Archives for March 2008

Treasury Bond Minimum Now $100, But Nothing To Buy

March 23, 2008 By Jonathan Ping 7 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

The Treasury recently announced that as of April 7th minimum investment amount for government bonds will be lowered to $100 (previously $1,000). This includes all Treasury marketable bills, notes, bonds and Treasury Inflation-Protected Securities (TIPS). Thanks for the e-mails.

This means you will be able to build a weekly Treasury Bill ladder for as little as $400. Unfortunately, right now yields are so low that I have no reason to bother. The last T-Bill auction resulted in an investment rate of only 0.527% for the 4-week T-Bill, 1.337% for the 6-month T-Bill, and 2.045% for the 2-year T-Note.

Even TIPS are so much in demand that some of them have been trading with a negative real yield. If you are interested in inflation protection, especially for mid-term periods like 5 years, it may be better to simply buy a Series I Savings Bond, which right now has a real yield (fixed rate) of 1.2% through April 30, 2008. You can buy those already for as little as $25 via TreasuryDirect.gov. (There is a purchase limit of $5,000 online and $5,000 paper, although people have reported being able to buy more online.)

Filed Under: Treasury Bills and Bonds
Last updated: August 9, 2018
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Shopping For A Mortgage? Consider Upfront Brokers and Upfront Direct Lenders

March 20, 2008 By Jonathan Ping 32 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

If there’s one thing missing from shopping for a mortgage loan, it’s transparency. You would think getting a mortgage would be close to shopping for a gallon of gas, but it’s more like shopping for a car. Blech. By this I mean you and the salesperson (broker) are at odds – you want the lowest price, and they want the highest price (and therefore fattest commission). But just like shopping for a car, information is the best weapon. What is the invoice price? What factory discounts or incentives are out there? What are other dealers asking?

The good news is that there are a few brokers and lenders out there who are working with more transparency. Most of these are listed on the Mortgage Professor’s website, which is a good source of information overall.

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Upfront Mortgage Brokers
Basically, the appropriate analogy here is that your car salesman has agreed to a fixed commission (say, $500) no matter what car they end up selling you. You know both their fee, and they will share what wholesale rates are available. Therefore, the only incentive left is to get you a loan type that fits so you can recommend them to your friends. You can find a list of Upfront Mortgage Brokers (UMBs) here.

One problem here is that there may be a lack of local UMBs in your area. Second, I have found that some brokers are more “upfront” than others. I feel that they should simply list their fees openly and directly (i.e. 1.5% of loans below $500,000), instead of having to submit an application first and jump through hoops.

Upfront Mortgage Lenders
Many rate comparison sites include a bunch of teaser rates that nobody can actually get. Either their credit is mysteriously not good enough, or that rate “just expired – sorry!”. What we want are real-time rate quotes, and guaranteed lender fees! The car analogy here is that you want the price quoted to be “set in stone”. No waffling at the very end and tacking on fees like “rust-proofing” or “documentation fees”.

This is exactly what Upfront Mortgage Lenders (UMLs) are meant to provide. All UMLs must:

  1. Provide quick access to the loan types it prices online.
  2. Disclose all lender fees, including points, origination fees, and any fixed-dollar fees, and guarantee them to closing.
  3. Disclose all third party fees with the best estimates possible, indicating which if any are guaranteed by the UML.
  4. Provides a clear explanation of its rate lock requirements, and disclose them prominently.
  5. Disclose all the information about its ARMs needed by shoppers to “make intelligent decisions”.

For example, lender Amerisave aggregates the available offers by other lending institutions, but it also has agreed to disclose its wholesale prices and markups to customers. For example, a recent quote on a $480,000 loan (home value $600,000) gave me a Guaranteed Lender fee of $5,780.00 (1.204%). This value includes all these various fees:

  • Application Fee
  • Funding Fee
  • Administrative Fee
  • Transfer Fee
  • Origination Fee
  • Processing Fee
  • Loan Set-up Fee
  • Wiring Fee
  • Discount Fee
  • Flood Certification Fee
  • Tax Service Fee
  • Underwriting Fee

This assures you that new fees won’t be added or others increased at the last moment, when you’re already stuck. However, it does not include all closing costs paid to third parties like the appraisal, credit report, and title insurance. Here is the current list of certified Upfront Mortgage Lenders, sorted with my favorite at the top:

  1. AimLoan
  2. E-Loan
  3. Amerisave
  4. National Mortgage Alliance
  5. BetterChoiceLoans

One potential problem with these is that if the loan you want isn’t very common (like a 30-year fixed, 5/1 ARM), then it may not be available for an instant online quote. Each lender can pick which loans it wishes to openly provide guaranteed quotes for. But overall, these sites are great for seeing what is a competitive price daily.

