Archive for February, 2007
Although many of us have thought about starting a small business, significantly less actually take the plunge. So when I read on Dennis’ Young Money Blog back in July that he had opened up his own custom Greek Apparel store, I was intrigued and have been following his adventures on and off since. Fast forward to today, and he’s attending trade shows and just spent over $20,000 on new equipment.
I wanted to learn more about his story, so I asked him for an interview. Here it is, condensed from an instant messenger chat we had:
Can you please give me a quick mini-bio of yourself?
I’m a 23-year old student at the University of Florida studying Marketing and Political Science.
So, when did you feel like you first started getting the entrepreneurial bug?
Actually, I was reading your blog a lot, as well as NevBlog.com. That got me started. I didn’t find any blogs that talked about students who didn’t have an income, so I figured I should start something. But along the way… my blog became an entrepreneurial blog too!
So no newspaper route when you were five or anything like that? 
Nope, my family was poor, so that stuff wasn’t even on our minds.
So how did you come up with the Greek store idea?
I’m in an Asian American fraternity, and I recognized that this portion of the Greek community, along with Hispanic/Latino and multicultural organizations, were growing. When you do a general search for “Greek store”, “Greek apparel”, etc. on Google, most of the sites focused on the National Interfraternity Conference (white fraternities) and Panhellenic Conference (white sororities). So I wanted to target a niche.
Did you have any experience in the clothing area beforehand?
Read the rest of this entry…
Posted in Entrepreneurial | 8 Comments »
Apparently the S&P 500 dropped 3.5% yesterday. Not bad for one day!
Let’s see what I haven’t done yet:
1. I haven’t logged into Vanguard.com, where all my IRAs are.
2. I haven’t logged into Fidelity.com, where my 401(k) is.
3. I haven’t logged into Scottrade, where… oh wait, I don’t have any individual stocks right now.
Why don’t I care? Because not only do I not have any control over the numbers, but there is also nothing I am going to do in response to what I see. I won’t be relieved, nor will I get depressed.
Remember, for every trade there is a buyer and a seller. The buyer thinks he’s getting a good deal. The seller think she’s getting a good deal. Both can’t be right. So now you must ask, how much do you want to bet that you are smarter then the next person? Many of us are competitive people, and it’s hard to admit that you’re average. This pervasive human tendency to overestimate one?s achievements and capabilities in relation to others is sometimes referred to as the Lake Wobegon effect (where all the children are above average).
For example, do you think you are an above-average driver? During one such survey, 80% of respondents rated themselves in the top 30% of all drivers. Hmm…
On top of that, you are going against the headwind of trade commissions, the bid-ask spread, and taxes on generated capital gains.
By essentially investing in every publicly-traded company out there (although not on a perfect market-cap weighted basis), I am able to take a different, non-competitive view of things. The way I see it, every single day millions of people are waking up and going to work in order to create value. They are thinking up new ideas, making better widgets and services, and selling those widgets and services to new people. And then they go to sleep, and people on the other side of the world wake up and do the same thing. It doesn’t matter if they are working for Ford or GM, Intel or AMD, Sirius or XM Radio. As a whole, value will be created using my money, and I sleep well at night.
Posted in Investing | 33 Comments »
I just finished watching my first episode of Deal or No Deal, a new game show on NBC. I personally thought it was amazingly dull, but it did remind me of a good parallel to investing that I read in the book The Coffeehouse Investor (Yes, I know. Who’s the dull one?). If you’ve never seen it, that’s okay, this is a simplified version which I will explain. (You can also play an online version if you’d like.)
Let’s say you have ten open suitcases, each with a different amount of money in them:
Obviously, if you had a choice you’d pick the one with $10,000 in it. But the Banker then closes the suitcases and mixes them all up. Next, he reveals the $8,000 suitcase. You can still choose any of the suitcases to take home. Which one would you pick?
Added: It’s interactive now! Click on a suitcase if you want to gamble.
This is similar to the situation that you are faced with when picking an active vs. passive mutual fund. Over extended periods, approximately 75-85% of actively managed mutual funds fail to match the total market average. Yes, you could pick the $9,000 or $10,000 suitcase, but do you want to take that risk? We should all the take $8,000 happily.
