Money Wise

Will the oil bubble pop?

2008-04-30T15:50:00.000-07:00

In April 2007, I was predicting $4 gas in the summer. I had the right idea, but was off by a year. Recently I've been seeing a few stations in my area posting 3.999 per gallon of gas signs for regular.

Over the last year, the dollar has declined in value 10% internationally, yet oil prices are over 80% higher. I don't think that's dictated by supply and demand. I'm beginning to think this is a speculative bubble. We had the dot.com bubble, then the housing bubble, even a little gold bubble recently. Now I think it's people investing in the only thing they see going up. Oil. I don't think market fundamentals are behind the sharp increases at all.

I predict we'll start hearing hucksters on radio commercials and internet ads telling us how we can make a killing by investing as they do in oil. Pretty soon, average folks will be talking about how they are thinking of investing in oil. That's when I think the oil bubble will pop. I predict that within 6 months, we're going to see oil start tumbling down to the $70 a barrel price range.

You heard it hear first folks!

Ode to good old traditional telephone

2007-08-30T14:37:00.000-07:00

In my previous post, I wrote about a fascinating new development in telephone technology. Now I'm going to tell you why I won't be buying it. Reliability.

The traditional telephone is over 100 years old. With age and regulation, the telephone companies have made traditional telephone service utterly reliable. Every time I pick up the phone, the friendly dial tone is there waiting for me. Every time I dial (assuming I dial the right number), the connection is made. My traditional phone services has worked during cable outages, storms, electrical outages, and even after the Loma Prieta earthquake. There are no mysterious outages. There is no doubt that when I dial 911, it'll connect to the right emergency response center, and they'll know who and where I am.

I can't tell you how many times my cable internet stopped working for no apparent reason, or recently my DSL modem died, again for no apparent reason.
How often does your computer mysteriously lock up? If phone is routed through the computer, you're screwed when that happens too.

Traditional phone service is also competitively priced with newer VOIP phone services too, if you shop for it. My traditional local phone bill is about $17 per month with taxes and junk fees. My separate long distance bill is usually under $2. When I get those calls from Comcast or some long distance company asking me to switch, I tell them my total phone bill is less than $20, beat that. So far, they've always said they can't. I think Comcast is advertising $39.99 for phone and all the long distance you can eat. What a rip off? For that price, I can have my regular phone and about 9 1/2 hours of long distance a month (at 4 cents a minute with no monthly fees or minimum usages), like I'd ever use that much!

I'd bet 80% of the people who buy VOIP from Vonage or their cable company, can get a much more reliable service and better price from their local phone company and a competing long distance company, then they ever could from a VOIP competitor. Oh yeah, and they don't have to worry about their old telephone company going belly up and screwing them, like SunRocket just did.

Maybe when VOIP can claim a track record of going years without an outage, will I be tempted to switch.

$39.99 per year for telephone?

2007-08-30T14:29:00.000-07:00

How would you like to spend $39.99 per year for telephone service. That's it. How can that be you ask? There's a new company out there called Magic Jack.

Here's how it works. You buy this little doohickey that plugs into the USB port of your computer, and then you plug your regular old telephone into the doohickey. Presto, you've got a telephone. The company gives you a telephone number, and you can call and receive just like normal using your telephone. There are no long distance charges for anywhere you call the USA and Canada. No monthly land line charges. You can even take your phone with you when you travel. Connect your laptop to the hotel wi-fi, or any hotspot, plug in the magic jack and a small telephone, and you've got your home phone with you wherever you go. You even get free voice mail.

Here's the part I don't like. You have to have an always on broadband connection, and you must leave your computer on all the time, and hope it doesn't crash. Still, it's an interesting new development.

Stickin' to the (phone) man!

2007-08-16T14:46:00.000-07:00

I have DSL Hi-Speed Internet (the Slowskys not withstanding) with my local monopoly phone company. I purchased their modem / wireless router about a 1 1/2 years ago and have enjoyed reliable and cheaper service since then.

When I recently returned from a 1-week vacation, I noticed the modem was flashing all kinds of crazy lights. Usually it's just 2 or 3 solid green lights. So I knew it had lost the DSL connection. I unplugged it for 30 seconds and then plugged it in again. Same crazy flashing lights. So I unplugged it and went to bed. The next morning I plugged it in and the thing was completely dead. No lights at all.

So I called the monopoly phone company tech support and they inform me that yup, my modem is dead. It'll be $80 + tax and shipping for a new one. I'll have to call the estore to order. Not being too crazy about this idea, I check out my cable company. They're running a special for $19.99 a month for 6 months, and a $30 modem.

So I call the monopoly phone company again and tell them I wish to cancel. After getting the right person, they of course ask why. And I tell them. My modem crapped out and I'm not going to spend $90+ for a new one. I suspected they would cave and send me a new one for free, just to retain me as a customer, and that's exactly what they did. Today I'm looking at my shiny new, and free, DSL modem.

Moral of the story is, don't be afraid to cancel services. The only caveat is, you have to be a customer in good standing. Businesses know that it's much more expensive to get a new customer than retain one. It's worth it to them to give upgrades or improvements to keep you as a customer.

I routinely do this with credit cards and get all sorts of nice freebies. The credit cards will almost always offer me free money. 0% for X many months. Oh and by the way, tell them you want them to waive or cap the transfer fee. Last go around I got 2 cards to loan me a total of $45k for 10 months, for only a $75 fee. I made close to $200 a month in interest alone.

Gas to rise to $4 a gallon?

2007-05-07T08:44:00.000-07:00

After seeing the relentless march of rising gas prices, I'm now convinced we will see $4 a gallon gas prices, at least in the south San Francisco Bay Area. Even the cheapest cash only places are now charging $3.35. $3.45 is more normal at the regular stations. Doesn't seem like more than 6 months ago, they were at $2.30 a gallon, or even less. And we are now moving into high driving season. Prices can only go up from here.

I'm kicking myself for my recent car buying decision. I bought a V6 Ford Fusion, and for a car it's size and weight, it's a total gas hog. My mileage, at least according to the onboard computer, is about 16.5 mpg for the last couple of fill ups. According to the sticker, it's supposed to get 20 in the city and 28 highway. Well, my driving is about 50% city and 50% expressway. I know the EPA estimate is not a realistic estimate, but given my driving conditions, I should be getting at least 20 mpg.

I could have easily bought the 4 cylinder version, and saved some dough in the process. But my prejudice against Ford 4 cylinder engines prevented me from even considering them, due to my previous ownership of two Fords with vastly underpowered 4 cylinder engines.

I had no idea they've increased the power output of their 4 cylinder engines so much in the last 20 years. I only found out when I went back and checked the specs for the Fusion I4 vs. my V6 Buick. Same horsepower! 16% less torque, but since the Fusion is about 1400 lbs (30%) less weight than the Buick, the I4 should have performed better than my Buick, and I never thought my Buick was underpowered.

I'm also kicking myself for not consindering the Camry. At the time I was looking, I thought the 2007 Camry was ugly. Now that I'm seeing them everywhere, I'm starting to find them attractive. The styling has grown on me. They still seem a little smaller on the inside than the Fusion and I like that interior room, but the V6 has more power and better mileage than my Fusion, just looking at the EPA numbers, and the 4 cylinder probably would have been fine too.

I've already made the decision that my next car will be something different. Plug-in Hybrid, electric, Biodiesel, whatever. Hopefully in 8 - 10 years, which is how long I generally keep a car, those alternatives will be available. If not, we're going to be in trouble as a nation. I told my wife she could have a new car in two years. I'm going to try and steer her towards a safe, but fuel efficient vehicle. Maybe a Prius. We'll see.

None of this is so much about the price of gas. My income has more than kept up. It's about using less of the gas. The price just makes it more noticeable. Don't get me wrong. I love the Fusion and think it's a great competitor to the Camry or Accord. It's just I wish it was more fuel efficient.

Downloading Music

2007-04-23T15:25:00.000-07:00

I'm not much of a music buff, so I'm kind of late to the game when it comes to downloading music. Oh, I've ripped some of my CDs so I could play them on the computer, and I toyed with Limewire a while back downloading some old songs that I used to have on cassettes I had bought.

But recently, I got a free Ipod Nano from a credit card promotion (sorry, that promotion doesn't exist any longer) and also I have a new car that has an MP3 capable CD player in it. So I thought I'd check out some of the legal music services. What a hassle!

First, I already subscribe to Yahoo Music Unlimited so I can listen to music at work. They stream it in and have a wide selection. I can play new hits, old hits, or maybe some relaxation music. Good stuff. The quality ain't the greatest, but I'm OK with it.

