eBay: Berkshire Hathaway 2009 Annual Meeting Tickets for $5

Kind of short notice, but as I mentioned before in my Pilgrimage to Warren Buffett’s Omaha book review, Berkshire Hathaway is now selling tickets to their 2009 annual meeting directly on eBay. You get two tickets for only $5 in Buy It Now format, including free shipping.

All buyers receive two (2) Berkshire Hathaway 2009 Annual Shareholder Meeting Tickets and Visitor’s Guide. Please provide a mailing address when you checkout.

These tickets are being offered directly by Berkshire Hathaway Inc. in response to others who are selling tickets on Ebay.

The meeting is on Saturday, May 2nd at the Qwest Center in Omaha, Nebraska. There are some additional activities on Friday and Sunday as well. If you are a BRK shareholder, you should have gotten your 2009 annual report in March, which had a postcard to mail back in order to get tickets. Hmm… maybe I’ll get to see Warren Buffett next year.

Posted in General | 10 Comments »

Business Mastercard Easy Savings: Get 5% Back on USPS Online Postage, Dunkin Donuts, & More

MasterCard has an automatic rebate program called Easy Savings that works with “a MasterCard small business or select middle market card issued in the United States, from a participating bank.” This includes certain business debit Mastercards. You can find out if your card qualifies by visiting the website and typing in the card number and trying to register for free.

Here is a list of participating merchants. Two newly added offers are 5% back at the U.S. Postal Service Click-N-Ship website (online postage) and Dunkin Donuts shops. I know some active eBay sellers that wouldn’t mind a 5% discount on postage. The rebates are automatic and show up on your monthly statements. You don’t even have to click through a portal like eBates, just shop like normal.

My CitiBusiness Mastercard and WaMu Business Debit cards were accepted. Given that any individual (as a sole proprietorship) can get either a business credit card or business checking account (with debit card), this is then basically open to anyone who wants it badly enough.

Posted in Deals & Offers | 11 Comments »

Savings I-Bonds Update: New Inflation (err… Deflation) Rate Announced

New inflation numbers for March 2009 were announced today, so it’s time for the usual semi-annual update:

New Inflation Rate
September 2008 CPI-U was 218.783. March 2009 CPI-U was 212.709, for a semi-annual decrease of 2.78%. Using this official formula, the variable interest rate for the next 6 months will be approximately -5.55%, depending on the fixed rate. What does this deflation mean for the investment returns for I-Bonds?

Buying Now = ~3.08% APR, 11-month investment
If you buy before the end of April, the fixed rate portion of I-Bonds will be 0.7%. You will be guaranteed an variable interest rate of 4.94% for the next 6 months, for a total rate of 5.64%. For the 6 months after that, the total rate will be zero, not -4.85%. This is due to the 0% floor on savings bond rates.

You can’t redeem until 12 months have gone by, and any redemptions within 5 years incur a 3-month interest penalty. However, a known “trick” with I-Bonds is that if you buy at the end of the month, you’ll still get all the interest for the entire month as if you bought it in the beginning of the month. Let’s say we buy at the end of this April, hold for the minimum of one year, and pay the 3-month interest penalty for redeeming within 5 years. You’ll be able to sell on April 1, 2010 for an actual holding period of 11 months.

This would leave you with a 5.64% return on your money for 6 months, and then nothing for 5 months. Overall, that’s a 3.08% annualized return, and you will be exempt from state income taxes on the interest as well. This is very competitive with current bank CD rates.

Buying Later? If you wait until May 1st, you will get a new unknown fixed rate minus 5.55%, for a virtually guaranteed composite rate of zero for the first 6 months. (The next 6 months will be based on an unknown rate based on future inflation.) Unless there is a big bump in the fixed rate that makes it a good long-term investment, sticking with banks or credit unions will likely give you a higher yield.

Low Purchase Limits
The annual purchase limit is now $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. Buy online at TreasuryDirect.gov. As for paper, here is a post on how to buy paper savings bonds from your local bank. Some larger banks may have an electronic process.

