to other providers.

Got other ideas? Please share them in the comments.

I am a winner!

2007-06-20T21:36:00.001-04:00

Whoohoo!! I won! I won!

What did I win, you might ask? I won a handy, dandy CrossItOff.list from All Financial Matters.

I've never used the CrossItOff.list, but I am constantly struggling to organize my time and GET THINGS DONE! Sounds like this might be a great tool to help me.

See my (rather lame...) winning entry in this post, comment 51.

Incidentally, I have now won items from 40% of the MoneyBlogNetwork blogs. Last year I won 5 financial books from Blueprint for Financial Prosperity – one of which changed my financial life.

June debt update

2007-06-20T13:16:00.000-04:00

I don't intend to provide "net worth" or other net calculations on this blog, but from time to time I would like to provide updates about certain aspects of my financial life, particularly those related to specific goals.

One of my financial goals is to eliminate, or reduce as much as humanly possible, my debt. Therefore, to hold myself (and allow others to hold me) accountable, I will from time-to-time post a debt report. To show trends, I will post both the previous report and the current report, with % change on the latter. For this first report, I will use approximate figures from last month as my previous report.

Since negative numbers are good, I will display negative in the black and positive numbers in the red. (Yes, I'm a contrarian.)

N.B. These figures include debt for which I am directly responsible (credit cards, student loans) or co-signer (mortgage, car, etc.). They do not include any of my wife's debt (student loans, credit cards, other things I may not know about...).

May

Debt item	Balance
Mortgage	61,095.59
Car	$14,890.00
subtotal	$75,985.59
Student loans	$4,857.99
Credit Card	$7,090.54
Other	$-
Subtotal	$11,946.23
Total	$88,036.23

June

Debt item	Balance	Delta
Mortgage	$61,002.02	-$93.57 (-0.15%)
Car	$14,890.00	$0 (0%)
subtotal	$75,892.02	-$93.57 (-0.12%)
Student loans	$4,813.30	-$44.69 (-%0.92)
Credit Card	$6,678.50	-$412.04 (-5.81%)
Other	$-	$0 (0%)
Subtotal	$11,491.80	-$454.43 (-3.80%)
Total	$87,383.82	-652.41 (-%0.74)

Notes

I paid down 5% of my highest-interest debt – credit cards. Yay!
All but about $750 of my student loan debt is financed at 0% That's right, you read that right – 0% I'm making minimum payments of $10 per month on it right now, and I don't plan to up that anytime soon. :)
The car payment hasn't gone through yet this month, but it should go through in a couple days or so. That should decline by ~$150 or so.

Sharing salary information and "pay equity"

2007-06-20T00:56:00.001-04:00

FMF at Free Money Finance asks whether you should (and do) share salary info with the people you work with. It's an interesting question – and one that soon may be moot in New York.

The other day I heard a story on my local NPR station about a group pushing a bill in the NY state legislature to promote "pay equity." According to the person interviewed, women and "people of color" are paid less than other people in "different but comparable" jobs.

Anyway, one of the provisions of the bill would be to require employers to make salary information available to all employees. So, basically, other people would be able to know how much I make, and vice versa.

Now, I think it's fine if people want to share salary information with their close friends and family, but I see no real reason why any random joe has a "right" to my salary information. Even if he suspects he is being paid less than others doing the same (or similar) job, there's no reason why he would need to know the personal details of my pay.

I'm not dismissing the idea of unequal pay for women and minorities. Undoubtedly, sexism and racism exist, and that's completely shameful. But I do contend that it's nearly impossible to determine what constitutes a comparable job (the interviewee in the NPR story mentioned above compares school nurses to school groundskeepers – not sure how those jobs are "comparable"). And if you're trying to find out whether you're being paid similarly to others in the same job, there are other ways to find out.

Obopay, fees and consumer outcries

2007-06-18T14:14:00.001-04:00

A couple months ago I signed up for Obopay, a payment service loosely similar to PayPal that promotes ease of sending payments using a mobile phone or debit card. The primary reason I signed up for the service is that I could get an easy $85 in account-opening bonuses and referrals.

