Living Well without Spending a Lot of Money

Having a moderate income does not mean that you have to live like a pauper.? If you want to live well, then the key is living within your means.? That means not stretching the family budget to upgrade to a larger home that you can barely afford, or trading up for a new car every few years.? A few small sacrifices here and there on your more big ticket items can mean a lot more money to spend (and save) in other places.??

If you find yourself tempted to “upgrade” homes, consider why you are looking.? If you simply do not have enough room for everyone, then think twice about how your home is currently arranged.? Does everyone have to have their own room?? Do you really need a room dedicated to being an office or an exercise room?? If you can combine spaces to make things work in a smaller home, then you can spend the money that would have gone to a larger mortgage payment on other things that will bring you much more immediate and hopefully lasting joy.??

The same goes for upgrading your car.? You may want to drive the newest model, but it obviously doesn’t keep you happy for long, or you wouldn’t feel the urge to upgrade.? Instead, pick a model that you love and stick with it.? Bonus points for picking a model that is moderately priced and that will save you money on gas in the long run, too.?

Spending quality time and living well does not have to involve spending a lot of money.? If you find yourself going out to dinner or to the movies often, then think about why you are going out and see if you can change your attitude to change your behavior.? You may find that taking a walk to the local park or spending time on your bike is not only healthier, but less expensive and just as enjoyable as spending money.? If you don’t cook your own meals because you don’t know how, then consider taking a cooking class - which you can consider an investment in yourself for the future.??

When you love to spend money, you should also never underestimate the power of the coupon.? If you have to shop, then save as much money as possible doing it by applying coupons and even using cash back rewards cards.? You should always make sure to pay your cards off in full when you get the bill to ensure that your interest does not negate the cash back.? Enjoy your spending, but do it wisely.??

It is easy to live well if you are living within your means.? “Keeping up with the Joneses” is a practice that is guaranteed to get you into financial trouble very quickly, but if you learn to enjoy the things that you can afford to have and to do, you will find that your life is already incredibly rich.?

House Flipping In The Real World-Part 8-Doing The Numbers

That Donald analysis bothered me all day and finally dawned on me that I did not include the repayment of the loan. As they say, duh. It bothered me that Donald was doing so good in his part of the analysis.

So here is the analysis the right way, I think

Income $73,195

Payback of Loan with Loan consisting of Principal of $21,600 (Purchase Price of $27,000-20% Downpayment=$21,600) plus loan to pay renovation cost, taxes, fees and interest of $31,889=Total Loan Repayment of

$53,489

Net Gain $19,706=ROI of 37% or 8.2% per annum over 4.5 years

Will look at this again in the morning light but does go to show, again, that you can make money at real estate but it is not as easy as the guys would make it look in the infomercials. And glad I don't have to do financial analysis for a living anymore.

Travel Tips

Someone pointed out a budget travel article to me sometime last year, but I didn’t care much for it, so I’m not going to link it here. But it got me to thinking about my last backpacking trip to Europe. This post is an old draft from October 2007. I’m just now getting around to finishing it up for you.

Now, first of all, somehow I scammed a friend into paying for my plane ticket from San Francisco to Paris about 10 years ago. It was a situation where her folks weren’t going to let her go without a companion so the money had to come from somewhere and by golly, this is how it was going to get done. It was her decision to do this, never my suggestion. She made the offer and I merely accepted.

I saved nearly all year for it since my friend called me sometime her final year of college and said she wanted to backpack in Europe for a month. Fine with me. I was living with roommates/family that were willing to let me pay a month’s rent late. I diligently paid down my credit cards, paid my student loans on time, and banked about $800 cash before I left.

To plan the trip we did several things.

1. We joined Hostelling International. That got us discounts across Europe at youth hostels. We used their pre-booking service to reserve rooms. This was absolutely essential in places like Paris, which are extremely popular during the summer months.

2. My friend had an ISIC card. It’s an international student ID card and helped her get cheaper admission to many museums. I was no longer a student, but I would let her pay for us and often the ticket taker would assume I had one too. When they didn’t, that was fine, I paid full price.

3. We did Eurail passes. To get the Youth price, you must be under 26. I think I was 24 at the time. I’m too old now so I might as well get the Adult 2nd class ticket these days. But yes, you can save quite a lot. We went from Paris to Madrid, to Barcelona, to Geneva, to Brussels, to Paris, to Munich to Geneva, back to Paris. Eurostar/Chunnel tickets were separate and I went to Brussels alone since I couldn’t afford the Chunnel. My friend left me alone to pick up another friend in London who couldn’t afford a full two weeks with us.

4. We ate really cheaply. We got breakfast at our hostel every morning without fail. We then bought fruit, snacks, bread, cheese and meat for lunch everyday. We only dined at restaurants at night. Since we weren’t big drinkers, we got vin du pays and shared it at the youth hostel, which is mighty entertaining. Take a pocketknife, bandanna, and canteen/water bottle. You will find them essential on your travels when it comes to dining.

5. We traveled light. I used a backpack that carried about 4,000 cu inches. It wasn’t very much, but that meant I kept my possessions to a minimum and my souvenir buying down. The only things I have from that trip are pictures and a pair of hiking boots because my regular sneakers just weren’t cutting the mustard. I spent a lot on them, and while they were worth it. I should have tried to buy better boots at home on sale. But I had no idea that running shoes were actually terrible for this sort of trip. Chalk this up to serious inexperience about hiking and traveling. Sneakers were ok in the past, but definitely not for this kind of trip.

6. Do your research to maximize your adventure! I got the Rick Steve’s Guide to Museums. I read it and was very specific about which museums I wanted to visit and gave them a priority. I studied art history and my friend has less of an interest in it, so she let me dictate a little of what to see. We had a really good time because Rick’s books are very informative, right down to a walking path through the museum that will take you efficiently past the major highlights. I kid you not. He will be specific about which staircase to take.

On a different trip to Italy, I used The Blue Guide to Rome. That was an extremely wonderful book. Don’t get too hung up on Let’s Go and Lonely Planet. If you are interested in a special location or topic, get the book and do the research since it will enhance your visit. Say if you are going on a wine trip in France, get a book that will teach you about the terroirs so you can figure out if you want to go to Burgundy or Bordeaux.

Rick Steves wrote a really great overview about guidebooks. Having used many of the guidebooks he’s listed. He is spot on with his descriptions of the books. Use this to help you decide between guidebooks. And I completely agree, get the latest copy you can. Absolutely borrow an old one from a friend, but when you are ready to go, get the latest copy for yourself, within 12 months of publication. Guidebooks are periodicals, and just like a magazine their information has time-value.

7. We didn’t have a crazy nightlife. Sure I went out on La Rambla in Barcelona and ended up dancing close to all night. I hit a bar or two with some Catalans I met in a Belgian youth hostel when I was by myself. But I didn’t pack a fancy outfit to wear clubbing and skipped all that entirely on this trip. Hanging out with the kids in the youth hostel was much more fun and conducive for conversation than a noisy club.

8. Work the network. Now that I’m older and have some extremely well-traveled friends, I can leverage those connections into couch surfing for a night or two in far flung locations. I haven’t taken advantage of it, but I have put people in touch with each other and had good reports about the outcome. Be prepared though to take a gift or some sort of thank you for the host.

I stayed with my pen pal’s parents when I stayed in Switzerland. I hadn’t written my pen pal a letter in 5 years. But out of curiosity, I called his parents’ house from Geneva out of the phone book and took a trip out to see them finally. It was really nice. I hope he gets to visit me in DC one day. I ended up sending a present later for his mother when I found out she likes to collect a special type of figurine.

9. Think about working on your trip. I haven’t done this, but I know someone who worked on his grandmother’s potato farm in Finland for part of the summer, prolonging his stay in Europe by a few weeks. I also had a friend who picked cantaloupes in Israel because he wanted to save money and travel longer on a trip around the world. Basically he was a migrant farmer, you know, the kind we try to keep out of the US. You do what you can if you want to keep traveling and since he was with a friend, he said it wasn’t too bad. Obviously, this route isn’t for everyone. But there are more formal work experiences you can arrange as well.

Ok, that’s about it. I hope it gives you some ideas for your next trip.

buy a town

The town of Albert, Texas is for sale on eBay –current price listed at $50,100. ?An investment project?

-Edit- The ending price of the auction was $52,100.00, and it had 24 bidders.