So there's some hits on the radio I like these days, and I buy 5 of them off of Yahoo. Can I put them on my Ipod? NO! Furthermore, they aren't MP3s, so I can't even burn an MP3 CD to play in my car stereo. Yes, I can burn an audio CD, but more on that later. Sure I can download from ITunes to put on my Ipod, but you can't burn an MP3 there either.

Also, Yahoo has an enhanced subscription music service called Yahoo Unlimited Music To Go. This let's me put as many songs on my MP3 player as I want to carry around with me. Uh, except again it doesn't work with the IPod. Also it costs extra. I checked out Rhapsody, Napster and they have the same story. ITunes doesn't even have a subscription service, like it, so no Ipod relief there either.

For all of these services, I have to buy the song using a lossy compression method, WMA or AAC, burn it as an audio CD, then rip that CD again with an even older lossy compression method, MP3, all to get my music in an eastily useable format.

The audio quality just ripping straight from CD, let alone converting these others, is nowhere near CD quality. Maybe cassette quality. What happened to how important CD clarity was? Now nobody gives a crap about the quality, just as long as you can move it around in an electronic format.

This brings me to my point. ITunes notwithstanding, the legal downloading music biz sucks! Because of Digital Rights Management, you can't really move it everywhere you want it, at least not without further audio quality loss, and the audio quality is inferior to begin with!

I used to think that people downloaded music illegally because they were just cheap. Now I'm beginning to understand there maybe other reasons. Portability for one. Still not sure how I'm going to resolve this. I really do want to buy music legally. The artist and distributors are providing value to me, and I want them to profit from it. But why does it have to be so difficult?

Car Buying Experience #4

2007-04-03T10:28:00.000-07:00

Decided to check another Chevy dealership for Impalas. Only 4, all silver or gray. Ugh. Didn't even bother asking the sales guy to open any up and just left. While walking out, I noticed that they had at least 20 of every other model Chevy makes, in a wide variety of colors and features.

What's up with Chevrolet? Cobalts, Malibus, Equinoxs, HHRs, etc are everywhere in abundance, but Impalas are scarce, and only in drab colors.

So we packed up and went across the street to the Ford dealership to look at Fusions. Pretty nice. Got in and checked it out. Lots of legroom, even in the backseat when I've got the front seat all the way back. Good size trunk. Nice interior design, and surprise! A nice selection of colors. They had a gorgeous Merlot Red one we took for a test drive. Very nice. Far better than the Five Hundred. I liked it so we went in and talked numbers. They offered me $250 over invoice. I asked for a minute and he went away and I talked with the wife and went over the options included - uh oh! There was a car navigation system on there for $1,650. Ouch! I generally know where I'm going, and even if I don't, I have a good sense of direction. I told the guy that was a deal killer. $500 maybe, but not $1,650.

He said let me show you another car. Drives up a silver one (goddamn silver again) with an ugly interior. Told him no good, we're leaving. He says, just let me check to see if I can find what you want elsewhere. He finds another Merlot Red one, basically the same, but no navigation and sob, no moonroof. OK, the moonroof I can live without. So I buy it sight unseen, because it's supposed to be identical.

Went in the next day to pick up. It has the spoiler, which I didn't really want. What do I do now? I've already signed papers. On the spot, I take a good long look at the spoiler and decide I'll live with it, so I took posession of my shiny new Merlot Red Ford Fusion V6 SEL.

So here's my tip for future car buyers. Do not buy sight unseen based on sales guy's assurance it's identical in every other respect. You MAKE them bring it in so you can look at it or you walk!

Car Buying Experience #3

2007-04-01T19:19:00.000-07:00

Started looking for my 2nd car model I was interested in. It was the Ford Five Hundred. Dropped by the Ford Dealership not really expecting to think highly of it, but they had a fantastic sale of $6,000 below MSRP. They were getting rid of those models as they are being discontinued.

They had 1 car on the lot that looked great! Black with shale leather, oodles of features, really big and really classy looking interior and exterior. I got really excited and told the wife we're taking a test drive. What a dissapointment. The thing was seriously underpowered, seemed like it was having trouble finding the right gear, and basically drove like an underpowered oil tanker. Not very smooth or satisfying at all.

The dealer than put on the high pressure, putting the screws to me to try and sign, but they made one fatal mistake. While running my credit to see if I'd qualify, they left me alone for 10 minutes. I sat down and started making a pros and cons list for the Impala vs. the Five Hundred. The Impala only had 2 pros and 1 con. The Five Hundred had abotu 7 Pros, but also 7 cons. In the end, I just didn't like how it drove, but in every other respect it was superior to the Impala.

When I gave them my final no, the sales manager said he understood and basically said "What was Ford thinking putting that small engine in that big car?"

He then insisted I drive a used Lincoln LS. I did. It drove much nicer, but it was dark and we were tired and I just wasn't prepared to make an offer on a car I knew nothing about. He dropped $5,000 off the sticker to encourage me to sign. Again, very high pressure. The deal was that day only, being the last day of the month. In my mind, there was too much pressure. There was no reason I had to do it right then and there, so I left.

After I got home I checked edmunds. The car's value was indeed what the dealer said, about $28k. However, it was listed on the dealer's internet site for $23k. Basically, he was giving me his advertised price. Plus I had no way to verify the quality of the car at the time. No mechanic's inspection. No title history. Plus the wife wasn'tt hat happy with it. Too little room in the back seat.

While in there showroom, I noticed the Ford Fusion was bigger than I tought it was, so I expressed interest. As we were leaving that asked if I wanted to drive it, but we were tired, it was late, and I was done with high pressure tactics.

Cary Buying experience #2

2007-04-01T19:14:00.000-07:00

Saturday morning I went to another Chevy dealership looking for the Impala. Got to take a good test drive of one. I liked it quite a lot. Good pick up, smooth ride, nice overall feel, and the interior was roomy and comfortable. The trunk was nice and big. The style was very nice. The only problem was that Chevrolet seems to make about 10 times as many silver, white and black cars then they do the blues and reds. I wanted the Bordeaux Red or my back up was Imperial Blue.

The sales guy was excellent, again very low pressure. He seemed to really want to find me the car I wanted, but only had one that I even half liked the color and interior.

After searching on the computer for other available cars within their sales region, he came up empty. He did offer me $250 over dealer invoice. If I had liked the colors I would have bought it.

But in the end I walked away, mentally making that my backup car if I couldn't find something I liked better.

Car Buying experience part 1

2007-03-28T14:11:00.000-07:00

It's been about 28 years since I last bought a new car. Since then I've always bought used. Anyway, you go into these things expecting all the stereotypes you like you saw on Fargo, or see in the news and magazines. High Pressure, smarmy sales guys ready to pounce on you and sell you a bunch of extras you don't want, etc.

So today I went down to the local Chevy dealer during lunch time to take a look at some Impalas and get some info. A very pleasant experience. This particular dealership told me up front they are a no haggle dealership, and the experience was very low pressure. The sales guy was helpful, asking what I was looking for in the car, trying to show me what they had in stock that might be helpful. I had to look at 4 different Impalas to see various features I was interested in, as they had not 1 even close to what I wanted.

Still, I spent some time talking with Medy, the sales rep, and he said they could always get one from somewhere else or even order one from the factory if I chose to. He gave me a quote on my ideal Impala based on the options I wanted. I matched what they quoted vs. Edmunds.com. Edmunds was spot on! The MSRP was exactly what Edmunds quoted, the dealer invoice was what Edmunds said it was, and the average selling price that Edmunds had was very close to what the dealer offered me, with the dealer beating it by a hair. The deal had a tag in the front window with how much they were discounting off of MSRP. That amount left them about ~~$650~~ $560 in dealer profit on a car they sell for $22,500. I think that's a fair deal, if not an outstanding one.

Still researching. Need to check out the Ford Five Hundred and also Chevy's at another dealership not too far away.

Free ID Theft Monitoring from Paypal and Equifax

2007-03-28T10:21:00.000-07:00

Paypal and Equifax have teamed up to provide a free ID theft monitoring system. Here's what it says it does

Early warnings. Automatic notification through email, in the event there’s a new account opened that impacts your credit file or a significant balance change to one of your existing accounts.

To sign up, go to Paypal and then find the link on the page that reads "Free Alerts to Help Protect You From ID Theft." You'll be taken to another page where you'll see the icon to Get Equifax Credit Alerts. Click on that and then fill out the forms and create an account at Equifax. Again, this is free, although they do offer a full featured credit monitoring system option that you are free to turn down.

Seems like a good service that will cost you nothing.

Cars. Then and Now

2007-03-27T15:17:00.000-07:00

I've had new car itch, and I've been looking up new cars like crazy on the web. I've noticed two things:

1. Cars are like cell phones. They keep adding on more features to keep the price up.
2. You basically get more car now then before for the same money, after inflation.

