Archives for September 2013

Vanguard STAR Fund vs. Vanguard Balanced Index Fund

I previously wrote about how the Vanguard Balanced Index Fund was a good example of the benefits of holding both stocks and bonds in your portfolio. Now, I’d like to extend this and compare the Vanguard Balanced Index Fund (VBINX) with another veteran balanced fund, the Vanguard STAR Fund (VGSTX). They are similar yet different:

Vanguard STAR Fund
Vanguard Balanced Index Fund
Overall Asset Allocation 60% Stocks
40% Bonds
60% Stocks
40% Bonds
Expense Ratio 0.34% 0.24%
(0.10% Admiral shares)
Geographic Exposure Both US and international stocks, US bonds only US stocks only
US bonds only
Investment Style Actively-managed,
11 underlying funds
cap-weighted index
10-year annualized returns (as of 6/30/2013) 7.22% 6.86%
(6.98% Admiral shares)

Here’s a chart of how $10,000 invested 10 years ago would have done. With the Vanguard STAR fund, you’d have $20,653 today. With the Vanguard Balanced Index fund, you’d have $19,749. (This is with Investor shares, which have a lower minimum investment than Admiral shares. The minimum used to a lot higher, but now it is $10,000 for Admiral shares.)

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My observations:

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How to Estimate Your Obamacare Health Insurance Premiums and Tax Credits

Open enrollment for “Obamacare” will start October 1, 2013 for coverage that will start January 1, 2014. Find your state’s exchange website at Plans will be broken down into four tiers: Bronze, Gold, Silver, and Platinum. People 30 and under will also have a catastrophic coverage-only option. While the cost of these plans will not be based on any pre-existing conditions, they will depend on factors like age, tobacco use, and geographic location.

Based on approved insurance plans in 48 states, the average individual premium will be $328 monthly for the cheapest Silver option and $249 for the cheapest Bronze option. This is before any tax credits. Subsidies will be provided to households with annual income up to 400% of the federal poverty level (FPL) (~$88,000 for a family of four). Individuals and families earning less than 250% of FPL (~$27,000 for an individual and ~$55,000 for a family of four) are also eligible for additional cost-sharing credits.

You can get a rough estimate of your tax credits by using this Kaiser Family Foundation calculator. Once 10/1 rolls around, check the official exchange website instead. Any subsidies are paid directly to the insurer, and you only have to pay the difference.

The Department of Health and Human Services released a report with premium estimates for the 36 states with federally-supported exchanges (data as of 9/18/13).

For example, in Texas, an average 27-year-old with income of $25,000 could pay $145 per month for the second lowest cost silver plan, $133 for the lowest cost silver plan, and $83 for the lowest cost bronze plan after tax credits. For a family of four in Texas with income of $50,000, they could pay $282 per month for the second lowest cost silver plan, $239 for the lowest silver plan, and $57 per month for the lowest bronze plan after tax credits.

HuffPost condenses the tables into a nice map:

Money Magazine – Best Credit Cards List 2013

The October 2013 issue of Money Magazine featured an article “Best Credit Cards” that (unsurprisingly) caught my eye. Here’s a quick list of their top picks for various categories. I’ve written about most of them, and in those cases I’m linking to that post which provides more details. Otherwise, I’m linking directly to the card page and including a few highlights about the card.

Best for Balance Transfers (Low, long introductory APR)

  • Chase Slate Card. 0% on purchases and balance transfers for 15 months. No balance transfer fee if you transfer within the first 2 months.

Best for Regular Balance Carriers (Low ongoing APR)

Best Tiered Rewards Cards (Tie)

Best Flat and Simple Rewards Cards (Tie)


Best Travel Rewards Credit Card

Best Card for Using Overseas

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Morningstar Target Date Retirement Fund Comparisons & Trends 2013

Target date funds (TDFs) get their name because they adjust their portfolio holdings automatically over time based on a given target retirement date. In general, this means shifting from mostly stocks to less stocks over time (known as the “glide path”). TDFs continue to grow in popularity, especially within employer-based plans like 401k’s and 403b’s.