Cheating Today

Actually I've been cheating for the last couple of weeks since our son went to blow up things in the Las Vegas desert, we're building a house, I may have to sue some people in Florida, and I'm having trouble getting the electrician to show up. Not a lot of time for other things like concentrating so I'm cheating. Actually the subject is about paying attention to only certain things so take a look at this article from Marketminder.com (again) and learn to ignore thinking that only gets in the way of getting rich. Here goes---

The Myth of One

9/12/2007 |

Right now, you’re reading this column and your mind is focused on each sentence. That’s a marvelous and miraculous thing your brain is doing! The ability to focus on one thing is an incredible feat of focus allowing us to accomplish much in life. But there’s a big drawback: While you’re focusing on this column, there’s a whole world of activity your brain is ignoring!

That pain in your back, the chatty co-worker across the room, the phone that won’t stop ringing, the fly buzzing around your head…where did all those pesky thoughts go? None of them ceased to exist, you just stopped paying attention for a few seconds.

Blocking extraneous issues from our minds and directing our focus towards what’s most relevant is a nifty feature of the human brain: We’re actually designed to ignore most of what’s going on around us. Human brains—and those of many animals—are made to focus and reduce situations to actionable, understandable steps. We can’t keep a whole lot of information at the forefront of our consciousness for very long. At best, we can hold on to a few items at a time, but mostly we just focus on one thing or we’ll forget it.

That’s because evolution designed the brain as a hierarchical thing—receiving stimulus from the outside world and running the data through various neural unconscious systems (which account for the vast majority of brain activity) and deciding what, if any, information is worth bringing to your actual frontal lobes (where most of your consciousness is believed to reside). You’ll never even know about most of what your brain does or perceives!

That’s a great thing because nobody wants to be thinking about regulating their heartbeat, digesting this morning’s cinnamon raisin bagel, or focusing the lenses in their eyeballs to read the newspaper every second of the day. Our unconscious brains do all that heavy lifting so we can put our attention on other issues.

Only problem is, the brain’s tendency to block out extraneous information can be a very hazardous thing for investors.

I like to call most of today’s financial media pundits disciples of the “Myth of One.” That is, most stories we read today tend to focus on one issue alone as if that was the only thing moving stocks. “Oh, stocks were down today because housing starts fell last month!” or “Stocks went up because mortgage loan demand was higher than expected in August!” (Really? Since when are we suddenly all so focused on mortgage demand as the seminal market moving issue?)

The reality is millions upon millions of factors are acting on the market at any given time. But our brains can’t live with that idea so we write and read stories about single factors as if they were the only relevant thing. How absurd! But that’s how our brains work—we’re just not made to see the big picture. (In fact, our brains are so blind no one seems to notice corporate earnings are easily surpassing expectations this year!) Today the singular mythic issue is credit and housing, yesterday it was energy prices and carry trades, and tomorrow it will be something else. That’s your brain tricking you into the Myth of One.

It seems impossible to truly understand what’s going on in markets if we can only focus on a few measly issues at a time. What can we do?

One useful strategy is to put things into perspective. Often when investors get too focused on a single issue it gets blown far out of proportion. A great example is last week’s US employment report. Investors headed for the hills as the S&P 500 relinquished more than 1.5%–supposedly all for a job contraction of 4,000. When we consider a workforce of over 153 million, 4,000 jobs account for less than one thousandth of a percent of the employee base. How silly! There’s virtually no way such a small thing could account for such a big move. That tells you investors irrationally fell prey to the Myth of One. If you can see that, you’ve put the issue into perspective and gotten ahead of the game. Read more about the employment issue here:

Belaboring Labor, 9/7/07
http://marketminder/commentary/CommentaryPage.aspx?articleID={FCC988F3-72BA-4D67-97CE-10681D05A89C}

Ultimately, you’re just going to have to live with the brain you’ve got. But that doesn’t mean you have to buy in to the myth that just one story alone moves global markets at any given time.

Stimulus

Well, I've just about let this blog go to pasture. We've been pretty busy around the Dimes household, but I shouldn't forget my readers. Since we last spoke, Mr. Dimes and I received our economic stimulus check. We originally planned to invest it, but then we decided, for once, to be frivolous. So we bought an iPod. Yes, six and a half years after the iPod made its debut, we finally decided to buy one. We certainly paid a lot less than the early adopters did (the original iPod cost $400!) and we have a lot more storage space. We also bought a speaker dock for it, so that it can be heard without ear buds. The whole setup cost us less than $300. Definitely a good way to stimulate the economy, respect our budget and purchase something we've been waiting on for years.

Reader Questions on Prosper

Reader Kevin asks:

Hey there, I just signed up for Prosper yesterday. I’ve been skeptical since the whole registration process asked for access to my bank account, and now I’m reconsidering after reading your post.

Is it worth the hassle? Or is this really just a gimmick to net a few pennies extra?

Dear Kevin,

Let me address the second question, is it just a gimmick? No, it’s not a gimmick. it’s the real deal and real money. Is it worth the hassle? Well, that’s a horse of an entirely different color. You seem to have reservations about linking to your bank account, however, to do all your transactions, Prosper wants to transfer money to/from a legitimate bank account.

That’s your first hassle and it seems a pretty low barrier to entry to me, that’s why I signed up. It’s no different than signing up with PayPal or an online bank like ING Direct. (If you want an ING referral I still have some. Please leave a comment and I will privately email you.)

As far as the rest of it being a hassle, well, I am making about 5.8%APR right now. (You can see me on LendingStats.com) Before one of my loans went into late status, I was actually making something closer to 15%. I just had a loan payoff as well, so that’s probably also depressing the rate of return at the moment. But either way, 5.8% is way better than my online savings bank. Or the stock market this year. I’m willing to assume some risk here for a better return than I can get anywhere else at the moment. (Heck, even my condo is upside soon with all the condo foreclosures/short sales in my area. I checked what’s for sale in my building and I’m definitely upside down by those list prices.)

Though I’m feeling cold about the one borrower who is and has been late, I am willing to take on that risk. It’s up to you to decide your risk aversion. I’m not risk-averse when it comes to investing. I hold zero bonds. But I am extremely risk-averse about other things in life, like motorcycle riding. I wear full gear head to toe. If it’s too hot to wear it, it’s too hot to ride. Period.

So, only you can really answer the question of if it’s worth the hassle. Ask yourself what rate of return you want and if you think you can realistically get it from Propser lending.

Reader Mary asks:

I was considering putting some money into Prosper but was a little leery. I also feel like I should use whatever I can to pay off my credit cards - but I noticed you still have cc debt too, so I was wondering how you figure out how much you get to play around with investing?

Dear Mary,

If you read about investing, you’ll find that most places recommend utilizing no more than 10% of your investments for doing something like Prosper or buying and selling stocks. The other 90% of your portfolio should be in index funds, bonds and professionally managed stuff. I’m inclined to agree with that advice. Ask yourself what you have to invest or what your total investments are. If you have $10,000.00 sitting in a bank account, use only $1000.00 for investing.

I’ve written about this before, but let me reiterate, I have about $300 in Prosper. I have more money saved up in my emergency fund than that. Heck, my monthly dining bill is more than that. This money was never going to go to my credit cards. If so, I would have sent it in by now. If you have credit cards, you should probably pay that off first. That’s what conventional personal financial wisdom would tell you. (At 15%APR though, I was better off with Prosper. My highest credit card rate is 11%. You’d have to figure out what rate of return you needed to beat your credit card interest rate, figure in taxes, etc. Do your math.)

The investment in Prosper represents about 1% of my total savings/investments. It’s not a lot. I’m not sure where you are at, but if you’ve only got $1000 saved, you might not want to put it in Prosper. If you only have $50, again probably not a good idea because Prosper’s minimum lending amount is $50, and that would is a poor risk management strategy. (It’s called ‘putting all your eggs in one basket.’)

None of these questions are easy. That’s why this blog is marked as a Fiscal Challenge. I’m not that great at it either. If you’re looking for real professional advice, try writing in to a CNN/Money or Kiplinger’s, or go see a financial advisor who has a CFP or some sort of professional license. (Series 6 for stocks, Series 7 for insurance.)

Quick Political Fixes That Don't Work

Going to post another article that is pretty good but pretty boring but has a lot of meaning so read it. I'm too busy right now to do it all myself since I just added a possible lawsuit in Florida over my late uncle's estate. Just gets better and better.

But I realized when I saw this article at MarketMinder.com (full disclosure--I do business with these guys) that none of you have ever seen or been under price controls. Hope you never do because they don't work, ever. Read on.

