Archive for July, 2007
Sometimes I am truly amazed by the internet. I can get an idea on a Friday night while talking with friends, go home, buy a domain name, create a website, upload it to a server, and have it live to the entire world before morning. I don’t need to buy any licenses, line up manufacturers, pick up raw materials, or hire any employees. Sure, I may have to wait a day for some DNS servers to resolve, and I will spend many more hours working on it later, but overall the instant gratification is great.
I’ve alluded in that past that part of my side business involves making websites for local clients, as well as miscellaneous websites on a variety of (mostly non-financial) topics that interest me. I get paid for the design work, as well and hosting and maintenance. Some of my own websites are profitable, and some are complete flops. But it’s fun and if you already have hosting set up for another website already, the only additional costs are my time and $9 at Godaddy (currently only $7 with coupon code ‘hash3′). To be perfectly honest, I’m not terribly good at graphic design or even web design.
Here’s the thing: I’m sure there’s some topic out there that you know about much more than the average person - venison recipes? making your own furniture? old Toyota truck? homeschooling your kids? That knowledge and passion are the most important things you need start your own website, not HTML skills.
Sorry for the rambling; I would write more, but the sun is going to rise soon and I can’t think straight anymore…
Posted in Entrepreneurial | 21 Comments »
It’s been over a year since I came up with my current asset allocation mix, and I should really rebalance my current portfolio to match those percentages again. It really should only take a few minutes of spreadsheet math and some clicking online, but I’ve been plotting out a few long-term asset allocation changes in the meantime and I’ve been putting it off. I really must do one or the other soon.
Rebalancing is a way to maintain the risk/reward balance that you have chosen for your investments, and also forces you to buy temporarily under-performing assets and sell over-performing assets (buy low, sell high). How often one should re-balance their portfolio depends on a few factors. In taxable accounts, rebalancing will create capital gains/losses and therefore tax consequences. In some brokerage accounts, rebalancing will incur commission costs or trading fees. As for me, the vast majority of my retirement portfolio is in tax-sheltered accounts and in mutual fund accounts which are not subject to transaction fees. Some of my funds have redemption fees, though.
After that, some people rebalance on a certain time-based schedule - for example, once every 6-months, every year, or every 2 years. Others wait until certain asset classes shift a certain amount away from their desired targets. I will dig up some good articles on this topic later (here is one math-intensive article to start), but after my previous research I had settled on an annual rebalancing schedule. Of course, that was almost 15 months ago. 
If you rebalance, what is your criteria?
Posted in Investing | 14 Comments »
Let’s continue with the 401k/403b Rollover discussion. Previously, I explored some possible reasons to keep your old employer’s plan. The next option to consider (if only briefly) is to transfer your 401k/403b assets into your new employer’s retirement plan. You can only transfer after-tax contributions between the same type of account (401k » 401k, or 403b » 403b), but more common pre-tax contributions should be able to be transferred between different types as long as the new plan allows rollovers.
The reasons you might want to do an employer-to-employer transfer are very similar to before:
Special investment options
Maybe your new employer plan has some desirable options that aren’t available to a retail IRA investor. The average 401k has something like 7 mutual fund choices though, so this is probably unlikely. Ask your new HR department for details.
Lower minimum balances or fees
If you have a small balance and figure you might as well cash it out as you don’t meet other account minimums, don’t! Your new employer will probably have no minimum requirements and you can continue to build on what you have already contributed.
Ability to take out loans
Your new 401(k) may allow you to take out loans against your savings, which you can’t do with an IRA. In addition, if you already have a loan from your old 401(k), your new one may allow you transfer over that loan. Otherwise, most plans make you pay back the balance immediately or risk having it penalized as an unqualified withdrawal.
Still not sure? Another alternative is to roll your plan into a Rollover IRA, keeping it separate and not merging it with any other IRAs, and then see how you like your new employer’s plan. If somehow you do, then you can transfer the Rollover IRA assets into your new plan.