Once I opened the accounts, I decided to make the most of them by earning some extra cash through linkage trial deposits. Basically, I had to sign up for their debit card (three of them, actually, one for each account I opened), which triggered the generation of an account number. Once I received and activated the cards, I had to call customer service to get my account number and routing number so I could start creating links from my other bank accounts. In the meantime, I was able to create links from Obopay to my other accounts; however, creating links from Obopay was really, really slow, to the tune of about a week per link. (Looking back, the process was involved enough that the few extra bucks I gleaned wasn't really worth the time spent, but it was an interesting experience.)

Then, a couple weeks ago I got an e-mail from Obopay stating that their account fees were changing. Up until now, I hadn't had to worry about any fees, and the only one I expected to have to worry about was the transfer fee of $0.10 per transfer (a total of $0.30), once I was done linking all my accounts and ready to transfer the funds out. But the updated terms and conditions, slated to become effective on June 19, indicated a couple new worrisome fees:

$0.25 transfer fee (up from $0.10)
$1.50 debit card dormancy fee
$10 account closure fee

Of course, this was absolutely ridiculous, even if I planned on using the service. A 150% markup in transaction fees is outrageous, and any kind of blanket inactivity or account closure fees is simply unconscionable in my opinion.

So, last week, after milking a few more linkages out of them, I closed my Obopay accounts, all three at the same time. And apparently I'm not the only one doing so. According to a number of FatWallet threads, people have been swimming away from Obopay like Cubans from their motherland. Enough so that Obopay send out a second message the other day stating that they've decided to push out their fee increases, and not include the inactivity or account closure fees.

In my opinion, it's too little, too late, though. They've lost me and quite a number of others as customers. Granted, I probably would not have used their service much anyway, but had they not tried to pull the wool over my eyes and boom-shock me with some nasty fees, I might've kept my account open, and who knows, maybe even used it from time to time. Now, though, I think they've shot themselves in the foot. Maybe they'll eventually become profitable, but not until they learn that customers are not merely people to charge for services that can easily be provided elsewhere.

Calculating wealth as you grow financially

2007-05-24T15:18:00.001-04:00

The past couple of days has seen a number of posts on financial blogs about calculating your wealth.

Yesterday, fivecentnickel posted about Net Worth vs. Net Investable Assets.
FMF at Free Money Finance commented that he records liquid assets as "(the ones I can get my hands on easily and without penalty)"
Brad at Analyzing Wealth took the three calculations and discussed how they interact.

I am going to take the discussion one step further and posit that these calculations are just reformulations of the most basic financial advice. Starting with Net Liquid Assets and ending with Net Worth, you can gauge where you are in your financial maturity, and perhaps guide your way to financial freedom even faster.

Net Liquid Assets: Start here first

Net Liquid Assets (NLA) can be defined by the following formula:

Total liquid money (deposit accounts, cash)

– total immediate debt (credit cards, home equity, student loans and other debt [but not car])

But why is this a good measure? Primarily because it will show you what your historic spending practices are like. If you have a negative NLA, then likely you have been spending more than you are bringing in – which is the antithesis of the primary rule of building wealth.

If you have a negative NLA, I would suggest that you don't even bother looking at your NIA or NW numbers. While it's possible for your NIA and NW to be positive even though your NLA is negative, if you don't bring your NLA positive (or closer to positive), then likely your NIA won't stay positive for long, and your NW might even be severely affected.

The simplest thing to do if you have a negative NLA is start a budget. Apply as much as you can to immediate debt, and a little bit to savings, and soon you will have a positive NLA.

Important: I am not advocating putting every plugged nickel toward credit cards and other debt. Even while paying off your cards, which may take awhile, you should look into maximizing your money through contributing to tax-defferred or -advantaged accounts, especially if you have a 401(k) or other plan that your employer will contribute to.