The high cost of cheap food

Published: October 24 2007 20:37 | Last updated: October 24 2007 20:37

In 1973 Richard Nixon, US president, under political pressure be­cause of rising domestic food prices, banned the export of soyabeans. The policy had predictably dire results, but today, with the world in the grip of another bout of food price inf­lation, governments worldwide are rushing to distort the market with subsidies and quotas, price controls and export taxes. They should stop.

In the run-up to its presidential election, Russia has imposed price controls on basic foodstuffs, and plans an export tariff on wheat. China already controls prices; other importers, including Egypt, Jordan, Bangladesh and Morocco, are increasing subsidies or fiddling with their tariff regimes.

The simple problem with all these actions is that they distort the market. Price controls and export tariffs make production less profitable, which discourages increased supply and can make shortages worse. Subsidies stimulate demand so it does not fall into line with higher prices. All distort the terms of trade within a country. Farmers suffer at the expense of city dwellers – especially perverse in countries with high rural poverty, such as China.

None of this is too bad in the short term. If food prices fall back, price controls become meaningless, subsidies can be withdrawn and export tariffs no longer make sense. The more pernicious problems will appear if food prices stay high. With more demand for protein from fast-growing Asian middle classes, lunatic policies to subsidise corn-based ethanol and the legacy of under­investment during long years of low prices, that prospect seems likely.

For exporters, distorting the market in favour of domestic consumers harms the balance of payments, lowers investment and helps rivals. Nixon’s ban is often credited with creating Brazil’s soyabean industry.

For net food importers, who can keep prices down without shortages only by offering subsides, the risks are much more serious. Cheap food is an open-ended fiscal commitment – once in place it is politically impossible to withdraw – that can play havoc with a budget. Developing countries have improved their fiscal position in recent years. They should not throw that away.

Rich countries, where food is a small part of total consumption, have less to worry about, although they should beware the ratchet effect as food importers increase subsidies and food producers tax exports, driving up world market prices still further. But leaders in the developing world, no matter the political pressure to bring down the cost of grain, should resist. Cheap food comes at a high price.

Copyright The Financial Times Limited 2007

Employed once more!

Hooray, today I actually got not one but two jobs. Had to turn down one. But this is great news. I had signed up with Spherion (temp agency) a couple weeks ago and they were very excited to talk to me, being that I am a college graduate with computer skills, phone experience, and can speak easily without saying like or ain't. Yesterday they called me to come in and take a Word and Excel test and a drug test for a potential full-time temporary administrative-type position with the bakery branch of a local grocery store chain. So I went in and did that today. The secretary thought I was great and told me semi-confidentially that she pretty much figured I'd get the job because the woman who interviewed me had suggested me individually for this position (the secretary read me the email - the gist was, start with her and you won't need to check 4 other people.) So that was pretty exciting, having been without normal full-time employment for 3 months now, and at home for the last three weeks. After a number of phone calls, they confirmed that I had the position, and I was to start tomorrow morning 8AM sharp. This meant that I would miss the home inspection on the new house but they did not seem to be willing to negotiate starting time. So everything got lined up, and I even got the dog a doggy interview at doggy day care tonight so she could start tomorrow.

THEN I come back from the grocery store and there is an email from the head doc at the private clinic/research organization I interviewed with last Tuesday, who liked me bunches.

Hi Kira --

please give me a call

I'd like to talk with you about a job.

So I call, and Top Doc says, are you still looking for a position, and I say yep, and she says, we're still looking for someone to fill our open spot, and I say, what an amazing coincidence! and she laughs. She asked if I would like to start tomorrow and I asked if Wednesday would be OK so I could go to the home inspection, and she said that was fine. (This is also beneficial because I could totally see the staff getting notice that I'm coming about 5 minutes before I show up. They know that I'm coming in general, but probably not specifically when. So this will give them some time to, say, find an extra desk.) I was so excited I forgot to ask her how much they were going to pay me, but the office manager had asked what my salary expectations were and I said $40-45k so if they're within shouting distance of that, that's great.

These people are as sane as medical clinics get, and just seem like reasonable human beings. I am excited to get back into the thick of things. They have a matching 401k and a health savings account medical plan, so I can bet I'll be posting about that when I get that set up.

Off I go to take Maggie to her doggy daycare interview - there's several doggy daycares in the area, and this one is about five minutes from our house so she won't throw up in the car. (Motion sickness.) It's $75 a week to take her every day, but I'll probably only end up taking her two or three days a week.

This is also excellent timing in that both of my guinea pigs have been seriously ill in the last few weeks, and I'm literally just today not going to be squirting medications and food into either little mouth five times a day. So it's good that I was able to be home to give them more frequent care when they needed it, but also good that when I won't be able to, they won't need it.

Hooray for money! This is exciting!

Phew.. a lot can happen in a week

It's been a bit busy. I started my new job last Wednesday and things are going pretty good. There was actually some back and forth about how much I was going to get paid.. I talked to Top Doc on the phone who just said, come in and talk to the office manager. So I showed up Wednesday morning and he had a very fuzzy recollection of me - apparently he had gotten about 15 seconds with Top Doc who just said, she's coming. So they had not had a conversation about my salary. He says he'll talk to her, and then for the next few days, I can never find him, plus I keep shuttling between two of the offices. Finally on Thursday evening before I leave, I sent him an email listing what I wanted to talk about (salary plus a couple other things) and said if I couldn't get a hold of him I would call him. I finally got him on the phone about 2PM on Friday and he said that they'd set me at $40k. Which is fine, I told them $40-45k in the interview, and while it is a little less than I used to make, I probably would have accepted less, but it does seem like bad form to cheap out on someone who's already BEEN there three days.

Something that is definitely a bonus though is that instead of working at the main clinic, which is out in the suburbs and is about 20 minutes of highway to reach, I'll be assigned to the downtown office, which is literally about five minutes from my house. So that's pretty awesome. Unfortunately it'll be longer after we move, but definitely not bad at all - about 12 minutes, none highway. If I REALLY wanted to, I could take a bus, with only a few blocks' walk to get to the stops at each end. But that's $41 a month for the bus pass, and I don't know how much the garage pass is going to be, but unlikely to be that much, and 12 minutes drive in each direction is pretty good on gas too. I'm also excited to be downtown because it's actually in a hospital, which means there are a lot of resources (like a cafeteria, a lot more bathrooms, gift shop, etc, as well as being able to schedule tests for my patients onsite.) Downtown also has a lot of lunch restaurants and some street vendors, so I could go out and get all kinds of good stuff.

(for those who used to read regularly, yes, I do now own a car. It is a 2002 Chevy Cavalier with about 9823498 dents, which is why it was about $2700. But it hasn't required much in the way of maintenance and I'll probably drive it into the ground. Driving is WEIRD but fun.)

One really awesome bonus though is that they FEED YOU LUNCH on Mondays and Tuesdays, and sometimes Fridays. Today I actually got two lunches, because I was in the suburban office in the morning when they were passing round the menu. Apparently the drug reps pick a restaurant and we all get to choose what we want off the menu. Most people got an appetizer or dessert in addition to a meal. So I picked out coconut shrimp (which they ended up not having) and chicken parmesan with pasta. Then at about 10:30 I got a call saying that there was someone to see down at the downtown office. I am meeting with the most experienced coordinator down there frequently for training. So by then the order was already in, and I went downtown before lunch arrived. And what do you know but they had Panera boxed lunches. Five kinds of awesome. So I got Panera for lunch, and my chicken parmesan was there when I got back to the suburban office. Hooray for free lunch! I am totally going to milk that. I don't think they do the menu ordering at the office I'll be at, but free food is still awesome.

In house news, we did our inspection on Tuesday, and there are of course a few problems. The ones we were most concerned with were the wiring and the hot water heater. The house is about 100 years old, so the wiring is pretty old, but it looks like someone rewired the downstairs but not the upstairs. The upstairs is not grounded at all, and there is knob and tube wiring in the attic that is under a foot of insulation. How this was explained to me as bad is that knob and tube has nice big copper cables, which can be good because they are much thicker than wires used today, and usually enclosed in a wall with air all around them to let heat escape. So being under a foot of insulation means the heat can't escape and this is a fire safety issue. So that's bad. The other big issue is that the hot water heater's air outlet is not drafting properly. The house has two chimneys and the air is supposed to go up one of them, and it's not. This might be because the chimney is full of leaves and crap, or it might be that the chimney has collapsed internally. Who knows. Not our problem. It's a safety risk. So we asked on our request to remedy that they replace and ground the upstairs wiring, and that they fix the hot water heater so it's drafting properly and the basement doesn't fill up with carbon monoxide. That's bad. We're waiting to hear back from them probably tomorrow about what they're going to do.