For more background, see the rest of my posts on savings bonds.

Posted in Savings Bonds | 20 Comments »

Credit Cards With Good Sign-Up Incentives

Use credit wisely. I don’t pay interest on consumer debt, and I never apply for a credit card unless I get something out of it! They still make tons of money from charging merchant fees, so those with good credit should expect a cut of the action…

Up to $250 from Starwood Preferred Guest American Express
Earn 10,000 Starpoints with your first purchase, and another 15,000 Starpoints when you spend $15,000 in 6 months, for a potential total of 25,000 Starpoints. You can exchange 10,000 Starpoints for a $100 Amazon.com gift certificate. (I ended up using my points to stay at the Westin Palace Hotel in Madrid.) No annual fee the first year, $45 after that if you don’t cancel.

$100 from American Express Preferred Rewards Gold
Earn 10,000 Membership Rewards points when you spend $500 in 3 months of Card membership- redeemable for a $100 gift card at places like Home Depot or Banana Republic. No annual fee the first year, $125 after that if you don’t cancel.

$50 from Discover More card + 5% Cashback program
Earn a $50 Cashback Bonus when you make $500 in purchases within 3 months after your account is opened. Also offers 0% APR on balance transfers for 12 months, with a 3% fee. There is a 5% Cashback program on rotating categories each quarter. No annual fee.

$25 from Costco TrueEarnings American Express + Gas / Travel / Restaurant Cashback
You get a $25 cash bonus after your first purchase. 3% cash back on gasoline, including Costco gas (up to $3,000 a year), 3% cash back at all restaurants, 2% cash back on travel, and 1% cash back on everything else. No annual fee.

Up to 11,000 ThankYou points from Citi Forward card
You get 6,000 ThankYou Points after making $250 in purchases within 3 months, and another 5,000 ThankYou points after switching to electronic statements only within 3 months. 5 points per $1 spent at movies, bookstores, and restaurants. 100 points for paying your statement on time each month.

Posted in Credit Cards, Deals & Offers | 19 Comments »

A Quick & Dirty Plan To Reach Financial Freedom

Despite the current financial funk, I still desire financial freedom. The general idea is simple; I need to generate enough income from my assets to pay for my expenses. Here is how I’ve been framing the problem in my mind recently. I’m 30 now, let’s say I want to be “retired” by age 50.

Part 1: Accumulate 30 times annual (non-housing) expenses

There are numerous studies about the “safe withdrawal rate” from a portfolio, and they usually end up at around 3% to 4%. This usually means that with $1,000,000 dollars, you have a high (say 99%) chance of being able to produce $30,000 to $40,000 of income each year plus inflation adjustments for a long period of time (30+ years).

This is the same as saying you need to save 25 to 33 times your annual expenses.. If you’re conservative (or young), I’d go with a higher number, so I picked 30. Multiply your annual expenses by 30. You need that much money to retire. All of these are based on historical numbers, so this is only an estimate.

Right now I’d estimate our annual non-housing expenses at about $24,000 per year ($2,000 per month). Previously I’ve found that we spend about $18,000 per year, but that neglects a few things like health insurance and car deprecation. (Again, health insurance for those that retirement very early and are not healthy might be a bogey.)

$24,000 x 30 = $720,000.

At about $200,000 in non-housing assets right now, that leave me $520k left. Divided by 20 years and assuming no investment return, that would require $25k per year (not inflation-adjusted). At a 3% annual real return, I’d still need to save nearly $20k per year.

Remarks
With this part, you can see the power of frugal living, or the damage done by lifestyle inflation. $500 a month is $6k per year. $6k x 30 = $180,000.

So if I could cut $500 a month in my expenses, I’d need to save $180,000 less. On the other hand, if I grow some bad habits and start spending $500 more a month, I’d need to save $180,000 more. Either way, that’s a big number! This is why I still need to complete my line-by-line examination of expenses.

Part 2: Own my house / Pay off mortgage

I currently have 29 years left on a 30-year fixed mortgage. For us, that would mean another ~$470,000 in mortgage principal, but more when you count in all that interest.