Once you have a positive NLA, or if you already have one, you might want to start looking at your Net Investable Assets.

Net Investable Assets: Get growing

So, you have a positive NLA – which means you have some savings squared away. Also, you might have some retirement plans that you've been contributing to. Looking at your Net Investable Assets (NIA) will help you see how much you have available for a rainy day and for some bright shiny days down the road.

To make the calculation simple, we'll specify the NIA in terms of the NLA:

NIA =

NLA + retirement accounts

+ other non-liquid investments

– investment-related debt (margin accouts, real-estate loans for investment properites, etc.)

That's easy, eh?

Note that if you have a negative NIA, it probably means that your immediate debt is so high (and your NLA so low) that you likely are not saving enough for retirement. In that case, don't even look at your NIA yet – just go back and see my statements about how to lower your NLA. It also could mean that you are risking too much on margins or investment-related debt, which is a very bad situation.

If your NLA is positive, your NIA will almost always be positive as well. In this case, what you should do is look at ways to maximize your investments and help you grow your capital (which will increase your NIA even more).

Net Worth: The cherry on top

If you have a positive NLA and NIA, then likely you will have a positive net worth as well. In terms of NIA, your NW can be stated:

NW = NIA + (house value + car value) - (mortgage + car loan)

Basically, you're just adding the value of your house and car into the mix.

My personal take is that NW is a feel-good number. It says: Look at me, I rock! Which is why you should only look at it when you know it's going to be positive (and, preferably, significantly so). If you look at your NW and see a big, ugly red number, it's way to easy to get depressed – which could negatively affect your whole financial outlook.

If you do have a positive NW, however, and it's backed up by positive NIA and NLA, then you have a reason to celebrate. Congratulations – Start a personal finance blog, get thousands of people to read it daily, and watch it climb even higher!

A personal case study on the psychology of spending money

2007-05-24T10:59:00.001-04:00

So, I'm going to be in my good friend Speedo's wedding this weekend, and my wife and I haven't yet gotten a wedding gift for the lucky couple. While looking over the registry, I asked my wife how much she thought we should spend.

As I should've known, her answer told me, once again, how differently we look at money. The surprising thing, though, was that our roles appeared to be reversed. Typically, I am the one who thinks we should spend less money on gifts, but this time around, the amount I proposed was double the one my wife had in mind. When she explained her reasons for the lower figure, I heard all the arguments I had used myself in other discussions.

We have a set amount that we try to stick to for gifts (with moderate success)
We haven't spent as much as I had proposed for other people's weddings
Our cash flow at the moment is a bit stretched at the moment for various reasons
We are already spending a bit more than we had planned to travel to the wedding (we're taking two cars) and have to pay for a hotel and buy my tux

These are all convincing arguments, especially to someone who has used them before, so I really had to think about how I had come up with my figure. Through my introspection, I came up with the following things that may have occurred to me subconsciously:

We are actually better of financially now than we have been in the last five or six years (nearly our whole marriage). That's not to say we don't have debt – we do. But I guess I have a bit of residual euphoria after using our tax refunds to pay off a large chunk of debt.
In addition, within the next couple of paychecks, our cash flow problems are going to be resolved as I start seeing the benefit of the 401k loan payoff and increase pay from a recent promotion. This is a dangerous situation because I find that I am tempted to charge things I normally wouldn't put on my credit cards, "knowing" that I will be able to pay them off in a month or two.
On a more emotional level, Speedo is one of my best college friends, and the one of only two that I keep in contact with fairly regularly. My wife argued that we haven't spent as much as I've suggested even on family member weddings, but I guess I consider Speedo closer than many of my family.
- Don't get me wrong – I love my family. Hearing horror stories about other families, I realize that my extended family is extremely fortunate in that we all get along well.... But while I love them and wouldn't trade them for anything, I'm much closer to Speedo than many members of my family. That's just the way it is, and I'm sure my family members all have closer friends than me.