We also went in early this morning and Boyfriend signed lock papers. We are locked in at 6.25% paying half a point of discount (probably covered under what the seller is paying) and given the way the markets look now, that's probably the best we'd be likely to get, even given what our mortgage person was up to. When we first met she had said 6.25% with no points, but this is acceptable given that we are putting so little down.

In completely unrelated news, I've also been spending money on clothes. This is kind of new for me, and I forgot how much I actually really enjoy having nice clothes and looking like an adult. At my last job I kind of fell into wearing the same pants every day with different solid colored t-shirts and long sleeved t-shirts, and I felt like I was starting to look my age. (this is not something you want when you are as young as I am in the professional world where people have to trust you are providing accurate, potentially life-altering decision-making information.) So I spent some time at the outlets on Tuesday and spent about $250 on clothes, and for this got six dresses, a couple tops, and some assorted other items. Went to a different store a couple days ago and spent $75 on four dresses. Kind of getting into dresses now, to some extent. But like the commercials say, feeling like a grown-up at your new job: priceless. I'm going to try to weed out some of my older, less attractive clothes and slowly turn over my wardrobe. At this point, if I can't wear it to work, there hardly seems a point in buying it since I already have plenty of t-shirts and shorts, and you can wear black pants any day. I do need to buy some black closed toed shoes that I can wear barefoot, since I a) hate pantyhose b) bought a bunch of knee length skirts and dresses and c) you can't wear open toed shoes in a hospital. So that might end up costing more than my outfit on any given day, but hey, no one said looking like a grown-up was cheap.

Five Basics for Your Finances

For those of you who missed this...

New York Times: Your Money
Five Basics for Building a Solid Financial Future

By RON LIEBER

Published: May 17, 2008

A new Times columnist offers guidance for making financial decisions, when making good ones is more critical than ever.

Read the full article here.


(Sorry, I can't figure out how to delete this darn "read more" link, so ignore it here.)

2008 CONUS COLA rates

A few months ago, I posted about CONUS COLA, as it was a new entitlement for Mr. Dimes. For the uninitiated, CONUS COLA is a taxable income supplement for living expenses in an area (as opposed to housing expenses, which are covered by BAH). It increases or decreases every year, and can appear or disappear altogether for certain areas. For 2008, a handy calculator is available at this site. An official list of sites receiving COLA as well as the percentage rate can be found on this Pentagon site, where the list is a PDF file. If your location is not listed, you are not eligible to receive CONUS COLA. A handful of locations that were previously receiving it lost it for 2008, though they may get it again in future years.

California--A Nice Place To Visit But I Wouldn't Want To Live There

Went out to the Bay Area for my niece's wedding. Great trip, had fun, glad to be home given the price of houses and a wee bit of overcrowding. Seems that I am not the only one glad to be out as outlined in this article at MarketMinder.com. Enjoy--if you can.

California Hates the Poor

10/5/2007 |

California hates the poor. At least the Golden State certainly seems to act that way, given the way it treats its lower-income residents.

But wait—isn’t California known as one of the most socially progressive states, spending billions of dollars on social programs and public assistance for low-income residents each year? Indeed! Yet Californian legislators uphold a policy choking off precious dollars that could go to residents needing it most. That wacky policy is the Golden State’s tax structure.

California boasts the most punitive state income tax system in the entire Union. (Not so fast New Jersey, Hawaii, Iowa, and Oregon! Though you’re all nearly as bad.) With so much wealth in the state, you might not feel much immediate sympathy for those paying the lion’s share of the state taxes. After all, California’s got Hollywood movie stars, celebutants, and Dot-Com-mega-billionaires! Make them pay! Folks tend to forget California has millions of souls—the vast majority are Average Joes.

Let’s examine the current tax structure. California income taxes kick in at a modest 1% rate for annual income up to $6,622. Not too bad—$6,622 seems a small amount to hit up for income tax, but 1% isn’t that much. But, California’s highest tax bracket of 9.3% (the highest in the nation) begins at the affluent, wallet-busting, Bentley-driving sum of $43,468.

I’ll repeat that. California imposes the nation’s highest state income tax level of 9.3% on residents earning more than $43,468. Some perspective: In 2004, the US Census reported California’s median income was $51,185—higher than America’s median income of $44,648. Translation: If you’re “middle class,” California wants 9.3% of your income. It’s a shakedown for your lunch money.

Meanwhile, nearby states Washington, Nevada, and Texas charge no state income tax at all. Arizona starts its highest tax bracket at $150,000 where residents pay 4.57%—less than half California’s top rate. It’s hardly surprising these states are some of America’s fastest growing states. In 2006, Arizona’s and Nevada’s populations swelled over 4 times faster than California’s.

If you’re a Californian with a nice retirement savings, where would you retire? California wants a hefty portion of your retirement income every year, whereas nearby Washington and Nevada want none. Add to the equation the far lower cost of living in those states, and relocating seems like a no brainer. So, folks leave and California ends up with none of their income, property, or sales tax revenue.

Those poor souls remaining in California end up with less money to fund public schools, build new roads, pay for social programs and so on. All thanks to politicians ignoring fundamental economic principles and placing too heavy a burden on its working residents and businesses.

When a state places too heavy a tax burden on its citizens or businesses, the government stifles consumer spending, business investment, and actually ends up collecting far less tax revenue. A government can maximize its tax revenue at an optimal point. Tax too much and folks don’t see much of a reason to get out of bed in the morning. Mrs. Entrepreneur fails to see the upside in launching her cutting-edge new business idea. Less business activity means less tax revenue. The Laffer Curve (shown here http://upload.wikimedia.org/wikipedia/commons/4/47/Laffer_Curve.png) demonstrates the concept.

If prohibitive taxation makes a difference between US states, one could also apply the concept to countries. When a nation imposes high hurdles for new business development and wealth creation, the prospect of strong economic growth becomes increasingly remote. Conversely, if a country slashes corporate tax rates to spur economic activity, all other factors remaining constant, that’s bullish for growth.

Take Ireland for example. The Emerald Isle slashed its corporate tax rate to 12.5%—one of the lowest rates in the developed world.

Selected Corporate Tax Rates by Country

Ireland 12.5%
Netherlands 25.5%
United Kingdom 30.0%
China 33.0%
Belgium 33.9%
France 34.4%
Germany 38.6%
USA 39.5%
Japan 39.5%

Much to the chagrin of France and other EU heavyweights, economic growth in Ireland is soaring! After all, entrepreneurs and existing businesses only need two very simple elements to justify a venture: profit and human capital. Ireland has an educated, English-speaking work force and a corporate tax rate low enough to entice entrepreneurs from around the globe. Ireland will likely attract business activity, people, and tax revenue other countries will miss out on. It shouldn’t be much surprise, then, that Irish GDP growth is expected to more than double the EU’s average. Erin go bragh!

Eastern Bloc countries are also joining the low-tax party. Estonia, Latvia, Russia, Ukraine, Slovakia, Romania, Georgia, and Macedonia all successfully introduced low flat tax structures in recent years. These moves now pressure Western European countries to either become more competitive with their business climates or face a hemorrhaging economic growth towards their neighbors with cheap labor and more welcoming tax structures.

With one of the largest gross domestic products in the world, one could only dream of the economic boom resulting from slashed California tax rates (not to mention falling federal tax rates). With the Irelands and Nevadas out there, Uncle Sam and the Golden State better act fast. Their poor depend on it.

Oil Speculators Aren’t The Problem

There's a very interesting Fortune article entitled In Defense of Oil ‘Speculators' that I recommend checking out.

I am not an expert on the energy markets, and therefore I appreciated this article, which explains in simple terms some basic economic and futures trading principles - and common misconceptions. Here are a few interesting quotes:

If our representatives did understand the oil markets, they'd know that the true telltale sign of a speculative bubble is not rising trading volumes but rising oil inventories. Speculators would be hoarding oil - building up inventories either in anticipation of higher prices or as part of a scheme to drive prices there. Yet according to the Department of Energy, U.S. oil inventories are now at below-average levels. U.S. oil stocks stand at 309 million barrels, versus 330 million in June 2005.

...

By providing a mechanism for locking in prices, the futures market makes it easier for oil companies to make costly investments in new production - which is the key to lowering prices at the pump.

Futures trading also discourages hoarding in an otherwise tight market. Without speculators willing to take the other side of so many futures contracts, oil refiners and other end-users might be inclined to ramp up their spot-market purchases and store more oil as a hedge against further price increases.

...