According to this mortgage calculator, if we make one extra monthly payment per year (simulating a bi-weekly acceleration plan), that’d give us about 24 years before we’re done. If I made two extra monthly payments per year, it’d be shaved down to 20 years, which has the house paid off at age 50. Lots of other considerations, but I’m strongly leaning towards it.

Remarks
I know that you could easily roll up “housing” costs into Part 1 above, but I didn’t for a few reasons. For one, housing is one of the few expense areas where you can essentially “buy” all future costs. For example, you can’t pay a lump sum in exchange for all the electricity you’ll consume in your lifetime. Same thing for your grocery bill, or even a car since you’ll have to replace it. But if you own your house, you’ve basically cut out rent forever (just left with maintenance and property taxes). It also reduces the danger of inflation eating up your spending power.

The second reason is lower taxes. Owning your own house not only saves you from have to pay a housing payment, but also keeps you from having to earn the gross income needed to generate that after-tax amount. Ignoring house, I saw above that I only need to generate $24,000 of income per year total. The income taxes on that amount is very, very small. Using current numbers it might be less than 5% overall, with my marginal tax bracket at a mere 10% after taking out the personal exemptions and standard deductions.

But if I need to generate another $24,000 of income to cover housing ($2k per month in rent), then that additional $24k would be taxed at much higher rate of 15%. With state tax, the difference might be another 5%.

Try out this method with your own numbers, and see what happens. When I run the numbers like this, I know that I could retire much earlier if I moved to a cheaper place upon retirement. But is it worth it? It’s all about priorities…

Posted in Real Estate, Retirement, Taxes | 41 Comments »

Free Song Downloads at Amazon MP3

Here is a link that lists all of the free song downloads on Amazon MP3. Sort by category on the left sidebar. You’re not going to find the latest Kanye West song there, but take a look and try some out. Via FW.

Posted in Deals & Offers | 1 Comment »

Free 60-Day Membership to BJ’s Wholesale Club

If you visit this page and print out the coupon, you can get a free 60-day trial membership to BJ’s Wholesale Club. There appears to be no surcharge as they say you get “full member benefits”. BJ’s also has a 100% satisfaction guarantee on their memberships, but this might be less hassle. Via FW.

One trial membership per household. In-club only, so no online shopping. Click here for locations, mostly in the Eastern US.

Posted in Deals & Offers | 2 Comments »

How to E-File Your Federal Tax Extension Online For Free

It’s almost April 15th, and you haven’t done your taxes yet. Time to file an extension! The IRS automatically grants a 6-month extension, as long as you ask. Websites like FileLater.com will charge you $17.95 to file the form for you. But below are two ways that anybody can e-File for free. Apparently, the only thing keeping these sites in business is lack of education! However, they do have a helpful section on state tax extensions.

Method #1: TaxAct
This is how I did my extension last year. Just sign up with TaxAct and e-file your extension for free through them. You don’t even need to actually use them to file your taxes later. TaxAct is already free for federal taxes with e-File regardless of income*, and is only $13.95 for state returns with free e-File. That’s cheaper than TurboTax or TaxCut, although if you’re already familiar with those programs it may be worth the extra bucks to stick with them.

Method #2: Free File Fillable Forms
Go to the Free File Fillable Forms site (say that 5 times fast) and click on “Start Free File Fillable Forms”. Click “Sign-in” on the top left, and create a new account.

After you’re signed in, click on “Continue” and pick your form. Go with 1040. On the top right, you should see an icon with the label “File an Extension”.

This will bring up Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, a long title for a really short form. You’ll need to estimate your total tax liability for 2008. This form only extends the time to file, not the time allowed to pay. Overestimate your tax liability to avoid penalties. Here is how I estimated my tax liability last year.

You can even request your estimated tax payment to be withdrawn electronically by supplying your bank’s routing and account numbers. For identification purposes, you’ll need your adjusted gross income (AGI) from your 2007 tax return.

