Archive for August, 2007
Starting a new job means signing up for benefits. In terms of health insurance, this has usually boiled down to choosing either an HMO or PPO plan for us. I still have never been offered the option of a High Deductible Health Plan (HDHP) with a Health Savings Account, even though I think it would be neat to have one.
After reading through all the paperwork and talking to the benefits administrator, talking with my parents (who’ve had lots of different insurance companies), and reading various articles online - here is my limited understanding of the differences, at least in my case. Please add your own thoughts too.
Health Maintenance Organizations (HMOs)
- Usually have the lowest premiums and lower annual deductibles. In return, you must submit to various cost-saving restrictions.
- You must get care from providers in your HMO network. You can’t use a doctor from outside the network unless in some special case it is explicitly approved (unless you pay for it yourself).
- You must find a primary care physician (PCP) who acts as a gatekeeper to other (in-network) specialists. For instance, your PCP decides if you need to see a cardiologist, dermatologist, urologist, whatever. Although this is designed to limit unneeded care, it can also be frustrating if you disagree with your PCP. It also underscores the importance of finding a good PCP.
- Often have less paperwork and forms to fill out.
- You are still covered for emergencies at whatever hospital can best provide care at the time, although they may transfer you shortly afterwards to an in-network hospital.
Preferred Provider Organizations (PPOs)
- Usually have higher premiums and higher annual deductibles than HMOs. In exchange it offers more flexibility.
- You can see any doctor, but the costs for you are lower if you see an in-network provider vs. an out-of-network provider. In-network doctors have agreed to a discounted fee schedule for people in the PPO, essentially providing a bulk discount. This is the PPO method of limiting costs.
- Even if you disagree with your PCP, you can still go to whoever you want (in-network or not).
In the end, I guess one has to balance the details of each HMO and PPO plans carefully with the price differential. How much choice do you give up by going with your specific HMO? Do they have a history of complaints? In looking at cost, it’s important to understand the whole picture beside just premiums - there are also annual deductibles, co-pays, and lifetime maximum benefits.
In our case, the HMO and the PPO are by the same big insurance company, so that simplifies things for us. In addition, our family actually already has an PCP that they’ve been going to for a while, so I’m pretty sure we’re going to go with the HMO over the PPO. The HMO is $200 cheaper per month, has no annual deductible, and has lower co-pays. Otherwise, I think the best bet is to ask co-workers and friends who have the same insurance plan about their experiences and if they know of a good PCP.
Posted in Insurance | 41 Comments »
The New York Time recently published an article In Silicon Valley, Millionaires Who Don?t Feel Rich about people who have big savings and big salaries, but still keep working crazy hours:
Mr. Kremen estimated his net worth at $10 million. That puts him firmly in the top half of 1 percent among Americans, according to wealth data from the Federal Reserve, but barely in the top echelons in affluent towns like Palo Alto, Menlo Park and Atherton. So he logs 60- to 80-hour workweeks because, he said, he does not think he has nearly enough money to ease up.
?You?re nobody here at $10 million,? Mr. Kremen said earnestly over a glass of pinot noir at an upscale wine bar here.
Working inside a start-up has always been invigorating, she says. But she and her husband, 62, who also works, have concluded that she must stick with it if they are to continue to live the life they enjoy here. Recently the couple hammered out an agreement: Ms. Baranski will work at least five more years for the sake of their bottom line.
?People around here, if they have 2 or 3 million dollars, they don?t feel secure,? said David W. Hettig, an estate planner based in Menlo Park who has advised Silicon Valley?s wealthy for two decades.
The easy response, and my initial one as well, is “boo-fricken-hoo, cry me a river”. But it kept sticking my mind for some reason. Will I be like this? These people are obviously intelligent, but perhaps these people are stuck in their own little hamster wheel, albeit perhaps a nice Land Rover version. Work, spend, work, spend. When looking at the rich people around me, sometimes I think that the people who get to be millionaires at a young age are the same people who just need to keep working. More, more, more. I can only hope that I will know the meaning of “enough”.
