Monday, June 23, 2008
Obama "also doesn't want to address, very clearly, the AMT, and he wants to boost capital gains taxes from 15 percent to almost double that. So if you have an IRA or a 401(k), which a lot of middle Americans do, and you go to retire or use that money, you're going to pay almost double the rate in taxation."
I encourage anyone with an interest in responsible media, responsible politicians and a well-informed American public to contact CNN's Late Edition by going to CNN.com/LateEdition and looking for "Contact Us" on the left side of the screen. Also, please contact the McCain campaign at JohnMcCain.com/contact, which lists a mailing address, phone number and email submission form. If you find any other ways to get in contact with the campaign, Pawlenty himself or CNN, please let me know.
Sunday, June 22, 2008
I was watching CNN today and heard Minnesota Governor Tim Pawlenty, a national co-chairman for the McCain campaign, talking about John McCain's and Barack Obama's plans for taxes. He criticized Obama's plan to raise capital gains taxes, saying anyone with a 401(k) account or IRA would be negatively affected. This is simply not true, bull, crap, whatever you want to call it. The whole point of these accounts (as surely the governor of a state should know) is that they are tax deferred, with withdrawals after age 59 1/2 being taxed as regular income. Capital gains taxes in no way affect 401(k) accounts or IRAs, but Pawlenty's blatant lie only serves to breed fear about Obama's plan (which may actually be a worse plan, but it should be debated with actual facts).
Thursday, June 19, 2008
It got me thinking about how it is otherwise nearly impossible to make any kind of person-to-person transaction without tax implications being involved. Earn money from a job, get taxed (often twice). Own a home, get taxed. Buy food, get taxed. Buy any other good, get taxed more. Own the company that collects the money I just spent on the good, get taxed. Earn pitiful interest on a savings account, get taxed. Etc. Etc.
Aside from the "gift" exception (which is why homeless people don't have to pay taxes), I know married people can trade assets freely, plus when someone dies they can leave a pretty decent-sized estate without being taxed (I think the max is around $2 million, but don't quote me on that). Also, services in this country generally don't get taxed, at least not with a sales tax like tangible goods. However, service providers still pay regular income tax (plus Medicare, Social Security....).
This is how I started thinking of some homeless people: service providers. Those that came to mind specifically included homeless street musicians and poets, who I often see pulling in the biggest tips/donations. Of course, if these service providers were running a legit business their tips would be subject to federal income tax (info from the IRS). At the same time, I'm sure plenty of people out there who receive tips don't include them in their taxable income, so it is hard to single out these homeless tip-earners.
Monday, June 9, 2008
The post referenced a local tv investigation on one panhandler in particular, which "exposed" that she in fact went home to her family in a house each night. I'm not completely sure how I feel about the tv piece, though I was interested to see the reporter estimate the young woman could earn about $26,000 tax-free each year. I did a little checking with the IRS on gift taxes and saw that the reporter was correct: panhandlers don't have to pay any federal income taxes from the "gifts" they receive from strangers, according to my read. While I'm not sure panhandlers focus on the tax benefits of their "jobs," I think they might just take the cake for legally avoided all income taxes.
Saturday, June 7, 2008
Friday, June 6, 2008
Initially when I saw the mortgage value of $4.8 million and the list price at $5.75, I wondered why they wouldn't just lower the price closer to 4.8 to be able to pay off the loan. However, I think there are a few reasons it's not that simple. First, you have to figure real estate commissions and transaction costs. I have little knowledge in this area, especially when it comes to celebrity mansions, but I understand the typical seller's commission is 6%. Unfortunately for the McMahon's, 6% of $5.75 million is a whopping $345,000, not to mention other (huge) closing costs. Also, there was no mention of the $300,000 loan on Larry King. Additionally, there is a decent chance of capital gains on the house in excess of $500,000 (the exemption for married couples), considering he bought it in the early 90s. Perhaps unlike some others, McMahon's cashflow troubles does not surprise me that much. It doesn't matter the person or the situation- everyone is quite capable of spending more than they earn or have in the bank. Couple that with a huge financial liability (like a $5.1 million one) backed by a recently depreciating and illiquid asset, and you can have financial disaster, no matter who you are.