My Experience
When I started looking for a loan, essentially I didn’t really care what the salesperson made, I just cared about the final price of my car. That kind of made sense in my mind, so I got quotes from everybody under the sun. Of course, there are several bait and switch tactics that unethical brokers can utilize, so trust and my impressions of each broker did matter. I felt (possibly incorrectly!) that I was educated and knew what to look out for. If they weren’t willing to give me an instant quote based on my criteria then I said thank you and went to the next person on my list.

In the end, I did not actually go through an UMB or UML, but I did use the websites as comparison shopping tools. It turned out that the best price package that I found was also offered also by someone that was a personal referral at a small local bank. (More on that later.) However, I am very happy that these options exist. If anyone has used a UMB or UML, I invite you to share your experiences in the comments!

Filed Under: Real Estate
Last updated: April 29, 2014
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Index Powered CD Review: Stock Performance + Bank Safety?

March 19, 2008 By Jonathan Ping 21 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

How would you like to get returns linked to the S&P 500, with no chance of losing a penny? You can with the Index Powered CD, a certificate of deposit being sold by a variety of smaller banks including Brentwood Bank. While the concept has been around for a while, it has been enjoying renewed popularity was people continue watching their 401(k)s shrink. Unfortunately, this is yet another product that uses clever marketing to hide important details from the less vigilant public. Here’s the pitch:

“Enjoy the stock market’s ups and not fret about the downs”!

The Index Powered® CD is a new FDIC insured certificate of deposit tied to Standard & Poor’s 500 Index. The Index Powered® CD was developed with today’s investor in mind and is available exclusively through community institutions. Enjoy the peace of mind of having your principal guaranteed and FDIC insured (up to $100,000.) while offering the potential higher returns of the stock market.

What The Average Person Thinks This Means
If the S&P 500 goes up a lot, I’ll match that return. If the S&P 500 drops – hey! – I’m FDIC insured so I can’t lose my money. Sign me up!! Let’s say this is a 1-year CD and here are the values of the S&P 500 for that year.

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It starts at 100 and ends at 108, so you would expect your CD with a “100% Market Participation Factor” to return… 8%, right? Unfortunately, if you spend the time to read the 17-page disclosure statement, you’ll see that it is not true. To put it bluntly, they manipulate the definitions to their advantage.

What It Really Means!
The problem is that I can say something is “tied to the S&P 500” or “linked to the S&P 500” without actually getting the full return. While they tweak many of the definitions, in particular this sticks out. “Closing Market Value” is defined as “the arithmetic average of the closing values of the S&P 500 Index on the Pricing Dates.” This changes everything. Using the example above again we’ll use the values given:

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By their definition, the “closing market value” was 103.4, and your starting value was 100. (Yes, the 100 is included in the average!) So your actual return would be a piddly 3.4%. Not exactly what you expected, huh?

And you know what? The S&P 500 Index they use doesn’t include dividends! That’s another 2% of annual return you’re missing out on.

There is no free lunch here. Not only do you on average less than half of the actual S&P 500 return if it does well, you also risk getting much less interest than a conventional fixed-rate CD if it does poorly. You cannot eliminate downside risk without giving up upside potential. Finally, this is actually a 51-month CD with heavy early-withdrawal penalties.

(For those that like “efficient” portfolios and optimizing risk/reward, here you are essentially taking on added volatility with no increase in expected average return. See my comment below for more details.)

Get your goals straightened out. Either you (1) have a short-term horizon with low risk tolerance and should get a conventional bank CD with a fixed guaranteed rate, or you (2) have a long-term horizon and are willing to accept the risk and full return of a S&P 500 index fund. Even if you don’t want to be 100% S&P 500 index and want less volatility, using a mixture of stocks and bonds would be the a much more cost-effective way of achieving this.

Again, I’ll avoid the word “scam” because this is technically a legal product, but the best weapon against such products is education. Know what you are buying and tell others!

