Saturday, March 31, 2007

Learning my financial skills

Did I learn a lot from my parents financially? That's a loaded question. The truth is yes and no.

From my parents I learned the basic and most important skills of money management. Live below your means, don't buy anything on credit you cannot afford in cash, and save first for retirement and adjust your living accordingly. Fortunately I married someone whose parents taught him these identical values.

Anyway these values having been instilled since childhood have kept me in good stead these many years. Because of it, I've learned to not like debt, though I've found it to be necessary in the form of student loans, mortgages, and a starter car loan. I've also found that I am able to be happy with what I earn because I have never gotten used to not saving for retirement. With DH's first job retirement became a line item we included before the mortgage was even conceived. Since DH started contributing to his 401k in January 2006, he current has $31k in there from contributions, match and earning.

Thus our parents teachings have helped us. But at least my parents never explained what mutual funds are, stocks, or any types of investments. Truth is they themselves have never really been into investing, just saving and living within their means. So there were many financial skills I had to learn on my own, including retirement options, investing, and mortgages.

But since my parents laid a solid foundation I was able to read many articles and learn about mortgages, student and car loans, and investing while keeping a firm head on my shoulders.

Since this is for the festival of under 30, will I share this with my younger relatives? No, probably not. I don't tell others what to do with their money because it's personal. I will discuss with them what I do, but I do not judge not impose my views on others. That being said when asked an opinion I will give it.

My younger relatives and those close in age to me I think are doing okay. I don't think many are saving like DH and I am, just based on their statements, but I think they are trying their best. And that is all one can hope for is a person trying to learn to live within their means and saving. Every step foward is still progress even if it's small.

Friday, March 30, 2007

Mom's Retirement...amazing

Today was my Mom's offical last day of work 3/30/2007. She is 55 years old and has been a state employee for 33 years. She has stuck with her job because of the amazing medical and retirement benefits. Earlier this week I discussed early retirement, well here I'm going to examine her benefits in detail and determine if it was worth it.

First she has contributed to her pension plan 7.8% for the duration of her career. This money has gone into a community pot which will generate her pension. Her pension is determined as follows 2% x years of service x highest 3 years of salary. That means she will get at least 66% of her salary, but because she also accrued while working over 2 years of sick leave, she is able to add that to her years of service. Thus her final benefit is 70% of her salary, which is amazingly about $4200/month gross or $50,400 annually.

Now to have generated this pension my mom would have had to have saved $1.3-1.4 million dollars in retirement accounts. Which she didn't do. This benefit is guaranteed for life. But first she uses her contributed portion up, which you wonder is how much? Well only a measly $200k which will take my mom less than 5 years to use up before she is living off the state's generosity for the rest of her life. And in my family the women live a long, long time my great-grandmother is 97 years old, grandmother is almost 78, and then my mom is 55.

However the second retirement bonus is that she will have free medical premiums paid for her and my dad for life. What that means is that she is retiring at 55 with a primary medical plan in place. She does not need to depend upon Medicare nor buying her own medical insurance at 55. When she turns 65, Medicare will become her primary insurance and this state insurance will become secondary. So if anything happens to her, my mother is 100% insured and pays zero out of pocket costs. The same for my father. The cost of this benefit, well it includes prescription coverage, vision, and dental insurance as well. And is approximately $1000/month. So my mom has right there "earned" another $12k/year in income in retirement benefits.

So turns out my mom get quite a retirement deal. Of course incoming workers and even people who started working 10 years after my mom did not have this sort of pension available to them. This pension and benefits were as she calls it "last of the mohicans." The state has been trying to "downsize" her for about 5 years so they wouldn't have to give her such a generous payout. But they hadn't been successful until now.

Anyway happy retirement mom! Wowzah! Amazing goals. I can't believe she did it. My MIL is also considering retiring at 54. DH and I are nowhere near completing that goal, main reason we still don't have kids unlike our parents who already were done childbearing by our ages. There is something to having kids young.

Thursday, March 29, 2007

Goals of retirement

Right now I have the goal in mind of retiring at 55 and DH 57. I think it's a really ambitious goal and one I doubt we'll be able to reach. But there is nothing wrong with dreaming.

As I stated in my previous post, my biggest concern is covering our medical costs associated with retiring early without group medical insurance. I think this could be circumvented by us saving a lot, or we could both work part-time jobs that offer group medical coverage. I'm not sure yet what the best option would be.

Right now we're on track I believe to replace 100% of our current income. However this is an unrealistic number because we're at 50% earning power, and starting out in our careers. So I'm really not sure how much we'll really need. But the best I can do is estimate what we'll need.

Somewhere I read that we should save 25 x our current salary in order to generate a nest egg large enough for a withdrawal rate of 4% without running out. That means we need to save about $3 million. I'm currently planning for double that. I think we will in reality end up close to the $4-5 million dollar range.

Another issue for us, is that retirement at 55 may not be feasible if we don't hurry and have our children. Our parents were done childbearing at this age, so we had left home by their 50th birthdays if not 45. So they were able to spend these past 10 years building their retirement kitty, while DH and I are trying to do it now in the earlier years of our careers. I'm not sure which is a better plan kids early and save more later, or save now and have kids later. I think it's a toss up, mainly because our parents were probably more mature than we are to have had children so early. So it's not just financial reasons that delay us from having children.