Perhaps I should buy this USB hamster wheel, which spins when you type. Seems like a perfect daily reminder 
Posted in Frugal Living | 40 Comments »
ING Direct has been offering $25 sign-up bonuses for their online savings accounts for a while now, but now they are offering them for their online checking accounts as well. I was excited as I thought this meant another $25 bonus for me, but the wording seems to suggest that you must be a customer without any current ING Direct accounts:
Bonuses are only paid for accounts that are opened with an initial deposit of at least $250. Initial deposit does not include bonus. Bonus only available for new accounts with a new Customer. Bonus starts earning interest upon account
So it seems that you can only get one or the other (unless someone tries and reports otherwise). If you aren’t a customer yet and wish to open up either ING Direct account with at least $250, you can get $25 bonus links to sign up with here. I’ve already had over 1,000 ING Direct accounts opened via this blog! That’s $25,000 in bonuses earned by readers! Hopefully jump-started some savings habits as well.
Quick Summary
Orange Savings Account - 4.50% APY, No minimums, no monthly fees, links to your existing checking account. I often refer to ING as “old faithful” since their online-only savings account was one of the first of its kind. (more info)
Electric Orange Checking Account - 4% APY up to $50k, 5.25% for $50-$100k, 5.30% for over $100k, no minimums and no monthly fees, offers BillPay service, can request checks to be sent online, but no checkbooks allowed. Also can link to your existing bank accounts. (previous review here)
Posted in Banking, Deals & Offers | 22 Comments »
I’m running low, but hopefully with these offers below, my streak of at over 5 years of not having to pay for razors can continue… Credit goes to Bargainshare. In my opinion, all razors are uni-sex.
Free Schick Quattro Razor (don’t forget to check the box)
Free Gillette Fusion Power Razor via Sam’s Club.
Also: Regular free samples from Wal-Mart and StartSampling
Posted in Deals & Offers | 16 Comments »
About My Credit Card Debt
Newer readers may be alarmed by my high levels of credit card debt. In short, I’m borrowing money for free and keeping it in safe investments while earning me 5-6% interest. Along with other things, this helps me earn extra side income of thousands of dollars a year. Recently I put up a series of step-by-step posts on how I do this. Please do check it out if you are curious. This is why, although I have the ability to pay the balances off, I choose not to.
Commentary
What a crazy month July was. Saying goodbye, packing up, visiting family, celebrating a marriage, moving, saying hello! In the meantime, our net worth dropped, again! What happened?
» Stock Market Blues. With everything that’s been happening, I haven’t been keeping up with this wild stock market ride. Losing 5% in one month in our investments was a surprise. Sub-prime loans are either a real factor to worry about or mainly just a cover-up for the fact that people really don’t know what to think right now. I certainly don’t, but I never try to understand the short-term movements of the markets.
» Moving Chaos. Moving cross-country really throws off a budget. We ate out a lot. We paid for travel costs. We had to pay for movers, but are waiting to get reimbursed by our employers. We bought some new furniture. We only had to pay for rent for a part of July, but we’re still waiting for our security deposit back.
» New Jobs. We’re both in our new positions and faced with new co-workers and bosses, bigger (upcoming) paychecks, and a whole new set of challenges. I have to decide on investments and contribution levels for a new 403(b), as well as other benefits like health insurance, dental insurance, and disability insurance. Lots of stuff to talk about in August!
Quick summary time… We are still saving cash, with our non-retirement funds now add up to $72,699, and total cash is $67,294 (+$2,573 from last month). Read about our mid-term and long-term goals and take a look back at our previous net worth updates.
Posted in Goals | 25 Comments »
[Update 10/1/08: For the month of October only, you can get a $50 bonus for opening a TradeKing account. Must fund with $2,500 and make one trade.]
By request, I’m posting a review of my opinions experiences with online discount broker TradeKing.com. I’ve actually had an account with them for over a year now. This will be done from the perspective of a buy-and-hold investor in stocks and ETFs, not an active trader.
Commission and Fee Schedule Overview
TradeKing offers $4.95 stocks trades across the board - market or limit, online or broker-assisted. $4.95 isn’t as low as it used to be, with brokers like Zecco.com offering free trades now, but it’s still much cheaper than the big discount brokers like E-Trade or TD Ameritrade for non-active traders. They also offer options for $0.65 per contract, also a competitive price.