Filed Under: Banking, Investing
Last updated: January 5, 2016
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Money Merge Accounts Explained, Part 1: The Basics Of Accelerated Mortgage Payoff

March 17, 2008 By Jonathan Ping 29 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Now that I have a mortgage of my own, I finally spent the time to read up on Money Merge Accounts – also known as Mortgage Offset Accounts, Mortgage Acceleration Programs, Equity Accelerators, etc. You may see them sold by various companies like United First Financial or Tardus. All of them offer to make it easy to pay off your 30-year mortgage earlier by 10 or 20 years without changing your spending habits. My goal here is to be educational without being inflammatory and using words like “scam”.

I think the best way to do this is for people to view their own 15-minute sales presentation video, and have me explain afterwards how the numbers really shake out. If you’re short on time, you can drag the little arrow to the middle and pay attention to their walkthrough of the $200,000 accelerated mortgage paydown.

Breaking It Down: Simplified Version

Finished? Okay, here is a simplified version of the situation in the video. Let’s just say you have plain loan with a $200,000 balance being charged 6% simple interest (accrued daily). You can pay the balance down, or borrow more money as you wish. You don’t have any minimum payments for the time being. You earn $5,000 each month, and have $4,000 in expenses. There are two sources of potential savings through this account.

Source #1: Interest Offset
If you simply deposited your entire paycheck into the loan balance, it would reduce the loan balance temporarily to $195,000. As you pay your $4,000 in bills throughout the month, you balance will go back up to $199,000. But your lower balance throughout this time will reduce the amount of interest you’re being charged. This is what they call “interest cancellation” or “interest offset”.

This interest savings will repeat each month. In an ideal situation, it would be like having your loan balance decreased constantly by $4,000. At 6% annual interest, this would be $240 a year, or $20 a month. Actual net savings would most likely be far less if you usually keep your idle cash in an interest-bearing account, but let’s just leave this number to be generous. Again, we are ignoring additional fricton

Source #2: Additional Principal Paydown
But hey, notice that after the first month your loan balance is now only $199,000. This is because you have $1,000 in extra income each month. Let’s assume you wish to keep paying down this loan with it. Besides lowering the amount owed, it also saves you interest this year and all the years after that. That’s $1,000 each month + 6% interest. In one year, you will have paid down the loan by $12,000 and also avoided $387 in interest. That’s a “savings” of $12,387 a year.

My point? Most of the benefit of this program is due to the fact that you are using all of your excess money to pay down your loan, not the interest offsets. This is also confirmed using their own numbers:

Breaking It Down: Using The Provided Example

In the marketing video, by using their special optimizing algorithms and juggling money between their Home Equity Line of Credit and the $200,000 mortgage, they claim to have shortened a 30-year fixed mortgage so that it can be completely paid off in 10.1 years.

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However, this result can be matched almost exactly by simply using this Mortgage Payoff calculator. Using the inputs of a new 30-year mortgage of $200,000 at a rate of 6%. Now let’s put that $1,000 as an additional monthly payment on top of the required $1,199. Again, you’ll see that your mortgage is shortened by 19 years and 10.5 months – the same as having it paid off in… 10.1 years! Virtually all of the mortgage acceleration is explained by paying extra towards your mortgage.

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One of the first things you learn about in investing is the power of having your money earn compound interest. Well, holding a mortgage is like paying compound interest to the banks. A $200,000 mortgage for 30 years at 6% ends up being $431,677 in total payments. On the flip side, paying a seemingly small additional amount of money per month towards your mortgage can shorten your loan drastically. Bookmark the calculator above and simply type in your own remaining mortgage balance. You’ll see that even an extra $50 per month would shave off 3 years from the example 30-year mortgage!

Conclusions So Far
Before even considering these programs, you have to ask yourself if you really do want to pay off your home early. That is a separate argument, and there are several arguments against it.

If you do decide to do this, I hope that I’ve illustrated (as many others have also discovered) that if you strip away all of the marketing distractions, the actual monetary benefit of this program is probably around 1% interest offset and 99% old-fashioned mortgage principal pre-payment. Simply keeping your idle cash in a high-yield bank account, and putting the cash you have left over towards your mortgage principal each month, will yield virtually the same results. All of the optimizing software in the world won’t change this fact by any significant amount.