* Here are some more free tax filing options, along with any restrictions.

Posted in Taxes | 20 Comments »

Thoughts on Paying Extra Towards Mortgage Principal

Since I mentioned it during my recent net worth update, I’ve been thinking more about whether I should commit some additional funds to pay down the principal on my mortgage and reduce my interest paid.

There is already a good deal of discussion on this topic in my posts Why Paying Down Your Mortgage Early Can Be A Smart Investment and 10 Reasons You Should Never Pay Off Your Mortgage, but I’ve tried to summarize all the pertinent points into something more coherent below.

Other Higher Priorities?
If you have no emergency fund, high-interest credit card debt, or don’t have your IRAs/401ks maxed out, then you probably should focus on those things before worry about paying extra towards your mortgage.

What is your tax situation?
Next is the topic of tax-deductibility of mortgage interest. Everyone already gets the standard deduction, which in 2009 is $5,700 for singles, and $11,400 for married folks. Only the amount that your itemized deductions exceed this amount actually saves you money. If you have a $150,000 mortgage at 5%, your interest is only $7,500 per year (and decreasing in the future). If that’s your only deduction, you’re not getting any real tax benefit at all.

However, some people have a big cushion of deductions, like high property taxes, state income taxes, charitable contributions, etc. Some don’t. Some people are in high marginal tax brackets, where saving 35% (and soon maybe 40%) sounds really nice. Some are in the 15% or lower tax brackets. As for us, we are in a high marginal tax brackets, and pay a good deal of state income tax, so the deductibility is definitely in effect.

Comparing with other investment options
One major argument against paying extra towards a mortgage is that you can earn a better return elsewhere. Who cares about saving 6% interest annually when your money could be earning 10% somewhere else? As we’ve seen recently, stock market returns are not guaranteed, and also not without lots of heartburn. If anything, you should compare your mortgage interest with a high-quality bond or bank account interest. If you could have your cash earning 6%+ safely, then there’s a solid alternative.

Liquidity
Another argument against paying extra is that it is hard to access the equity in your house. You may not get a home equity line of credit, or it may be frozen later. However, if your alternative investments are in IRAs or 401k’s, then those aren’t exactly liquid either. Also, if you have an adequate cash cushion (as we do) and proper insurance, then liquidity will become a lesser concern.

Inflation hedge
A nice thing about mortgage payments is that if you have a fixed mortgage, the payment stays the same each month. Meanwhile, rents will increase with inflation. If inflation starts to rise significantly, you’ll be very happy to have a loan at 5-6%. A previous landlord told me his mortgage payment was $300 per month, while our rent was $1,100!

A possible strategy?
After all that, my idea is to simply look at the current yield of a comparable U.S. Treasury bond and compare it to my mortgage interest rate. If my mortgage interest rate is a lot higher than the bond rate, then I should pay extra towards the mortgage. Otherwise, if the Treasury rate is higher, then I should invest in bonds or bank accounts directly instead. If it’s close, stick with liquidity.

For example, say my mortgage rate is now 5.125% fixed, with 29 years left. The 30-year Treasury rate is currently about 3.7%. In 1990 or in other times of high inflation, a bond with the same maturity remaining would have been yielding more than 8%.

This way, I pay down the mortgage in times of low interest rates, and keep my inflation hedge during high interest rates. That means right now, for my situation, I should pay extra towards the mortgage. Am I missing anything? (Most likely! But please tell me what.)

Posted in Real Estate | 55 Comments »

Opened Rewards Checking and Mega Money Market Savings Accounts at Evantage Bank

I haven’t been much of a interest rate-chaser recently, and it feels like it’s been a while since I’ve opened up a new bank account. For one, I already have a lot of my cash tied up in CDs and I-Bonds. Also, most of my recent cashflow has been going into 401k and IRA contributions.

Now that I have a bit more free time, I decided to open up a new “Rewards Checking” account at Evantage Bank. It offers 5.25% APY on the first $10,000 in balances, and 2.25% APY for anything over that if you meet their requirements of electronic statements and 10 debit card purchases per month. I liked it because it was available nationwide, there were no minimum balance requirements, and didn’t have a direct deposit requirement.