Wednesday, June 4, 2008
Ultimately, after I thought through the situation, I determined that the banks themselves have little to do with the situation except handling the details of the transaction. Ultimately, all that matters is that one guy owes me money and that he hasn't paid me. I guess if the amount were $14,000 instead of $14, I could take the guy to court and sue him, but obviously this won't come to that. I suppose I've learned the value of getting a certified check or money order or some other guaranteed source of money when dealing when larger transactions (and not relying on a personal check being "good").
Saturday, May 31, 2008
If this laptop doesn't replace a standard, modern laptop or a desktop, what good is it? Two things: price and portability. First, it is now priced under $400, which is pretty insane for any new computer, desktop or laptop. As I mentioned above, 2 GB of RAM and 8GB of solid state memory can be added to this machine for about $70 total, making it quite versatile. Second, you can't beat this machine's portability. It comes with Windows XP, a familiar operating system to almost any PC user, and includes both ethernet and built-in Wi-Fi internet access, making it the ultimate, portable internet machine. It is the perfect laptop for taking on vacation or on business travel, since it allows the user to check email and perform nearly every function one would use on a regular laptop or desktop.
It is understandable that ASUS would drop its price on this laptop, since it recently released a replacement, the Eee PC 12G. The newer machine, for about $150 more, solves many of the problems and limitations of its predecessor. It has a bigger screen (8.9" vs. 7") with higher resolution (1024x600 vs. 800x480), bigger solid state drive (12GB vs. 4GB), double the RAM (1GB vs. 512 MB) and a faster processor (fully 900 MHz vs. underclocked at 630MHz). The new laptop still comes with the built-in SD slot, meaning you can add 8 GB of solid state memory for around $35, or 16GB for around $65. Though not noticeably heavier than its predecessor, the 12G price tag puts it in line with bargain-priced, larger laptops. Still, this laptop is definitely worth a second look as a portable, nearly do-it-all, light-weight second computer.
Thursday, May 29, 2008
The other day, I found another great Google product. I had been using Yahoo! Finance to track stock and ETF quotes, as well as get financial news (some of which I blog about). The problem was that I used Yahoo! Finance plus a somewhat organized Word document record of my stock trades every time I wanted to check on the status of parts of my portfolio. I could always view my portfolio status online at Zecco, my brokerage, but their format for displaying my equity positions was confusing. It was not their fault entirely. My biggest position I had bought at another brokerage then transferred to Zecco. As a result, it was nearly impossible to track the history of my portfolio.
This is where Google Finance comes to the rescue. Using the username and password I already used for Gmail and Google Calendar, I quickly input all the information about what I owned and the price at which I bought it. Now, Google Finance clearly displays the cost basis for every position, its market value (using real-time quotes), the change (in dollars and percentage) for the day and for its life in my portfolio. Additionally, news stories concerning my stocks are updated throughout the day and I even like Google's interactive charts better than Yahoo!'s The one advantage of Yahoo! is that it provides better personal finance columns and news, but I am glad I found this simple tool from one of my favorite online empires.
Wednesday, May 28, 2008
Whenever I read personal finance blogs, people always seem willing to pay for some kind of televised entertainment, whether its cable, satellite, iTunes show downloads, in-store DVD rentals, or DVDs by mail. Some particularly value-conscious TV watchers have given up cable and satellite for free over-the-air analog and digital channels. Some simply watch free programming available from a number of sources, such as the major networks' (CBS, ABC, Fox, NBC) websites. Often, when I miss an episode of Lost , I'll watch it the following day from ABC.com. The quality is good, with streaming HD available on the most recent seasons, but I still prefer watching shows on my TV.
Netflix, though a partnership with a small company called Roku, is trying to bridge the gap between the computer and TV in a way that other devices like Apple TV have been unable to do on a mass scale.
Announced last week, the Netflix Player by Roku allows Netflix subscribers with plans costing at least $7.99 to stream an unlimited number of TV shows and movies from their PC to a TV connected to the player. The player connects to virtually any TV via HDMI, component cables, s-video or RCA ports (red, white, yellow). The box connects to your computer via ethernet or Wi-Fi, with a faster connection (read, ethernet) producing generally better picture quality. The box is value-priced at only $99 and simple to install and operate, according to news accounts.