In November 1979, my dad and my 16 year old self went out car shopping for my first car. We both knew I needed something cheap and reliable. We settled on, and don't laugh, a brand new 1979 Ford Pinto. The sticker price was $5,800, but my dad being the former car salesman knew that this particular vehicle had been on the lot a long time as they were well into the 1980 year sales, so he bargained them down to $5,000. Thus I was the lucky recipient of a Ford Pinto with luxuries of automatic transmission, Power Steering, Power Brakes and AC. Well, recipient wasn't the word. I paid for almost all of it over the next 3 years. I drove that car to death selling it 10 years later with 138k on the odometer.

Anyway today using internet searches I looked for the most likely equivalent of a Ford Pinto and settled on a Ford Focus hatchback. I went on Edmunds and equipped it with at least what the Pinto had, including Automatic Transmission. Of course it comes with much more standard than the Pinto ever did. The Average selling price was $14,228.

Next, I went to the governments CPI calculator and asked what $5,000 is 1979 is equivalent to today. It came out to $14,015.

I think we can all agree that the Focus is a far superior vehicle. I've rented one and was satisfied with it. It also has more luxurious standard features. So the lesson here folks is we are getting much better equipped cars, better performing (trust me, the Focus performs far better than my gutless Pinto ever did), and safer (remember the infamous exploding Pinto gas tanks) cars than at least in the late 1970s, for roughly the same price.

Microfinance and Kiva.org

2007-03-16T11:39:00.000-07:00

There is a very interesting article in today's Mercury News about microfinance or microlending and a web site that can help arrange it called Kiva.org. Make sure to check out the graphic of how it all works.

What is microfinance? It's the lending of small amounts of money to people in impoverished nations or poor areas, so they can buy tools or assets, that they can use to earn a better life for themselves. It helps a poor woman in Africa buy chickens so she can sell eggs, or a cobbler in Bangladesh new tools so he can repair or make new shoes much faster, etc.

Usually this is done through very small banks or finance institutions set up for this very purpose. The entrepeneurs then pay the loans back from their increased earnings. That money is then lent to another poor entrepeneur, etc.

I dislike many charities, because they aren't geared toward helping people become self-sufficient, but here's a great alternative. In the past, this was done as a charitable donation. The money was given to these microbanks and it was then lent.

The beauty of Kiva, is that instead of given money to charity to make these micro-loans, you can do so directly. And if the entrepeneur is successful, you get your money back so you can lend it out again. It's a lot like prosper.com, but only geared towards micro-lending for poor entrepeneurs. You can start with amounts as low as $25.

Zoho Applications for Small Groups or Businesses

2007-03-14T14:08:00.000-07:00

There's a little known company out there providing a whole host of useful online applications called Zoho. Like Google that offers online word processing and spreadsheet programs, Zoho offers them, and much much more. Their additions include a Presentation program, Wiki, Notebook, Project Management, Database, Planner, polls, tests, and Chat.

But best of all, they offer a CRM application called Zoho CRM. It's an online Customer Relations Manager that is very similar to Salesforce.com. It's not as polished, but it has virtually all the same functionality.

What I love about Zoho is that all of these programs, including the CRM, are free to use to individuals, small groups or small businesses. It's not until you start signing on 4 or more people to these applications that they start to charge anything. Even the CRM is only $12 per month after you've gone past the first 3 free users. Cheap compared to Salesforce.com If you have need of online applications for individuals, small groups or need small business tools, for free or very cheap, check out Zoho. I can't believe they haven't been bought out yet by the likes of Yahoo or Google.

IRS gets it bass ackwards

2007-03-12T09:23:00.000-07:00

Every year this irritates me, as if having to spend hours preparing my taxes isn't enough. I'm talking about the IRS's E-File program. What is the purpose of the E-File program? Why was it even created? Was it to help taxpayers get their refunds faster? No! That's the incentive to encourage people to e-file.

The E-File program was created to accomplish two goals. To reduce data entry error and to eliminate the extra labor and hassle of handling paper returns. For every paper return filed, the IRS has to deal with handling the mail, opening it, scanning the forms, seperating out the checks, W-2s, etc. On many it has to do manual data entry. It's much more efficient and accurate to have them filed electronically.

So why does the IRS insist on making those who have the largest returns pay a fee to efile? If you've got a simple return, like a 1040A or 1040EZ, it's usually 1 or 2 pages, and it's pretty much free to file. If you have a return like mine this year, it's 8 pages, with a lot of numbers. Wouldn't it be in the best interest of the IRS to make longer more complicated returns Free to file?

If I wasn't getting back very much, or god forbid had to pay, I wouldn't pay $16 to e-file. And my home state of California is just as bad. In their case, I'm not getting much back, so I am not paying the additional $16 to e-file with them. So what if it takes an extra couple of weeks to get my return. They can just do the extra work in dealing with my paper return.

None of this makes sense. They've got a program in place, and it works! Now they just need to implement so all want to participate and save the government money. But we're supposed to pay for the privilege of saving the gov't money when doing the most hated of gov't requirements. Screw that! But I guess that shouldn't surprise me, because it's the government.

Annual Flower and Greeting Card Extortion Day - A man's perspective

2007-02-13T14:28:00.000-08:00

Otherwise known as Valentine's Day.

I hate Valentine's Day.As a man, you are absolutely obligated to buy your wife or girlfriend flowers and a card, and usually a present. Of course, on this day, flowers are easily twice as expensive as normal. I haven't priced it, but I bet the Valentine's Day cards are more expensive than other cards too.

Then of course, there's dinner out somewhere nice.And what's the benefit? After you've paid this extortion, you've fulfilled your duty. Any other day of the year and you get extra credit for doing the above. Today, it's just to stay out of the doghouse.Not only that, but it's a woman's holiday. Men don't want gifts on Valentine's Day. Where's the equivalent holiday for the men? None! We don't get any. How about a holiday where the woman is expected to buy her man a new tool or gadget or take him golfing. And if she doesn't, she's in the dog house!

What a jip.

Online Storage

2007-02-13T11:54:00.000-08:00

The Wall Street Journal had a good article on Online Storage and how about numerous companies are trying to get us to store our important data online as a back-up. Frankly, this is an idea whose time has come. If your computer dies, or you accidentally delete an important file and don't have an onsite back up, or god forbid if your place burns to the ground taking your computer and back ups with it, what will you do? With online storage, you simply fire up the computer, login and retrieve your important data.

If you already pay for virus and malware protection on your computer, paying to back up important data shouldn't be a foreign concept. Isn't that what is really important on your computer anyway?

There are numerous ones offering a taste for free, offering anywhere from 1 to 5GB for free, and then of course charging $50 to $100 a year for much more storage. Here's some I already knew about:

Xdrive - 5 GB online storage for free from AOL. All it takes is an AOL account, which is now free as well. You can designate files to share as well. $100 per year for 50 GB
Mozy - 2 GB for free. Has the virtue of encrypting your data with Blowfish, a well respected ciper, so only you can read your data. $50 buys you all the storage you can eat.
Carbonite - No free plan. Unlimited for $50. Has utility that automatically backs up your documents for you all the time.

There are several others, each with it's own specialty. Also I'd like to mention Yahoo Photos, which allows unlimited photo storage, and the ability to get those photos back at full resolution, although only 1 at a time. Still, it's free too, and you can view, share and order prints as well.

Right now, I'm currently in the process of backing up all my music and documents to Xdrive, and my photos to Yahoo Photos. What great services, and for free if your need is small, or cheap if you have lots to back up.

National Debt Misunderstood

2007-02-13T09:06:00.000-08:00

One of my favorite blogs to read is Blogging Away Debt. This week she posts a guest article titled Consumer Debt vs. Government Debt. How Can We Judge Congress When Our Plastic is Maxed Out?

Gov’t debt is a vastly misunderstood subject, and Ben seems to be just one of the misled.
Simply put, there is no reason this debt EVER has to be paid back. For virtually all of our country’s entire existence, the debt has never been paid back. It’s been rolled over.

Think of it this way. A person starts out their adult life earning generally low wages, and then throughout life as they gain skills and expertise, they continually earn more and more. This represents our country’s GDP.

That same person probably also starts with renting a small no frills apartment, and then throughout their life continually continually rent nicer and nicer homes, at higher and higher rental rates. This is interest on the ever growing national debt. (No home ownership allowed in this analogy, because that builds equity).

Since the nation will never retire, the GDP, and thus the tax revenues, will only continue to grow, and thus the gov’t can continue to afford the interest payments on more and more debt.