In addition, they have a “Mega Money Market” savings account that is currently paying 3.10% APY on balances to $35,000. (No debit requirements.) So you could keep a total of $45,000 parked at Evantage at a combined interest rate of 3.58%. Not too shabby in this current environment. Alternatively, you could open a second Rewards Checking account and get another $10k at 5.25% (but also with another 10-purchase commitment).

So far, the account application was run by CashEdge, with the usual informational requests and ID verification using questions based on your credit report. The process was completely online, with both online signature cards and an ACH transfer option for initial deposit. I’ll provide a better update once I get started.

I’ve written about rewards checking accounts in the past. They are a gamble and you can earn very little interest if you don’t pay attention to the requirements. In addition, the rates can drop quickly. Look at your own habits, and hopefully these rates will stay competitive for a while.

Evantage is one of identical triplet banks, along with Redneck Bank and AmericaNetBank, which are all owned by the Huckabay family of Oklahoma. The three banks reportedly have different gimmicks to attract publicity - supposedly the redneck, patriot, and high-tech crowd? Apparently it worked, because Redneck Bank isn’t even taking new applications as of yesterday.

Posted in Banking | 41 Comments »

April 2009 Financial Status / Net Worth Update

Finally a bit of green!

Credit Card Debt
For newer readers, don’t worry. In the past, I have been taking money from credit cards at 0% APR and immediately placing it into high-yield savings accounts or similar safe investments that earn 5% interest or more, and keeping the difference as profit. I even put together a series of step-by-step posts on how to make money off of credit cards this way. However, given the current lack of good no fee 0% APR balance transfer offers, I am just waiting to pay off my existing balances.

Retirement and Brokerage accounts
March was a rebound month for the stock market, and our balances went up accordingly. We contributed $10,000 into IRAs, and $12,969 in 401(k) salary deferral and company match. A chunk of that was a true-up contribution from 2008. Score! See my 2009 Q1 portfolio update for more details.

Cash Savings and Emergency Funds
Our cash savings did drop due to the IRA contributions, but we still have over a years worth of expenses set aside. I want to keep one year of expenses for our emergency fund, and start looking for places to invest the rest.

Home Equity
I used the same internet valuation tools as before - Zillow, Cyberhomes, Coldwell Banker, and Bank of America (old version). The magical elves have decided that my home is worth a tiny bit more this month. The number shown is after another 11% reduction to be more conservative.

It’s been about a year that I’ve had this mortgage, and I am wondering if I should commit some cash towards paying down the mortgage principal too. If I make an extra mortgage payment each year, I replicate a biweekly accelerated payment plan, and can shave around 5 years off my 30-year mortgage.

Posted in Goals, Investing, Real Estate, Retirement | 33 Comments »

2009 Q1 Investment Portfolio Update - April 6th, 2009

2009 is already over one-fourth over, so I think it’s a good time to check on the ole’ battered portfolio.

Contribution Details
In early 2009, we each made a $5,000 contribution towards our non-deductible IRAs for the 2008 tax year, for a total of $10,000. We have also contributed $12,969 so far into our 401ks through regular salary deferrals and the company match. We haven’t made any after-tax investments in our portfolio yet.

YTD Performance
According to my spreadsheet, the 2009 year-to-date time-weighted performance of our personal portfolio is -15.5% YTD.

For reference, the Vanguard S&P 500 Fund has returned -6% YTD, their FTSE All World Ex-US fund has returned –6.36% YTD, and their Total Bond Index fund is -0.13% YTD as of 12/8/08. The Vanguard Target 2045 Fund has returned -4.70% YTD. Part of the poor relative performance is probably due to the timing of my large lump-sum investments.

Investment Changes
We have used our new contributions to bring us closer to our asset allocation target, with a 85% stocks/15% bonds split.

You can view all my previous portfolio snapshots here.