Knowing the $8,000 suitcase is readily available is another analogy to knowing about index funds. Otherwise, you might be walking around with the $6,000 or $7,000 suitcase thinking you got lucky… Remember, even picking the active mutual funds with the best 10-year historical returns doesn’t work! For example, the top 35 mutual funds from 1978 to 1987 cumulatively under-performed the stock market average by 7 percent annually the next ten years (data also taken from The Coffeehouse Investor.)
Posted in Investing | 19 Comments »
Everybody loves hearing success stories. I certainly do. And I know that many of you readers have some great tales to share…
- Did you start your own business?
- Did you crawl out from under a mountain of personal debt?
- Did you overcome hurdles (illness, tragedy, divorce…) to reach financial stability?
- Did you switch careers?
If so, I would like to interview you either online or via telephone. I’ll ask questions like - What did you start with? Who/What inspired the idea? How did you do it? What outside help did you have? What tools, software, or services did you use? What was the most helpful advice you received? What was the most unhelpful advice you received? Any regrets?
Alternatively, you can submit something to me in writing. Please include as much detail as possible. Either way, toot your own horn and contact me! I can keep it completely anonymous if you’d like.
Posted in General | 2 Comments »
Besides shopping at Whole Foods or Trader Joes, it seems like one of the major hobbies of young professionals in cities like Los Angeles or San Francisco is to complain that we can’t afford a house given our mere $50,000-$100,000 salary. It’s true. Housing is pricey. But every time I hear this lament, I think of the e-mail I got from a single woman who made it happen on $75,000 per year in the Bay Area. How did she do it?
She saved for a few years, and made it a priority. Sure, rent is high, but there is still a lot of fat in a $75,000 salary. By far, the easiest way to save money is to get a roommate. Your rent goes down by at least a third, utilities are cut in half, and if you get along you can save a lot in food. Even if you live by yourself, I would say that saving $10,000 a year should be possible, even on top of saving 10% towards retirement. If you think I’m insane, I would definitely take a look at your definitions of “needs” and “wants”.
She got realistic. If you grew up in the suburbs, you’ll may feel like living in anything but a 2,000 square foot ranch home is just not acceptable for a hard-working educated person like yourself. Nope. Homes like that cost $1 million here. First step, downgrade your size requirements. Her sights moved down to townhouses, and then to condos or even studios.
She got even more realistic. Still too pricey in the trendy areas. Time to give up? No, time to downgrade your location requirements. The East Bay is filled with workers that commute to either to San Francisco or San Jose every morning. She finally found a nice $300,000 1-Bedroom condo in the East Bay for which she paid $30,000 down. Since it was near public transportation, her total commute is a reasonable (for the area) 45 minutes door-to-door.
She’s got almost $100,000 in equity now. Fast forward to today, and her $300,000 condo is worth more than $350,000. Add in her down payment and the small bit of her mortgage payments that goes toward principal, and she’s got a good chunk of equity built up. If her career (and boyfriend) keeps moving in the right direction, her next property just might be that 2,000 square foot ranch home in the suburbs…
It won’t happen overnight, but from her I know that the now seemingly bizarre idea of saving for 3-5 years for a down payment really does work. There is light at the end of the tunnel. At least these days people are less likely to think “dude, I have to buy now or I’ll be forever priced out of the market”. You can save without pressure under the guise of waiting the market out… with me! 
Posted in Frugal Living, Real Estate | 33 Comments »
Yodlee MoneyCenter is an account aggregation service that logs into your online accounts automatically in order to track your financial balances and transactions. It’s also a great way to see all your rewards points. While Yodlee is available for free directly, they make their money by licensing their software to financial institutions. Thus, you may know it instead as HSBC EasyView, Fidelity FullView, Wachovia OneStop, or Bank of America My Portfolio.
I’ve discussed in the past why I use Yodlee to track my accounts, despite the potential security concerns. One of the major worries was that if someone got a hold of your Yodlee password, they could then get access to all your other passwords. But I just noticed that at least for the Bank of America and HSBC versions, they have disabled the ability to see your individual account passwords. They are still viewable in the Yodlee direct version.