The main drawbacks appear to be three-fold. First, the streaming Netflix library the device draws from, about 10,000 titles, is still fairly limited, especially with newer releases. I've heard most of the movie titles available were released 5 or more years ago. This is to be expected, since it would be hard to fathom Netflix offering unlimited viewing of the latest releases. Second, because the device only streams content from a computer (it has no hard drive), picture quality can be spotty and is limited by one's internet connection. Plus, movie viewing can be interrupted by the device having to buffer during times of slow internet connection. Obviously, a hi-speed internet connection is required and I think you need at least a 1 Mbps speed, but obviously, the higher the better. I read that the device offers three bit rates, with the highest at 2.2 Mbps, and that it automatically detects your connection speed. Lastly, though the box is capable of receiving and outputting an HD signal, Netflix does not currently offer any HD streaming content. Even if it did, the previous streaming speed problems would certainly come into play. In all likelihood, internet connections would have to see a big across-the-board jump in speed before streaming HD would be a viable option with the Roku box.
I don't subscribe to Netflix, but my girlfriend does, so this box, despite its flaws, seems like a welcome addition to her TV cabinet. It is fairly inexpensive (especially if you are already a Netflix subscriber and if you can use it to offset any other entertainment spending like cable TV altogether). It is easy to setup, which is a huge plus for her. She is like a lot of people in that she just wants devices to work without much fuss. She also is not such a stickler for video quality as much as I am. The biggest drawbacks for her, and I think for most people, are the limited content and the possibility of waiting for video to buffer. Still, for $99, this device sounds like a bargain worth investigating and I can only imagine what type of further innovation this device may bring.
Tuesday, May 27, 2008
I was happy to find gas cheaper last night than I first thought. Driving back into town Sunday, the first "cheap" gas stations I saw were charging $3.999 for regular. Fortunately, I paid $3.799 last night using a site called gasbuddy.com to check local prices before I left home. I was also again pleased with the mileage on my last tank: close to 30 mpg (which is the EPA estimate for highway driving on my nine-year-old car). I added a new feature to the blog on the right column tracking this information. Note: gas prices are per gallon and rounded to the nearest cent.
The local paper again today had an article on how bus ridership is up in my area, with a lot of people who wouldn't ordinarily consider riding the bus buying their first bus pas. The article also mentioned one couple who have taken to living apart during the middle of the week (not coming home at night) so that they can save gas. That would be tough on me personally, but I guess desperate times call for desperate measures. The problem is the I think we are in “desperate times” for good now.
In my town, we are somewhat fortunate with one of the best bus systems in the area. Buses here are entirely supported by tax dollars and there is no additional fare for riding. While the Libertarian in me bemoans the $100 a year I pay in student fees to support the bus system, from a public policy perspective, this system undoubtedly makes the town a more attractive place to live, allows low-income people a good method of transportation, keeps more cars off the roads and improves air quality.
Perhaps this run-up in gas prices is what is finally needed to get us as a whole to shift toward more fuel-efficient options, like smaller cars, bikes, carpooling and public transportation. It all but seems inevitable, since I don't think gas prices will recede substantially anytime soon. It wouldn't surprise me if within a few years, most families drove small cars getting mileage in the upper 30s, garaging or just renting larger vans/trucks/SUVs/station wagons for occasional hauling or road trips. One of the biggest impediments to people buying smaller (more fuel-efficient) cars seems to be that so many people still drive big cars/SUVs and new car buyers do not want to risk their lives driving a less-safe smaller car. This is a main reason my brother likes Jeeps and won’t buy a smaller vehicle. What happens is that the new car buyer ends up buying a larger vehicle and the process becomes a vicious cycle. Hopefully gas prices will break this cycle, but one possibility is that the government might have to offer an incentive to drive smaller cars or disincentive to drive larger SUVs.
In nearly every political science class I've taken (and I'm a poli sci major), we've discussed game theory so I thought I would take this opportunity to point out how buying big vehicles is in some ways a Prisoner's Dilemma. Though not a perfect example, generally speaking, most people would be better off if everyone would buy smaller (more fuel-efficient) cars. Individually, they would spend less on gas because of their efficiency savings, and prices in general would likely drop because of an aggregate drop in demand. The problem is that individually, it is in each side's best interest to buy a big vehicle for safety. Let's simplify this to Jim and Sally, two people in the market for new cars. We'll look at Jim first. Jim knows he wants to be safe (one of his top criteria for a new car) and he knows that if Sally buys a big vehicle, he wants to buy a big vehicle, because he doesn't want to be killed if his small vehicle gets hit with Sally's big vehicle. Even if Sally buys a small vehicle, Jim still wants a big vehicle, because now he will be even safer in a crash with Sally. Sally will make a similar decision and both will end up with big vehicles, whereas they both would have been better off buying small vehicles. However, they can not trust each other to buy small vehicles. They need some third-party action to keep them both from buying big vehicles. This is where I'm hoping the high price of gas (or possibly, the government, though the chances of that are slim) will force both Jim and Sally to buy small vehicles.