Anyway my current goals for retirement is retire with $6M at the age of 55, already have paid for college and the home, and travel and see the world.

Wednesday, March 28, 2007

Risks of retiring early

What define early retirement? I think that anyone retiring before 62 is retiring early. At 62 people are able to collect social security, which will supplement their retirement income. Another important age is 65, when Medicare kicks in and provide medical coverage for free. However what are the risks of retiring sooner?

People think the biggest risk of retiring early is running out of money. Which I think is a valid concern. However I think this risk can minimized by proper planning, correctly analysing spending, and learning to live within your means early in life.

The single biggest risk I see of retiring early is not having medical insurance. What you say? Well think about it, if you retire at 55, you will be responsible to cover yourself and your spouse as individual's, not through a group plan from work you no longer will have access too. This needs to be your major form of insurance until Medicare kicks in. Also you probably will forced to buy a high deductible health plan (HDHP) to save money because a regular medical health plan at 55 will be too expensive. What that means is you will pretty much pay all medical bills out of pocket, except for catastrophic illnesses.

I priced the average HDHP for a couple that's 55, in great health with a $5k deductible. They will be paying about $500-600/month for their medical premium. That means about $6-7k/year just for catastrophic coverage. This does not include dental, nor does it cover prescriptions. Plus before any insurance options kick in a $5k deductible must be meet annually, and the plan only cover 50% of expenses. If you were to want a more comprehensive plan that cover say 80% it would cost $800-1000/month or $10k-12k/year, again with a $5k deductible.

Thus I think the biggest risk in retirement is affording your medical needs. You not only have to buy catastrophic health insurance, but you must be prepared to cover your own preventative care annually out of pocket. You must be ready to pay for prescription drugs once a $20 co-pay instead $100 or $200/month. You must pay for vision or dental services entirely out of pocket.

So when planning, you must account that though a mortgage payment may be gone, it's possible that it will be replaced by a more expensive medical premium.

Another risk in retirement is the cost of long term care insurance. Buying a policy to ensure your care in a nursing home facility can run a few thousand a year. Also paying the property taxes on your house, which probably has increased substantially in value could put your retirement savings at risk.

All these factors should be considered when retiring early. However, many retirees today were able to enjoy early retirement because they were covered by employed paid health insurance and pensions for life.

Tuesday, March 27, 2007

Know your mortgage?

According to a recent article published by Bankrate, 34% of homeowners had no idea what sort of mortgage they were carrying. How is this possible? I find it very strange that about 1/3 of homeowners pay a mortgage, yet have no idea what sort of mortgage they have.

Does this mean that people are in over their head? Possibly, it definitely means that 1/3 of homeowners may have bought too much house. It also suggests they may be in very risky mortgage vehicles.

The article also discusses that those who have adjustable rate mortgages, almost 60% have no plan about what to do when their rate adjusts. That means they are just living in the now. I am an advocate for adjustable rate mortgages, I even understand getting an interest only mortgage. But I advocate such risk for people who are educated about these types of mortgages and are fully aware of the pros and cons.

I discussed this in November why i love my ARM. I realize that such risk not for everyone, nor should people enter into such mortgages who are not willing to take the risk. But I think it's worse to be so unknowledgable about your mortgage that you could have a fixed rate and not know it. These are probably the same people who haven't got a clue about the closing costs in buying a house or what their rates were.

The point? It doesn't matter so much what type of mortgage you have, so long as you know and understand the type of mortgage you have.

Monday, March 26, 2007

Carnival of Personal Finance #93

The #93 Carnival of Personal Finance is up at Tired but happy. This carnival was the first I made the editor's choice, with my article about children as a retirement vehicle.

Other top picks were "why you don't need an EF", which brings up good things to think about when establishing if you need an EF and how large.

Also a frugal Zietegeists discusses paying off the mortgage early, something heavily debated by PF bloggers. Good analysis, I love the fact he states that he's fully funding retirement before anything else, then the mortgage.

I have to say I enjoy reading the host blog tired but happy. It looks at life as a working parent and examine whethers it's better to be a stay at home parent or not.

Sunday, March 25, 2007

Trusting Trust deeds?

What are trust deeds? They are deeds which are basically mortgages. However these deeds do not transfer the property to a buyer. Instead the trust deed transfers the title of a piece of property to a "trustee", usually a title company or trust. This deed is held as security for the loan by the borrower. When the loan is paid, the deed is transferred back to the borrower. However if the borrower defaults the trustee can sell the property.

Sounds great? And people who get these sort of loans often are paying you the "trustee" 10-15% interest for a specified amount of time say 5-10 years. This sounds like a good deal with minimal risks right?

Wrong. With every investment, there is not guaranteed return. Much less something not well advertised or publisized.

One major issue with these types of loans is that people who get these loans usually are unable to finance properties through a normal bank. They have bad credit, poor risk, etc. Also these loans are locked in for a set amount of time, and often these borrowers are more likely to default during this period. So the risk is that you won't be paid back.

Of course you'd respond but you have a property deed in security. But the property when sold is only worth what someone else is willing to pay you. If you sell the property, typically it's run down or raw land, and the borrower was using the money to develop the property. That means it can be very difficult to sell the property for what you "mortgaged" it for.

