Archives for May 2011

Thinking Of Switching To A Smaller Car To Save On Gas?

With the arrival of summer and gas prices at around $4 a gallon, the water cooler conversation has turned again to fuel efficiency. One important thing to remember is that the MPG number is not directly proportional to how much money you’re paying for gas. The chart below shows the annual cost of gas varies with the miles-per-gallon rating. Assumptions are 12,000 miles driven a year at $4/gallon.

Going from a medium-sized SUV that gets 20 mpg (Ford Explorer, Nissan Xterra) to a compact car that gets 30 mpg (Honda Civic, Ford Focus) will save you $800 a year. That is more money than going from the compact car to a hybrid like a Toyota Prius that gets 50 mpg combined, which would save you $640 a year.

Now, if you are driving a full-size truck that gets 15 mpg, just going from 15 to 20 mpg would also save you $800 a year. So we see that going from 15 to 20, 20 to 30, and 30 to 60 mpg are each about the same size “step” in terms of annual savings. For heavy drivers, each such step would be nearly $1,000 a year in gas, and that’s assuming gas prices don’t keep increasing! Look up your car’s numbers at

So while making the jump to 50 mpg would still save you the most gas, the Prius still costs more money than a similarly-sized compact car like a Honda Fit. One piece of good news I read recently was from Scott Burns at AssetBuilder that his Prius batteries have lasted 100,000 miles and 8 years with no need for replacement. If you get good at buying and selling used cars on Craigslist, you could conceivably make the swap to a more fuel-efficient car relatively painlessly.

Infographic: How We’re Preparing For Retirement

The Onion shares their scientific poll results for the ever-important retirement question:

Some quick online research reveals that what I thought was just another funny option is all too real – lotto tickets. According to a 1999 survey by the Consumer Federation of America, 40% of Americans with incomes between $25,000 and $35,000 thought their best shot at paying for their retirement was winning the lottery. Along the same lines, a recent Consumerist article has low-income households spending a whopping 9% of their annual income on lottery tickets.

I wonder what would happen if on a certain number of the losing scratch-off cards, scratching off the latex ink won you free personal finance and budget management services.

In most states that have them, lotteries are justified because the revenues goes towards education. But what I’ve seen happen is every $1 that comes from the lottery just means the government can cut $1 of funding from somewhere else. The quality of education stays the same, if not worse. According to this article, a study found that states without lotteries maintained or increased their education spending more than states with lotteries.

Hmm… I got sidetracked on this “fun” post and landed in sad town. Doh!

Reader Poll: Do You Still Have a Landline Telephone?

A recent government study found that over 25% of Americans now rely solely on a cellular phone for calls. In some states, over a third of people were wireless-only. This is a growing trend, and I wonder if you readers are any different?

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Factors that increased the likelihood of being wireless-only were having a lower-income, being younger, and renting. It’s suggested that being poor means you’re more likely to cut landlines as an extra expense, while being young means you may simply never have had a landline. Finally, both prepaid basic plans and packaged plans offering unlimited minutes have become cheaper and widely available.

One major factor stated for keeping a landline is for reliable emergency usage. Other possible reasons that come to mind are that you make a lot of calls, better clarity, or you wish to minimize radiation exposure. I solve those problems with my significantly cheaper VoIP phone service.

Fidelity App now has BillPay, Funds Transfer, & Remote Check Deposit

Fidelity Investments has just added some handy new features to their Apple iOS and Android OS apps. You can now use their BillPay service, transfer funds between accounts, and deposit checks remotely via camera. Before, you were limited to viewing account holdings and making trades. Competition is good, and I expect all major banks and brokerages to offer these features soon.

Mobile Check Deposit
Basically the same as other apps, you take a picture of the front and back with your smartphone camera. You can deposit only into non-retirement accounts, and the back must be endorsed with the text “For deposit only to Fidelity account #XXXXXX”. The deposit limits vary.