What this software will also provide is give directions for payment each month, as well as continually update your projected payoff date. Is this worth $3,500? Definitely not for me, but I’ll try to show next why it’s also not worth it for most people. Meanwhile, consider this: Putting $3,500 towards the $200k mortgage – instead of buying this software – would shave over a 1.3 years off the loan length and save over $16,000 in potential interest all by itself.

Additional Resources

Filed Under: Real Estate
Last updated: February 9, 2017
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Bear Stearns Meltdown Timeline

March 17, 2008 By Jonathan Ping 37 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

I usually don’t pay attention to short-term market moves, but I just can’t take my eyes off of this Bear Stearns train wreck! The recent timeline is almost amusing (assuming you don’t hold BSC shares…):

January 12th, 2007
Share price was $171.51.

March 10th, 2008 – Monday
Closed at $62.30 per share. From Bear Stearns CEO via Bloomberg:

“Bear Stearns’s balance sheet, liquidity and capital remain strong,” Chief Executive Officer Alan Schwartz said in the company’s statement. Alan Greenberg, the former Bear Stearns chief executive officer and current board member, told CNBC that the liquidity rumors were “totally ridiculous.”

March 11th, 2008 – Tuesday
From Jim Cramer via CNBC’s Mad Money:

Dear Jim: Should I be worried about Bear Stearns in terms of liquidity and get my money out of there? -Peter

Cramer says: “No! No! No! Bear Stearns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear.”

March 14th, 2008 – Friday
Closes at $30 per share. Federal Reserve gives emergency loan to Bear Stearns. CEO Schwartz clarifies earlier statement:

“Our liquidity position in the last 24 hours had significantly deteriorated. We took this important step to restore confidence in us in the marketplace, strengthen our liquidity and allow us to continue normal operations.”

March 16th, 2008 – Sunday
JP Morgan agrees to acquire Bear Stearns via a share exchange for the equivalent of $2 per share. The money for this is provided by the Federal Reserve Bank, which agreed to cover any potential losses if the loan defaults. Huh? How come I don’t get no-lose deals like this?

Now What?
Will this help contribute to a full 1% drop in the Fed Funds rate on Tuesday as is expected by the futures market? If so, it may be a good time to lock in some bank CD rates today. As for me, I’m going to have to re-read all those articles on why timing the market is bad. 😉

Filed Under: Investing
Last updated: January 5, 2016
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Should I Buy Mortgage Protection Life Insurance?

March 16, 2008 By Jonathan Ping 41 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

You guys were right. Less than a month since we closed on our mortgage loan, we are already getting bombarded with letters offering “mortgage life insurance”. The official-looking letters seem like they are from your lender, but are really just another piece of junk mail.

The pitch is pretty simple – it will pay off your entire mortgage in the event of your death. You don’t want your family to lose their home, do you? *sniff* *sniff* If I do it soon, I don’t even have to submit to a medical exam. (This is not the same as Private Mortgage Insurance or PMI, which is to protect the lender when you have a small downpayment.) The problem is that it’s usually a better idea to simply buy a plain term life insurance policy with a comparable or greater cash payout. Here’s why:

Term Life Insurance Offers More Flexibility
So let’s see, if I buy mortgage protection insurance and die then my loan is paid off. What about the rest of the monthly bills? Childcare? The house isn’t everything. Wouldn’t you rather leave your family a lump sum of cash to do whatever you want with, rather than have a paid-off home with all of the equity stuck inside? They could even buy an annuity to replicate your income.

Mortgage Life Insurance Has A Shrinking Payout
Remember, this insurance only covers the mortgage. As the years pass, you keep paying premiums, but your loan balance keeps on shrinking! After 10 or 20 years, your benefit will be greatly reduced. Compare this with most term life insurance policies which offer a fixed payout.

Oh, and don’t be fooled by a “return of premium” (ROP) feature. Sure, they’ll refund 100% of your premiums at the end of the term. Not only does this cost more than non-ROP insurance, but that’s ignoring the fact that in the meantime they’ve been investing your premiums and making lots of money off of it (which you could have been doing instead). And if you miss just one premium payment you’ll be disqualified.

Term Life Insurance Is Probably Cheaper
Insurance is all about statistics. If the policy requires “no medical exam”, then it’s going to be more expensive in order to cover everyone. If you don’t smoke and are in average or above-average health, then you should simply apply for insurance that does require a medical exam. Now, if you are in poor health, then this might be an opportunity to get some insurance that otherwise might not be available to you. But remember that there are also a few no-medical-exam term life insurance companies out there.