There are no minimum opening balances, and also no maintenance or inactivity fees to worry about. (You need $2000 to open a margin account.) There are no annual maintenance fees for IRAs, but to transfer out or terminate one costs $50. Electronic statements are free, but paper statements cost $2.50 each.
Opening Process
The application seemed pretty standard, including having to sign off on all those long disclosures. It was all online and I did not have to mail anything in.
One thing to note is that if you want to fund your account via an online bank transfer, you’ll have to be very patient. After you provide them with the account and routing numbers, they require 5 business days to verify it. Then, every online transfer (max $10,000) takes 5 business days to complete. So if you choose this option like I did, you’re looking at two weeks minimum before you’ll be ready to trade. The quickest way to start is to perform a wire transfer into your new account.
Trading Interface
My first impression of the account several months ago was that the interface was a bit sluggish. But recently, the response time has been great and overall I like the interface. Here are some screenshots of the Account Summary and the Trading screen:
They offer trailing stops and contingent orders based on price triggers, as well as complex options trades like spread, straddle, strangle, combo, butterfly, collar, and condor.
Customer Service. They are actually very responsive on the customer service side. I can usually get someone on Live Chat within 5 minutes, and they are faster to pick up the phone than my previous calls to Ameritrade and E-Trade. I can’t speak as to how they handle complex questions, as I haven’t been faced with any real problems yet.
Dividend Reinvestment. They offer free automatic dividend reinvestment, with the ability to purchase fractional shares. This can be set for all your stock holdings, or just specific ones. This is nice if you have ETFs and you want to reinvest dividends like you used to with mutual funds.
Money Market Sweep. By default, only 1% interest is paid on cash balances. You can sign up for one of three money market sweep accounts (taxable, tax-exempt, treasury), with the taxable option is currently paying 4.22% and is FDIC-insured. I highly recommend signing up for this right away, it takes just a second to send them an e-mail message and you’re all set. No forms to fax or mail in.
Long Transfer Times. Again, ACH deposits are subject to a trading hold of 5 business days, and also cannot be withdrawn for 10 business days. This can be a pain if you have a hot idea and want to make a trade fast, so I would keep whatever money you want to invest in the money market sweep above.
Awards. They are quick to point out on their site that they won Best Discount Broker in SmartMoney’s 2007 Broker Survey for the second year in a row, as well as being awarded the highest ranking of 4 out of 4 stars in Barron’s.
Sign-up Bonuses. For the month of October 2008, you can get a $50 bonus for opening a TradeKing account. Must fund with $2,500 and make one trade.
In addition, they will reimburse ACAT transfer fees charged by your existing broker up to $150 when moving your account over to TradeKing. Sometimes you can ask if there are new promotions by visiting their home page and clicking on “Live Chat”.
I hope this helps people make a decision! It’s very hard to simply call any broker “the best” or “the worst” as everyone has different trading levels and preferences. What one person deems a critical feature, another cares nothing about.
More Broker Reviews
Scottrade Review - $7 Trades
Zecco Trading Review - 10 Free Trades/Month
Posted in Investing | 27 Comments »
August’s issue of Money Magazine asks: Are You Doing The Right Things (For Retirement)? Although a bit mundane, it’s offers a quick gut check. Here are the questions and my answers:
1) Are you maxing out your 401(k)?
I think I put in $10,000 last year, which wasn’t the max. This year I haven’t been on pace for the $15,500 maximum either, but I do plan on reaching it by year’s end. I’ll need to run the numbers to see how much I’ll need to increase my contributions in order to catch up in time.
Maxing out a 401(k) does seem like a tall order for the average U.S. household though, considering the median income is about $46,000 a year.
2) Are you keeping tabs on your progress?
Yup, every month. Next update is coming up soon.
3) Are you grabbing every tax break you can?
This is mostly directed at IRAs. I’m probably not going to be eligible for a Roth IRA this year due to the income restrictions. However, I will likely fund a non-tax-deductible IRA, which has the potential to be converted to a Roth in 2010. Otherwise, I’ll settle for the watered-down tax advantages and stick some bonds in there.