Morningstar Fund Research recently released its 2013 industry survey, Target-Date Series Research Paper [pdf]. While it feels targeted at financial professionals, there are some good nuggets for us individual investors looking to decide where to invest. For example, we have to be careful as look how widely the glide path can very between different brands of target funds:

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While the most popular TDF providers have much more similar glide paths, they still differ in important ways (especially after retirement age).

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Other highlights from the paper:

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Tips on Reducing Your Food Waste Impact

I hate wasting food, but it still happens to me with fresh fruits and vegetables. I will eat leftovers even if it means eating little bits of four different meals at once. Globally, 1/3rd of the food supply is wasted and uneaten, with the rate even higher at 40% in the US. This is bad all over – financially, hunger-wise, and environmentally. At lot of this involves farming, food processing, supermarkets, and restaurants – but it includes us as well. Here are some good tips about how to reduce our food waste by not throwing it away unless necessary.

Marianne Gravely of the USDA Blog writes about double-checking before tossing food from the freezer or pantry:

Food poisoning bacteria does not grow in the freezer, so no matter how long a food is frozen, it is safe to eat. Foods that have been in the freezer for months may be dry, or may not taste as good, but they will be safe to eat. So if you find a package of ground beef that has been in the freezer more than a few months, don’t throw it out. Use it to make chili or tacos. The seasonings and additional ingredients can make up for loss of flavor.

What about the foods in your pantry? Most shelf-stable foods are safe indefinitely. In fact, canned goods will last for years, as long as the can itself is in good condition (no rust, dents, or swelling). Packaged foods (cereal, pasta, cookies) will be safe past the ‘best by’ date, although they may eventually become stale or develop an off flavor. You’ll know when you open the package if the food has lost quality. Many dates on foods refer to quality, not safety.

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United MileagePlus Dining: 3,000 Bonus Miles

Many of the major airlines partner with Rewards Network (formerly iDine). You give them your credit card, and when you pay with that card at participating restaurants (which I believe have to pay for inclusion) then you get a certain number of miles per dollar spent. The good news is that you don’t have to use any coupons, show an app, or do anything that indicates you’re getting a discount. I don’t let this determine where I eat, but a few places I already eat at do participate so it is basically free miles.

Earning a few miles this way will also reset your United miles expiration date, which is 18 months from most recent activity. So it’s good to have it set up ahead of time, even with a seldom-used card.

Right now, the United MileagePlus Dining program is running a special promotion where can you can get 1,500 United miles if you join by 10/31 and spend $40+ at a participating restaurant, bar or club within 40 days of joining, plus write a quick review. If you do this twice, you’ll get the max possible 3,000 bonus United miles. Again thanks for reader Jessica for the tip.

AAdvantage eShopping: 2,000 Bonus American Airlines Miles

AAdvantage eShopping Mall is like other cashback shopping portals (eBates, TopCashBack, etc), except that they give you American miles as a reward. If you visit this promo link, it shows an offer that will get you 2,000 miles after you spend at least $35 at any store.

Now through 9/30/13 11:59 PM EST receive an additional one-time bonus of 2,000 miles when you shop through this email and spend a cumulative amount of $35 or more online in the AAdvantage eShoppingSM mall. […] Please allow 8-10 weeks from end of promotional period for bonus miles to post to your account.

Earning miles this way will also reset your miles expiration date, which is 18 months from most recent activity. Via reader Jessica, who also points out that Peapod is an eligible store, so if you get grocery delivery from there that’s an easy way to get 2,000 points.

OptionsHouse Raising Commission Rate From $3.95

Online stock broker OptionsHouse sent me the following e-mail today:

On October 1, 2013, OptionsHouse is changing our stock commissions rate. However, we wanted to notify you that this change will not affect any of your current accounts with us. In addition, if you choose to open and fund any additional accounts in the future, you will continue to receive your current stock commission rate. For full details related to changes to our stock commissions, please visit our rules page.

Basically, their commission on stock trades is going up from $3.95 to $4.75 for new customers only. Existing customers will stay at $3.95. They’ve done this before, as I’m actually grandfathered in at $2.95 a trade (opened back in 2010), which I think is a good way to treat existing customers. Options pricing remains the same, starting at $5 for up to 5 contracts. Under $5 a trade with no minimum balance requirements is still very competitive.