Mortgage Protection Life Insurance Is Hugely Profitable
In addition, simply since this product is marketed by fear (remember your homeless family!) and primarily through unsolicited mailings, it has a higher profit margin and thus higher cost than regular term life insurance. This is supported by this InsWeb article that states:

The National Association of Insurance Commissioners (NAIC) says that mortgage insurance lenders pay out only about 40 cents in benefits for every dollar consumers spend buying that type of policy, compared with 90 cents on the dollar paid out to consumers who hold regular term life policies.

60% profit vs. 10% profit! I wouldn’t even bother myself, but if you must, simply comparing quotes with an insurance comparison website like SelectQuote will provide you an easy answer as to which is a better deal.

Filed Under: Insurance, Real Estate
Last updated: February 9, 2017
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Easy Money: Get Paid $115 To Try These Financial Services

March 15, 2008 By Jonathan Ping 10 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

I can’t stop the stock market from tumbling any further, but here’s a quick roundup of promotions by companies willing to pay you to try out their services. None of these listed require even a credit check. Additional information can be found through the links provided.

  • LendingClub $25 Bonus. Just sign up as a peer-to-peer lender and you’ll get $25 in your account, just link your bank account. If you deposit $1,000 you’ll get $50. More details here.
  • RevolutionMoneyExchange $25 Bonus. Also no initial deposit required to try this money-transfer service. More details here.
  • TextPayMe $5 Bonus. No deposit required. You can pay people via text message with this service. More details here.
  • eBates $10 Bonus. eBates offers rebates on online store purchases. After your first purchase of any amount, you’ll get a $10 bonus. Or you can simply sign-up for a free trial of Netflix through eBates and get another $18. Just remember to cancel in time. More details here.
  • Prosper $25 Bonus. Also a peer-to-peer lender. You’ll need to make a loan of $50 to receive your $25. More details here.
  • Capital One 360 $25 Bonus. One of the earliest online-only savings accounts, Capital One 360 will pay you $25 immediately if your initial deposit is at least $250.

I have gotten all of the bonuses above successfully except for the Prosper one, as I had signed up before the promotion started. I have also gotten several $100 bonuses from these credit cards, although applying will require a credit check.

Filed Under: Deals & Offers
Last updated: March 14, 2014
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

A Rough Start For New Investors In 2008

March 14, 2008 By Jonathan Ping 49 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

I received another reader e-mail whose question was very similar to this worried young investor’s question from back in November. Essentially they still wanted to know my opinion in this bleak market and if there is something they should do. I can’t blame them for asking. Although I was in the buy-and-hold camp, here’s the chart for the Vanguard 2050 Retirement Fund (VFIFX) from November 2007 until now:

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In addition to my suggestions in that post, I also wanted to add that I can empathize with their situation. My very first Roth IRA was only partially funded with $1,000 because that’s all the money I could spare at the time. I then proceeded to buy shares of Janus Mercury, recommended by various publications and rated 5 out of 5 stars by Morningstar at the time. How could I lose? This was around 2001-2002. It tanked. Although I didn’t sell that year mainly because I didn’t know what else to buy, the next year I was certainly not interested in making any more IRA contributions!

Looking back, I would say starting out involves a good dose of luck. Let’s say 60% of new investors are up during their first year. For these lucky folks, they have a bit of “house money” to cushion any future losses. They have a positive vibe, and are more likely to keep their portfolios constant and make a habit of contributing regularly.

But what about the other theoretical 40% of new investors? They start losing money in their very first year. The media is now showing nonstop stories of foreclosures, rising inflation, weak dollars, poor job reports. Beginning investors are not used these drops. In their eyes, it took them months if not years to save up enough money in a nice, safe bank account before finally opening a Roth IRA. Then in a few months nearly $1,000 (20%) of it might have already disappeared! Worst case, they might be turned off from stocks for years. I’m no expert, so I can only reiterate the importance of time horizon when investing.

I’d like to hear how other people remember their very first year investing. Was it a good year for you? Bad? How did you react?

Filed Under: Investing
Last updated: March 14, 2008
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Test Driving The Financial Life You Want

March 13, 2008 By Jonathan Ping 40 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

Now that we have a fixed monthly mortgage payment for the foreseeable future, we are looking ahead to our true mid-term goal of living on one income. Specifically, we’d like to live on two half-incomes when we have children. We live in one of the most expensive areas in the country. Can we do it?