So even selling the property may not net you back what you loaned out. Is it a legitimate way to make money? Yes. Does it have high returns? Yes. Should it be in a person's portfolio? Maybe, afterall diversification is important. But should it be the only thing in a person's portfolio? No. This is just perhaps one component of the Real Estate portion of a person's portfolio.

My post though negative sounding is not meant to be. I'm considering trust deeds, but realize it will only happen after I have substantial assets and are able to should the loss of the money. And that it is only a small fraction of our overall net worth, and not a large portion of the basis.

Saturday, March 24, 2007

mypoints gift cards

We have been doing mypoints for years now just clicking on ads. We do nothing fancy and we earn 5-10 point here and there. Strangely earning the points have been beneficial. We fortunately managed to trade in our points for 3 $25 gift cards to Olive Garden, Maggiano's group, and the California Pizza Kitchen. That's a freebie for doing nothing more than clicking on ads.

I have to say that this was one of the better freebies we've done in awhile. I would suggest people do it because you get emails which you can ignore and then click on for points. If a $25 gift card is 3500 points, and you get 5 pts an email you have to click on 700 emails. If you get 1 email a day, that means every two years you get a gift card. Which I think for clicking is pretty good. The company makes money by trying to get you to buy stuff by seeing emails, going to websites, and wanting to buy. We've never bought anything other than our free gift cards, so it actually works for us. However if you are a online shopping addict this might not be the freebie you are looking for.

Anyway last night we went to Olive Garden and it turns out that the food tasted better because it was free. We only spent $4 cash on a tip, but the meal was $25 for the two of us. Not a bad deal, we split a meal and appetizer and had breadsticks and salad. We still have to use the other two gift cards.

I'll keep you updated on our endevors.

Friday, March 23, 2007

USDA food expenditures

The USDA posts every month, January 2007, the average cost of food that should be spent per family or single based on 4 different spending levels. The levels are thrifty, low-cost, moderate, and liberal spending plans. The USDA assumes all food is purchased at the store and prepared at home.

A couple between 20-50 for the 4 different levels should be spending $318, $401, $495, $620. I'm glad to say that we are easily a the low-cost level. We probably this month will hit the thrifty level because we're eating out a bit and we're also eating a lot out of the pantry.

I've noticed that we probably spend between $300-$400/month on food at home, however this does not include eating out. I've also noticed like this month, we're currently at $120 thus far for groceries, $212 for eating out. Which is double what we spent last month and the month's not over. So I'm guessing that's part of the reason.

I am going to try tracking our eating habits and see if I can't consistently keep it under $400, which is hard because we include things like toiletries, cleaning supplies, pet supplies, in that number. Mainly because we shop at costco so segregating out the items is tough. Because of that I feel that we're doing a pretty good job.

I'm also trying to use coupons so we'll see how that works out.

Thursday, March 22, 2007

CPA worth the price?

Well this year our CPA charged us quite a large amount, $585 to file our taxes. Last year we were charged $475 for 2 states and 1 federal return. And it was complicated without our moving situations. This year it was one state and one federal return.

I'm not exactly sure why he charged us more. Neither is DH. We can't figure it out. I don't think we'll be using him again next year because the costs were exorbitant.

Granted this year we learned a lot of things we didn't know before about the ESPP being income, so it's taxed differently. Also our stock grants are treated also as income. Also we learned about donating our timeshare and stuff. So I sort of feel that this year we paid to become educated about the finer details about the tax law.

But $585 is ridiculous. Sure we had a lot of stuff, but we didn't have a second state this year? What is going on?

Wednesday, March 21, 2007

continuing the saga of eating out with people

Okay so last week DH went out to eat with coworkers for a going away lunch for someone. Of course they split the check for the person leaving. No big deal. However they also split the bill for everyone's meal, and included beers for those who ordered it and did not segregate it out for those who didn't. DH usually doesn't drink during lunch and certainly wasn't expecting to spend $20 for a lunch meal. Especially when his meal was less than $10.

Now I expected him to pay about $15 bucks with tip, tax and chipping in for the guy leaving. But it was very unfair to just split the bill 10 ways. Yes I know I'm cheap. And yes I know that it's to be expected when you go out. But it doesn't mean that I can't blog about it and just complain a little.

I am glad DH went out and the $20 wasn't a huge deal in the budget. Actually it didn't break the budget at all. But it's the principal of the matter that DH and I rarely drink alcoholic beverages out solely because of price. We do enjoy eating out but dining out is rare.

Thus I feel that when going out to a lunch like this it's unfair to expect others to pick up your bar tab. I don't know if I am wrong for feeling this way but I just do.

Tuesday, March 20, 2007

Carnival of the Credit Card #6

This was my first time participating in the Sixth carnival of the Credit Card hosted by Credit Card Lowdown. I submitted by post on paying off the Home Depot 0% offer. Which was not a huge deal, but still it just made me feel better.

Two different posters Nickel and Golbguru wrote articles about 0% CC arbitage. Which are very informative and helpful. I am not sure I have the stomach for it, but I have been considering it for a long time. Which is strange considering I utilize 0% financing on a Best Buy and Home Depot CC for 1-2 years. These articles should be read before anyone considers 0% CC offers.