Monday, May 26, 2008
I returned from the beach yesterday, arriving home with my tank nearly empty. I avoided filling up anywhere near the beach because I was convinced gas prices would be cheaper inland. Was I ever wrong. When I left for the beach a week ago, gas was around $3.78 per gallon. I filled up once at the beach for around $3.80. I return yesterday to find gas at $3.999 (Four Dollars!). I am hoping prices will drop slightly after the Memorial Day weekend.
Regardless of my minimal success in attaining better gas mileage (checked my tire pressures before I left yesterday and used cruise control most of the way back), gas this expensive makes me wonder about alternatives. Apparently, I'm not the only one. Last month,
Also last month, for one of my video journalism classes, I shot a story about the owner and driver of a restored 1964 Vespa scooter. The woman who owns it bought it about two years ago, largely for the appeal of classic Vespas and aesthetics as much as gas savings, but recently, she said the fuel savings are unbelievable. She estimated the scooter with a two-gallon tank gets around 70 miles per gallon. She couldn't remember spending more than $5 to fill her scooter tank, whereas she easily spends $40 to fill her car gas tank when taking longer trips or when she needs to haul cargo.
One of the reasons I decided to work on this story was the appeal of scooters from a value perspective. Obviously, they are cheaper to buy than most cars, use little fuel and parking is generally cheaper, quicker and easier than with a car. I told my subject I imagine that if I have a twin out there from whom I was separated at birth, he owns a scooter; I figure he is just as value-conscious as I am, but has fewer inhibitions and is a little wilder. I can't see myself owning a scooter now (for one, I think my mother would kill me), but depending on where I end up working after college and the state of gas prices, it may be a viable alternative to firing up the car every time I want to go across town.
Friday, May 23, 2008
As depressing as gas prices appear these days, I knew gas station owners/operators (especially independents) weren’t reaping the windfall profits. However, this is a new twist. I knew that station owners tended to make a larger profit on a bottle of water than a tank of gas, but the credit card fees associated with charging customers never occurred to me. Even as oil companies like Exxon and Chevron make record profits, local competition and limited choices of supply tend to limit local station profits.
It seems like everybody pays for gas with credit cards these days, and for good reason. In the old days of paying with cash (back when a $20 bill would buy a tank of gas plus a bag of chips), customers would generally only put $5, $10, $20 of gas into the tank. Of course, this is inefficient compared to actually filling your tank and paying the cost, regardless of the required uneven change. Also, credit cards are safer to carry than cash and offer rewards. Gas cards in particular tend to have special deals, and it seems like most major gas brand credit cards are offering even sweater deals- like 10% off for 60 days with no annual fee. As the article mentions, however, credit card companies do not offer these rewards from their philanthropic arms- they pass on the costs directly to gas station owners, cutting into most of their profit margin. I don’t have a solution for station owners, but it is just something to think about when visiting the pump or pondering the wonders of those little plastic cards.
Wednesday, May 21, 2008
In another sign of the current state of the airline industry, American Airlines today announced it would start charging extra for any checked luggage, as of June 15. This comes as no surprise, given the surging fuel prices and decreased demand for air travel facing the industry.
I can see why people hate this idea. Shareholders, of which I am one, apparently didn’t take well to the news and caused the stock price of parent company AMR to drop about 20% today. The Association of Flight Attendants president also voiced concerns over the safety issues and congestion that will result from more people carrying on their luggage. My mother got hit by someone’s large carry-on and now believes airlines should basically forbid carry-on luggage. Ultimately, if more people check all their luggage, security check-in will also be slower since more people will probably try to carry on forbidden amounts of liquids. At the same time, initial check-in times with ticket agents should be shortened since agents will handle a lighter load of luggage.
However, I recognize that airlines have to pull in more revenue one way or another and I think ala carte fees (which now-defunct discount airline Skybus used extensively) make the most sense. Instead of charging every passenger for the costs incurred by some passengers, I prefer to only pay for those costs I incur myself. I believe if given the choice of keeping my flight cheaper or getting more “conveniences” (more leg room, food on the plane, checked bags, curbside check-in), I can and will choose to keep my costs down. I want that kind of choice these kinds of fees allow me to do that.