I like the hidden passwords, and now use BofA My Portfolio exclusively. It is slightly more inconvenient for those that use the service as a password reminder service, but I think it makes things significantly more secure. It is much easier for a hacker to gain access into a single user’s account by phishing or spyware than to break into to a bank’s central database. Still not perfectly secure, but I thought I’d give people a heads up.
Posted in Tools & Calculators | 12 Comments »
I just got a letter regarding a class-action lawsuit claiming that “Visa, MasterCard, their member banks, and Diners Club conspired to set and conceal markups and fees, typically of 1-3%, on foreign transactions.” I guess the companies settled, and “those persons who made a foreign transaction using a Visa-, MasterCard-, or Diners Club- branded credit, charge or debit card between February 1, 1996 and November 8, 2006 are members of the Settlement Damages Class.”
Don’t hold your breath for these settlement claims. They can take years to process. Just file a claim and hope for a nice surprise somewhere down the line.
I spent over a thousand dollars this year on foreign transactions, but I used my Capital One card, which didn’t charge me any exchange fees at all. See more in my post about the Best ATM or Credit Card For Foreign Travel?
Posted in Credit Cards | 26 Comments »
Two weeks ago I asked people with six-figure salaries to share their stories. There was a great response, and I wanted to both summarize and add to the discussion some more.
$100,000 Isn’t That Much… Is It?
Many people expressed that $100,000 is simply not very much money anymore, especially in certain urban areas like the San Francisco Bay Area. I went out to find some numbers to back this up.
Initially, I quoted a study that stated that only about 5% of individuals in the United States made more than $100,000. But if you take into account entire households instead, 16% of them nationwide earn over $100,000. However, in the San Francisco Bay Area almost twice as many households (31%) made that much. Here is a graph from Wikipedia that compares the income distribution among Bay Area households to the national level.
Having almost a third of households over the $100k mark would definitely skew perceptions. This is supported by the CNN Cost of Living Calculator, which says that earning $100,000 in Atlanta is comparable to earning $172,000 in San Francisco. Put another way, earning $100,000 in San Francisco is comparable to earning $58,000 in Atlanta.
That’s a bigger difference than I thought. Still, remember that the 16% and 31% figures are household figures. Also, the majority of the people that I know who work in San Francisco don’t own houses there. In the end, while making $100,000 as an individual may not be considered “rich” in certain areas, there is still no way it can be considered “poor”.
Who’s Making Six Figures?
Based on the completely unscientific comments, I made a chart showing the the breakdown of six-figure earners by job description. The categories were all very general, and some were very tough to pigeonhole. For example, what is a self-employed software project manager? Tech? Small Biz? Management?
What does this chart show? Really, not much with regards to specific professions. My two takeaways were that (1) there is a very wide variety of jobs that can make a healthy salary, and (2) you need a useful skillset and effort. Nobody responded that they simply moved papers back and forth, or that they coasted into their position. Everyone needed some combination of talent, passion, ingenuity, education, and hard work to get to where they are now.
Who Cares?
Really, this is not to suggest that making $100,000, or $200,000, or whatever, should the primary goal for anybody. As with many things, it is about balance. Many folks noted that they used to make more money, but now make less but are happier overall. Others noted the high debt levels and long education (and thus missed salary) that come with certain professional careers.
Also, we didn’t focus on the total compensation package, including health insurance, stock options, pension benefits, or other perks. I know plenty of lower-paid state workers that have enough years under their belts to get both guaranteed pensions and health insurance during their entire retirement. Think of how much that will be worth! This was mainly an exercise in curiosity, and I’m glad I did it.
Finally, it’s not how much you earn, but how much you keep.
Posted in Career | 11 Comments »
Speaking of business cards, check out this one I found:
If you can’t read the sentence on the back, it says:
This card waives the setup fee for your first paycheck advance. Call us to set up your consultation with our financial advisors today!
My head hurts.
Posted in General | 6 Comments »
Vistaprint always gives out 250 “free” business cards, but they have a little “made by Vistaprint” watermark stamped on the back, and you have to use one of their templates. Right now, they are offering 250 business cards with a customized logo and no watermark for “free” plus shipping. Here are the rates:
Not a bad deal for those that want to project a professional image for their small business.