Even if you believe there's no way that oil trading volumes could be soaring without influencing oil prices, remember that influence then has to run two ways.

If an index fund is indirectly driving up spot oil prices every time it buys a future, then the converse must be true, too - there must be an equal and opposite downward push on spot prices every time that future is sold. In other words, futures market critics can't have it both ways.

There's something else politicians conveniently overlook: futures trading requires two to tango. For every investor who is betting oil prices will go up, there also needs to be an investor willing to take the opposite side of that bet.

There is a lot more in the article itself. Read it for yourself and share your thoughts. Do you think oil speculators are to blame for volatility in the energy market? And, more importantly, what effect do you think increased congressional legislation on the matter will have?

More from Meg at The World of Wealth

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Are single stocks too risky?

If you've listened to the Dave Ramsey show for any length of time, you'll hear him say that he doesn't invest in single stocks. Instead, he invests in “good growth mutual funds and paid-for real estate”. His reasoning is that single stocks are too risky.

I wonder though, is that true? If you're talking about putting all of your money into ONE single stock, I totally agree. Of course it's too risky to put all of your eggs in one basket. That's like putting it on a roulette wheel. Even putting it all on a few different stocks would be extremely risky.

On the other hand, what IS a “good growth mutual fund”, exactly? It's a fund that invests in securities. (Usually stocks, bonds, and money market accounts.) Which means...you're in a variety of single stocks. Plus bonds and money market accounts.

How is that any different from investing in a large number of diversified stocks, bonds, and money market accounts yourself? I don't think the danger is so much the dreaded “single stocks” as it is in not being fully diversified or choosing stocks without doing thorough research.

Of course a mutual fund manager likely has significantly more experience in investing than most individual investors, which can greatly reduce risk as well. Finally, mutual funds are able to invest extremely large amounts of money, since they are pooling the resources of many individual investors. This gives them opportunities that individual investors may not have. So mutual funds probably ARE less risky than single stocks for the majority of people. (Although it depends on the mutual fund, too.)

But simply to blindly label the whole category of “single stocks” as “too risky” is over simplifying things. I have a problem with that because when people hear a mantra over and over again, they begin to believe it without questioning. One thing I always want to do in investing (and the rest of life!) is question. Questioning leads to understanding, which leads to more informed decisions.

Writing Off 2008 Already

The new year has a rough start. Will it continue? Who knows but historically the beginning of the new year has little impact on what happens for the rest of the year as shown in the following article from Marketminder.com.

January Ineffect
1/7/2008

Story notes:

• January’s rough start has many investors invoking the old saying, “So goes January, goes the year.



• Statistically, this belief isn’t supported. History shows negative starts can be followed by positive years and vice versa.



• Market volatility is normal, no matter when it happens, and doesn’t mean a prolonged downturn is at hand.

_________________________________________________________________________

January has commenced with gray weather, record snows, fierce storms, already broken New Year’s resolutions (stupid leftover pumpkin pie), and the usual post-holiday gloom—not to mention a continuance of December’s volatility. Most major market indexes are negative so far this year, leading many investors to invoke the old saw “so goes January, goes the year.” Already, we’re seeing stories highlighting the long and widely held belief that a rough start to January portends trouble ahead.

The Stress Is Just Beginning
By Tomoeh Murakami Tse, Washington Post
http://www.washingtonpost.com/wp-dyn/content/article/2008/01/05/AR2008010500149.html

This article states, “If the first three trading days of the year are any indication, 2008 is bound to test the nerves of even the most poised investors.” Fair enough—volatility always “tests nerves.” Except the first three trading days are never an indication of what’s ahead. Not ever. Three days of any month, no matter the calendrical significance, tell you nothing. Investors wouldn’t make a stock forecast based on the Ides of March—there’s nothing about any one day or group of days’ returns that tells you anything about what to expect looking forward.

Statistically, this is easy to disprove by checking historical data to see what happened each January and the annual results. Throughout history, negative starts to January have been followed by all sorts of combinations of positive and negative returns. Positive start, negative January, positive year. Negative start, positive January, negative year. On and on. Looking at the six worst first 10 days for the S&P 500, you see US stocks ended positively four of those times—one year up a big 42%! Another up 26%! What does that tell you? Nothing—beyond stocks are positive more than negative. And the third best start ever ended the year down 15%. Not so great.

Fundamentally, this makes even less sense. What do a few days in January tell us about investor demand for securities? Markets don’t obey a calendar. There’s nothing magical about January’s start suggesting markets must suddenly begin “behaving” themselves. Markets are volatile. They can be volatile in January, July, on Tuesday, the day after the Fourth of July—pretty much any time. Markets don’t have neat steps-and-stairs increases, and if they did, you wouldn’t be happy with the return you got. If you want that kind of steady appreciation, you’re going to have to be satisfied with what you can get by buying US Treasuries and holding them to maturity (i.e., not much).

We call the market “The Great Humiliator” (TGH for short) around here for a reason. Its sole purpose is to humiliate as many people as it can for as long as it can for as much money as it can. Scaring investors out of superior long-term returns with a bumpy start to the year is one way the market robs otherwise rational people of their senses.

We remain confident the world is altogether too dour. Don’t let TGH humiliate you out of the market with a bumpy start to the year—that’s just what that filthy trickster wants

Going once..

I posted before that I am looking to see if someone else would like to take over running the Under 30 Honor Roll and Festival of Under 30 Finances as I don't have the time to develop it into something better - if anyone's interested, please let me know!

Shameless plug - Get a free Fandango movie ticket

Join the Johnnie Walker email club and get a free movie ticket from Fandango! I believe this will only be open until Feb. 15th. If you prefer, you can also join CashDuck and earn a dollar for completing this offer - but a free ticket is pretty good too. =)

What the CEO envisions… vs. the reality of what may actually be happening

Back in December when I reviewed??Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time, I did not live in a community dotted with a Starbucks at every block, so I have never been to a Starbucks. ?I was able to read the book and see the vision Howard Schultz, the CEO, had of the company. ?I saw how he wanted the Starbucks image to exist. I wrote my review of his business techniques in the book?here.

Now my commute to work passes three Starbucks Cafes, so I decided to check the place out. ?My brain carried the image Schultz painted in his book. ?The experiences have been totally different. ?Yes the employees were great and the coffee was delicious–but it was the other things that were off. ?He said they give real cups unless customers ask for to-go cups. ?The baristas told me it's actually the opposite. ?They don't even have enough?porcelain?cups to?accommodate?the seats in their shop. ?Schultz said his business was green; the places I visited had no recycling for the disposable cups. ?The differences between what Shultz said was standard and what I saw were shocking. ?But it just goes to show:

A CEO can't always be in touch with what is really happening in his company. ?It's like a king–does he really know everything his subjects are up to? ?There are so many people and so many cups of coffee.

I feel lucky that I read the book before I walked in the coffee shop. ?Of course, it means I was disappointed when I walked in while the average person is won over by the experience. ?Oh well. ?No wonder this book is on clearance at Amazon now.

?

?

- Top 10 Retirement Financial Planning Mistakes That Will Make Sure You Don't Retire Wealthy

It's a sad financial retirement planning fact that most people won't retire rich. Most people are pretty sure of that fact too. The 2008 Retirement Confidence Survey� performed by the Employee Benefit Research Institute showed that only 18% of you out there are confident that you'll have enough money for a financially secure retirement. The real tragedy is that for many people the dream was well within their grasp and they screwed it all up.

It only takes a few mistakes throughout your working life to kill any chances you may have of retiring wealthy. Heck, you can ensure that you'll be asking “Would you like fries with that?” if you're not careful. With that in mind I'm going to reveal 10 of the most common retirement financial planning mistakes that can keep you from retiring wealthy, and may even make sure you see a whole lot more of your grandkids; every Friday from 3-11 at the deep fryer.

Retirement Financial Planning Mistake #10 is relying on Social Security to fund your retirement. If you're under 35, it may not even be around when you retire, and for the rest of you it won't provide a very high standard of living, even if it does stick around. Your maximum Social Security monthly benefit if you retire this month is only $2,030 for a single person and $3,027 if you're a married couple.

While this does rise over time, it's not too much unless you have virtually zero expenses. Consider that if you own your home, property taxes will rise, especially if your area experiences dramatic real estate appreciation. You could easily find yourself in a position where your property taxes chew up nearly all your monthly Social Security income.