P.S:(In a microeconomics class I took this past semester I learned about price discrimination, which is basically the same concept as the ala carte fees mentioned above. Price discrimination means charging different people different prices. For instance, airlines charge business travelers more than leisure travelers for their flights by charging more for tickets booked closer to the flight and making flights which require a Saturday night stay cheaper. Price discrimination helps some people while hurting others. With airlines, business travelers pay a higher price than they would if all seats cost the same price. Leisure travelers benefit from the higher prices paid by business travelers by paying lower prices than they would if all seats were priced the same. When it comes to charging a fee per checked bag, those passengers who check bags are worse off (compared to an across-the-board fee imposed on all passengers instead of a checked bag fee) than passengers who do not check bags. Essentially, passengers who don’t check bags therefore benefit from the higher prices paid by those checking bags. I put myself in the leisure traveler and no checked bag (or maybe just one checked bag) traveler, so I see myself benefiting from the price discrimination here.)
I left on a class trip to the beach a few days ago (sweet class, right?) and during the preceding week, I busied myself on the latest gas mileage-improving methods available without cost on the internet. I ran across a few myths (like properly inflated tires don’t really save gas, nor does replacing a dirty air filter) and re-affirmed some old knowledge (cruise-control is good so long as you’re on a flat road; going 75-80 mph cuts travel time but worsens fuel economy compared with driving 55-60). I still changed my air filter (in my mind, it will help the engine start a little smoother) and properly inflated my tires (over-inflated tires have less of a tread and less resistance on the road, therefore they actually improve mileage; however, over-inflated tires also wear faster and are less safe since they provide less traction). Being the rebel that I am, I didn’t bring directions to my destination, instead relying on one of my co-pilots’s “navigator,” a GPS mapping function available on Verizon phones. For whatever reason, her navigator took us away from the interstate and onto smaller highways. This route still worked out well, because: 1)the scenery was better 2)we were not in a hurry 3)I could cruise at around 55 mph, a much more fuel-efficient speed than the 65-75 norm on an interstate.
Monday, May 19, 2008
So after contemplating my chocolate episode the other day, I read today about one psychologist’s reason for my indulgence: “each instance of self-restraint weakens us a little more.” In other words, every time I passed up chocolate in the past, it was like adding helium to my burning chocolate desire. The quote came from Roy Baumeister, a social psychologist at
Saturday, May 17, 2008
When I go to the grocery, I rarely buy anything more than essential food, occasional toiletries and cleaning supplies. In other words, I almost never buy any dessert/candy or drinks (except for some cheap wine here and there). However, the other night I had a big craving for some chocolate. I really didn't want to have to make a trip to the grocery just for chocolate (my natural reactions against unhealthy food, wasting gas and wasting money on unnecessary food were kicking in pretty well). After several hours of contemplation, I finally decided to go and I ended up not feeling too badly about it. At least I got my chocolate on special.
I often find myself (at least trying) to make financial/food decisions as rationally as possible and I sometimes have a hard time relating to people who act clearly against their own self-interest in financial matters. I recognize that a lot of the personal finance blog world is built around bloggers supporting other bloggers as they decide to live frugally, invest and otherwise make healthy financial decisions; though again, it is hard for me personally to get into the "cheerleading" spirit. I generally believe that with enough good information available, people can and will make the right decisions for themselves, which is where I see the value of many PF blogs. However, like everybody else, I recognize that I'm only human and that it is OK to make irrational decisions sometimes.
Tuesday, May 13, 2008
I just got back from the grocery store after scoring one of the best finds in several weeks. I am a big fan of black beans. They taste great, hardly ever expire (in a can), provide decent protein with low fat, can be mixed with some Mexican cheese and cumin and chili powder for practically a meal in themselves, or can be added to virtually any Mexican dish (and I love Mexican). Perhaps the best thing about black beans is their price- 69 cents for a 15.25 oz. can of store brand beans (and I've never tasted any difference between the generic and branded beans). Sixty-nine cents is pretty insane to me. Well today, my beloved beans were on special for an almost outlandish 2 for 1 (50 cents per can!). I bought at least 10 cans. Oh, the simple joys in grocery shopping.
Monday, May 12, 2008
I just returned from a family trip to
1. Gambling- Recognize it for its entertainment value and have fun with it. Put a limit on the amount you are willing to part with and don't gamble any more. One solution is to leave most of your cash in the hotel room (preferably in a safe) or with a friend, and only keep in your wallet what you are willing to spend/lose.