Posted in Investing, Retirement | 14 Comments »

Zecco April Fools’ Day Error Aftermath

Apparently my post on the million dollar account balances at Zecco Trading got picked up by The Consumerist over the weekend, but the tone was changed with the inflammatory title “Worst April Fools’ Day Joke Ever: Zecco Pretends To Give Away Millions”. People got excited, the SEC got involved, and the entire post over there has since been revised (see URL for original title) to incorporate the official reply from Zecco:

On April 1, 2009, one of our vendors provided Zecco Trading with an incorrect data feed which caused some customers to see erroneously high buying power. This error was quickly corrected, but about 1% of our customers were impacted. All positions in excess of our customers’ true buying power have since been closed. Except in a very small number of egregious and fraudulent cases, customers will not be responsible for losses (or gains) incurred for trades in excess of their buying power.

Additionally, we want to make it clear that contrary to some reports, this was not in any way intentional and was not an April Fool’s joke. We take the integrity of our customers’ accounts very seriously and we have taken measures to ensure this does not happen again. We sincerely apologize to our customers if this caused any confusion.

To be fair to Zecco, I never said it was an April Fools’ joke, I only said it happened on April Fools’ Day and because of that there was (understandable) speculation as to whether it was a joke or a system glitch. It turns out it was the latter. Either way, it’s always a bad idea to spend money that you know isn’t yours.

Posted in Investing | 8 Comments »

Free Experian PLUS Credit Score From American Express

American Express is temporarily offering a peek at your Experian PLUS credit score. This is Experian’s own proprietary credit score, but is the best you can get from Experian since you can no longer get your FICO Score based on your Experian credit report. (Only Equifax and Transunion.) PLUS has a range of 330-830 as opposed to the FICO range of 300-850.

You can either try this link or log in and look for “View your complimentary Credit Score & Report now.” under Card Options. It is free, and appears to be promoting their CreditSecure paid product. You do not need to enroll in CreditSecure to get your free score.

From their site:

How much does My Credit Score & Report cost?
My Credit Score & Report is a complimentary benefit offered exclusively to American Express Cardmembers. You pay absolutely nothing. Simply sign up to gain access to your Credit Score and Report.

How long will I be enrolled in My Credit Score & Report?
Your enrollment in My Credit Score & Report will last 30 days. After 30 days, you will no longer have access to your complimentary Credit Score and Report. If you wish to continue enjoying access to your Credit Score and Report, you may enroll in CreditSecure.

As always, you can get your free credit reports (not scores) at AnnualCreditReport.com.

Posted in Deals & Offers | 13 Comments »

Gift Code for Free Insurance Kit + Will & Trust Kit From SuzeOrman.com

Suze Orman is giving away her stuff again!

Insurance Kit
I’m not 100% sure of what all this kit provides you, but it appears to be some sort of questionnaire which helps determine your insurance needs. I’ll try it out myself shortly. From the site:

This one-of-a-kind program provides you and your family with an instant, on-line evaluation of your insurance needs. Suze’s Insurance Kit provides easy to understand, step-by-step advice to help you determine if you have the right coverage in place for all the important areas of your life.

It also includes a disaster simulator and a online home inventory tracker which can store photos and receipts in case of an insurance claim.

To get your free activation code, visit this page and enter the following gift code: “people first“.

Will and Trust Kit
Based on a question-and-answer format, this software includes the ability to create a will, a revocable trust, Financial Power of Attorney, and an Advanced Directive / Durable Power of Attorney for Healthcare. I’m not sure how this compares to a more established legal service like LegalZoom which I had considered using up until now (I used them to incorporate my home business), but they charge about $100 for a basic will.

I would think that it would at least be an acceptable stopgap solution for those with simple estates, but for those who have lots of assets or complex issues, hiring an attorney would be worth the extra cost. I think having an advanced healthcare directive is an even better idea. Remember, it’s your family that will have to deal with all this! Do them a favor.

To get your free activation code, visit this page and enter the same gift code: “people first“.

Posted in Deals & Offers, Insurance | 5 Comments »