Here’s some interesting facts about the national debt:

Interest on the debt now consumes less percentage of government tax receipts than it did during Clinton’s time, despite Bush’s heavy borrowing. How can this be? Because tax receipts have also been growing heavily. In 1998, debt service consumed 14% of tax receipts. In 2006, it consumed under 10%. America’s ability to pay interest on the debt is becoming less of a burden, not more so.

Approximately 40% of the national debt is owed to the government itself. US Citizens own approximately 35% of the debt. The other 25% is owned by Foreigners.

While I would prefer that the federal gov't do a better job of living within it's means, and use debt only in times of recession, disaster, war or investing in building of new national infrastructure, it is not the boogeyman we all perceive it to be. Simply put, it is OK for the debt to grow, and continue to be rolled over, as long as the economy grows along with it, so we can continue to pay the interest.

I highly recommend you point readers to a blogger called The Skeptical Optimist for facts and views on the national debt that you just won’t hear anywhere else. He too is one of my favorite blogs.

Hunting for New Life Insurance

2007-01-25T16:30:00.000-08:00

I went quote shopping for new term insurance on a couple of those internet sites. Wow! I have been getting barraged by calls from agents, all of whom claim to be independent. All but one have been pushing one company over another, each a different company. I can't help but think it's because that's who they'll be getting the biggest commission check from. No bother. I'm after the lowest rate and I don't care how much commission they get, as long as the company is rated A+ or better by AM Best and gives me a great price.

One good thing about these calls is that one agent really took the time to show me that I'm woefully underinsured. As a result, I've doubled the coverage that I'm seeking. Whichever policy I do choose, it will be a bigger bite than I was hoping before because of that. Still, since I'm the only breadwinner, I have to make sure my family is secure if I'm gone.

So far, only 3 agents are credible. 1 pushing West Coast Life, 1 pushing US Financial and 1 pushing Prudential. I currently have West Coast Life, and my health has only gotten better since I took the policy two years ago. If they quote me based on the health info they have, I know it's a real price. I think some of the other agents were giving me too optimistic of quotes saying I'd fit into a catagory that I don't think I can fit it. My health is fine, but I'm way overweight for my height.

I'm surprised that not one agent has tried to push me into whole life or variable life or any of that other garbage. The one agent who talked me into seeking higher coverage even told me that term was the best way to go, and that any extra money should be invested in my retirement program, rather than a cash value life insurance policy. He's got a lot of credibility right now with me.

If any readers have any useful tips to pass along, please leave a comment for me.

Roth vs. Traditional IRA

2007-01-21T23:51:00.000-08:00

I keep seeing everyone advocating putting money in Roth vs. a Traditional IRA. Maybe they're seeing something I'm missing. To me, a Roth is really the best choice only in a narrow set of circumstances.

For many, they did not save as early as they should of. And even if investing everything they can for retirement, their retirement will still earn them less taxable income than they earn now. So why would you want to pay the higher tax rate now and then invest in a Roth, vs. take the bigger tax break now and invest in a Traditional IRA or your 401k?

For example. Right now I'm in the 25% tax bracket. However, by every retirement calculator I've ever ran, my annual retirement income will place me in the 20% or less bracket. So why not pay lower taxes later?

The common argument against my point is that you don't know what Congress will do to tax rates in the future. Fair enough. But you also don't know what they'll do to Roth rules either. If the gov't is hard up enough that they need to raise income taxes on less affluent retired seniors, they can just easily turn around and say that Roth earnings can be taxed too.

The Roth does offer one nice feature. You can withdraw your contributions (not earnings) early, without penalty. This makes it a good way to save for retirement, but still have that cash available without penalty if another more important need arises. I have seriously considered this as an investment vehicle for my son's college education / my retirement, while putting everything I can into my company's tax-deferred 401k. If you ever look at the 529 plans, they have penalties galore if the money is not used to spend on a post-high school education. The Roth would have none, as long as I only took out my contributions, and left the earnings in for my retirement.

Unless you are predicting a rosy scenario retirement, I say take the sure thing bigger tax break now, and use that extra tax savings for further investments of one sort or another.

Tip on Tax Return Advances

2007-01-18T11:57:00.000-08:00

Many people when they take their taxes to a tax preparation center, or even if they do it with some computer software, will be offered a Tax Return advance from the tax preparation company. These companies will give you your tax return instantly for a small fee, and then your tax return from the IRS will be given to them later. Sounds great, right?

AVOID THESE OFFERS LIKE THE PLAGUE! If you calculate the fee as you would interest on a loan of 1 to 3 weeks, you often wind up paying 600% or more on that loan. You've already paid too much to the IRS and let them hold your money for a year or more. What's another week or three?

In fact, some companies actually make very little money on the tax preparation, and make their real profits from these short term loans. The actual tax preparation is almost a loss leader.

If you are that anxious to get your money as soon as possible, adjust your witholding exemptions to a higher number, so you keep more of your money every payday. Then you won't have a large return at tax time.

What's Old is New Again

2007-01-12T16:33:00.000-08:00

USA Today reports that AT&T will be ending the Cingular brand and replacing it with AT&T. Uh....Cingular used to be AT&T Wireless.

"Today's AT&T was known as SBC Communications until late 2005, when that
regional Bell company acquired its former parent, the AT&T Corp.
long-distance business. Several years before that deal, the AT&T
long-distance company spun off its cellphone business, AT&T Wireless, as an
independent concern. Then, in late 2004, AT&T Wireless was acquired by
Cingular, which had no real desire or legal right to adopt a brand still owned
by the AT&T long-distance business."

I just find it amusing that here Cingular has invested all that time and money in brand building over the last 6 years, and it's just scrapped like that, especially when they already had the AT&T name before, and chose not to use it.

Do You Have a Silent 2nd or 3rd Mortgage?

2006-12-18T12:05:00.000-08:00

When I bought my home, my mortgage broker found some state assistance for the first time homebuyers. It was a silent 2nd mortgage at 5%. What this means is that $25,000 of my mortgage loan requires no payments until at the end of the 30 year period. At that point, I would owe something like $62,000 and could re-finance it if I had to, as my 1st mortgage would be paid off by then.

Anyway, the interest has been adding up since then. I've made a few occassional small payments, and the interest paid has been tax deductible. Right now, it's about $1,300 in interest. I'm taking money out of savings and sending in a payment on it for that $1,300 in interest. It's going to save me a bundle.

First, I'll be saving 5% in future interest on that $1,300. That's what I was earning in the savings account. Plus, I can deduct that interest payment on this year's taxes. I'm expecting to be in the 20% bracket, so it'll save $260 on income taxes this year.

Get Your Mortgage Payment in Early to Maximize Your Tax Deduction

2006-12-18T12:01:00.000-08:00

This year I'm sending my mortgage payment in 2 weeks early. Why? So I get 13 months of interest paid this year, so I can deduct it on my taxes.

If you've had a good income year, and expect to owe a larger amount in taxes, here's a free way to save taxes on that interest. If you haven't had such a good year and don't expect to owe much in taxes, make the payment in early January. Maybe you'll have a better year next year and can take that extra help on next year's taxes.

Get Free Bill Pay Service

2006-09-22T12:48:00.000-07:00

If you want a full featured FREE Bill Pay Service, look at AOL. America OnLine (AOL) is restructuring from a membership model to a ad supported model. In doing so, they are making many of their services free to all. Their Bill Manager Plus is a full featured Bill Pay system, integrated with their Email. All you need is an AOL account, which is free too, just go and sign up for one AOL.com.

Here's some of what it will do:
Receive Secure E-Bills from over 4,400 support billers and bankers.
Receive and Pay Bills from your inbox
Automatically Add Bill Due Dates to your calendar
Track Monthly expenditures with easy to read charts.
Spending Alerts -- designed to protect you from fraud.
Credit card and banking alerts enable you to monitor suspicious activity and large transactions
Cell phone minute alerts allow you to avoid monthly-minute overage fees from your cellular provider.

AOL is also offering other free services, including 5GB of storage, free safety and security software, local voicemail, picture storage.

AOL is no longer the stodgy dial-up company with their own weird software. It is definitely bringing on the heat and is offering hard core competition to Yahoo, Google, and MSN. We consumers can only benefit.

Great Deal on Prepaid Wireless

2006-09-19T16:48:00.000-07:00

I just ran across a company offering a great deal on Prepaid Wireless. The company is STI Mobile. They offer prepaid plans at 12 cents a minute or less. Most prepaid plans have gotcha's like all the minutes expire in 30 days or whatever. I could could find no such conditions on their web site, other than you have to make or recieve at least 1 call every 60 days to keep your number active, and you must maintain a positive balance on your account. They use the Sprint 3G network, so you have nationwide coverage.