2. Entertainment- For top-rated (and generally the most expensive) shows, book tickets before your trip, far in advance if possible. You should definitely see at least one show and preferably one of the top-billed shows. We saw Ka by Cirque du Soleil and it was a fantastic and unbelievable display of dance, acrobatics, costumes and music. Tickets are expensive, but worth paying and these shows tend to sell out more often and more quickly than second-tier shows.
2.1 Entertainment- For other shows (and less frequently for the top-billed shows) a good budget-friendly option is Tix 4 Tonight, which offers tickets for the current day's show at up to 50% off, in addition to discounts at major restaurants. As I said, many shows tend to sell out (and if there is a show you really want to see, buy ahead), but this can be a great way to see a great show on the cheap. The company has 5 locations around Vegas and tickets must be purchased in person. According to the website, they open at 10 a.m. and it obviously makes sense to arrive early in the day. There is a service fee involved, but the website offers a $2 off coupon.
3. Food- Vegas can be an expensive town, where typical dinners can easily run $30-40 per person (plus the expenses of shows, transportation, hotel, etc.). Breakfasts and lunches usually aren't much cheaper. One fairly easy way to save a little (especially for a college student like myself not accustomed to a regular food schedule) is to skip a meal, usually lunch, and just eat a decent breakfast and dinner. If you think you'll get hungry, bring snacks with you from home to eat throughout the day. Vegas is the king of buffets, which are a great way to sample a ton of different food. Though officially frowned-upon, you can often sneak a banana or other piece of fruit for later. Also, see 2.1 for discounts on meals.
3.1 Drinks- Drinks can also be wildly expensive and drink prices vary an equally wide amount. At the bottom end are a few convenience stores sprinkled throughout the Strip, which sell liquor, beer, etc. at prices closer to what you might expect at home. Otherwise, it is not hard to find a bar and/or cocktail waitress to bring you drinks. Always look for drink specials and ask about prices before you buy. The same beer might cost you $6 at one place, but only $1 35 feet away. Often in casinos, if you play long enough, a waitress will bring you a drink for "free" (hoping for a tip, which is not a bad deal).
4. Hotels- Vegas has something like 140,000 hotel rooms, a number which is always on the rise. Hotel prices can be a tricky business but I picked up a few fundamentals. Obviously, avoid major holidays if you can. For instance, New Year's Eve in Vegas is big, but the middle of December is slow, so the same room on New Year's Eve might cost 5-10x that which you would have paid a couple of weeks earlier. Many hotel websites show calendars with room prices per day, simplifying a budget-friendly stay. Also, avoid the ritziest hotel/casinos if you are more concerned with value than luxury. The newest, fanciest hotel/casinos on the Strip can charge the most, but there are a number of older, less-expensive accommodations right next to the newer places. Check out older places like The Flamingo, Bill's Gamblin' Hall and Saloon, and the
4.1- Rewards Card- You can sign up for a rewards card at nearly every major casino for free. When I signed up for one, I received a decent coupon book and t-shirt. Most people use them in slot machines when they play, and it tracks your winnings and losses, plus gives you rewards points. Honestly, I think you would have to play slots a lot more than I ever will in order to earn enough points to use, but I did find one good use for the cards (in addition to the shirt and coupons). On your next Vegas trip, you can usually get a slight discount off your hotel rate if you use your rewards card with the hotel/casino. If it is your first trip, ask friends to see if they have one. One note- sometimes, room prices can actually be cheaper without using a card, so always check prices with and without the card.
5. A note on coupons in general- Coupons are plentiful in Vegas, so get them and use them. People will often hand out coupons on the sidewalk and sometimes coupon books can be found in hotels (see 4.1). However, watch out for the swarms of people handing out what look like baseball cards (they usually operate in packs and flick the cards to get your attention). These cards are actually ads for call-girl/escort service, with naked women on the front. I'm not sure if they save you money on their services, but they definitely won't save you anything in restaurants and legit shows.