Anyway, we haven't settled on a final amount yet, but likely it will be somewhere between what my wife and I each proposed.

"Everybody's good enough for some change..."

2007-05-21T23:34:00.000-04:00

I was a mediocre fan of the band Live back when they were popular in the mid-90s, enough so that I have a couple of their songs on my iPod. One song in particular happened to play today ("Waitress"), and one line from it reminded of the importance of small-change transactions. It got me thinking about how small change has made a difference in my finances over the past year. Not all of them are positive.

Linkage - Many banks allow you to link to accounts at other banks, for transfer purposes. As part of the linking process, the originating bank will make two small deposits to your other bank account, which you then have to verify to complete the link. Some people take advantage of this process by performing all possible permutations of links to and from each account. Using this process, I have made an extra $45 over the past year, in many less-than-$1 transactions. I know someone else who has made over $75, and have heard stories about making much more.

%-back debit cards - Banks make money off of debit card transactions, and many of them encourage customers to use their debit cards more often by providing percentage-based cash-back programs. Most of these programs are similar to cash-back credit card programs, which aren't very new. I've earned about $28 in the last year using with such programs without really doing anything different than I normally would do.

Mountain Dew - My beverage of choice costs $1.25 at the vending machine in my office. It costs $1 at the Wal-Mart down the road, which I drive past every day. Assuming I buy 3-4 bottles per week, I could be saving $39-$52 a year by buying it an easy quarter mile away. Yes, I said "could be" not "am."

Of course, the question remains if I would really be saving any money buying it from Wal-Mart vending machines. With the price of gas these days, I probably would spend more than a quarter by turning off the main road, stopping the car, jumping out, buying some sodas, and then starting my car again.

I probably should just cut soda out of my diet altogether and drink water. That would save me at least $260 a year, and I would be the healthier for it. Short of that, I could probably save quite a bit by buying them in six-packs or something, but I'm afraid I'd be tempted to drink more because they are available, which would save me nothing.

Others? I use cents-off coupons, pick up coins I see lying on the ground and take a penny regularly (which I usually try to leave again at the next opportunity). I don't keep track of each of these things, but I'm sure they add up to significant amounts over the course of the year.

What about you? How has the small change accumulated in your financial life?

Pop money ethics: Part 1

2007-05-20T22:06:00.000-04:00

All Financial Matters posted about a new money and ethics survey at CNN. The survey was conducted by Money Magazine, and after each question you can compare your own money ethics with the participants' responses as well as commentary provided by Money Magazine's group of "ethicists" after each question.

Over the next couple of weeks or so I'm going to post a series of responses to the survey, including my on comments about the ethicists' analysis. If you haven't taken the quiz yet, hop on over to CNN and take it, and then come back and see what I have to say. Leave your own thoughts in the comments.

Question 1:

You're remodeling a bathroom and the tile guy offers a 20% discount if you pay in cash. It is clear to you that he will not report cash payments. Would you most likely:

Pay the full amount check (14%)
Take the discount and pay in cash (65%)
Refuse to do business with someone who cheats on his taxes (21%)

Right from the start, the question is rigged. Maybe I'm just naive, but I doubt very highly that most people would tell a customer that they were planning to do something illegal, unless they were a good friend or extremely sure the person wouldn't say anything. Anything more relies on assumption, which should be avoided in nearly all situations requiring moral judgment.

If the presumption of illegal intent is based on the large discount for cash payment, then one would do well to remember that there are number of reasons why a business person might prefer cash payments: To avoid the potential for bounced checks; avoid credit card fees; because he really, really needs the money and doesn't want to wait for the check to clear, etc.

In addition, the third option is extremely biased. "Cheats" is an extremely loaded word and should have been avoided.

Anyway, the ethicists said:

Happily, we live in a country where citizens are not obligated to report to the state the misdeeds they suspect others of committing. Still, knowingly profiting from someone else's cheating on their taxes is wrong - as wrong, for example, as getting a discount for letting the workmen install stolen tiles. In either case, the tile guy is stealing, and being a party to it is abetting a thief.