Added: You can upload your own logo, but at an additional cost.
Posted in Deals & Offers, Entrepreneurial | 18 Comments »
Now, these won’t work for everyone, but they are really easy so give them a shot. Remember, Delta miles expire after only two years of inactivity now! Grab your Delta SkyMiles number and try these in order:
- 250 miles for a 1-question survey.
- 1,000 miles for signing up for a mailing list.
- 500 miles - similar deal, less miles.
Now grab your Priority Club number and do this survey for 250 points.
Posted in Deals & Offers | 9 Comments »
Queercents offers some tips on choosing a tax professional. It’s always interesting to see tax advice from an actual accountant.
No Credit Needed explores the differing attitudes towards debt amongst personal finance bloggers.
This week’s edition of the Carnival of Investing is available at Stock Market Beat. If you’d like to host please visit the main Carnival page.
In anticipation of March Madness, Free Money Finance is gearing up for a tournament bracket composed of blog posts. Readers can participate to choose the winners and get some prizes. Time to start studying that bracketology!
Posted in General | 2 Comments »
FON is a company with an interesting idea: What if everyone shared their WiFi with each other? We could all get internet coverage in much of the world for free. But what about the bad people? FON has developed routers that have both public and private channels to allow people to share without worrying about their own privacy. There are still other worries, but considering how many people already have wide-open access points, I don’t think it’s too horrible. Sometimes they charge a one-time $30 fee for the special routers, and sometimes it’s free.
In addition to allowing the “sharers to share”, you can also pay for access to their network. Finally, there is the entrepreneurial option - get a kickback for selling your own internet access. They’ll even give you a free router to start. This is intended (on the honor system) for people who live near a Starbucks or other busy gathering space.
By installing your FON router, you let others share your broadband for a daily fee. A fee that goes straight into your pocket. A savvy patron of your Starbucks need only pay $2 a day for your WiFi. They’d have to be a grande drip to pay the [regular T-Mobile fee of] $10 Starbucks charges. Each customer who chooses you puts $1 into your latte fund. Cha-ching.
I think their new software even lets you decide how much bandwidth you want to “rent” out, so you won’t be stuck with molasses. Pretty slick! Thanks to Torger for the tip.
Posted in Deals & Offers, Entrepreneurial | 15 Comments »
This is a follow-up to my series on How To Make Money From 0% APR Balance Transfers, where I discuss borrowing from credit cards for over a $1,000 in profit last year. (If you’re curious about this, I highly recommend reading it first - It’s all carefully laid out, step-by-step.) Now, several people have already done this and were wondering what to do after the initial 0% period is up - Do you cancel the old card? Apply for another one right away? How do you keep the gravy train running?
First of all, do not cancel your existing cards. Why not?
Canceling won’t help your credit score, and can even hurt it. Once you’ve opened the account, closing it will not help. You could have 100 credit cards and still have a top credit score if you use them responsibly. I have over 15 cards and my scores are just fine.
The only time I ever cancel a card is when I reach the maximum amount of cards per issuer. (Added: I also cancel when faced with an annual fee that can’t be waived.) For example, Citibank allows three or four cards per person. If you want to open another one, they will make you close an existing account.
Your card has a credit line attached to it, which can hopefully be moved to another card. Let’s work from the examples I’ve already talked about in the previous steps. Let’s say you already have the Citibank Platinum Select card, you’ve made your money, paid it off, and the intro period is now over. Now it’s just a $10,000 line of credit just sitting there.
You go ahead and apply for a Citi Diamond Preferred Card (0% APR for up to 12 months), and only get a $5,000 credit limit. What you should do next is call up Citibank, and move your old limit over, as they are within the same card issuer family. They can do it right over the phone. Now your new Diamond card has a nice usable $14,500 limit (and your old Platinum card has the minimum $500 limit).
Now, you can close the Platinum card if they ask. It may hurt your score a bit, but the trade-off of getting a new card may be worth it.
You could also try for an automatic credit limit increase on your old line first before moving the lines over.