References: SmartMoney, American Funds
Posted in Investing, Retirement | 11 Comments »
You have probably heard of hedge funds, which are investment funds somewhat similar to mutual funds in they pool together money from different investors, but with the very important difference that they have virtually no limitations on what they can invest in, and also have no requirements to disclose their holdings.
In order to invest in a hedge fund, you are usually required to be an accredited investor, which means that you either have a net worth of at least $1 million or have made at least $200,000 each year for the last two years (or $300,000 joint combined). Supposedly this is to show that you are savvy enough to navigate these loosely-regulated waters, but to me it seems like they just want you to be able to lose a ton of money on these sexy-sounding investments and not make a big fuss about it.
I was reminded of this when reading about the most recent big-name hedge fund failures:
Investors in two troubled Bear Stearns Cos. hedge funds that made big bets on subprime mortgages have been practically wiped out, the Wall Street firm said yesterday, in more evidence of the turmoil in this corner of the bond market.
Bear said one of its funds was worth nothing and another worth less than a 10th of its value from a few months ago after its subprime trades went bad, according to a letter Bear circulated and to people briefed by the firm. The Wall Street investment bank — known for its bond-trading savvy — has had to put up $1.6 billion in rescue financing.
Oops! I guess they didn’t hedge their credit risk exposure very well. For more reading, just run a search for Long Term Capital Management or see the Wikipedia entry:
Initially enormously successful with annualized returns of over 40% in its first years, in 1998 it lost $4.6 billion in less than four months and became the most prominent example of the risk potential in the hedge fund industry. The fund folded in early 2000.
Here is an example of hedge fund fraud:
An Atlanta hedge fund manager under suspicion of defrauding a group of investors that included several NFL players now faces criminal charges in connection with the collapse of funds that investors believed held up to $180 million.
While I plan to meet the requirement to become a accredited investor, and wouldn’t mind working for a hedge fund, I’m pretty sure I’ll never sink a penny into one. I just don’t see the need to take such risks.
Posted in Investing | 25 Comments »
(Update: the 25,000 mile offer is now expired) 
I finally got around to opening some mail today and saw that my American Express Gold Business card arrived. I had almost forgotten I had applied for it in the whole move. (I convinced my wife to apply as we could really use the 25,000 Membership Reward sign-up bonus as frequent flier miles.)
As has been reported by other readers, the paperwork that came with it only mentions a bonus of 5,000 points after the first purchase and another 20,000 after spending $50,000. I really wanted to get to the bottom of this, so I called American Express and talked with multiple reps about the bonus. I explained to them that the wording is very clear, I have the specific bonus code, and is the offer still up after more than two weeks, so it is clearly not some unintentional misprint:
Upon the Basic Cardmember’s first purchase, a one time bonus of 25,000 points can be earned toward the Basic Business Gold Rewards Cardmember’s Membership Rewards? account and may appear as separate credits of 5,000 and 20,000 bonus points.
Most of the reps seemed like robots and just sounded confused as this wasn’t on one of their scripts, so I just ended the call quickly in that case. But two of them were familiar with this promotion, and said that they had already fielded several calls about it. The summary:
1. The same paperwork goes out to everybody, and what is mentioned is the standard, older promotion. This doesn’t mean you won’t get the 25,000 points, as this special promotion does exist and is valid.
2. The problem is that they can’t tell on their computers which promotion you signed up for. However, it should be tracked in their systems internally if you used the right link. I would keep a print-out of your page. If you want, you can call them and ask them to note specifically the Bonus ID 2329 on your account, which may help you dispute if anything does happen later.
4. Otherwise, there is really nothing you can do right now. Personally, I am confident that they will come through, as I have already scored $100 + 5,000 miles from the same card last year, and in that case nothing about any bonus was mentioned in the paperwork that came with the card! I’m just going to make my first purchase quickly, tuck it away, and wait the 6-8 weeks.