This is just plain irresponsible analysis. Consider the following scenario: You're walking along the street at night and are stopped by a mugger, who tells you at gunpoint to give him your money. You happen to have prepared for this scenario by sticking some of your money in your sock, so you happily hand over your wallet and continue on your way.

According to Money Magazine ethicists, you just stole from the mugger. You see, what they fail to realize, whether intentionally or just because they blissfully believe what the government tells them, is that when the government levies taxes, they are stealing from you. Not reporting income to the government is no worse than hiding money in your sock to foil a mugger.

I wonder who these ethicists are taking money from - they should have to pay it back.

What to do with a tax refund

2007-05-18T20:53:00.001-04:00

It's that time of year again, when the guv'mint so graciously and kindly returns the money it pilfered from us throughout the previous calendar year. Here it is, a little more than a month after my wife and I filed our income tax documents, and we just got our refunds. (Okay, so I suppose it's not the government's fault we are procrastinators – no matter how much we vow and swear and oath on New Year's to collect all the necessary documents and have it done and over with by mid-February, we never seem to get it done with more than a week left in the deadline. At least we've never gotten down to the very last day and had to deal with long lines at the post office or anything.)

Anyway, like I said, here it is, a little more than a month after we filed our taxes, and we just got the refunds. (Which, going back to my previous parenthetical, is yet another reason why you should get your taxes done a month or more before the deadline. My brother got his done in early March and got the refund in less than two weeks....)

So, where was I? Oh, right, we just got back our tax refunds. Together, the federal and state refunds totaled about $6,200. Now, we get to figure out what to do with.

Setting aside the ridiculous notions of blowing it all on a vacation or dabbling in penny stocks or what-have-you, here are the options my wife and I have considered:

Option 1: Pay down credit card debt. – For the last two years or so, my wife has been a direct sales "consultant" for a home decorating company. Essentially, she bought stuff from the company and tried to sell it at parties and other events. It was not a very successful business for a number of reasons, some of them our fault and many not. Many of the expenses that we weren't able to absorb went on credit cards. The refund would wipe out more a little more than 80% of it. (Yeah, go ahead, do the math. Our current total credit card debt is about $7,500. But that's another post.)

On the surface, it sounds like a shoe-in: Get rid of 80% of your credit card debt? What flavor of crack must one be smoking not to do that? To be specific, strawberry, but read on, because there are actually some good reasons not to go this route. Firstly, more than a third of our credit card debt is currently financed at 0% that isn't set to expire for another four more months. Furthermore, there are some other options.

Option 2: Pay off 401(k) loan. – A few years ago, I did something that could be called dumb. It certainly wasn't the dumbest thing I've ever done, but it was far from the smartest. The dumb thing I did was that I took out a 401(k) loan.

I won't get into why I took out the 401(k) loan (another post...), but suffice it to say that I and my family have paid dearly for it. It severely pinched our cash flow at a time when we should've been more careful – a few months after I took out the loan my wife became pregnant, and thirteen months after taking out the loan our second daughter was born. Between the bad business venture above and the expenses of pregnancy (which fortunately were somewhat alleviated because we still had a lot of items from when our first daughter was younger), cash flow was something we definitely could've used a bit more of.

One of the silly terms of the loan is that, while I am able to pay it off at any time without penalty, it must be in full. I can't, say, pay off part of it and use the rest to pay off most of my credit card debt. At about $5,000, that means I'd have to use most of the refund to pay it off.

Option 3: Pay down other debt. – Are you sensing a pattern? Don't worry, I'll dismiss this one pretty quickly. We have a mortgage, car loan, student loans and I borrowed some money from my mom a few years back that, although she says I don't have to, I'd really like pay back to her at some point. Broken down, here's what we could do (approximations only): Pay 10% of our mortgage; pay 25% of our student loans; pay 40% of our car loan; or pay my mom back and pay slightly less on any of those. But these aren't really options we'd choose right now, since all of the rates on these debts are lower than any of the CC debt we have, excluding the aforementioned 0%. Let's move along.