Finally another interesting article is the post by David Weliver about raising your FICO score fast at his site Money Under 30.

Enjoy a great carnival.

Houses cheaper than Cars?

An article published yesterday discussed the trouble Detroit real estate was in. Detroit's economy is in serious trouble with the loss of jobs in the automotive industry. Over 14% of the population are unemployed and one-third live in poverty. Added to those problems is the rising costs of mortgages because of sub-prime lending these past few years.

Because of this many homes are going for auction. This past weekend over 30 homes were sold for under $30k. That is less than many cars on the market. A 4 bd home near Motown sold for $7k on auction.

I have no idea what will happen. I had never thought that homes would be worth less than cars. But it appears that people are leaving Michigan in droves. And they are just walking away from homes. The opportunities outside the state are so much more appealing that people are deserting their homes. When will this exodus stop? Is this what will happen to other midwestern cities?

Monday, March 19, 2007

Frugal Superman

I think I married a Frugal Superman. Sounds crazy, but I think I acheived the impossible. DH works super hard full-time, goes to school part-time, while helping around the house. He cooks, cleans, and fixes stuff around the house to save money. He very rarely complains. Instead he enjoys the simpler things in life.

He's so great, everyday he takes a homemade brown bagged lunch. He's 29 years old, makes great money, and still is humble with great integrity. I cannot imagine marrying someone else. I can't believe sacrifices he has made to make our life work. He has never allowed himself to enjoy the 4x times increase in his salary. Instead he lives the same life we had less than 18 months ago!

I just wanted to write about my appreciation for my frugal superman. His work ethic, his integrity, and his monetary values are unmatched. He's making the sacrifice of trying to finish an MBA as quickly as possible so we can have kids sooner. Most people take 1 class, he takes 2 classes a term and is getting A/B+. He graduated college with a 3.8 and it appears the same wil happen now.

I hope to one day, be able to afford his $1600 watch. I know it's a crazy purchase, but I hope that one day our sacrifices now pay off later so I can surprise him with a present he really wants and would treasure forever. He's kept his $80 watch already for 7 years and repaired himself when it broke recently.

I know many people are pulling their spouses to frugality, however in this case, I am often the spendthrift spouse and need to be lead down the frugal path. Thus I appreciate his efforts on making our lives rich and fufilling.

Carnival of Personal Finance #92

This week the Carnival of Personal Finance #92 is hosted by Lazy Man and his money here. He has an excellent blog website about personal finance so check out his posts about making money work for you. Right now he's blogging about generating alternate streams of income.

However this week's carnival includes my post about reducing my property tax bill. There are also other excellent posts. One to consider is Flexo's cost of owning a home. Another is how to purchase your next car by mytwo dollars. Something which I need to consider in the next few years.

Great Carnival and tons of interesting posts. Check it out.

Sunday, March 18, 2007

Payback of Pets

On a message board, people were debating the cost/value of pets. I guess it's pretty obvious which side of the debate I'm on. But I had to sit and reconsider many of the heartfelt posts by people on both sides of the issue.

Is it wise to spend $3k on treating your dog? Many said no way, others said of course. And some said depends on age and quality of life of the animal.

I took our dogs yesterday to the vet for some shots. Because of our "medical" plan it costs $61.90/month for 2 dogs. This includes all the shots for the year, teeth cleaning annually, blood tests annually, etc. That means we spend $742.80/year for two dogs on just vet treaments. We also spend $20/month on dog food, I bought another 30 lb bag of Eukanuba Senior diet because it was on sale for $30. However the previous bag purcashed 2/2/07 still hasn't run out yet. It typically lasts about 2 months a bag, and typically costs $40 a bag.

Thus on food we spend $240/year. This does not include dog treats, which I guess runs another $10/month = $120/year. Realize we do have two dogs so these numbers are double what a single pet would cost.

But we also spend about $20 for 6 month supply of heartgard = $80/year for two dogs. Then we also pay $50 for 6 month supply of frontguard tick medicine = $300/year. So our overall basic cost of maintaining our dogs is $1482/year. I could have guessed we were easily into 4 figure dog ownership.

This does not include extra like eye surgury these past two years for S to the tune of $300/each surgery. Nor does it include things like kennels, leashes, pet beds, etc. Also not figured in is the cost of kenneling our dogs if we travel. And the medicines we buy if they are ill.

That being said, I guess we probably spend about twice what I've calculated so $3k/year on our dogs. Geez, seeing that hard number on paper sort of hurts. Granted we just got one dog a years ago, so it was half the cost previously.

But is it worth it? Every penny has been worth it. Both guys are our best friends. Especially for DH, I know he talks a lot to them, plays with them, enjoys their company. To him, they are equal in friendship level to real humans, but without the complications. To me they are steadfast, loyal, and loving.

I guess the truth is that I'd rather spend $3k/year on "the boys", than going out to eat with people every night of the week. The boys are our happy hour. Instead of going to happy hour with coworkers or out to lunch, "the boys" are our latte factor. And I know DH would agree that the payback of love they give us and the feeling of family we get is priceless.

As a side note, we both grew up with dogs and would definitely not be with a person who didn't love dogs as much. So I guess this would be a dealbreaker for any relationship we're in. Love our dogs or bye bye.

Saturday, March 17, 2007

Saint Patricks Day!