There is still a small window if you want to get yourself grandfathered in at $3.95 a trade. You must complete your application prior to 10/1/2013 and fund your account prior to 1/1/2014. There are a variety of promotions available for new customers. You can only get one of these, so pick carefully:

US Income, Poverty, and Health Insurance Stats 1978-2012

The U.S. Census Bureau just released its 2012 annual report on Income, Poverty, and Health Insurance Coverage in the United States. A good recap of the data can be found via the charts in this slide presentation [pdf]. Below is my even-briefer summary.

The US median household income (inflation-adjusted) was roughly $51,000 in 2012. This number has decreased or remained stagnant each year since 2007, and is actually about the same as in 1989.

The 2012 official poverty rate was 15.0 percent, and roughly the same amount of the population was without health insurance coverage, 15.4%.

I think this report provides some perspective about the realities of many families today. As a household that earns more than average, this reminds us that it is quite possible to spend less, as many others already do out of necessity. I am not one of those money gurus that tells everyone that they can get rich and retire early; it will always be very difficult for most people. I want to take advantage of my current situation, save money and use it to create future income and financial freedom, and then hopefully that will enable me to help more people down the road.

Do You Spend More at Restaurants When Splitting The Bill?

There always seems to be a new startup involving sending money person-to-person, with the most common demo showing how easy it is to split a restaurant bill with your friends. Is this really a huge problem? Are there many groups of friends where one person orders lobster and four drinks without offering to pay their fair share? Yes it can get weird once in a while, but I would think things would self-regulate quickly. (Okay, maybe not the $47,000 food bill for 6 people on the right!) Also, it’s not very hard to ask for split checks with modern POS cash registers… maybe just tip a bit more for the inconvenience.

The economic argument is that if you know you’ll be splitting the bill evenly, you are incentivized to order more. In a group of six, ordering a $6 cocktail only costs you $1 more. A $12 appetizer is only $2. But you’re also subsidizing other people, so social dynamics come into play. If someone believes others are “freeriding” on them, then they’re more likely to order more, and so on. Do people really spend more when splitting the bill?

According to a study pointed out by Undercover Economist Tim Harford, people just might:

Diners were, at random, offered three different billing rules: split-the-bill, pay-your-share, or on-the-house. They were also asked to order food by writing their choices down, without discussion. This odd request was made less odd by the fact that they were all filling in questionnaires at the time.

Homo economicus immediately emerged: diners ordered, on average, 37 shekels worth of food when paying their own way, 51 shekels when splitting the bill, and 82 shekels when the experimenter picked up the tab for everyone. (A small follow-up experiment hinted that people splitting the bill six ways behave similarly to those paying one-sixth of their own bill.)

The study involved bringing strangers together in an actual restaurant ordering real food, so it’s close but not quite the same as eating with friends. Even with friends, I still tend to think as a group the total bill would be a bit higher, like maybe one more person will order a beer if everyone else is having one.

Cheapest iPhone Plan with Unlimited Data? Virgin Mobile $30 a Month

Price drop! You can now buy an 8GB iPhone 4 for only $199.99 from Virgin Mobile. Even after learning about the new iPhone 5S, in my opinion the iPhone 4 is still not that outdated and still works fine with nearly every app out there.

Their Beyond Talk plans at just $30 a month will get you 300 voice minutes, unlimited text messages, and unlimited data (throttled after 2.5 GB each month). To get the $5 discount, you must sign up for automatic monthly payment with a credit card, debit card or PayPal account. No contract.

Virgin Mobile is a Sprint MVNO which means your coverage is coming from Sprint towers. Compared to a regular Sprint plan, paying $200 + $30 a month can save you more than $500 dollars over a 2-year contract when compared with paying even $0 for the phone and $60+ a month for service.

For $50 a month, you can get unlimited minutes. Here are all the plans:

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Free Subscription To Businessweek Magazine

Here’s a free 2-year subscription to Bloomberg BusinessWeek magazine. Not a trial, no credit card required. My suspicion is that magazines allow these free deals to boost their circulation numbers, which in turn increases the amount they can charge for advertising.

I’ve been a regular reader of this magazine since getting it for free in 2010, and I think their new format is a good mix of short articles and a few in-depth features. You can also read it on your iPad/iPhone with a subscription, although most of the articles are free online. It is a weekly, so if you don’t read it as it arrives the issues do stack up and will waste a lot of paper.