You could keep the card for it’s rewards perks. For example, the Discover Platinum card (another no fee 0% APR card) also has a rewards program where it offer 5% cash back on a specific category every quarter. Right now it has 5% back on hotels, airline tickets, and car rentals. Even though you might not have gotten this card for that reason alone, since you have it, why not use it?
Same thing with the Citi Professional Card with ThankYou Network, I got it for the bonus and 0% APR period, but I now use it for 3% back a restaurants. I even put a little sticker on it that says “Restaurants” so I remember.
You could be offered another 0% APR period later on. Sometimes if a card issuer notices inactivity on your card, they might try to lure you back with another low-rate offer.
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When should you start applying for new cards? This depends on how your credit score is doing. The problem with credit scores is that they are a complex formula (hidden intentionally by FICO so you’ll buy their scores) and different people’s score react differently to the same event. But as very general rule of thumb, if you have more than your gross income level of credit card debt, it is going to be difficult to be approved for another card. For example, if you make $50k a year and have $50k of credit card debt, even if it is at 0% APR and you have it socked away safely in a savings account, it will be tough to get another card.
My suggestion? Wait until most or all of your current cards are paid off for a couple of months. Then, your low debt levels will be reflected in your credit report and your score will rebound. Then you can re-apply for more cards and start up again. If this is your first time around, you can use this period to confirm for yourself that all this stuff only hurts your credit score temporarily.
You may notice that I only have about $30,000 borrowed for profit. This is mainly on purpose, because at this level my credit score is still good enough to be approved for new cards (like this one). Others prefer to go all out, apply for a ton of cards, put off all new applications for a while, wait, and then go all out again. I have nothing against that, but I prefer my way because I am holding a steady but reasonable amount of debt with respect to income, and it doesn’t necessarily raise any big flags with card companies. To them, I’m just another consumer with some credit card debt. I like to keep this a low-stress activity. Once I start making more income, I’ll probably borrow more.
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What if I run out of good cards to apply for?
You can have 3 or 4 Citi Cards and you can have 3 or 4 Discover Cards at at time. If you reach the max, just follow the example in the main post and move your limit to the new card, and close the old card. If the card is already at a low limit, just close it out and then apply. That’s 6-8 cards at a time, I’m pretty sure that’s enough for most people.
You can find several options with both no fees and 0% APR at my best no-fee balance transfer offers list, please refer back there for an updated rundown.
Finally, I know that at least Citibank let’s you have multiples of the same card. If you have a high enough limits, a 3% fee capped at $50 or $75 really isn’t that bad.
Armed with discipline and information, you should be able to consistently increase your credit limits and make money from credit card companies for many years to come. 
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Skip To Another Part
I. Introduction and Warnings About 0% Balance Transfer Offers
II. Scouting For 0% Balance Transfer Offers
III. Application Tips and Getting Cash From 0% Balance Transfers
IV. Setup And Management of 0% APR Balance Transfers
V. Best Pre-Screened No Fee 0% APR Balance Transfer Offers
Posted in Credit Cards | 53 Comments »
Here is an interesting survey from the Pew Research Center - Americans Assess Their Saving Habits. A lot of the results are what you would guess:
- Most people (77%) say they are always trying to save money.
- Most people (63%) also say they aren’t saving enough.
- Housing, cars, and utility bills are the hardest to afford.
- Dining out, entertainment, and shopping are the most common areas that people splurge on.
What caught my eye was the section on unexpected expenses. About a third of adults say they had an unexpected expense in the past year that “seriously set them back financially.” Among this group, here is the breakdown of the top 4 most common expenses:
By these numbers, the average American this year will have:
- 11% chance of having a significant unexpected medical bill, and a
- 8% chance of having a significant unexpected car expense, and a
- 7% chance of having a significant unexpected housing-related expense
My conclusion? Expect the unexpected. It’s only February and we’ve already had unexpected family-related expenses in 2007. I think an allowance for such occurrences should be included in our budgets specifically, and not just reserved as a reason to use the emergency fund.
Do you budget for the unexpected? Or do you just let it happen and deal with the ups and downs?
Posted in Budgeting, Insurance | 19 Comments »