Posted in Credit Cards, Deals & Offers | 25 Comments »
I have been neglecting some of the supporting pages on this blog, so I spent some time tonight freshening them up:
- Updated my About Me page to include more current and descriptive information.
- Simplified the site’s Advertising options, and changed to an easier payment system which requires less maintenance.
- Updated the links and graphs in my Net Worth history section.
Posted in General | No Comments »
I have received several messages and comments this morning about how SunRocket has quietly shut down, with them no longer taking new customers or answering their phones (outside sources: NY Times and DSLReports), as I am have previously been a happy customer and even posted a review. I might have picked up on this earlier but my Gizmo VoIP box is on a moving truck somewhere right now so I have no idea if it still works. There appears to still be no mention on the main website, which makes it seem like they really don’t care anymore about customer service.
My current status: Still don’t have Gizmo so I can’t say about service. I set my Sunrocket number to forward to my cell phone and it works fine. Caller ID even transfers through. I can still check voicemail over the phone, but not online.
The NY Times article suggest that accounts will be taken over by another company, but other competitors are already trying to lure us with offers to port our numbers for free. If you’re a new customer, you may want to hurry up and dispute the charge with your credit card company before it’s too late. Refunds may or may not happen (It’s not looking good.) Here are some alternatives to waiting that come to mind:
» ViaTalk - 6 month now only 3 months contract buyout (print out your Sunrocket information), $199 for two phone lines for one year. You must also pay $10 for shipping and $30 for initial activation. However, I don’t know about their situation either and what’s to stop them from going belly-up as well? Shaky financials is probably the case for all the VoIP-only companies right now.
» Vonage - The embattled VoIP company is offering former Sunrocket customers two months free if the sign up for the Unlimited plan. More stable, but I wouldn’t say Vonage is a solid company right now given all it’s legal troubles from Verizon on top of plain old financial troubles.
» Skype: SkypeIn + SkypeOut + Skype Phone System - SkypeOut (unlimited calling out to US and Canada) is $30/year, SkypeIn (phone number + voicemail) is $60/year, and a phone system cost varies from $5 (just add headset to PC) to ~$200 (cordless phone w/o PC).
I’ve been using Skype more recently via headset and it’s not too bad, but I still like have a “real” phone. I need to do more research on the newer Skype phones that don’t need PCs to work or those boxes that replicate a phone jack - any experiences or recommendations? Update: I am looking at phone jack replicator for $60 that lets me use my traditional cordless phones.
Posted in Frugal Living | 90 Comments »
One of the most common questions I get from people when they find out that I like personal finance is “What should I do with my 401k/403b/457 plan from my old job?” My own 401k rollover decision process was one of my first blogging topics. I eventually settled on rolling my 401(k) balance into an IRA at Vanguard, although I have since changed my specific investment choices. This time around, my wife has the ex-401k that needs to be addressed, and so I think it’s a good time to do a more in-depth series on 401k (and similar) rollovers.
To start off, should you really move your retirement plan somewhere else? I think you’ll see that in most cases the answer is yes, but there are some possible benefits to staying put. Here are a few:
Special investment options
While many 401(k) plans offer very limited or expensive options, some of them actually offer investments that you may not be able to get anywhere else. For example, your plan may give you access to a mutual fund that is normally closed to new investors, a special institutional or pooled fund with super-low expenses, or the ability to buy your company stock at discounted prices.
Lower minimum balances or fees
One benefit of many 401(k) is that there are often no minimum balance requirements to invest in an offered fund. For example, my wife might have as little as $10 in a Fidelity Spartan index fund with a tiny 0.10% annual expense ratio while it is in her 401(k), but in an IRA the minimum would be $10,000. At the same time, the account may continue to waive all maintenance fees even after you leave (check with your administrator.) Depending on where you move your money to, other brokers may charge fees for low balances.
Together, it may be a good idea to keep smaller portfolios in such a 401k until the balance grows enough to consolidate with other investments.
Ability to take out loans
Although not necessarily a good idea, many plans do offer the option of being able to borrow money temporarily from your 401(k). This option is not available in an IRA.