If you are like me, and only use your cell phone for 30 or 60 minutes a month, this is an incredible deal, compared to most of the major monthly plans that generally start at $29,99 + fees and taxes. It's also a good way to keep your kid in line if they have a cell phone. Buy them a new prepaid card every month and let them juggle the minutes. If they run over, they're out of luck, unless they want to pay the difference.

Precautions for Dealing with Debt Collectors

2006-09-18T16:46:00.000-07:00

There are many scavenger debt collectors buying old debts and then sending out collection letters to anyone with a same or similar name, and then dinging your credit or forcing you to pay a debt that isn't yours, when it's crunch time like when you need to close your home loan. Rules for dealing with debt collectors, courtesy of radio consumer advocate Clark Howard:

If you receive a collection letter for a debt you do not owe or are disputing, always replay in writing via Certified Mail within the 30 days allotted. Otherwise they can ding your credit report. You tell them that the debt is not yours and to go buzz off. You also tell them you will sue them if they put that debt on your credit report.
If you make an agreement to pay a debt collector for a debt you do owe, ALWAYS get that agreement in writing before you pay them. Do not pay them anything unless you get it in writing. Do not even make a good faith payment until you have the written agreement in hand.
Never give a debt collector your checking account number - EVER! They'll cheat you in a second.
Do not give them a post dated check. Again, they'll cheat you.

Get Rid Of All Those Credit Card Offers

2006-09-15T13:45:00.000-07:00

The major credit bureaus routinely sell your credit info to all sorts of companies, and those companies send you those annoying credit card offers in the mail. How'd you like to stop those annoying offers cold? Then go to https://www.optoutprescreen.com

This site is run jointly by the 3 major credit bureaus that will prevent your info from being sold to those company's who send you those unsolicited offers. I've done it and it works great. I've gone from getting 4 or 5 of those offers a week, to 0.

You will have to give some private information, like your Social Security Number. You shouldn't trust me, but trust me, it is OK to enter that info here. If you doubt this, check our Clark Howard's web site at www.clarkhoward.com and do a search for OptOutPrescreen. You'll find out it's legit.

Contest Winner Announced

2006-09-06T12:13:00.000-07:00

Philip is the winner of the Best Web App contest for recommending Google Notebook. Unfortunately, he was also the only person to enter.

I guess I'm going to have to do more to get greater exposure to the blog.

Philip will be receiving his Amazon gift certificate by email shortly. Congratulations Philip.

Best Free Web Apps Contest - $15 Amazon Gift Certificate

2006-08-30T15:17:00.000-07:00

I'm conducting a contest. I'm looking for the best of the best of free web applications. I'll give you two examples of my favorites.

Yahoo Mail - With their Beta version, they've essentially created a web based email and contact manager, that functions a lot like Outlook. I've completely abandoned Outlook in favor of it. And because I'm an AT&T DSL subscriber, I've got something like 2GB of searchable email storage.
Zoho.com - They've got excellent web based office applications like email, spreadsheet, word processor, etc., including an incredible online CRM that is very similar to Salesforce.com, that is free to individuals or very small businesses, and very bargain based for others. They also have project management tooks, customizable databases.

I'm running this contest for two reasons. The first is to find out how many people actually see this blog and the second is to hopefully find some really good free web applications.

The winner will receive a $15 Amazon.com certificate.

Here are the rules.

All entries must be emailed to this email address nohgxiwx9071yph@jetable.org You must provide your email address so I can send the gift certificate. I promise I won't send any spam.
You must also post your entry as a comment. Sorry, I wasn't smart enough to figure out how to derive your email from your comment, without asking you to blatantly put it in the comment.
You must provide the name of the web app and why you think it is among the best. Also include a link to it. Remember, it has to be free!
All entries must be received no later than September 5th at 11:59:59 pm Pacific Daylight Time.
Winner will be chosen by me based on how much I like the web app.
Winner's name and entry will be posted and gift certificate sent no later than September 10th.

Good luck

Comcast - Too Little, Too Late

2006-08-27T09:20:00.000-07:00

I got a call from a Comcast telemarketer. The call went something like this:

Comcast: Good evening sir, I'd like to tell you about our digital telephone server, that gives you all the long distance you can eat for only $30.00 a month.

Me: Not interested.

Comcast: Sir, how much is your current phone bill?

Me: About $17 a month.

Comcast: And that includes long distance?

Me: No, make it $20 a month all together for phone and long distance.

Comcast: I see, well, we are also offering our broadband internet for an introductory rate of $30 per month. With that....

Me: That's interesting, especially when I called Comcast about 6 months ago and asked them to reduce my rate of $42.95 a month to AT&T's competing DSL rate of $17.99 a month. You folks didn't seem too interested in keeping me as a customer back then. Even your introductory price doesn't come close to my current rate.

If AT&T would give me TV too, I'd be happy to chuck Comcast all together. They charge me $80 a month for cable tv, and unfortunately, I have no other alternative due to HOA rules. I bet that AT&T, whenever they get around to offering TV service, will charge me less than $50 for the same service.

Comcast, you are no longer a monopoly in broadband. You better start competing. Yes, you've got faster pipes, but I don't need the Ferrari speed at the Ferrari price. Most other people don't either, unless they are downloading boatloads of video. I'm perfectly happy at DSL speeds and with my regular old telephone service, with dirt cheap 3rd party long distance at Americom.com. When AT&T provides television, your monopoly on that will be over too!

Don't Just Tear Up Those Credit Card Applications

2006-08-08T15:48:00.000-07:00

I was reading an amusing blog about how a guy applied and received a credit card, using an application that had been ripped up. He even tested it by asking the credit card company to use a different address and a new cell phone number. You want to guess what happened? Yup, he received his shiny new credit card anyway.

The lesson here is to do more than rip up and throw away sensitive documents. Invest in a shredder. Any documents with bank account, credit card, social security or other sensitive info, should be shredded into tiny pieces and mixed up with other shredded documents.

Also do more than just cut up and throw away your old credit cards that have expired or you don't want any more. If you are paranoid like me, cut them up into 3 pieces vertically, then dispose of each section in a different place.

Check Your Credit Report Regularly - For Free

2006-08-08T09:02:00.000-07:00

Checking your credit report regularly is important for a number of reasons. First, you want to make sure there are no accounts or credit balances that are not yours. These could be indications of Identity Theft or just someone elses info that got swept into your report by accident. Second, when you do want to get credit for a mortgage or auto loan, the cleaner your credit report, the better your loan terms will be.

By law, everyone is entitled to check their report from each of the 3 credit bureaus, once per year. You can do this by going to www.annualcreditreport.com This is the only site that offers truly free credit reports, without having you sign up with an expensive credit monitoring service. This site is provided by Experian, Equifax, and TransUnion themselves.

They will also offer you the opportunity to look at your credit score, for a small additional fee. Be warned, the FICO score is the only credit score that matters right now. The credit bureaus have come up with their own scoring system, and may be offering you to sell you that score instead. FICO is the industry standard. That may change in the future, but for right now, unless they offer to sell you your FICO score, don't pay anything extra for a credit score.

If you find any incorrect information on your report, dispute it with the credit bureau. The report itself will have instructions on how to do that.

Lastly, I recommend checking only one report from one of the bureaus, every 4 months. You might set up a schedule to check the Experian report in January, then Equifax in May, then TransUnion in October. This way you are really checking 3 times a year for errors. If one has an error, the others might have the same error.

If you are getting ready to make a large credit purchase, you may just want to go to www.myfico.com instead. There you can pay to get all 3 reports and FICO scores at one time, and can fix anything that needs fixing ahead of time.

Gift Cards are Evil!

2006-08-02T16:18:00.000-07:00

We've been sold a bill of goods when it comes to gift cards.

I have these "gift certificates" available in $1, $5, $10, $20, $50, and $100 denominations. They are good anywhere at any time. They're called CASH!

So why on Earth do we take these universal gift certificates, and turn them into gift cards, that are good only at 1 place, for merchandise and services only carried by them, only when they are open, and only at the price they offer?

Not only that, in many states, these gift cards can expire. I pay $50 bucks for a gift card at someone's favorite store, and if they don't cash it in 3 years (or whatever the terms) they're no good any more? Talk about a rip-off.

Also, have you ever noticed how these gift cards get misplaced, or set aside, and you find them later and go, "Oh yeah, I got that last Christmas. I forgot all about it." Have you ever noticed how that rarely happens with cash?

2 years ago, I wanted a DVD player. I had a $100 gift card I received for Sears. So I checked price online at major electronics stores and figured out what I wanted in a DVD player. If I could have bought anywhere, I would have bought a $49 one. As it was, the only one Sears had that I wanted, was $99. It's been a great DVD player, but at twice the price I would have paid otherwise.