Option 4: Invest it! – As I mentioned yesterday, I am a longstanding veteran of the stock market, having owned stocks (outside my 401k) for a whole nine months now. Since then, I've earned a respectable 15% – a significantly higher rate than any of my debt, credit cards included. Assuming I could keep that up, it would be better for me to work my market magic and just keep paying off my debt as I am able, one minimum payment at a time.

Of course, that's a big assumption. Brash talk aside, I'm a newby at the whole stock market thing, and I realize that, except may for one stock I own, luck has a lot more to do with my success so far than anything else. More on that in another post. Not being able to guarantee a 15% rate, I'm going to have to put a big strike through this option – even if it is the coolest one.

So what did we do?

We went with option two and a little bit of option one. After paying off my 401(k) loan, we'll apply the leftover $1,200 to our highest-rate credit cards. The next paycheck after I pay the loan, I will see an extra $110, which I can then apply directly to my credit cards. Combined with a recent pay raise and some finagling of benefits, we'll soon be looking at an extra $500-600 more per month that will really help us aggressively pay down our CC debt. That will be nice.

What did you do?

Leave some comments and let me know what you did with your refund. If you didn't get a refund, share how you scooped up the dough to pay Uncle Sam.

Equity Instruments and Markets - downloadable course from NYU

2007-05-17T13:40:00.001-04:00

Not including my 401k, I've been "in the market" (i.e., the stock market) for about nine months now. So far I've done fairly well, but in the short time that I've been investing, while I've learned a lot by reading books like Rule #1 by Phil Town and The Intelligent Investor by Benjamin Graham (which I am slowly slogging through), I've quickly come to grips with the fact that there are huge swatches of theory and practice that I still have to learn.

Hopefully, though, that will change soon, because today my good friend Dave sent me a link to a 26-lesson MBA-level Equity Instruments and Markets class taught by Professor of Finance Aswath Damodaran of New York University. The objectives of the course as stated in the syllabus are to be able to:

value any publicly traded firm, small or large, domestic or foreign, healthy or troubled.

value a private firm for sale to another person , company or for purposes of going public (as an IPO)

value a division of a firm for sale or purchase

value the synergy and control in an acquisition

come up with a value enhancement strategy for a firm's management

define, describe, analyze and apply any multiple (PE, Value/EBITDA, Price/Book Value...)

separate fact from fiction, sense from nonsense and real analysis from sales pitch in equity research reports, valuations and general discourse.

The is amazingly timely, as within the last few months I have hesitated on making potential investments simply because I have not been able to make some of these kinds of valuations. I'm grateful that Prof. Damodaran has provided me this great opportunity.

Enjoy!

Where personal finance and individual freedom collide...

2007-05-17T11:45:00.001-04:00

It seems like such a simple concept, but it wasn't until last night when my wife said, "Everything is so much easier with money," that I realized there are very few blogs dealing with the Reese's-cup-esque relationship between money and liberty.

Sure, libertarians of all stripes state general maxims about how the government has screwed us over by inflating the money supply, or by creating a central bank, or by generally regulating any and all aspects of money from how much you can carry on a plane to what may used to pay a debt. But in their diatribes against these undoubtedly troublesome and dictatorial nuisances, many libertarians fail to look how one can still achieve liberty through building personal wealth and finance. Undoubtedly, they believe this is possible (and preferable!), but the connection rarely is made.

Similarly, in the slew of personal finance blogs I've been keeping tabs on recently, there is rarely a clear relationship between the information and advice given and how it can increase individual freedom. Of course, many of them refer to "financial freedom" but I think there's a distinction to be made between financial freedom and personal liberty, the latter being a broader topic but affected just as much by one's personal finance as the former.

So, my goal with this blog is to bring together the two concepts. Undoubtedly, at times I will fail. But with any luck, I'll strike a new vein of gold.

Enjoy!