I probably missed something, so if you have some more reasons not to move your retirement plan into an IRA, please share in the comments below.
Posted in Investing, Retirement | 30 Comments »
Everybody says up, right? While I can’t predict the future, I thought it would be interesting to see what the historical tax rates were for different income groups. Here is some data taken from the Congressional Budget Office about historical federal tax rates as a percentage of “comprehensive household income”, defined as pretax cash income plus income from other sources like rental income and dividends. Note that this isn’t the same as your marginal income tax rate, which is the tax rate on your last dollar earned; This is a percentage of all your income.
As a reference, here are the quintiles for annual household income as defined by the US Census Bureau in 2005:
1st Quintile: $0 - $18,500
2nd Quintile: $18,500 - $34,738
3rd Quintile: $34,738 - $55,331 (Median: $46,326)
4th Quintile: $55,331 - $88,030
5th Quintile: Over $88,030
Looking at the chart, it seems that the top quintile has paid about the same amount overall, while the overall effective federal income tax rate has actually fallen for the rest.
Now, what about social insurance payroll taxes that go towards Social Security and Medicare? These have been going up over time for just about everybody:
I even added a linear trendline, which although completely unscientific, suggests that if such a trend continues the effective percentage will increase approximately 1% every 20 years.
Posted in General, Taxes | 26 Comments »
Whew! I’ve slept in seven different beds so far in the last two weeks, not including airport lounges. How about some updates?
The Big Move. Sadly, we no longer in Oregon. We are leaving a great city, great food (tachos and microbrews!) and even greater friends. Luckily, we managed to secure a very generous relocation package from our employer, complete with full-service movers that packed almost everything for us, from the dishes to the furniture. The bad news is that we had a lot less incentive to properly shed ourselves of all our clutter, and instead it’s coming with us. 
I’m keeping our exact location vague for privacy reasons, but I’ve hinted before that it has a high cost-of-living and is near the Pacific Ocean.
New Digs. We are actually going to be staying in a relative’s extra rooms for now. We have been living out of suitcases for a while now and it has actually been nice, so the plan is to keep living as such for as long as we can. If we don’t find any acceptable houses to buy, we will then start to look for another house to rent. Our biggest problem currently is trying to convince our relatives to accept money from us!
New Jobs. Soon after we arrive we will be starting our new jobs. Again I won’t name our employers, as sharing detailed financial information anonymously online is one thing, but sharing them with co-workers is another. I will reveal that we will now both be making six-figure incomes, and they are in categories listed in my six-figure salary survey results. Accordingly, you will be seeing a boost in our monthly net worth changes.
I’m 29 years old now. I know the number shouldn’t matter, but I’m sort of happy that all these things have happened before I turned 30. We are not millionaires or anything spectacular, but we are settling down somewhere for the long haul, surrounded by family, gainfully employed, and moving forward. What more could one ask for?
Posted in Career, General, Simple Living | 40 Comments »
Why do stock-market contests continue to exist? I even had them in my high school Economics class, as if they were a useful learning tool. The goal is always to have the most money within just a few months. Since it’s always done with fake money, there is no punishment (like say, poverty?) if you lose everything. Only the top 0.01% win, and the rest lose. How is this applicable to real life at all?
I was reminded by how much I dislike such fake contests when I read about how CNBC’s Million Dollar Portfolio Challenge ended with a whimper. A quiet announcement revealed that waitress who’d never owned any stock before beat out 377,000 other participants to win the $1 million prize. But what got the most attention was the fact that people figured out a loophole in the system (being able to trade after the markets had closed) and cheated their way to great gains.
What have I actually learned? First,such short-term stock picking contests are about luck, not skill. A slot machine pull would be both faster and easier. Second, there will always be people trying to cheat the system, and many will get away with it. I find it very hard to believe that the SEC catches the majority of insider trading or other short-term manipulations of the market (you know, like Mad Money guy Jim Cramer used to do.)