Do yourself a favor. As long as it is socially acceptable, give your friends and relatives cash instead of gift cards. Consider it the ultimate gift certificate! Plus it also gives them the opportunity to save, pay down debt, or invest it, rather than be forced to spend it. Yet another reason Cash is King!

Saving for College

2006-08-01T16:51:00.000-07:00

I've been looking into saving for my son's college education. So far, every educational plan leaves a bad taste in my mouth. Of the educational plans, the 529 seems the best so far.

Each state has it's own plan, but the California plan is a good one. It's a low fee plan and the earnings avoid federal and California state tax, when used on qualifying education expenses. Sounds great, right?

Here's the part that leave a bad taste in my mouth. If my son chooses not to go to college or any higher education, and I wish to take that money and use it for my own purposes, I have to pay income taxes on the earnings, because they grew tax free, plus I have to pay a 10% Federal Additional Tax and 2.5% State Additional Tax in penalties. In other words, if my son chooses not to go to college, then 1/8th of my earnings are vaporized in penalties, in addition to the income taxes I'll pay. Ouch!

Another suggestion given to me was to save that money via a Roth IRA. Even though a Roth IRA is for retirement, you can later pull out the contributions you made (not the earnings) and not pay any taxes or penalties, because the money has already been taxed. The earnings can be taken out later after age 59 tax free. The downside is that I can only contribute $8K a year for my wife and myself, and we may want to use that for our retirement first.

Lastly, someone else suggested I-Bonds, where the earnings are not taxed by the state, and are exempt from federal taxes if used for educational expenses. The downside is that the I-Bonds are earning very little right now.

So for right now, my son's college savings is on hold, until I exhaust my search for a better plan that doesn't penalize me if he doesn't go to college.

If anyone has a better idea, please leave me a comment. Remember, a big factor is avoiding penalties if he doesn't go to college.

How I got into Personal Finance

2006-07-28T11:50:00.000-07:00

I thought it might be interesting to tell the story of how I became interested in personal finance. Back in the 80's and most of the 90's, I neither had much money, nor was I interested in investing or saving it. As typical with many Americans, I had credit card debts equal to about a year's pay. These debts were used to buy stuff I no longer had, or vacations or eating out, etc. I was living better than I could afford.

In 1996 or so, I started wising up. I was working at a job and they had a Fidelity Investments guy come in and talk to us about retirement. I started saving some money in a 401(k), and started looking at the stock market. Also, because I was making more at this time, I started living within my means. My credit card balances were not really going down much, but they weren't going up either. I always juggled them around with low interest offers, so I never paid much in interest on what I did owe.

I proceeded along like this until late 2003. My mother had passed away back in 1999, and where her husband passed away, I was entitled to a sizeable inheritance. At this time, something clicked in me. I decided that I was not going to mess up this opportunity. This was my one and only big chance at getting a large amount of money at one time. I was going to use that money to get out of debt and get on the road to financial security. I started reading books, checking out financial sites, and listening to Clark Howard on the radio. I started making plans for that money.

First, I was going to pay off every debt I owed, which were basically credit cards and auto loans. Next, I was going to buy a home using much of the inheritance as a 20% down payment, because I've known for a long time that a home is probably the best asset anyone can ever own. Up til then I could never save enough or afford the mortgage payments. Then I was going to create an emergency fund that I could live off of for 6 full months. Then I was going to fully fund our IRAs. Lastly, I was going to invest the rest in a variety of mutual funds.

I'm proud to say that except for a few hundred dollars, that's exactly what I did. I continue to drive the used car I had before the inheritance, and so does my wife. I did not buy any fancy electronics or go on any fancy vacations. Well, I did buy a new $1,500 TV almost a year later. Does that count?

I also swore at that time I would never be in credit card debt again. I've kept that pledge, until now. I'm going to violate it because of the creative financing deal I'm embarking on, but I'm keeping that money strictly in a CD and seperate savings account, to be used only for paying back the credit card and earning interest.

I've had to use that emergency fund and depleted a little more than half of it, due to being laid off last year. I'm now working again, with full benefits, and have started rebuilding that fund. I've also joined my new company's 401(k) and started kicking in 15% of my base salary. I also get commisisons, which will be used for special projects, like starting my son's college fund, saving for a new car, and big ticket purchases like that 50" Plasma TV I've had my eye on.

I admit it, I was damn lucky in that my mother had been such a good saver in her life, and such a sharp businesswoman. I'm very lucky she and her husband decided to leave us kids this money. I'm also very lucky for all the help my older brother has given me over the last 5 or 6 years. I could have done it without his help, but only just barely, and only by not having any emergency fund, funding my retirement to the level I have, or having those other investments. I owe a great deal to both of them. I owe it to them both to use what they've given me wisely, and not blow it! Thanks Mom. Thanks Bro.

12 Rules to Get Ahead in Life

2006-07-27T15:04:00.000-07:00

Someone asked a question in Yahoo Answers, "How to you get ahead in life." I started thinking about all I had learned. Since this was in the Personal Finance area, it is geared more to Personal Finance, but I think the more rules one follows, the happier one's life will be. I'm still short of all 12. I may never get there. But I know as I've started following one rule, and then another and another, my life has gotten better.

In no particular order, here they are:

Get a college education. College opens so many doors economically that you will make far more money on average than a non-college graduate.
Choose a career you love. Don't worry about the money at first. You will naturally excel at it and prosper.
Always live beneath your means. Most likely the people you see flaunting their wealth by driving luxury cars and sporting the latest expensive purses, etc., are in debt up to their eyeballs.
Learn the differences between wants and needs. Never go into debt to get something you "want."
Start saving now. Some for retirement, some for a home, some for car, etc. A good rule of thumb would be a minimum of 10% of your pre-tax income. Do it through a payroll deduction, before you ever see any of it. Make it automatic!
Don't get hooked on liquor or drugs.
Do not have any children until you are married and stable. Also do not have any children before graduating college. This means take precautions!
Buy a home. People who own their own home accumulate far more wealth in life than those that rent.
Be assertive. Don't be afraid to go after the things you want. This includes asking bosses for raises and promotions, and going up and talking to interesting people.
Always think about the consequences of your actions. For every action you take, think "If I do this, what will happen?" What will the positive results be? What are the negative side-effects. What responsibilities will you incur?
Take care of yourself. Eat right and exercise. Stay in shape. It's the only body you have.
Use debt only to acquire things that will grow in value, or will help you earn income.

I hope you find some value or guidance in these rules.

The $900 phone call

2006-07-27T08:45:00.000-07:00

So I was on another blog called Stop Buying Crap and it was talking about making money off of 0% Balance Transfers on your credit card. One of the cards on there was the Citibank Platinum Select MasterCard. Well, I just happen to have this card. So even though the offer was for new members, I called Citibank anyway, because I've been a card holder and good customer of theirs since 1986.

I asked them if they could make that 12 month 0% Balance Transfer to me, with no transfer fee. The lady said, "Unless you want to close your account there's not much I can do." In essence, she was telling me to tell her that I wanted to close the account. OK, so I told her well if you can't do anything for me, then yes, I'd like to close the account. She immediately says, let me transfer you to someone who can help you.

Next thing I know I'm talking to Mike, who's offering to upgrade me to the Diamond level MasterCard, lowering my interest rate, and to cut me a $20,000 check at 0% for 12 months, with no fee. Needless to say I accepted the offer.

I'm going to deposit $15,000 in a 5.45% 11-month CD my credit union offers, and $5,000 in an online savings account earning ~~5.05%~~ 5.15% interest. That last account will be what I pull money from every month to make the minimum payments. At the end of 12 months, I'll pay the remaining balance off in full. I computed this will earn me about $900 in interest, using Citibank's money the entire time, while never touching any of my money. Not bad for a 10 minute phone call and a couple of hours of research and moving money around. Thank you Citibank!

There are some dangers you should be aware of if you wish to try this yourself:

You cannot use that card for anything else until that balance transfer is paid off. Nothing. Otherwise your monthly payments go to pay off the 0% balance only, and not the balance on purchases with higher interest rates.
You absolutely must pay your minimum payment every month, on time! You can't give them any excuse to say you violated the agreement so they can raise the rate to 18% or whatever it will be. It might be a good idea to set up an automatic minimum monthly payment with your card issuer, so they are responsible for taking the minimum payment every month on the day it is due. Of course, make sure you keep enough money in your checking to do this. It should only be a few hundred dollars.
You absolutely must pay back 100% of that balance transfer by that 12 month mark. Otherwise, they'll hit you for interest, possibly dating back to the beginning.
Your FICO score will take a hit, as you increase your ratio of debt to available credit. If you are planning a major credit purchase, like a house or car this year, you may not want to do this.