If you're covered under the railroad retirement act you'll fare much better. For those of you that think social security is such a fantastic retirement vehicle (Mom, you know who I'm talking about) you should take a gander at the plan that railroad industry employees got out of Congress. It was first enacted in 1934, then redone in 1935 when the Supreme Court found the first version unconstitutional. The version of the act we have now has been with us since 1974.

In case you're unaware what good lobbying can accomplish, the railroad union talked Congress into exempting railroad employees from the Social Security system. They knew a bad deal when they saw one, I suppose. They basically got a plan to replace social security, except that it delivers greater returns to participants. In addition there is a second tier that delivers benefits according to years of railroad industry service. The upshot of the whole thing is that, while a Social Security beneficiary retiring this month stands to receive only $2,030, a railroad employee retiring this month will get almost double; $3,959. Put that in your retirement planning pipe and smoke it!

Retirement Financial Planning Mistake #9 is never financially educating yourself. It will be hard to understand everything there is to know about finances and your money. Indeed, that's why there are professionals. You should know the basics of personal finance, however. That way you'll know what questions to ask, what terms mean and when things just don't pass the smell test. You'll also be in a better position when it comes to voting and understanding the candidates position's on financially related issues, as the politicians who make their way into office can have a huge impact on your financial future.

Retirement Financial Planning Mistake #8 is not considering retirement benefits when choosing your employer. This can happen when you're young and free, because hey, retirement's a long way off. Thinking like that will make sure that it's a long way off, you knucklehead!

Retirement Financial Planning Mistake #7 is putting all your eggs in the company stock retirement plan basket. I've said this one before, but you're relying on your company for both your primary source of income and retirement funding, and that could easily lead to trouble. Several well publicized corporate debacles, such as Enron, have illustrated the fallacy of this approach. While stories are rampant of Home Depot and Wal-Mart cashiers retiring wealthy due to their company retirement stock plans, for every one of those there are many others who paid the price when their company's stock tanked just about the time they were due to head to the golf course for the next 25 years. Unless you have no other way, put some of your money in your company stock, but put 70% somewhere else.

Closely related to mistake of keeping all your eggs in the company basket, is failure to adequately diversify your investments. All but complete financial newbies will be aware that the purpose of diversification is to reduce risk, yet many of those same people will have large percentages of their retirement funds concentrated in sector funds, company retirement accounts, real estate, or a few company's stocks. If you're young you can have time to recover from a problem, but if you're nearing retirement, this can have devastating results. Anyone living through the tech bubble burst in 2000, or real estate investors in the last year or two (depending upon where you live) can attest to the perils of this approach. Yes, you can achieve spectacular results with investments that are concentrated in narrow sectors or industries, but that's a strategy best left to younger investors that have time to weather a storm, should one occur.

Retirement Financial Planning Mistake #6 is spending more than you make. This will not only make it much more difficult to save for retirement, but can leave you deep in debt. You want to have income and be debt free when you retire, not have a string of credit card bills and other debts to contend with. Remember that if you're truly retired, you're on a fixed income, so as inflation rises, your real income will fall. That doesn't leave room for too much debt.

Retirement Financial Planning Mistake #5 is failing to make a retirement plan. Yeah, we've all heard the “failure to plan is planning to fail” adage that's drummed into your head in business school and elsewhere, but you know, there's actually quite a bit of truth to it. You need to find the two things that every plan should incorporate; a goal, and a path to achieve it. A bit of oversimplification, yes, but that's what you need. You want to find out when you want to retire, what else (kid's college, vacation property, etc.) you'll have to fund along the way, and how much income you'll need to support you and yours in the lifestyle to which you've become accustomed (or any other lifestyle you may want to retire in). Once you've done that, you can sit down either with a retirement planning professional, or on your own, and make a step by step plan to achieve your goals.

Retirement Financial Planning Mistake #4 is funding other things ahead of your retirement. This is a common mistake, borne of parent's desire to see their children do better than they, or misplaced recreationally-oriented priorities (you bought a boat instead of maxing out your 401k). If you fund your kid's college fund at the expense of your retirement fund, all you're really doing is helping to ensure that your children will have the job necessary to help support you in your retirement years, because you won't have enough money. Better to not need their help and have them work their way through college like the rest of us. It will be far better for both of you, trust me.

Retirement Financial Planning Mistake #3 is using the “set and forget” approach to retirement planning. While there's nothing wrong with a buy and hold strategy when it comes to investing (Warren Buffett's done pretty well, after all), you want to revisit your asset allocation once in a while to ensure that your strategy is the most advantageous for the times. For example, technological, economic, political, and demographic shifts will make some industries have greater potential as times change. You want to be sure that you're taking advantage of this, or at least not getting caught heavily invested in dying or declining industries. You may also want to shift more of your assets from stocks to bonds to more closely match your investment requirements as you near retirement, for example.

Retirement Financial Planning Mistake #2 is common and very serious. It's starting too late. Learn from my mistakes here, please. The power of compounding is well known, but often ignored by young investors that have their priorities more closely aligned with this weekend, rather than what they'll be doing in 30 or 40 years. You're shooting yourself in the retirement foot with this strategy, however. As an example, if you're 25 years old and earn $40k/yr now, you can contribute 8% of your salary into a fund that earns 10% for the next 40 years. Assuming you et a 5% annual raise, you'll retire with a hair over $2.2 million. Making the same assumptions, but starting only 5 years later, at 30, and you'll have almost a million dollars less, just a bit under $1.3 million! If you stop and consider that people are likely going to live much longer, that money may have to last longer than you actually worked.

Retirement Financial Planning Mistake #1 is never starting or participating in a retirement savings plan at all. That's a sure way to find yourself on the opposite end of the wealth scale in your golden years. According to the U.S. Department of Labor, 25% of Americans who had an available 401K plan didn't participate in it. That's a financial tragedy that can keep wealth a distant dream you'll never have the pleasure of living. If you consider that many 401k plans include employer matching funds, you're turning your back on free money that can multiply your investment returns. Not too smart.

If you're just starting out, avoiding these top 10 financial planning mistakes. You can retire wealthy, the real tragedy is far too many people don't think they can do it, and so they're right. Remember (Debt Free Saying of the Day)

“Good luck is a created through the sacrifice of the persistent and the prepared.”

Are You Adequately Covered?

One of my more popular posts is about a former co-worker who lost everything in a rental fire on St. Patrick’s Day.

Well, insurance is back on deck as today’s topic because last evening there was a fire and boyfriend had to call 911 and knock on doors to make sure some neighbors got out of their houses. Four houses in a row were lost, possibly some pets as well.

Last night a boarding up crew was out. I could hear their saws ripping through plywood as I went to sleep. All I could think about when I saw the fire engines was if the Red Cross was out to help the residents and hoping the residents had some insurance coverage.

If you haven’t done so already, review your insurance policies for 2008. Did you buy anything new of high value in the past year? Did you have a life changing event? Are you renting? Can you buy more coverage? Is your car old enough to warrant a change in policy? What’s your commute like? Longer or shorter? Are you carpooling?

I feel particularly sad for the young woman who is clearly house-proud. She was out with her parents earlier this spring planting and re-mulching her front garden. She obviously just bought the place because she’s sprucing it up so much. I also feel pretty bad for the lady boyfriend rescued. She answered his knock on the door and he convinced her to get out. She was house- and petsitting. She saw the smoke through the wall and was looking for the cats when he knocked. He had to plead with her to leave the cats behind and make sure she was safe first. Then there’s the lady in another house with lots of little dogs to keep her company.

The Fire Department was still out there this morning to ensure the hotspots were out.

After the shooting in the neighborhood a few weeks ago, I think the neighbors are slightly shell-shocked today.

See Me On The Tee Vee

Check this out! They actually didn't use very much of my footage.. but I'm glad they pronounced my name correctly. :) And they didn't use any of the shots of the guinea pigs which I think were definitely way more interesting than me talking.

2008 NMFA Fellowship Program available

Hey everyone, I'm writing to let you know that the Military Spouse Fellowship for the Accredited Financial Counselor Program for 2008 is now accepting applications. From now through the end of April, the application will be available online through the National Military Family Association website. It's a great program and at the end of it, the selected applicants will have attained the certification of Accredited Financial Counselor under the guidance of AFCPE and FINRA. Please see the linked website if you're interested in learning more or applying to this program. It is definitely worth the effort.

And on a more personal note, tax season will be over in less than two weeks, and I look forward to blogging again!

The Land of Bad Financial Decisions

Yesterday, I ventured into the land of bad decisions. I left my apartment at 8:00 a.m., running late and unprepared for the day ahead. I knew I had a series of events to attend, yet I had not determined how I was getting to them, coordinated meeting points with other attendees or planned how to transition my outfit from day to evening. It was the perfect equation for overspending.