Happy Saint Patricks Day! I'll keep this short because it's been a long day. Today instead of boozing about, we spent the day snowboarding in NH. It was awesome, the powder was like being back in the Rockies.

We had such a great time. The weather was awesome, the snow amazing, and not many people. I can't figure out if it was because it was Saint Pattie's day or because everywhere go so much snow that people didn't care which mountain they went to.

Anyway our tickets were a steal of a deal at $29 each. We bought boards, boots, and bindings last season so our investment in going boarding has dropped dramatically.

While our boards last year for everything cost $300/per person, I calculate that it has now cost us about $20 per use of our boards. Cheaper than renting, mainly because we went so often last year and a few times this year. Fortunately because we're not growing any, it's not a huge investment. It's a fun, healthy hobby, and keeps us active during the winter months.

So happy Saint Patrick's day!

Friday, March 16, 2007


We went out to eat and paid by CC as usual. The server added an extra dollar to their tip, which I found odd. Why? I've waited tables in college and would never have tried to pull a fast one on a client. I'm stunned that someone would be so dishonest.

I caught it after the statement came, so I didn't feel like complaining. But now I'm a lot more careful and check every restaurant transaction immediately as it posts. That way the stores will keep the receipt handy.

I posted on another website and apparently this is can happen quite a bit. It happens with both Debit and CC. It appears as long as you tip on plastic of any sort this can happen. Also sometimes waitstaff accidentally double charges you as well.

So keep an eye on the receipts and check everything twice.

Thursday, March 15, 2007

a new retirement plan

Out there a fellower blogger JW at his blog Need to be Debt Free. He's a 40-something guy on the journey of being debt free. He's trying very hard to follow a plan and still retire. Yet he worries about funding college and paying off the house, although he is far behind pace in retirement.

What to do? Well the answer is save for retirement because there are no loans for retirement. But there are loans for college. Also paying off the house faster isn't as important because the house will get paid off eventually. But when you retire, a person needs a pot of money to generate income to pay for repairs, property taxes, and general maintenance of a home. So retirement savings it is.

But what about new retirement plan of living off your kids? Sound nuts? Here is a website on the sandwich generation. Mostly it's boomers who are financially required to help their parents in retirement, while paying for college for their children.

The new retirement plan is to support your children so much that when you retire they take care of you. I don't advocate or think this is sound judgement. However many parents are making college and their children's lives such a huge priority that it leads me to question whether this is a new retirement strategy.

These parents not only moved cross country but are paying $50k/year for tuition at a private high school for their daughters. This is in hopes of going to a "good" college. They have no retirement, have sold their home to fund tuition, moved cross country and for what?

I imagine in 20 years they'll be struggling to retire, and perhaps expecting their daughters to help them out. They'll play the guilt card about all the sacrifices they have made to allow their daughters to become successes in life.

Of course the negative to this, is what if their daughters do not succeed in life? What if their daughters are unable to support them? What if they marry someone whose parents also need support? Or work in careers that are not lucrative?

These issues make the idea of basing a retirement plan on your children's support ridiculous. There are so many variables that cannot be accounted for. And yet parents are still struggling to pay massive college tuition bills and spend any amount to assure their child goes to Harvard.

Parents be wary of such a plan. A more viable plan would be to fully fund and secure your own retirement so you never need to ask for money. Then instead help your grandchildren's tuition, trust me your kids will thank you two-fold. For allowing them to not support you and the gratitude that they don't have to foot their own children's college.

Then they in turn can perhaps save for retirement and fund their own grandchildren's college account.

Wednesday, March 14, 2007

Grocery Bait and Switch

One of my pet peeves is going to a grocery store and having a bait and switch done. What is that? It's where the item, for example candy, is in a bin with a sign saying Buy One Get One Free and $1.50. So you think great deal, right?

Well DH thought awesome. He took the candy to the register but then it didn't ring up correctly. So he asked the cashier what was going on? The cashier said the sign was for another candy in the candy aisle, but the candy in the bin directly below the sign was not on sale. He knew this was a scam by the store to attempt to sell the more expensive candy mislabelled. He tells the cashier he doesn't want the candy. The cashier still trys to sell it to him. The idea is that the store is trying to make people buy something more expensive by pressuring you when you are in line and unable to return the candy. Also you have people behind you waiting to check out, and possibly you'd miss the cost of the candy period. Because you aren't watching every item scanned. These stores know every trick to get you to spend more money.

Same thing happened to me the other day. What do you say? I bought 4 ice creams and was supposed to get $4 coupon back for my next trip. Anyway, I purchase it on the add, and the coupon doesn't print. I go to the front desk and complain with my receipt. They give me one but only after I threaten to ask for a refund.

I can't believe that stores can get away with these business practices. They rush you through the checkout line so you feel pressured to not return an item you "thought" was on sale. Or are not paying attention to the price because of your kids. Or are just to lazy to go and change the item.

Anyway enough about my rant. I'm exceptionally careful now and look over not only my receipt but I carefully watch as every item is scanned if the price is what I expect.

Is this the experience others have had?

Tuesday, March 13, 2007

Small savings now...big savings later

Well we got back our notice from the city, and our assessed value of our home was abated $15,600! That only translates into a $145 tax abatement for this year. However it means that moving forward our tax basis for our house will be lower because of it.