Save Money on School Clothes and Backpacks

2006-07-25T16:40:00.000-07:00

If you buy school clothes for your kid, as my mother did for us every year, wait until the school year has already started. Same for backpacks.

As for the clothes, retailers are selling pretty much at full price now and in early August. Oh, they'll say it's on sale, but on sale from the high list price. You can bet in late August and early September, the sales will really be big to move unsold new school clothes. Plus, if you have a teen daughter, it gives her a chance to see what the other kids are wearing the first few days, and then she can choose clothes that she will want to wear and fit in. Better that then if she buys what she thinks will be hot, and then not wear them as she finds out it's not in style any longer.

As for backpacks, retailers will want to dump those unsold backpacks after school has started, just like retailers want to dump Christmas wrap the day after Christmas.

You don't have to wait a long time, just a few days after the school year starts.

As for school supplies, go ahead and get them now. Stores run that stuff as loss leaders to get you in the stores.

Lesson 8: Find Your Latte Factor

2006-07-25T14:24:00.000-07:00

To help you start saving, it is very useful to find something you can cut to boost your savings. For instance, do you go out and buy a latte every day? Maybe a pumpkin seed muffin too? Do you smoke? Do you eat out or get fast food for lunch during the week? Maybe you get your nails or hair done once a week? These are all expenses that you can cut out and take that extra money and start saving.

For me, it's eating out or eating fast food too often. Every work day, I generally eat out for lunch. My usual lunch tab runs between $9 and $13. Also, my family usually buys some sort of fast food for dinner 4 nights a week or so. So what if we trim that back some.

Let's say I eat out for lunch only 2 times a week. That would save me an average of $8 each time. My replacement lunch that I pack myself still costs some money, so that's why only $8. OK so that's $8 x 3 days or $24 a week.

Now let's say my family cuts down the fast food to only 2 nights a week instead of 4. Each fast food bill is generally around $15 to $20. Figure a prepared meal would still cost $8 for us. That's $9 x 2 days = $18 saved each week.

That's $42 a week I could save, and probably eat healthier doing it. Multiply that times 50 weeks, figuring vacations, and that's $2,100 a year my family can save, just by eating in more and probably eating healthier.

$2,100 is a lot of money to save, and remember, that's After-Tax money I'm saving. Let's say I take that $2,100 each year and add it to my and my wife's Roth IRAs every year. Using this savings calculator, if the IRA's earn an average of 8% a year, which is a fairly conservative number, and I've got 20 years until I retire, it amounts to $99,353! And no taxes due on any of it.

Holy Crap!

My fast food habit is costing me $100,000, and extra pounds, and higher cholesterol. You better believe that's going to stop now!

What's Your Latte Factor? How Much is it Costing You?

Listen to Clark Howard

2006-07-22T09:09:00.000-07:00

Clark Howard is a nationally syndicated radio consumer advocate. But he's also so much more. Clark answers caller questions and provides a website at Clarkhoward.com to inform on a range of topics, including current scams and rip-offs, bad companies, how to save money on a variety of things, real estate, investing, taxes, you name it. If it's something consumers deal with involving money or businesses, he has tons of good advice. Best of all, he's not selling you anything. Well, OK, he does write and sell books, but on his radio show, he even tells you to buy them used or find them at a library. Unlike other financial shows (Dave Ramsey), Clark isn't trying to sell you seminars or programs or any other crap. Everything in his books has been advice given on the air, for free!

Clark is responsible for saving me $900 one year by pointing out an alternative cheaper source of a service I use, and by pointing out the Saver's credit, which I had missed on my taxes.

Clark has written several books, and one called Get Clark Smart: The Ultimate Guide to Getting Rich from America's Money-Saving Expert is filled with incredibly wise and useful info on spending and investing your money wisely.

I've had 2 main sources of inspiration and information in my personal finance makeover. Clark Howard is the #1 inspiration. Listen to his radio show. Read that book. Start saving your money and spending it wisely.

Lesson 7: Review All Services You Buy At Least Once a Year

2006-07-21T11:16:00.000-07:00

It's amazing how easily additional services creep up on you. You sign up for one, and then another, and eventually you've got many. Here's just a partial list of stuff that adds up- Cable TV, DSL Internet, Netflix (actually Blockbuster), Yahoo Music Subscription, cell phone, 3 magazine subscriptions, and 2 political organization memberships.

Each of these is a monthly or yearly expense. Many are not needed or no longer used. This is very common. So you should at least once a year, go through all this stuff and ask yourself. Am I still using this? Do I need it at that level? Do I need it at all? Can I get this or a similar service elsewhere for less? Even better would be to think about these every time you pay the bill.

Right now, I'm considering halting the Blockbuster DVD service, or trimming it back from 3 DVDs at one time to 1 DVD at a time. I just don't get to sit down and watch DVDs that much.

I recently switched to DSL internet at $17.99 per month from Comcast Cable at a rapacious $42.95 a month. I haven't missed the higher cable speed at all, but I sure like having that extra $25 per month.

I've shaved my home telephone bill from $27 to $17 a month by going to a 3rd party long distance carrier. They have great rates by the way, with no monthly fee or minimum usage requirements. I urge you to check out Americom for your telephone and long distance needs.

I've ditched one of our two cell phone plans in favor of Prepaid. My monthly cell phone bill went from $19.99 to about $3 to $6 per month depending on how many minutes I used. If you use less than 200 minutes a month like I do, take a hard look at prepaid cell phone plans. Right now, I think T-Mobile has the best prepaid plan. Like Catherine Zeta-Jones says, "Why pay more?"

Your auto insurance is a great service to do this with too. Every year you should review your coverage, and then shop around to a few different companies or sites to see if they can give you something better. One time, I reduced my rate by $500 per year this way by finding out Costco offers low cost auto insurance. Make sure you check the rates your warehouse club offers if you are a member. Or if you aren't a member, check anyway. A $500 annual savings is worth a $35 annual membership.

By staying sharp and investigating alternatives, you can save substantially. Who doesn't like to save money?

Lesson 6: Banking

2006-07-20T14:03:00.000-07:00

By and large, banks are for chumps.

With a traditional bank, if you overdraft your checking account, you can expect to be hit with fees ranging from $19 to $39. With their credit cards, late fees or overdraft fees range from $25 to $39, or even more, even if only a day late or a dollar over your credit limit. And what do they give you on your savings account? 0.25% to 0.50% interest. A stinking half a percent.

For checking, auto loans, and credit cards, Credit Unions are the far better deal. And in recent years, they've really opened themselves up to most people in the community, rather than specialized groups. Because they are essentially a co-op, they do not charge high fees like banks do, and generally offer better interest rates on credit cards and loans. My credit union charges me $2 for an overdraft on my checking, and doesn't charge late fees on my credit card, unless I'm really late, which I've never been. My monthly checking service charge is $3 when I don't maintain an average balance of X dollars, but usually that's low enough that I rarely get charged that service fee.

To find a credit union close to you, go to the National Credit Union locator.

A newcomer is online banks. They're great for high interest savings or CDs, but that's about it. They link to your checking account to move funds in or out. A high interest savings account at an online bank is a good place to keep your emergency fund.

For traditional banking services, join a credit union. For savings, go to an online bank. For mortgages and loans, go to a mortgage broker, lending internet sites like Lending.com or eloan.com, and your local Credit Union.

I can't think of a single reason why I'd want to go to a traditional bank.

Money Saving Tip #1: Warehouse Clubs Offer Bargains on Services

2006-07-19T17:02:00.000-07:00

Are you a member of Costco, Sam's Club, or some other warehouse club. Beyond the merchandise they sell, these clubs also sell great discounted services.

I saved a cool $500 per year on auto insurance with Costco. That's $500 below every other quote I could find after shopping numerous companies and internet broker type sites like Geico, Progressive and others. I also received a $1,200 rebate when buying my home using their Real Estate Agent Services. Just on these 2 services alone I've saved $2,700 over the last 3 years.

These warehouse clubs also offer many other discounted services like film developing, travel services, check printing, car buying, home and auto financing, pharmacies, financial planning, health and dental insurance, phone services, etc. They've established relationships with 3rd party vendors at substantial discounts for their membership. They also offer discounted business services for small businesses, like payroll processing, merchant card processing, insurance, overnight delivery, etc.

Personally, I hate shopping at the warehouse club stores. They are too crowded, and I don't like buying in bulk. But I absolutely love the discounted services they offer!!!

Lesson 5: Don't Budget! Automate Instead.