BillPay & Funds Transfer
You can pay bills with your mobile app, either through a regular brokerage account or their mySmart Cash Account (basically their checking account replacement product). Fidelity also allows you to link outside banks to your accounts, so now you can initiate money transfers both within Fidelity and externally on your phone.

American Association of Individual Investors (AAII) Review – The Numbers Behind The Non-Profit

I’ve been getting letters from the American Association of Individual Investors (AAII) for years now, and another one arrived yesterday. Their stated goal is to “assist individuals in becoming effective managers of their own assets through programs of education, information and research.” In big print on the front of the envelope, they declare that they are a 501(c)(3) non-profit “education” organization.

But after reading their pitch about investing in little-known small-cap stocks and their claims of earning 6% a year more than the averages, I just got the feeling that this was another stock tip newsletter. Keep in mind that if someone could beat the market by just 2% a year consistently, they’d be very rich folks.

From previous research on charities, I know that a lot of “non-profits” have top executives making a lot of money. On the extreme end, there are shell charities that are basically really good-paying jobs that hide behind helping veterans or orphans. Of course, there are many situations where an executive can justify their salary, especially if the organization’s administrative and salary costs are a small percentage of donations and most revenue goes directly into the community.

Usually non-profits have to file an IRS Form 990 that is similar to an annual report, and this document is legally required to be open for inspection by the public. Let’s take a look at the 2009 AAII Form 990 from

In 2009, AAII declared revenue of $5.8 million, mostly from annual membership dues and subscriptions to their stock newsletters. That $29 a year adds up! Out of that, the salaries of the employees took up $3.1 million, over 50% of the revenue. The top 5 employees get paid a total of over $1.3 million a year. The top two officers both paid themselves approximately $450,000 each in 2009. Here are the exact numbers from a snippet:

$1.1 million was spent on marketing costs of printing and mailing all those letters, and the organization actually lost $1.6 million for the year. I wish I could start a non-profit that actually didn’t make any profit, but yet still paid me and my buddy both nearly $500k a year!

Finally, let’s take a look at their performance claims. According to the site, AAII appears to use the shady tactic of only releasing performance numbers after they know they beat their desired benchmarks. (If it doesn’t, it’s swept under the rug.) After the Hulbert Financial Digest monitored their true performance based on public, replicable stock picks, the newsletter was found to have subpar returns over the last 8 years. It lagged the Wilshire 5000 index by over 2% a year, and lagged the Vanguard Small Cap Index by over 7% a year.

I know there are some happy AAII members out there. Teaching individuals to invest independently seems like a good idea, although promoting unrealistic returns is sketchy in my book. Mostly, I find the fact that they are using non-profit status to increase their own wealth very irksome. I think AAII should be run as a for-profit business, and then they can charge whatever they want and pay themselves whatever they want. If you are happy with how this non-profit enjoys their tax-exempt status and how they spend most of their revenue on themselves, then by all means keep on sending in your money. I’ll pass.

Crunching The Numbers & Looking Into The Crystal Ball

While catching up on some reading over the weekend, I found two articles that both dealt with large issues that we’ll have to face over the next few decades. Predicting the future is always difficult, but sometimes the numbers can seem very compelling.

Oil & Commodities
Jeremy Grantham is co-founder of GMO, an investment management firm with $107B in assets. That doesn’t mean he necessarily knows the future. But in his April 2011 quarterly letter titled Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over Forever, he does manage to put together a convincing argument that we are using up our natural resources very quickly, and we can’t continue on at this rate. It’s mathematically impossible.

Will we find other energy sources to replace cheap oil? Will technology allow us to do more with less? Probably, but I doubt the transition will be a smooth one. I think learning to be less dependent on natural resources (read: be frugal, efficient, and less wasteful) will even more important financially than it is now.

Medicare & Taxes
Paul Krugman is a Nobel-winning economist with a popular blog at the NY Times. In a recent Op-Ed titled Seniors, Guns and Money, if you strip out all the political stuff, you’ll find this: In the coming years, there will be either significant cuts in Medicare, or tax increases to pay for the rising heath care costs.