When we bought our place, the cost basis was $x in 2006. We applied for an abatement last year and had it decreased by $10,500! This saved us only $100 last year. However this year our assessed value increased by $16,100 for 2007.

However by challenging our assessment this year in January it was lowered by $15,600, meaning our total increased assessed value for our home was only $500! Woohoo!

So our savings is going to compound annually because we'll be able to slow the "assessed value" of our home. Where we live the property taxes cannot increase by more than 2.5%. Meaning that people who have lived here for 15 years pay less taxes than we do because the assessed value of their homes have gone up very slowly. And because of the size of the city, the assessor's office only reassesses newly purchased homes.

Thus the taxes are extremely disproportionate for new versus long term homeowners. To take advantage of this, we decided to challenge the assessement annually. DH thought it was stupid at first, but now that our assessed value is going up very slowly and more in line with people who have owned for 10 years, he's happy.

Sure it's a $100 now, but in say 3 more years, when our neighbors with the identical unit are paying more it'll be worth it. Right now because our neighbors did not file an abatement, their assessed value is $31,600 more than our unit. We have idential townhouses, except we have the original stairs, fireplace, but brand-new storm windows! They pay $295/year extra in property taxes this year with a $31,600 difference in assessed value.

But because of our lower value, next year our assessed value can only be increased off the smaller number. So though our units are identical, by taking a bit of time to research assessed values, we're going to save more money in the long run. Because every year it compounds the amount the city can raise our taxes!

So small savings now...big savings later.

Monday, March 12, 2007

A guide to Boglehead investing

Excellent book. It really starts out well and finishes strong. There are many different aspects of this book. The books is 5 stars because it's easy, fun, and informative reading. I borrowed it from the library, but it's probably worth buying used.

It starts with talking about successful investing. Some of the steps are having an EF, investing early, maxing out all retirement options. It then moves to discussing stocks, mutual funds, and bonds. I found the bond chapters very informative. because it discusses both individual bonds and bond mutual funds.

Another informative part of what you're buying is annuities and Exchange Traded Funds (ETFs). The information is well written and easy to understand. Also it discusses buying TIPS or inflation protected bonds. I love the fact they discuss the two parts of TIPS (Fixed and variable components). Which really explains how I-bonds works.

Chapter 6 moves into determing how much you really need to save. Within this chapter there are many different tables and figures to use to gauge how much you really need to be saving. Chapter 7 discusses keeping it simple by investing in index funds, which is obviously a huge cornerstone of this book considering it's written by Bogleheads (Bogle followers). Chapter 8 goes over proper asset allocation. It discusses risk tolerance, personal situations, and guidelines for age allocation. Chapter 9 looks at keeping costs low, a very important principal/value to a boglehead. Chapters 10-11 look at taxes and how to efficiently manage your taxes while investing. These chapters focus on tax harvesting in taxable accounts, why you should focus investing in retirement accounts (401k, IRAs), and how important fund placement in either a taxable or non-taxable account is.

Chapter 12 focuses on Diversification, parallels asset allocation but a bit more in depth. Chapter 13 looks at market timing and chasing returns, a huge no-no in a boglehead's rulebook. Chapter 14 looks at investing for college examining the different accounts available like Coverdells, IRAs, 529s, etc.

Chapters 15 and 16 look at inheriting money and needing an advisor. Very short chapters.

The second half of the book looks at following through on your investment strategies. Chapter 17 discusses the importance of rebalancing your portfolio. Chapter 18 tells you to not chase returns. Chapter 19 is about mastering emotions when investing. The idea is that you have to not become emotionally attached or invested, use logic. You need to invest and avoid emotional traps. I think this is one of the most important chapters of the book because a lot of people get attached to investments (myself included), hoping it will come back. Or just other stupid things.

Chapter 20 is about discussing how to guarantee your money will last. It talks more about annuities and withdrawing less in early retirement years. Chapter 21 discusses insurance to protect your assets. Chapter 22 is about dying/wills.

And chapter 23 is just a wrap up and encouragement. There are forums for bogleheads. They is a diehard boglehead forum at morningstar where people discuss investing.I really enjoyed this book, it was fun and easy to read. Definitely worth the time to read.

Carnival of Personal Finance #91

The carnival of personal finance #91 is up at the Sun's Financial Diary. There are a lot of great posts including my post on whether it's worth stockpiling.

I suggest people read about 529 versus Coverdall IRAs at Financial Dad. It was an excellent read.

Also on another note people should check out Freemoneyfinance for the March madness blog contest. It looks like a great tournament is finishing fast.

Hope you enjoy blogs this week.

Sunday, March 11, 2007

Coupons = spending more money

Okay today I purchased the Sunday paper, it was $2.50. I've decided I'm going to start ordering the paper because I'm going to get serious about couponing. I looked through the sales and coupons, and decided I'm going to buy Irish Spring body wash ($1 coupon) from CVS + $4 bonus bucks, Garnier Fructis Shampoo $2.99 sale - $1 coupon, and $1 coupon on Shady brook turkey.

So that's $7 savings, which is great, I may also use another coupon later if something else goes on sale. Most of the stuff is for preprocessed food and for once I'm tempted. For example there is a $1 coupon on Margaritaville Shrimp (frozen), and it looks good. I'm really tempted to buy it.