6. Airfare- I feel like books could be written (and maybe have) on the art of picking cheap airfare. There are many strategies people follow (a common one is using sites like travelocity and kayak to compare airfare) which I will not get into in this post. However, since we used frequent flyer miles to book most of our tickets, I thought I would share some wisdom I have found in that area. Nearly every major airline offers a credit card which allows customers to earn airline miles as they shop, usually 1 mile for every dollar spent. Most major airlines' cards also offer sign-on bonuses (at least they are now) just for signing up for the card. I have been compiling a list of offers, some more valuable than others, which I hope to post soon. The best deal by far is the current American Airlines Promotion with Citi. If you apply by August 31, 2008 and spend $750 within the first 4 months, American will give you 25,000 miles, enough for a free ticket in the continental US. Most airline cards usually carry an annual fee, but this offer waves the fee for the first year. So basically 1) get an AA frequent flyer number (if you haven't done so already, it is free to sign up) 2)spend $750 on the card in 4 months (shouldn't be too hard for most people) and 3)now you have a free ticket for yourself or a friend to Vegas or anywhere else. Of course, the usual frequent flyer difficulties still apply. I would probably cancel the card before the 1-year mark, in order to avoid the annual fee, unless you really like the card.
Sunday, May 4, 2008
While I don’t intend to weigh in on the mucky waters of politics in a personal finance blog, I was intrigued by Hillary
Like any other frugal, gas-paying American, the idea of saving a little bit at the pump interests me. But remembering back to Econ 101, this may not represent a wise or effective policy at this time. First, one of our nation’s greatest problems is our demand for oil/gas, and taking away the tax would only increase demand. If the tax is dropped and demand increases, prices will return pretty much where they stood with a tax. Assuming the lost tax revenue is not fully recovered, this is just another example of deficit spending to give Americans a little more money, on top of the $150 billion economic stimulus package. Though smart people can debate the principle of taxing profits (and the message it sends), Americans’ demand for gasoline is also relatively inelastic (remember back to Econ), which basically means any new tax on the oil companies could and would be directly passed onto consumers. And I’m not just making this up because I secretly want to pay more for gasoline. Thomas Friedman of The New York Times apparently has similar thoughts.
Saturday, May 3, 2008
Investing in index funds is such a good idea that professionals like Warren Buffett, David Swensen (who manages Yale's $22 billion endowment) and even crazy CNBC stock picker Jim Cramer recommend it for most investors. I personally favor exchange-traded funds, since they tend to operate even more efficiently than index mutual funds, but I will leave that argument for another day. Basically, index mutual funds are the way to go for most average investors.
I was not surprised, however, when I ran across this article from Kiplinger's online titled Indexing in Question. In it, author Steven Goldberg notes how popular S&P 500 index funds have essentially remained flat from January 2000 through the first quarter of 2008. Goldberg, who admits he personally does not favor passive funds, saying "I think I can pick funds that will beat the market indexes over time. But it's hard as the dickens, and I know I will often fail," warns that good investing is not as simple as putting all of one's money in an S&P 500 fund or even a Wilshire 5000 fund. I completely agree with him on this, though apparently we disagree that index fund investors have some deficiency that causes them to only invest in a single fund.
Of nearly all the information I've read advocating index funds (and there is plenty I have not yet read), I have found no pro-index author who only recommends investing in a single fund, even if it does diversify across a broad range of stocks (like 5000 of them). Instead, most experts I've read have recommended a portfolio suitable to one's age and risk-tolerance, composed of index funds properly diversified among small, medium and large capitalization growth and value stocks, as well as bonds, foreign stocks and (often) real estate.
My feeling (and hope) is that people who research the value of indexing also recognize the value of proper diversification, which is key to any portfolio of actively-managed funds as well.
Thursday, May 1, 2008
The Federal Reserve cut a key short term interest rate again yesterday by 1/4 point, marking the seventh cut in the last 8 months or so. The decision dropped the federal funds rate to 2.0% from 5.25% last September, and interest rates in most people's checking, savings and money market accounts have plummeted with the key rate. Two popular options for finding a decent savings rate include the ING Direct Orange Savings Account and E*Trade Complete Savings Account, both currently paying around 3%. This rate is several times larger than the average savings rate from a "brick and mortar" bank, which may currently pay .5-1%. I've tried both the ING and E*Trade accounts, and both seem to offer a good alternative to low rates at local banks. It is usually easy (and free) to transfer money between these accounts and your regular checking or savings account, making this a great option for an emergency savings fund.
However, I'd like to recommend another option I think people often overlook- credit unions. Credit unions are basically member-owned, non-profit banks. Because of this, they don't pay taxes and pay higher interest rates to their member-owners. Credit unions are generally set up to serve a specific group of people, so there are some requirements (such as being a government employee, living in a certain area, working in a certain field, etc.) to join one. However, most people would find they are eligible to join one near them if they did a little looking.