I was aware I approached the day without a plan, but I felt a bit helpless about it. My morning work conference began 9:00 a.m., and I would not be caught dead lugging a weekend bag full of clothes and make-up to an event full of influential health care communications professionals from around the nation. (Leaving it in my car wasn’t an option; I don’t have one.)

So from the conference on, my day was full of tragic spending missteps: I knew I was making bad decisions, yet I didn’t see any better options, so I just kept spending. I bought lunch, I spent $20 on a dress and another $20 on a sweater for the evening (I couldn’t remember if I had anything clean; I would have been fine without them) and then spent another $30 on a cab ride from my apartment (to make up for time), rushing all the way and still arriving a full hour late to my evening affair.

As with most bad decisions, after all was said and done, I felt terribly guilty about my spending afterwards, and in retrospect was able to identify numerous other options that would have enabled me to spend less (arriving to work early and dropping off a bag, or staying home from the evening gathering, for instance). But I was living in the moment, rushing ahead of myself and blindly moving through the day, so I missed those opportunities.

It’s a story not unlike most people’s approach to personal finance.

I’ve been reading Jean Chatzky’s book, “Make Money, Not Excuses: Wake Up, Take Charge and Overcome Your Financial Fears Forever.” Though I’m only through the first few chapters, what struck me while reading her introduction was that many of the women she interviewed were just floating through their financial lives, unaware of where their money was going, without a plan, a savings structure or an understanding of their financial needs and goals. And while most of the women she interviews are in their 40’s and 50’s, the sentiment also rings true for most 20-somethings I know.

For those right out of school, a first paycheck and a first raise are a cause to celebrate. And while happy to focus on securing a job and developing new skills to attain raises, financial planning is not front and center (at least in my experience). So into their mid- to late-20’s, many intelligent, hardworking people are scratching their heads, still moving blindly though their financial lives, spending here and there, monitoring checking accounts and paying off credit card bills and student loans, but feeling terribly guilty about not having any savings and silently panicking because they know where to start. Some have amassed major debt, others have just been hemorrhaging money. In short, living in the land of bad decisions.

The good news is, every single day offers the opportunity to start anew. Every day offers the opportunity to make a good decision – to look into your 401k, to open a savings account, to spend a day at the library learning about financial goals, to reassess your income and your outgoing cash flow. There are numerous resources available – books, Web sites and blogs – that can start you on the right path. But to get there, you have to recognize that the decisions you’re making are the wrong ones. You have to slow down and assess your progress. You have to ask yourself: Am I making decisions today that will help me achieve my future goals? If the answer is no, it’s time to start changing your behaviors.

So today, I’m determined to get back into the wonderful world of good decisions. I’m starting by taking it slow: I went to cheap and delicious buffet breakfast this morning with a good friend, then came home to take stock of all my accounts, finish my laundry and do a bit of writing. We’re going to watch the final four at home tonight and maybe head to a local watering hole to celebrate a big law school achievement for B. It’s all planned out, there’s no rush, and my spending limits for the day are set.

Now for another good decision: time to go transfer some money from my checking to my downpayment savings account. After all, there’s no better way to make an evening of overspending up to yourself than by stashing some cash away for future use.

How often do you replace pillows?

Our bedpillows hadn't been washed in some time, so I cleaned them on Friday. After taking them out of the dryer, I was amazed to see what awful shape they were in. The shells were clean and pretty, but the filling was all wadded up and sideways (and I'd even dried them with tennis balls, like everyone recommends). A lot of punching and jumping on them has made them look a lot prettier but they're far from new, and when I fold them in half they don't spring back to their original shape. So should they be tossed or not? I'm sure a pillow salesman would tell me to replace them every two years or something, but what is the lifespan of a pillow?
I'm probably going to replace them in the summer, after they've gotten four years of use. Seems like a reasonable timeframe.

Simply College Answers Our Student Loan Q's

While I typically spend my weekends dining, drinking and catching up with friends at social functions, I spent much of this weekend at the Kellogg School of Management's
Women's Leadership Workshop in Evanston, Ill. Kellogg is one of the world's top business schools, and I was honored to be a participant. The session featured valuable classroom workshops on negotiations, interviewing techniques, values-based leadership and relationship dynamics for leaders.

I'm going to reflect on those themes and share learnings from the workshop in coming days, so look for more on that. In the meantime, I noticed that many of the women attending the session were grappling with the issue of funding and student loans. Serendipitously, I had already been working on a story about college loans with the good folks at Simply College, a company that specializes in simplifying financial aid for those applying to college and graduate school.

Since the job market's looking pretty glum these days, and the news about student loans has been drab as well, I posed some questions about loans to Rene Bolti, Vice President of Simply College, and an educator with 17 years’ experience creating and administering programs and services for elementary, secondary and higher education. I hope you find her answers helpful.

Here's the Q&A...

1. In layman’s terms, what’s changed in student loans over the past six to twelve months?
Probably the most significant change is a new trend toward eliminating loans from financial aid packages of students below certain income levels. As a result, students at many top-name colleges may find themselves being awarded grants (which don’t need to be repaid) instead of loans.

But, the vast majority of students attend colleges that still include loans in the financial aid equation, so unless you are accepted at one of the top-tier, no-loan colleges, you’re likely to have to grapple with the question of student loan debt.

Although some lenders are exiting the student loan market, there are still many education loans available through a variety of lenders, including federal loans. In fact, the maximum annual limit on federal loans and grants for undergraduate and graduate students has recently increased, making the loans go further toward paying for a year of school.

2. What are three things I should know about college loans today?
1) There are many different types of college loans.

- Federal Stafford loans are available to students who complete a Free Application for Federal Student Aid (FAFSA).

- A family’s financial situation determines whether a student qualifies for subsidized or unsubsidized Stafford loans. (In subsidized loans, the government pays the interest while you’re in school; in unsubsidized loans, you’re responsible for the interest that accrues while you’re in school.)

- Federal PLUS loans are a low-cost option available for parents of students.

- Private loans, made directly by banks or specialized lenders, which tend to be the most expensive option, are available to students and parents to fill any gaps that remain once financial aid has been awarded.

2) Not all education loans are taken in the name of the student; some are student loans, some are parent loans, some need to be co-signed by the student and a credit-worthy adult.

3) Private education loans need to be researched for terms of repayment, length of repayment, total cost over the life of the loan, special qualifying characteristics (like minimum grade point average), and whether all terms and special offers (like interest reduction based on a certain number of on-time payments) are guaranteed for the life of the loan.

3. Can’t parents help their kids navigate the process?
The financial aid process is complex and overwhelming, even for parents who are college-educated and highly motivated. It is a multi-step process requiring attention to timing and detail, with many significant decisions compressed into a very short period of time. To minimize the anxiety and stress inherent in the process, it is beneficial for parents and students to work together, using trusted resources, to be sure they pay attention to each critical component.

Our program, Simply CollegeTM offers a step-by-step workbook/organizer, “Financial Aid Simplified”, to guide students and parents through the entire financial aid process beginning as early as January of junior year in high school, including researching scholarships and loans, completing required forms, comparing financial aid award offers, building a “college life” budget, and more. Go to www.simply-college.com to view video segments that accompany each tab of the workbook.

4. Is the financial aid process different for grad students?
The financial aid process for graduate students typically includes the FAFSA (to make federal loans accessible), but also may include looking for fellowships, assistantships and private loans. FinAid.org has a page dedicated to information for graduate students, including information on specialized loans.

5. Are working professionals at a disadvantage when it comes to loans?
While it is true that income will determine eligibility for certain loans and grants,
working professionals might consider financing their graduate degree through a combination of: employer tuition reimbursement, fellowships, grants, loans.

If you research the possibilities, you’re likely to be able to put together a package that meets your needs. In addition to discussing all possible funding sources with your selected university’s financial aid office, be sure to discuss assistantship and fellowship opportunities with your selected department.

If you are currently employed, talk to your human resources department about tuition reimbursement options (even if you’re unsure whether your employer has a tuition reimbursement program). As mentioned above, finaid.org is a good source of information and fastweb.com has loads of scholarship opportunities, including some for graduate students.

6. If I’d like to quit working and go to school full-time, using student loans, what special considerations might I have to take?
Giving up a salary and returning to the classroom full time will mean making some adjustments to your current lifestyle as student loans are unlikely to equal your salary. Each person needs to weigh personal responsibilities, career aspirations and financial goals when considering full time graduate study and how best to finance it. Here are some specific questions you should ask.