One, our population is aging, with more retired seniors being supported by fewer workers. Two, health care costs keeps rising on their own. As he says, “It’s just a matter of arithmetic.” Either the government will raises taxes to pay for all this, or there will be major cuts in benefits. My guess is both.

Chase Sapphire Card 10,000 Points = $100 Cash w/ No Annual Fee

Previously, I posted about the Chase Sapphire Preferred® Card, which is currently offering 40,000 bonus points after you spend $4,000 in purchases within the first 3 months. This is quite a good deal, as 50,000 points can be redeemed for $625 in travel when you redeem through Chase Ultimate Rewards™ (you can buy a more expensive ticket from any website and simply pay the difference). The Preferred card has no annual fee for the first year, but is $95 in future years. See the original post for more details.

If you don’t want to deal having to remember to cancel your card, the regular non-Preferred Chase Sapphire® Card is now offering 10,000 points worth $100 in travel rewards when you redeem through Chase Ultimate Rewards, after you spend $500 in purchases within the first 3 months, and an additional 2,500 bonus points after you add the first authorized user and make a purchase in the first 3 months from account opening. There is no annual fee in the first year or subsequent years. The non-preferred used to give out their bonus with no minimum purchase requirement, so personally I’d rather take the extra $500 travel bonus via the Preferred.

Ideas for reaching the purchase limit without spending more money that you would otherwise include: prepaying any monthly bills like utilities and let the credit go down over time, pay your 6-month auto insurance or home insurance bills via lump sum, buy American Express gift cards that don’t expire and then spend them gradually, purchase gift cards at a discount from places you will shop at eventually through PlasticJungle or similar (Home Depot, Target, etc.), buying $1 coins from the US Mint (you’re basically buying cash), or buying grocery store gift cards (Safeway cards at Safeway). Basically just shift your usual expenses.

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Reminder: Savings Bonds Monthly Purchase Deadline Tips

Here’s a reminder regarding an opportunity to buy savings bonds near the end of May and receive an annualized return of 2.51% over the next 11 months. This would be 1% more than the highest current CD rates, with potential for continued higher interest. See this previous post for more details. The main catch to this opportunity is that you will not be able to sell your savings bonds at all for the next 11 months.

The reason why you want to buy at the end of the month is that savings bonds are labeled by month, and as long you buy anytime in May, it will be stamped with a May 2011 date. Then, on the first day of May 2012, you can redeem for an entire year’s worth of interest. However, you don’t want to miss the deadline, because then your bond will end up an April 2011 bond. The annual purchase limit is currently $5,000 in paper I-bonds and $5,000 in online I-bonds per Social Security Number. For a couple, that’s $20,000 per year.

For electronic bond purchases, Ken of DepositAccounts conducted an experiment as to how late you can wait to buy them on TreasuryDirect. To summarize, in order to avoid this, you should enter your purchase order a minimum of two business days before the last day of the month. For peace of mind, I would pad it 4 business days. You can schedule your purchase ahead of time online (recommended).

For paper bond purchases, you can visit your local bank and ask to buy them. Here are detailed instructions. Not all banks do this, so check ahead of time. The issue date of the savings bond will be the same day that the bank accepts payment. This date will be noted clearly on the application, and the bank should also stamp it to confirm. In this case, if you are familiar with the bank and you have the money available, you could conceivable wait until the last day the bank is open before the end of the month. Again, I’d try a couple days beforehand to be safe.

Yet Another Housing Bubble Video: Hitler the Flipper

We’ve all probably seen enough YouTube videos about the housing crash to last us a lifetime, but this one still made me smile. Hitler as a real estate flipper? It’s embedded below, but here is the direct link for those RSS readers who can’t see it. Via LH on Bogleheads. Over 2 million views!

Apparently, this is a popular meme based on a scene from the movie Downfall about the final days of Hitler.