I’ve been a member of a credit union for about 5 years and have always been happy with it. While others are currently earning .5-1% interest or less, my money market account with the credit union is currently paying 3.25%, down from about 4.5% before the Fed started cutting rates. In other words, I get a better rate from my convenient “brick and mortar” bank, with access to ATMs, than I could get from many of the highest-yielding online banks.
To find a credit union near you, check out Credit Union National Association .
Sunday, April 27, 2008
These days especially, credit cards get a bad rap. Some personal finance "experts" like Dave Ramsey have gone so far as to encourage no one to use a credit card. I can understand some of the hatred. Many people used credit cards, for whatever reason, to spend money they did not have at the time. They then went into debt, at often ridiculous interest rates of 12%, 16%, 22%, 30%, etc., not to mention incurring a number of fees. Many personal finance blogs were started to track the progress of the blogger's paying down of their credit card debt, sometimes in the tens of thousands of dollars. Such efforts should be commended.
But a credit card themselves are not really that bad, nor is the concept of credit. While I can appreciate some people's ambivalence toward the plastic cards (and there is something to be said for the fact that people generally have an easier time spending money on plastic than cash), I think all the negative press really distorts the benefits of credit cards. Credit cards are generally safer to carry than cash, allow for better organization and tracking of one's spending, help users build a credit history and many offer rewards. I am still amazed at the ease with which I can travel internationally and quickly, easily and safely use my credit card or ATM card operating on the Visa network to pay for goods and services.
I recently requested and automatically received a credit line increase on one of my cards. As a young adult trying to establish a credit history with the hopes of buying a home in the next 5-10 years, I was pleased to see the increase. After my request, I noticed I was still given the option to decline the increase. Some "experts" might suggest that an increase would just encourage me to put more money on the card, fulfilling the card company's dubious plan. I see it more as recognition by the company that I have been decently trustworthy with their money, so they are now giving me the option to borrow more of it. It also represents a small step on the path to a positive credit history and financial freedom. Today, I, for one, am thankful to the credit card company.
Saturday, April 26, 2008
If you have one or several credit cards, you likely have received a check in the mail and had the same reaction I did- FREE MONEY (well, not quite). Most of the “checks” I receive from my credit card companies I can spot pretty quickly as just being cash-advance devices. In other words, cash the check and you have immediately consented to a cash-advance on your card, which is likely racking up interest at around 12-20%. This means the cash you just received is immediately losing value and losing it quickly. So, cash-advance checks= bad.
However, I was almost fooled by another “check” I received from a different source. When I was booking a flight one time, I had heard of Priceline (with the William Shatner commercials on tv), and decided to try their “Name Your Own Price” service to save some money (this experience- and I don’t recommend it- will be discussed in a later posting). As I was finishing the transaction for my flight, I was told I could save an additional 15% by signing up for the classic free 30-day trial of some service. Trying to get the most bang out of my ticket price, I signed up for the discount club service, called Great Fun, noting that I could opt out within 30 days of signing up, never pay a thing, and keep my 15% off my airfare. Though I’m sure the company was hoping I would just forget about opting out, I did so within the next 2 weeks, never paid for the service, and received my rebate check a few weeks later (which was about a month ago now). Recently, I received another check from Great Fun and on first glance, I had almost forgotten about my first rebate check or perhaps just thought this was rebate check #2. In fact, after I read the fine print, I learned that if I cashed the $9.25 check, I would automatically be enrolled in a new discount program (with the usual 30-day free trial of course). If I didn’t opt out by the end of the 30 days, I read, I would be charged around $190 for one year’s annual membership.
Again here, I find myself in a similar position as I found myself purchasing my plane ticket. This company hopes I cash their check, then either forget to opt out or love their service so much that I stay with it. Personally, I have little doubt that I would remember to opt out of the service if I did cash the check- I tend to obsess over these things. Looking at this from a strictly financial point of view, I could continue a cycle of cashing these types of checks (not the cash advance type described previously), always opting out within the 30-day free trial and have a little more money in the bank (and every little bit helps a college student without a regular job). However, there is always the slim chance I could forget to cancel the service or have one of these companies write such crafty fine print that my best efforts at escaping with their money would be thwarted. I took the check to the bank along with some others I had to deposit, but ended up not depositing it.