Both of our incomes are somewhat comparable, so our plan is to actually pretend that only one of us is working, deposit that person’s paycheck into a checking account, and work only from that checking account. The mortgage note, utilities, food, gas, all expenses will be deducted from that account. A reasonable percentage (15%? 20%?) for retirement will still be taken out. I have no idea what a child will cost, but maybe we’ll take out an extra $500 a month for food and diapers as well? The second person’s income will still be dealt with, but just separately.

This way, we will get as close as we can to simulating living on one income. If the checking account starts to shrink too fast, we’ll have to think of ways to cut expenses further. I think this is an interesting idea that could be applied to anyone who wants to stretch into a new financial goal. You may think you can do it, but failure might be costly.

  1. Buying a new home. Can you afford a mortgage payment that is significantly higher than your rent? You should be sure, otherwise you might be joining the million other people in foreclosure.
  2. Kickstarting your retirement contributions. Maybe you’re afraid of putting too much in a 401(k) or IRA and not being able to take it out. Why not just use savings account and stick your imagined contributions in there for a while? That way you won’t have to deal with penalties.
  3. Increasing your debt payments. Some people are afraid to pay off too much debt in case they need the money for later. An emergency fund would help solve this, but also the “pretend” debt account might be a good temporary solution.
  4. Going back to school, switching careers, etc. Again basically the same idea – how will you react to living on less income?
Filed Under: Family, Frugal Living, Retirement
Last updated: March 13, 2008
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

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Two Free $400 Airline Tickets with $25,000 Deposit into Citibank Savings Account

March 13, 2008 By Jonathan Ping 38 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

I just found a pretty good offer in one of my Citibank credit card statements. (I still get paper bills for everything, it’s my longtime system for paying them on time.)

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If I open up a new Citibank Ultimate Savings account + Checking account with at least $25,000 by 4/30 and complete a direct deposit for 3 consecutive months, I can get 40,000 ThankYou Points which can be converted into two roundtrip airlines tickets worth up to $400 each. Here is a scan of the offer. Offer code is CEJT. However, note the very first line states that “this offer is only available to individuals to whom this communication is addressed”, so please check your statements and save it to avoid hassles later. I would think most others would get it as well, since I am probably one of Citibank’s less-profitable customers and I got it. 😉

The Ultimate Savings account pays 3.25% APY if you do two online billpays per month, 2.51% APY otherwise. The attached checking account has no monthly fee if you connect it to the Ultimate Savings account. This seems like a pretty good deal because the interest paid is competitive with other online savings accounts, and I can get up to $800 worth of airplane tickets on top of that (worth at least another 2% APY). Of course, you’ll need to have $25,000 to commit. Ironically, much of the $25,000 I’m going to put into this account is Citibank’s own money that they let me borrow at 0% APR!

Update: I found a version of the 40,000 point offer online. Offer code CSZ2. Two important differences: (1) accounts must be opened by 3/31/08 and (2) it is valid for existing Ultimate Savings account if you add in another $25k.

Filed Under: Banking, Deals & Offers
Last updated: October 27, 2011
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Should I Buy Flood Insurance?

March 12, 2008 By Jonathan Ping 26 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

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When we bought our house, the lender said we weren’t in a flood zone so we didn’t need to buy flood insurance on top of our homeowner’s insurance. I figured if the bank isn’t worried about it, then I shouldn’t be either. Apparently this might not be the best idea.

Virtually every home is in a flood zone
Unless you live on the top of a mountain, just about any area is susceptible to flooding. Heavy rains can make instant rivers where there wasn’t even a trickle before. All it takes is for a big storm to come after the ground is already saturated. Or you could simply ask some of the people who experienced Hurricane Katrina. Dams and levees fail. Just a few inches of water can cost tens of thousands of dollars worth of damage. In fact, 25% of flood claims come from low and moderate risk areas (areas not required to have insurance by lenders). Check out your local flood map here.

Where do I buy flood insurance?
Flood damage is not covered under homeowner insurance policies. You must buy it separately through the National Flood Insurance Program (NFIP), which is run and backed by the US government. However, nearly everyone is eligible to buy flood insurance regardless of risk level (although the premiums will vary).