Which leads me back to my previous couponing point that couponing leads to spending more money. How so? If not for the coupons I would not be buying any of the three items, not even the turkey. But with the coupons I can justify it because it's less than $2. But still the point is that I am spending money on stuff I could live without.

Saturday, March 10, 2007

$1600 Watch Followup

Timbo being my DH is laughing right now. So we went to check out the fossil store but they couldn't repair the band nor did they have any watch bands to replace the broken band.

So I said just get something you like. We walk all day looking at watches and there is nothing he really loves. We've both seen the combo watches by Timex, in fact he still has his old expedition combo watch. So he decides he'll just come home and replace a watch he's had since high school. Fossil does not have combo watches anymore, at least not the combo watch I bought him or else we would have gotten the identical watch. Personally thinking back I should have bought two.

Anyway though, low and behold when he goes looking for his Timex, it's in his fossil box, he finds a couple of old links. So last night he spends some time fixing his watch and replaces the broken link with a new link. It's not easy because it's a non removable link, so he still has to solder the links into place. But wow. My DH is a savings guru. I am very impressed I wonder if he can get another 7 years out of this watch?

I guess that's my goal is to be wealthy enough one day to be able to purchase that $1600 watch. Not saying that I will, but to be able to think about it would probably mean that I've accomplished other savings goals which were more important.

I think it's relative to being able to always buying a new car or luxury trip. Great if you can afford it and even laudable. Because it means you've been able to save and live within your means!

Friday, March 09, 2007

The $1600 watch....

DH's watch I bought him in 2001 for V-day broke finally. It's a fossil watch, so it's wasn't expensive, although at the time spending $80 on watch seemed like a lot. Because of his requirements in a watch there is basically only one watch that he wants. He wants this expensive Tag Heuer Kirium watch see here.

I have no idea why a watch would be so expensive. Is it built better? Is it worth the money to buy an expensive watch? We're not getting it because well $1600 is a lot of money to spend on a watch. However I wonder at what point are you able to afford a watch like this?

Is it just a very nice accessory that you wear all the time so it's worth it? Or is it pure luxury? And you can't afford it until you make $200k? Also is it possible negotiate for a watch this expensive?

Because DH wants a combo watch, we're going this weekend to a fossil store to see if we can't just replace the band on his watch. And he can keep on using it. If we do this, then perhaps he'll be able to reach his goal of wearing no more than 25 cents worth of clothing a day.

Thursday, March 08, 2007

Sub-prime lenders

It appears that two subprimer lenders New Century Financial (NEW) and Novastar Financial (NFI) have dropped about 90% since their 1 year highs. These drops have occur precipitiously within the last month.

Today the NEW CEO stepped down and the company is considering entering chapter 11 bankruptcy. But foreclosures haven't really spiked up in January to push these mortgage companies into the red. I wonder what is going on? The housing market has supposedly been in the dumps for months now. Yet the number of foreclosures does not seem terribly high. I also think that these foreclosures are localized more on the coasts where risky loans had become the norm.

Yet in the middle of the country and southern states, the price of homes did not skyrocket these past 6 years. So is there a lot of danger in assuming that the only potential pitfalls in home lending is in very few, high COL cities?

I bought NEW for my CNBC portfolio today. We'll see how it goes.

Wednesday, March 07, 2007

Pellet Stove or Gas Fireplace?

We're trying to heat the bottom floor of our house more efficiently. I'm not sure which is a better way to go. Initially I thought a gas fireplace, however it was suggested to me on a frugal forum to go with a pellet stove. A family mentioned buying 4 tons of pellets for $1k and it lasting all winter.

Now that sounds like a great deal, however I'm not sure about the feasiblity of either. DH thinks the gas fireplace would be easier to install since we have a gas line for the stove. I concur. He also thinks a pellet stove might not work because it needs air to run so it would deplete the oxygen in our house and would need to vent somewhere, preferably outside. If not it would potentially lead to increased carbon monoxide in the house.

I haven't done much research but the pellet stove and a gas fireplace appear to run about the same price, especially if we get a pellet stove insert for the fireplace. However energy is required to run the pellet stove.

I also am debating between a gas log and a gas fireplace or fireplace insert. The running costs of logs is about $1000, but for a fireplace/insert it is $2500. Pellet stoves start from $1200-$3000 depending also on installation. I guess we'll do more research, but any input would be appreciated.

Tuesday, March 06, 2007

Best Money savings deal..

I read a blog today asking about your best money deal. Thinking back there for sure was a deal that we ended up stealing the store with.

We used to go to IKEA and shop the as-is department, put things together, fix it up and sell it. Anyway I was going through the rummage when I saw three wardrobes taped together with boxes half attached priced for $1. I stood there motioned to DH and off we went with 3 $1 wardrobes. We sold two of them immediately for $40. Then we kept one for ourself. Now what we do when we buy and sell these things is we look and make sure all the parts are there. Then we go back to IKEA and ask for any missing screws, parts and explain with our receipt (yeah $1 receipt) and ask for the missing parts. Then we "restore" it.

The greatest thing about our wardrobe is when we moved from SD to NEwe sold it for $40. It was really nice wardrobe too. Guess that was our best deal for a $1.