I continue to ignore short-term variations of the real stock market as a result, and I often urge my family and friends to do the same. It feels like a lost cause though, as watching stock market gyrations has become America’s new favorite pastime and water-cooler material.
Added: The Motley Fool also has a nicely written article on what they term the CNBC’s “Portfolio Challenge” Fallacy.
Posted in Investing | 11 Comments »
In celebration of getting $29 million in new financing from investors, Obopay is offering a free $15 Prepaid MasterCard for signing up for their service. They seem to also be a money transfer service like PayPal mobile.
Never carry cash again.
Send money instantly from your cell phone, online, and even AOL Instant Messanger.
Receive money in 10 seconds and spend it with Obopay Prepaid MasterCard?.
The $15 offer expires at the end of July 13th.. The $15 promo is expired, but they are still offering $10 free. There are no monthly maintenance fees for the card. Thanks to Sri for the tip.
Posted in Deals & Offers | 32 Comments »
While traveling today I was reading in a local newspaper an article by Suze Orman (couldn’t find it online) about how to close the wage gap between men and women. The tips to getting a higher salary were equally applicable to everyone, so I took some quick notes:
Don’t expect them to recognize you automatically. Seriously, you may think you are on the same page as your boss, but if you don’t talk about it specifically, you may be terribly disappointed. I’ve seen lots of coworkers come out of their performance reviews in shock.
Make goals and document your accomplishments. Everything is driven by numbers these days. Work with your boss to identify goals, and then record the steps you took to reach them, and which ones you accomplished. Your boss will likely need to justify any raise to his/her boss as well, and concrete reasons help. I think this is critical.
Argue your case, and don’t be afraid to ask for a future commitment. If you don’t get what you want even after stating your case, discuss reasons why they refused, and ask “what would it take next time” to get what you feel you deserve. Get a commitment that if you reach certain benchmarks, then you will get that 10% raise or whatever.
Be prepared to quit. Sometimes you just can’t see eye-to-eye with a company. While it is often easier to find a new position while still at your current one, having a healthy emergency fund can also give you the flexibility to avoid settling for another dead-end job.
As I’m going back to being a W-2 worker again soon, I’ll definitely keep these tips in mind.
Posted in Career | 10 Comments »
Bank of America is offering 25,000 Worldpoints for signing up for the University of Iowa WorldPoints Mastercard and spending $250. You can redeem 25,000 Worldpoints for $250 cash or a plane ticket. Via Fatwallet.
?To qualify for this offer, your new account must be used to make any combination of purchase, cash advance or balance transfer transactions totaling at least $250 (exclusive of transaction fees, if any). Please allow 8-12 weeks for the 25,000 bonus points to be credited to your account after qualifying.
Alternatively, American Express has their AmEx Business Gold Rewards Card which offers 25,000 points after your first purchase.
Posted in Deals & Offers | 14 Comments »
You go on at $50,000 trip touring the world by private jet. One of my oldest (and obviously, most successful and busy) friends is actually doing this next year, the deposits have already been sent in.
Join National Geographic on an unforgettable expedition, traveling in ease and comfort by private jet. While circling the globe, explore the world’s most treasured and legendary natural and cultural wonders. Visit Peru, Easter Island, Samoa, the Great Barrier Reef, Cambodia, Tibet, India, Tanzania, Egypt, and Morocco on this once-in-a-lifetime adventure.
* Meet with National Geographic Explorers-in-Residence Meave or Louise Leakey in Tanzania and Dr. Zahi Hawass at G?za.
* Explore 12 UNESCO World Heritage sites, including Machu Picchu, Angkor Wat, the Taj Mahal, and the Pyramids of G?za.
* Discover Easter Island’s giant moai statues and famously lost culture with resident archaeologist Edmundo Edwards.
* Delve into the natural world on game drives in the Serengeti Plain and while snorkeling in the Great Barrier Reef.
This is me being jealous green with envy. 
Posted in General | 31 Comments »