4) Have you created a safety net?
In an addition to an emergency fund (they say 3 months), the article states you should have adequate life and disability insurance. Life insurance is something I definitely want to get within the next year, and definitely before we buy a house.
Posted in Insurance, Retirement | 24 Comments »
Summer’s winding down, which means that certain states (though not mine) are having sales tax holidays for the back-to-school crowd. If you’re in need of stuff like clothes, school supplies, computers, and electronics, TaxAdmin.org has a nice table of all the holiday dates listed by state for 2007. A quick summary of eligible items and links to the official state websites are also included.
Posted in Frugal Living | No Comments »
Unless you have unlimited ATM access to the Bank of Mom and Dad, most of us keep some money around for the unexpected. I haven’t been worrying about this much, as we have over $80,000 in cash split between our savings accounts at Washington Mutual (5% APY) and FNBO Direct (6% APY). (See bank reviews and more here.) Although this is for a mortgage down payment, technically all of it could be tapped if needed.
But, if we do buy a place, we’ll need to decide exactly how much we want to keep in cash. Instead of absolute numbers, I like measuring it in terms of “months of basic expenses”. This expense total will be different for everyone, but it is essentially what you would spend if you had no income anymore. For most people, they would still need to pay things like rent, utilities, and insurance. But maybe they would spend less on dining out, travel, or entertainment.
You can help us decide by sharing your own situation. Just divide your current Emergency Fund balance by your Basic Expenses, and vote below. One is for what you actually have saved, and one is what you think you should have saved. You can view the results right after voting.
How Many Months Of Basic Expenses Can Your Emergency Fund Cover?
How Many Months Of Basic Expenses SHOULD An Emergency Fund Cover?
If you’re curious, you can also check out the results of the last poll: Do You Have A Speculation Portion Of Your Portfolio?
Posted in Frugal Living, Insurance | 35 Comments »
Before I “check out” of any online store, in addition using one of my best rewards credit cards, I always see if a shopping portal will offer me an addition rebate on my purchase. You have to carefully use their links to track your purchase. Two popular ones from which I’ve gotten checks from are Ebates and FatCash.
Right now, Ebates is offering new members a $10 sign-up bonus if you join and make a purchase by May 31st. I can get $10 as well if you list my e-mail address: 
.
Don’t forget that you can get rebates on many travel sites like Hotwire, Travelocity, and Expedia. (I always do.)
Posted in Deals & Offers | 28 Comments »
Chase Bank is offering a $75 $100 bonus for opening a “Free Checking” account with direct deposit. Thanks to SoonToBeKSGrad, who found it from the post office when moving. Chase will likely perform a hard credit check, they did for me. Selected fine print below:
Offer valid from 08/01/07 through 10/31/07. A $100 minimum opening deposit of new money … Reward will be automatically deposited into your new account within 10 days of account opening …. Chase Free Checking has no monthly service fee when you have a monthly direct deposit. Checking account must remain open for six months or the reward will be debited from the account at closing.
Posted in Deals & Offers | 42 Comments »
How about some helpful investigative reporting from the media this time? The New York Times article Every Penny Counts profiles six New-Yorks who managed to buy their home without the benefit of rich relatives or Wall Street bonuses. While the stories weren’t surprising, I still found them to be very reassuring and even inspiring. In addition, I tried to pick out a few useful themes:
Make The Home A Priority
There’s saying you want a home, and then there’s taking action to get that home. One of the new homeowners put it bluntly:
?If you want to own a place, you have to do everything to own a place and everything else comes second.?
Along those lines, every single person profiled changed their lifestyles to make saving up over $20,000-$100,000 a reality. While it wasn’t easy, each person did it their own way. Take Pablo Ag?ero and wife Janey Lee:
They gave up smoking to cut costs, they stopped meeting friends after work for beers, they didn?t buy new clothes, and they stashed away tax refunds and as much of their earnings as possible. Whenever they wanted to buy drinks, gadgets or cookware, they asked each other: ?Do I want an iPod or a house? Do I want a latte or a house??