PayPal Offers Remote Check Deposit on iPhone and Android Devices

PayPal announced today that you can now deposit checks in your PayPal account via photo upload from both Apple iOS [iTunes] and Android OS devices. Just sign the back of the check, take a picture of the front and back, type in the amount, and submit. (If you have a iPod Touch, iPad, or Android tablet with camera, that works too.) You are free to withdraw the funds into your linked bank account. Via MobileCrunch.

This is pretty cool, as it basically allows remote deposit of checks into any bank, not just Chase or USAA. Reading through the Terms & Conditions, you are limited to total deposits of $1,000 per day, and $3000 per month. You’re supposed to keep the check for 15 days to verify that it went through, and then destroy the check.

The only thing to consider is do you trust PayPal? Long-time readers may know that I have an uneasy relationship with PayPal. They’ve frozen my seller accounts before with no evidence and required all my personal information (SSN, credit report, driver’s license, utility bills) to release the money, and they’ve never been known for their stellar customer service. But I still use them when the alternatives are too inconvenient and the dollar amounts are small, because honestly I’m too lazy (and like I said, they already have my info). I simply operate on the principle that they can freeze my account again at any time, so I never leave more than $20 in my account. I’ll definitely try this app out the next time I get a small check to deposit, but only for small deposits that I’d be too lazy to deposit at a branch and it will be withdrawn immediately.

Book Review: Rework by Fried and Hansson of 37Signals

Rework is a book written by the founders of 37Signals, a company that makes online collaboration software like BaseCamp. They also write about running small businesses on their blog Signal vs. Noise. It is readily admitted that this book is a condensed and tightly edited version of topics from their blog. I don’t read their blog regularly, but had heard of it when I came across this book while browsing inside Barnes & Noble.

This is a short book with a casual writing style, complete with about 60 “chapters” that read just like blog posts. Many of the posts chapters make it a point to contradict common “rules” within the entrepreneurial and/or MBA-driven world. Here are few overall ideas that I noted, which the authors support with their own experiences.

  • Don’t learn from your mistakes. Learn from your successes.
  • Don’t make your business big. Small is okay.
  • Don’t do surveys or market research. Make something you would want to use.
  • Don’t wait for perfect to launch. Just make a decision and correct course as needed.
  • Don’t make your product do everything, especially if it means you’ll have to do it half-ass. Make it do important things, well.
  • Don’t hire based on GPAs or degrees. 90% of Fortune 500 CEOs did not come from an Ivy League for undergrad. The most common undergraduate school among them? University of Wisconsin.

I don’t use any of the 37Signals products, but they have their own niche, and they make what seems like good money at it. I believe their target sweet spot is for people who are self-employed or wish to work in a small but passionate small business that has no intentions of hiring 500+ employees or filing for IPO. This book is not for those with Facebook or Twitter-like aspirations, but if you’re trying for something smaller, I would recommend reading this book.

DIY Dining Table from Reclaimed Building Materials – Recycled Basketball Court Flooring

Ever since I stopped moving every year, I’ve wanted to get a big dining table, something that could fit at least 8 people. Finding one big enough at a retail furniture store was difficult, and when I did find it they were really expensive. While working on our house, we discovered home improvement stores that stores that sell reclaimed or recycled building materials. There are many local non-profits that do this, but one national “chain” is the Habitat for Humanity ReStore, which accepts material donations to fund their charitable home-building goals.

I was exploring one of these stores when I came across a 8 ft x 3.5 ft sheet of what look like reclaimed hardwood flooring. Upon closer inspection, it was actually pieces of the flooring from an old high school basketball court. The underlayment was still attached, and it was pretty sturdy. A handmade sign suggested making a table out of it. How cool is that?

The store had already recycled a piece for themselves. After some sanding and adding a border with reclaimed 2x4s, here’s what it looked like:

It cost us $60 plus $20 in reclaimed wood for the border, legs, and apron. Now to borrow some power tools and learn some carpentry…