The policies are available through private insurance companies and agents. You can find agents here for a free quote. Some insurance companies hint that they can offer discounted quotes, but this is not true. The price should be the same no matter who you go through. I actually tested this by asking 5 different agents both local and nationwide for quotes, and they were all exactly the same once adjusted for the same coverage and deductible. Therefore, I would simply get a quote from the same insurer I have for homeowner’s insurance.

How Much Will It Cost?
Chances are if your lender didn’t make you buy it for your mortgage, then your premiums won’t be too bad. You can estimate your flood risk and premium here. Remember, you have a few choices: Your building coverage amount (up to $250,000), your contents coverage amount (up to $100,000), and the deductibles for each (from $500 to $50,000). If you are in a moderate-to-low risk area, you might get coverage for $200-$500 per year.

With a few exceptions, there is a 30-day wait before the policy takes effect, so don’t be thinking you can just buy it at the last minute. Even if you aren’t a homeowner, flood insurance is available to renters who want to cover their contents.

So, it would seem that almost all homeowners should at least consider getting flood insurance even they are not required to. It can’t hurt to get a quote and research your flood exposure.

Filed Under: Insurance
Last updated: August 9, 2018
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

Trying To Eat Out Less: Ideas On Reducing My Grocery Bill

March 11, 2008 By Jonathan Ping 66 Comments
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone.

thumbnail credit: http://www.jonco48.com/blog/grocery_bag.jpgLast month one of our credit card statements spanned two pages because we had eaten out so often. Not only is it more expensive, I’m pretty sure it’s less healthy. So now we’re trying to limit ourselves to 2-3 times a week (minus the cafeteria at work), and making one of our outings to a new restaurant that we haven’t tried before.

This means more grocery shopping. But did you know that grocery food prices jumped 5.3% in 2007? Milk, eggs, and bread all cost from 10-30% more than last year. This year looks to be even worse, especially with rising oil prices making transportation more expensive. In last weekend’s WSJ Sunday edition, there was an article titled Savvy Grocery Shopping that had some good money-saving tips. Here are a few of them along with some others I’ve also picked up elsewhere.

Stockpile and Hoard
Grocery stores constantly rotate the stuff that they have on sale, so that at any one time there is something new to attract you into their store. Then, while you’re already there, they expect you to buy other things at full price. The key is to know when something is at a great price, and then stockpile staples at that price. That way all your pasta, canned veggies, soups, broths, sugar, and all non-perishables are all bought 20-50% off retail.

Keep Track of Prices
The problem: How do you know what is a good price? I forget all the time. Some people keep what is called a “price book”, where you track the price of your commonly bought items so you can start to see the cycles and pricing patterns. There is even a website called TheGroceryGame that will track prices for you and let you know when to buy – for $10 every 8 weeks.

I’ve also noticed that you can also start to learn when they mark down meat, usually a day or so before the legal sell-by date. The meat is still good, I just stick it in the freezer right away until I need it.

Be a Coupon Ninja
There is an entire subculture of “couponers” out there that I call “coupon ninjas”. They find good coupons, then get 20 duplicates of them, go to a store that doubles them (instead of 25 cents off you’d get 50 cents off) and then stockpile like crazy. I’ve seen scans of grocery receipts that show $150 of food bought for $23.47. Sometimes they actually get negative! While I admire their drive, I just stink at using coupons. I’ll clip them, but I always forget to bring them along, or I wait until they are expired. My new store doesn’t double coupons anymore, so the incentive is also less. TheGroceryGame also helps point out good deals.

Buy Frozen and/or Generic
Many times frozen fruits and vegetables are even more nutritious or tasty when you buy them frozen, because they can wait longer before picking them. Also, there’s always store-brand or generics. The article shares that the manufacturer of Birds’ Eye veggies also makes store-label veggies. I love my Safeway frozen mixed vegetables! 🙂 Did you know that produce even has brands now? I didn’t even notice. I like to buy generic on many things, but not all of them.

Filed Under: Budgeting, Frugal Living
Last updated: March 12, 2008
My Money Blog has partnered with CardRatings and may receive a commission from card issuers. Some or all of the card offers that appear on this site are from advertisers and may impact how and where card products appear on the site. MyMoneyBlog.com does not include all card companies or all available card offers. All opinions expressed are the author’s alone, and has not been provided nor approved by any of the companies mentioned.

MyMoneyBlog.com is also a member of the Amazon Associate Program, and if you click through to Amazon and make a purchase, I may earn a small commission. Thank you for your support.

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