- Is there an alternate source of support available while you’re in school, like a spouse or parent? Even if it’s a loan from a family member, the terms of repayment and amount of the loan would likely be more favorable than any formal education loan.

- Is it possible to work part-time to cover basic living expenses while in school?

- Will a post graduate-degree job in your field draw a salary sufficient to afford and justify educational loan payments?

- Do you already have employment prospects that will be enhanced by a graduate degree?

- If you need to take an educational loan, how soon will you be expected to begin repayment?

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To read some of my personal thoughts and other research on college loans and education, click here and here and here.

Good luck with your applications!

The Stock Market--What To Watch Out For

Uncle Bill is always looking out for your well being and as the credit crunch heads west and out of sight, I think, there are some real things to worry about and they are---

1) politicians

2) the Supreme Court

3) the Fed

As the guys over at MarketMinder.com (full disclosure--I am a client) are often more articulate than moi, I'll let them do the talking--I've got a house to get built.

The Real Risks

10/9/2007

Story Outline

• “Credit crisis” headlines are being replaced by economically insignificant headlines, signaling a lack of legitimate negatives to report.



• Legitimate market risks are few, and unlikely to impact the market much at this point. The risks for aggressive legislation and a major monetary policy error remain low.



• Positive fundamentals currently far outweigh potential market negatives.

Anyone else notice the “credit crunch” headlines are starting to go away? They’re still out there, but no longer occupy top billing, chased off by Britney’s child custody saga, Pamela’s quickie Vegas nuptials, and harrumphing over stores gearing up for Christmas in October. This is front page stuff from allegedly “legitimate” news sources! Very bullish. (For more, read MarketMinder commentary “What a Week,” 10/05/2007.)

We spill barrels of virtual ink at MarketMinder underscoring why now’s a great time to be bullish and pointing out glaring flaws in popular bearish views. As we’ve covered here, popular concerns such as the credit crisis, a weak dollar, allegedly slowing US growth, trade deficits, debt, and even terrorism don’t have the market impact folks think. (For more, you can refer to our commentary archive.) But that doesn’t mean we’re blindly bullish. Rather, we see that legitimate risks are unlikely to develop into major market negatives right now and are far outweighed by positive fundamentals.

For example, we’d view an aggressive legislative reaction to perceived subprime problems as a legitimate risk. Our senators vow to “solve” subprime by forcing banks to tighten lending standards in order to protect the “little guy.” (Pardon us, but who is going to protect the “little guy” from the Senate?)

In our view, any attempt to limit credit access could have negative economic and market consequences—perhaps serious. Is it time to pack it in, go to cash, and safely watch the political melee from the sidelines? Not at all. As we’ve discussed here in the past (“Veto Power”—10/04/2007, “A Political Punch”—05/31/2007) third and fourth years of presidents’ terms are famously feckless. We nearly always see the president’s party lose relative power in the mid-terms—donkeys and elephants alike—setting up the perfect recipe for political gridlock. The political furor over subprime is likely to devolve into nothing more than inane investigations and name-calling—a very good thing if you’re a fan of rising stock prices.

The same goes for rising protectionism—another legitimate market risk. Though congressional cries to “save American jobs” may increase political contributions in the near term, efforts to hinder globalization will likely have an ugly economic outcome. But for now, third- and fourth-year politics should keep ill-considered protectionist legislation to a minimum.

What about a case the Supreme Court is hearing today—being called the Roe v. Wade of securities law (i.e., unique in its far-reaching significance)? In StoneRidge Investment Partners v. Scientific-Atlanta, the plaintiffs argue investors have the right to sue third parties—accounting firms, investment banks, consultants, vendors—if a public company commits fraud. If the plaintiffs succeed, it could mean open season on big business and an exponential increase in frivolous lawsuits. (Great news for plaintiff’s attorneys! Bad news for pretty much everyone else.) Imagine what companies would have to do to protect themselves from litigation. CEOs would become prohibitively risk averse—which would likely reflect in lackluster earnings growth and stock prices.

StoneRidge: Don't Look For a Landmark Ruling
By Brian Wingfield, Forbes
http://www.forbes.com/home/businessinthebeltway/2007/10/08/stoneridge-lawsuits-supreme-court-biz-wash-cx_bw_1009scotus.html

However, we agree with this article’s assessment that the Supreme Court is highly unlikely to rule in favor of the plaintiffs. A 1994 precedent and two recent lower court decisions make it easy for the Supreme Court to rule against the plaintiffs and in favor of capitalism. Another risk moderated. (Though we’ll watch the Court carefully on this.)

Another risk we see is a massive monetary error—like the Fed aggressively tightening or even dropping rates dramatically. We view this risk as slightly higher now, though still unlikely. Mr. Bernanke will be the first Fed head up for reappointment in the first year of a president’s term, as opposed to the fourth year (thanks to term limits imposed on Mr. Greenspan). Ben’s recent cut might have been a signal to presidential candidates, “Hey! I can be accommodative! You want to get reelected to a second term? You need a pleasant economy in the first—and I’m your guy!” If he is indeed auditioning, he may very well cut rates again. But, we still don’t see a few rate cuts as a major deal. First, they take a long time to be felt. Second, inflation has actually been dropping over the last two years. We can’t see how another cut or two will ignite inflation radically from here. File “major monetary policy error” under “still highly unlikely.”

None of these seem likely to flare into major market conflagrations at this point. And they pale in comparison with healthy fundamentals like a growing global economy, strong corporate earnings, and attractive equity valuations. Add to the mix a historically unique positive gap between earnings yields and bond yields globally—which contributes to shrinking stock supply—and a lack of economically significant headlines, and the bears don’t stand a chance. Neither does Britney’s custody case, by the way, but as long as she hogs headlines and fundamentals remain positive, we’ve got a nice ride ahead of us.

Military personnel probably not eligible for RALs this tax season

The Military Lending Act came into law on October 1, 2007, with the intent to stop predatory lending to military personnel, their spouses, and their dependents. The primary target of this law was to protect military families from payday lenders and to protect the nation from the risks of servicemembers with high levels of debt and out-of-control financial situations. The law caps interest rates on all short-term loans (defined as loans of less than 91 days in duration) at 36% APR. One provision of this law deals specifically with Refund Anticipation Loans, or RALs, which are short-term income tax refund advances. With RALs, customers of tax preparation companies forfeit a portion of their refund in order to get it in one or two days instead of the 8-15 days normally required with an IRS direct deposit. The interest terms on these loans are usually right at 36% APR, since the major tax preparation companies have known about this impending legislation for awhile. That should make the fit within the parameters of the law, right?

Not necessarily, and if you live in California, the answer is definitely no.

Aside from the APR, these loans have an origination fee which cannot be waived for anyone.* The origination fee (or account creation fee, or check fee, depending on where you go) added to the interest charges on the loan bump the loan's interest charges well above the federal limit of 36% APR. This means the loans are considered too predatory to military families under the Military Lending Act and are therefore unavailable. Therefore, as a servicemember, you need to plan ahead and realize it will be a couple weeks before your refund is available.

Are there any loopholes? Not as far as I know, short of committing perjury. A wife filing separately from her servicemember husband is not eligible for a RAL. A child who has received more than half of his support from a servicemember for the 180 days preceding the loan request is likewise ineligible for a RAL. Major tax preparation chains will have their software programmed to recognize certain EINs as belonging to military divisions and will invalidate the RAL option on that basis alone.

This will probably prove to be one of the more frustrating aspects of the new legislation, as many people who don't bother with payday lenders still request income tax refund anticipation loans. Many may not be pleased with the longer wait time, even if it does save them some money.

*Specifics here might vary by state. If you're interested in one of these loans, contact your tax preparation company of choice to inquire. They will know, and more likely than not, they will not be able to offer this product to any member of the military, their spouse, or their dependents.

Frugality is a habit

Frugality is a habit just like any other. Habits are powerful things. If you make sure to get into good habits, they can change your life for the better, a little bit at a time.

Some examples of frugal habits that I use without thinking about them are:

• Using half the recommended amount of laundry detergent


• Washing a few large loads on the weekends (to use less water and a cheaper time of use) instead of several smaller loads


• Using half a dryer sheet instead of a whole one


• Making sure the dishwasher is full before running it


• Using only a small amount of dish detergent instead of the recommended amount


• Using a mop, vinegar & water instead of the hateful-smelling Swiffer


• Turning worn-out clothes into rags, which can then be used instead of paper towels


• Combining errands into one circular trip

What habits do you have that are frugal?