2006-07-17T11:32:00.000-07:00

I've briefly covered this in earlier posts. When doing strategic things like saving for retirement or building an emergency savings, it is incredibly helpful if you automate it.

Many advisors say you should track all your expenses, then build a budget and try and live within it. They even go so far as to actually put cash in envelopes marked groceries, clothes, etc., and you pull money out for those items as you buy them. Unless you are one of those anal types who love doing this kind of stuff, this is a recipe for failure. It is a recipe that few will follow. Screw that!

My approach is much quicker and easier. Take a few minutes and write down what you think your expenses are, including weekly pocket money, then subtract that from your take home pay. With this, you can guess at what you can put away for your retirement and savings. If the answer is zero or close to it, then start with a small savings plan, like 5% of your total pay for savings. Instruct your employer or financial institution to deposit that percent of your pay directly to the 401(k), your savings account, college fund, or whatever it is. In my case right now it's 15% going into my 401(k) and 5% into a high interest rate online savings account.

Then live with that for a couple of months. Were things too tight and you had to raid your savings? Then dial your amounts back a little. Did you easily adapt? Then maybe try and increase your savings a little. Did it feel about right? You weren't deprived, but didn't have much money left over? Perfect!

The beauty of this system is that it's quick and painless, and once you've made 1 or 2 adjustments, it's automatic. After that, you don't have to think about it again unless your circumstances change.

Again, start now, no matter how little it is. Some savings is better than no savings. And automate it so it happens before your spend your money, not after. This is called "Paying Yourself First."

Lesson 4: Start Savings for Retirement

2006-07-14T14:37:00.000-07:00

I know. I'm starting to sound like a broken record. Save. Save. Save. It's important! If you are working for a living and out of school, you must start saving for retirement now!

Hopefully you are in your early or mid-2o's and reading this. The earlier you start, the easier it is to have a wealthy retirement. That's because money saved now will have 35 - 40 years to grow.

If you are in your 30's and 40's, it becomes even more important to save now! Because your money has less time to grow before you need it.

Here's a savings calculator that you can play around with the numbers. A 25 year old person who puts away $100 a month earning 8% will have $350,000 after 40 years. A 40 year old person would have to contribute $375 per month for 25 years to earn that same $350,000.

At this point, don't worry if you're behind. The worst thing you can do is to do nothing because you feel you're too far behind. Even a little retirement savings is better than nothing. If you're starting late, figure out what the maximum you can contribute each month is, and then do it. Set it up to be deducted from your check automatically.

If your company offers a pre-tax retirement investment like a 401(k), get into that. If your company matches that with company funds, then absolutely invest whatever you have to to capture all the matching funds. That's free money! If not, you can invest on your own with IRAs through brokerages or banks.

When you do invest, invest in no-commission, low cost investments. Fidelity and Vanguard are low cost brokerages/fund company's that make it easy to start. You don't even have to worry about what to invest in. Fidelity offers Freedom funds and Vanguard offers Target funds that will automatically diversify your investments for you based on your projected retirement dates. These funds usually have a year in their name like Freedom 2040 or Target 2035.

Start saving for your retirement now! The sooner you start, the easier it will be, and the more you'll be able to have for your retirement. The alternative is to be completely dependent on Social Security, like so many of the poor elderly are. Take control and don't be a victim of your own fears.

Lesson 3: Save For A Rainy Day

2006-07-13T13:27:00.000-07:00

Yes, it's a cliche, but emergencies do happen. The car dies, you get sick and can't work, or you lose your job. What do you do then? If you have no savings, you can rack up credit card debt just to get by, but that just leads to misery and bankruptcy down the road. You can sponge off of family, but that only creates bad feelings among the family.

You must build yourself an emergency savings. Your ultimate goal is to build a minimum of 3 months of living expenses worth of savings. You want enough to pay all your expenses, like rent, food, utilities, etc. for at least 3 full months. Personally, I'd feel better about 6 months, but you need to at least save the minimum 3 months worth of expenses and then figure out what level makes you comfortable after that. If you are truly paranoid and always worrying about the next depression or if your job is always in danger, or even UFOs, you may even want very high levels of savings, like 24 months worth of expenses.

Then after you reached your emergency fund's goal, don't touch that money, unless it's an emergency. A great sale on a new car or big screen TV is not an emergency!

Even more important is how you do this! Do not just save whenever you have some extra money. You must make this a priority. You must pay yourself before you pay anyone else. Look at your income and expenses, then try and set aside a set percentage every month for this saving. 5% of each month's gross pay is reasonable. Then make it automatic. See if your employer will do a direct deposit and automatically siphon off 5% every month into your designated savings account. You may have to estimate the dollar amount for them. If your employer won't do this, then you instruct your savings account to automatically deduct that money after every pay day. Almost all banks can do this online now.

The goal of making it automatic is so that you don't see the money, and you don't wait to do it. It saves automatically. After a few months, you'll completely get used to not having that money.

After you've saved the 3 or 6 months, or whatever you feel is appropriate, worth of expenses, keep saving that money automatically. Save it for a down payment on a house, a car, vacation, whatever. Use this automated savings method for larger purchases, to avoid using debt to buy that car or vacation.

As I write this, several online banks are offering phenomenal interest rates on FDIC insured savings. Also money market funds through brokerages offer good rates and are very secure as well. Some money market accounts are even tax free. Here are links to these online banks and brokerages. Check them out.

Emigrant Direct
HSBC Direct
Amboy Direct
Fidelity
Vanguard
E-Trade Bank

Lesson 2: Good and Bad Debt

2006-07-13T09:10:00.000-07:00

There are two kinds of debt. Debt that makes you money and debt that costs you money.

Debt to buy a house - Good. You need a place to live, plus homes appreciate in value.
Debt to expand your business - Good. Because your expanded business will increase your sales and ultimately your bottom line.
Debt to buy a big screen TV - Bad. By borrowing, your only making the price of the TV more expensive, and the TV will only depreciate in value. In 5 years if you try and sell it, you'll only get pennies on the dollar.
Debt to go on vacation - Really Bad. After the vacation is over, you are still paying for it, plus interest, and have absolutely zero to show for it.
Debt to buy a truck for your job - Good. You're a carpenter or contractor. You need a truck. It's a necessary tool for you to make your income. Debt to buy any tool needed to make money is good debt.
Debt to go to college - Good. You are investing in yourself and your future. Your education and degree will open many opportunities for you and usually lead to much greater income.

Debt to buy a car - Necessary. In today's environment, you need reliable transportation. Your job and livelihood most likely depend on it. And let's face it. A car is an expensive purchase that few can afford to pay cash for. But are you borrowing to buy the 1-year old lightly used Toyota Camry? Or are you buying a new Lexus? Both will get you reliable transportation, but one is a smart play and one not very smart. Unless you put a whopper of a down payment on the Lexus, it's a bad play. The second you drive it off the lot, you've lost about 15% to 20% of the car's value. Cars, even great cars, always lose value over time.

Ultimately, debt should be used only productively. It should be used to better your situation. Getting into debt just because you want more stuff, or you want to live nicer than you can afford, is stupid and harmful.

Do yourself a favor. Don't borrow to get more stuff or live beyond your means. It's a trap and ultimately makes you a slave to the lenders. Save and pay cash for the things you want.

Lesson 1: Live Beneath Your Means

2006-07-12T08:34:00.000-07:00

The first and most important lesson everyone should learn about money is to live beneath your means. Wealthy people did not become wealthy by blowing all their money as soon as they made it on new cars, fine dining, expensive clothes and toys, or expensive travel. Wealthy people became wealthy by living beneath their means, spending their money wisely and investing it in assets or businesses that made them even more money.

Accumulating more and more stuff will not bring you happiness. Having the latest Coach purse or a new car every couple of years will not bring you happiness. Oh, it may briefly make you happy, but that happiness is fleeting. What it will bring you is debt. And debt will not bring happiness. Debt brings misery and frustration. And that lasts as long as your debt does.

It's easy to get caught up in all of it. I did too for many years. We see all the stuff on TV and see that our friends and parents may have all the stuff. You think you deserve it too. However your friends may be in debt up to their eyeballs, just a paycheck away from bankruptcy. Your parents didn't accumulate their stuff overnight. They most likely worked and saved for it. You don't deserve to have all the stuff just because you exist! Life doesn't work that way.

As a result of that, I had credit card balances of up to $20,000 for years. I would struggle to pay the minimum balances, making a little headway, only to go out and spend again. And after all that, I had very little to show for it. I still rented an small 1 bedroom apartment and was getting nowhere. I had nothing in the bank. I was living paycheck to paycheck.

Don't make the same mistake I did. You don't need all that stuff! It only clutters your life.