Or Amy Wegenaar:
So she went into savings overdrive: she went grocery shopping only with a list and cut out luxuries like expensive juices. When she went out with friends, she ordered the happy-hour drink specials and often chose Mexican food so they could munch on free chips and split a cheap entree. She shopped the sales racks at Urban Outfitters and sewed dresses from discounted fabric she bought on the Lower East Side.
Getting Support From Your Family and Friends
Obi Onyejekwe actually made friends with co-workers who also wanted apartments of their own:
They chose to eat out at places with entrees that never cost more than $15 and went to events like the Warm Up dance parties at P.S. 1, where the only thing they bought was beer. ?A lot of pressure to spend and splurge wasn?t around because everybody was saving to buy real estate,? he said.
It worked: He and 8 friends now own homes that cost $320,000 to $550,000.
On top of this, I say share your goals with your friends. Tell them why you’d rather watch the game at home, or why you can’t fly out to Vegas. They should understand, and might even share the same dreams or at least wouldn’t mind saving a few bucks themselves.
Don’t forget your family either, all I ever hear is “Did you find a house yet?” I think being in this together with my wife has made the process a hundred times easier than if it was just me.
I discovered this article at Well-Heeled, a fellow blogger who’s new focus is also saving up for a home in a pricey area. (She was way too hard on herself over a creme brulee.)
Posted in Real Estate | 20 Comments »
I know there is plenty of bad advice out there, but this one just caused me physical pain. Mr. Cliff Mason impressively gained the status of Staff Reporter at TheStreet.com fresh out of college (did I mention his uncle is Jim “Mad Money” Cramer?). He hits the ground running with his recent article Young Ones, Go Forth and Speculate, where he bashes veteran Wall Street Journal reporter Jonathan Clements and proceeds to share some of his vast financial knowledge with us.
Pearl of Wisdom #1:
I believe that saving money is at best nonessential for the under-30 cohort, and that people my age will generally get more from spending their money than from buying stocks or bonds.
Pearl of Wisdom #2:
Buy small-cap stocks that trade under $10, have little analyst coverage and a reason to go higher. In a word: Speculate. […] With maybe $2,000 to invest a year, you won’t make serious money in the market unless you take enormous risks. It’s much more likely that you’ll get wiped out, but since you won’t have a lot of money on the line, it’s a worthwhile risk.
Wait, there’s more! You must see Mr. Mason in person in this TheStreet.com video showing off his brand new iPhone. Why did he buy this phone? “Well, I wasn’t doing anything… and I had money to burn… it is a babe magnet…” What about his current plan? “I have an old Verizon line that my dad still pays for [the iPhone is AT&T-only] … I should tell him about that…”
Hmm… sure sounds like someone I should listen to for financial advice!
I found this article via the Diehards Forum, where author Taylor Larimore submits his succinct reply:
If a young investor age 25 invests $4,000/year @ 10%, at age 65 he/she will have $1,947,407.
If a gambler waits until age 35 (and loses), he/she will have $733,774–less than half.
Investing for retirement should not be a gamble.
My response? As a 20-something who tries hard every day to balance enjoying life now, buying a house, and funding my own retirement someday, I’m a bit offended by his flippant views on saving.
I don’t really care what Mr. Mason does with his money. But to tell others to just gamble it away because it’s “not that much”? Being 25 and actually having $2,000 saved up is not something to be dismissed. Not only can you take advantage of the wonder of compound interest, but look at how risk decreases as your time horizon increases when properly diversified. Why increase your risk needlessly when you could be decreasing it?
Okay, maybe I’m being too harsh. When you’re young, you should take risks. Go into debt to pay for college or graduate school, work at a start-up company or at a non-profit that you love, or even start your own business. Take chances with money that can really reap huge rewards!
Posted in Investing, Retirement | 52 Comments »
Now that I’m getting a bit more settled, I’m making an effort to get back to being more active in the blogging community. Carnivals are a place where blogs get together and share posts pertaining to a specific topic. Here are a few that I participated in recently -join me in perusing them and sharing what you found especially helpful.
Posted in General | 1 Comment »