That day we picked up the wardrobes we bought a desk for BIL for $40, that is regular price $200. He still has it and loves its. So we had more than one win that trip.

Monday, March 05, 2007

Do you really save by stockpiling?

I've been contemplating stockpiling more non-perishable stuff I could get cheap or "free" from coupon usage. I wonder however if it is worth it? I mean is it worth stockpiling stuff if you need to live in a bigger home to stockpile?

How do you justify the expense of purchasing or renting a large home/apartment? I ask because if you are stockpiling an entire garage and two spare bedrooms, wouldn't it be cheaper to sell a huge home and just downsize?

Does it not cost more to maintain, heat/cool, other utilities for a larger home than a smaller one? I understand if you have children you need more space than a couple of DINKS, but I wonder if our consumerism isn't driving us to stockpile more than necessary?

I wonder if the meat is good after sitting for 1 year? Is it worth an extra 500 sq ft to save on non-perishables, when you could a house 1 room smaller?

Where do you draw the line between being frugal with stockpiling and being foolish? Remember the saying "penny-wise and pound-foolish?" If it costs more to heat a 2000 sq ft home when you only need 1000 sq ft but would have to shop more and stockpile less who comes out ahead? The person with the smaller mortgage or the couponer?

Carnival of Personal Finance #90

This week it's hosted by mapgirl, it looks like a great carnival. I don't like her website however because it's so frustrating with a little overlapping map on it. I didn't participate this time, but there were many interesting posts.

Sunday, March 04, 2007

February 2007 Spending Wrap Up

February we spent on discretionary items such as entertainment, food, eating out, gas, etc. This is not our mortgage or fixed utility bills. We spent $818.06 on everything.

For the month we spent $431.36 on groceries with $88.85 being spent only on soda, thus putting us over the $400 budget. But overall I think we did great on groceries. We also ate out for $153.21/month, way below our $400/month budget amount. I guess we were just trying to be conservative. But honestly $550 is a lot for DINKS to be spending on food to be honest. I guess we should be eating more out of the freezer.

We spent $88.81 on gas for the cars, under our $150/month budgeted amount. I guess this was a great experiement, that I'll be continuing the trend this month to see our spending.

I should be really embarrassed because we spend so much on food.

Saturday, March 03, 2007

Coupon shopping part II Update

I keep reading on MSN and other places people saving huge amounts with coupons. Which I can't seem to do. They never pay for shampoo, deoderant, soap, etc.

I'll use a coupon when it's something I buy, but honestly with two people I've written dates on stuff I buy like shampoo, soap, etc and we just don't use a lot. I bought 1 container of laundry detergent 2 years ago and it's still not gone. I bought 1 huge bottle costco electrosol tablets (85) $6 and it lasts 85 weeks, once a week dishwasher runs. I have a bottle of dish liquid soap when we moved 2 years ago and still have the same bottle it's $4.99 at costco. Stuff like that I guess I could save $5 but I mean for 2 years worth of not shopping. Toilet paper, paper towels last us a year or more the giant pack from Costco and it's $15 so I could save $15. But then if I shopped 1 hour every week with coupons, it would cost us far in how much we could be earning than $15. DH could be studying or we could be having fun together. So should we bother looking for coupons and then going to stores for it?

But the problem is I don't think I am the type of person to buy 270 boxes of pasta or 40 cans of beans. How do you store that much stuff? I buy and use till the end. We live with limited space for housing. How do you calculate the extra space needed to store buying a ton of non-perishables? Is that how people got into debt just buying stuff?

I mean part why we didn't get into debt before was 550 sq ft of living for two people made buying stuff hard. And we never overbought or overloaded the fridge/pantry. I mean 270 boxes of free pasta sounds great but where would we put it? Or 40 cans of beans? Or 10 tubes of toothpaste? It would cost us more to have to live in a bigger home than living simply and buying what fits in the smallest space possible. We saved more by living in a 1 bd than moving up into a 2 bd to fit more stuff. And we already lived with stuff like books under the bed, clothes in a dresser, etc. We stored everything we could including built in shelves in the closet and in our outdoor patio closet above the washer and dryer.

So where do you draw the line? Is it really money saving or are you buying and having to store more stuff? And do you buy things you wouldn't normally buy because of a coupon?

Friday, March 02, 2007

February 2007 Net Worth Update

Okay our net worth has been declining since December. Not that it was unexpected because we owed a lot of tuition which I had saved up in cash for and we had to paid. How much tuition? $10k worth and it's been paid for in cash. Yes this is on top of the $8500 in loans we took out this year.

Anyway though our networth this month unfortunately. But part of it was due to the 400 point drop in the stock market earlier this week. I can't say that I'm sold off anything, if anything I am hoping to invest more. Right now in our net worth I probably should be tracking the 0% CC we have with best buy which has $1k due in August. I am considering however just paying it off this coming March to free up cash flow.

Also DH is considering taking classes as at a public school this summer.

Thursday, March 01, 2007

CNBC $1 million challenge

Okay readers and friends, let's do this challenge. On March 5th, CNBC is going to launch this build a dream portfolio. I'm going to do it and challenge my DH (if he decides to do it). We're going to go head to head with everyone here and elsewhere. Wanna join?

Send in results in my weekly commentary.