A possible solution? Make sure you stay under the coverage limits of your state’s Life & Health Guaranty Association. From NOHLGA.com:

State life and health insurance guaranty associations are state entities (in all 50 states as well as Puerto Rico and the District of Columbia) created to protect policyholders of an insolvent insurance company. All insurance companies (with limited exceptions) licensed to sell life or health insurance in a state must be members of that state’s guaranty association.

These are not federally-backed like FDIC insurance. Instead, all the member insurance companies agree to cover each other in cases of insolvency up to the policy limits. In order to be a licensed insurer, you need to maintain a certain level of financial stability. But just like banks, some insurers are stronger than others. So if you’re going to go over the limits, the standard advice is to go with a top credit rating from AM Best, Moody’s, or S&P. However, credit ratings can go down over time, and you may be holding these annuities for many years. Therefore, it’s still safest to stay under the limits.

While they vary from state to state, virtually all states offer at least $100,000 in coverage for withdrawal and cash values for annuities. (Connecticut and Washington offer $500,000 in coverage. In California, the limit is 80% not to exceed $250,000.) Look up your specific state’s limits here or here.

In order to maximize your coverage, the process is similar to that for FDIC insurance – spread your money across different institutions and use different ownership titles. Let’s say you have $100,000 in state annuity coverage. That value is per owner designation, per company. The Mr. Annuity website has a helpful article [pdf] about how to structure your annuities to maximize your coverage.

If a client has $300,000 and wants to make certain all the money is protected, including future interest earnings, while taking advantage of the highest rate possible, we set up 3 contracts in Company A for $80,000 each. In annuity 1, the husband is the Owner and Annuitant. In annuity 2, the wife is the Owner and Annuitant. In annuity 3, the husband and wife are Joint Owners with the husband as the Annuitant. Then, we’ll put $60,000 in the next highest rate we can find in Company B, normally with the husband as Owner and Annuitant. That way, as the money grows, it will be protected under the guaranty laws because they are covered up to $100,000 per owner designation, per company.

I made a quick illustration of this theoretical example:

Notice that you need to leave some room for growth, that way your future earnings are covered as well.

* I’m not saying these annuities are a great deal for everyone. If you are in a situation with a high-income and are already maxing all your other tax-deferred accounts like IRAs, 401ks, and are still looking for safer retirement investments with steady growth then this might be an option to consider due to the ability to get tax-deferred growth with rates competitive with current bond yields. I’m still in research mode.

(You may not hear much about these guaranty associations because it is illegal for insurance brokers to use them in advertisements as a reason to buy annuities. I find this somewhat ironic, considering all the misleading statements they are allowed to make about equity-linked or equity-indexed annuity products.)

Fixed Annuities: Maximize State Guaranty Coverage Limits from My Money Blog.

© MyMoneyBlog.com, 2013.

Get another 3% or so rebate via a cashback shopping portal like eBates ($5 new customer bonus), Mr. Rebates ($5 bonus), and BigCrumbs.

Stack the discounts even more with the 5% rotating cash back available currently on home improvement stores from the Citi Dividend and new Discover It card. Or, buy a Home Depot gift card at a grocery store using the American Express Blue Cash Preferred card which offers 6% cash back at supermarkets, or buy a Home Depot gift card for 7% off at a secondary market like Raise.com.

Home Depot Coupon Code: $10 off $100+ Purchase from My Money Blog.

© MyMoneyBlog.com, 2013.

Chase has announced a new small biz credit card, called the Ink Plus® Business Card. It turns out to be very similar to the Chase Ink Bold Business card (full review), but with the important difference that the Ink Plus is a credit card where you can carry a balance and the Bold is a charge card that you must pay in full each month. The current APR for both purchases and balance transfers is 13.24%.

The good news is that the Ink Plus also has the same big sign-up bonus, offering 50,000 60,000 Ultimate Rewards points after your after spending $5,000 in the first 3 months your account is open. You can read about my Ink Bold bonus experience here. To briefly recap:

Ultimate Rewards points are very flexible:

• Cash. 1 point = 1 cent in cash, so 60,000 points = $600 cash.
• Travel. 1 point = 1.25 cents towards travel, so 60,000 points = $750 towards travel at the same prices at Expedia or Travelocity (no markups), split up however you like into multiple tickets, down to the penny.
• Frequent flier miles and hotel rewards points. Transfers directly to United miles, British Airways miles, Hyatt hotel points, and Marriott hotel points.

The card also has the following same Ink Bold features:

• Earn 5X points per dollar on purchases made at office supply stores, and on cellular phone, landline, internet, and cable TV service on the first $50,000 spent annually.
• Earn 2X points per dollar on purchases made at gas stations and hotels (booked directly with the hotel) on the first $50,000 spent annually.
• No foreign transaction fee.
• Annual fee waived for the first year, $95 after that.

I noticed that you can buy Amazon.com gift cards at Staples and OfficeMax and get the 5x points, effectively discounting them 5% in cash (6.25% in travel), which may also help you with the spending requirement. Based on past experiences, you should be able to get this card and bonus in addition to the Ink Bold card as they are different cards. I already have the Chase Sapphire Preferred personal card and the Ink Bold card, so I’ll probably wait for a bit during my no-annual-fee first year and then try out this new card as well for my business.

Many people aren’t aware of the fact that they can apply for business credit cards, even if they are not a corporation or LLC. The business type is called a sole proprietorship, and you may be a consultant, freelancer, or other one-person business. This is the simplest business entity, but it is fully legit and recognized by the IRS. On a business credit card application, you should use your own legal name as the business name, and your Social Security Number as the Tax ID.

Chase Ink Plus® Business Card application link

“Disclaimer: This content is not provided or commissioned by the issuer. Opinions expressed here are author’s alone, not those of the issuer, and have not been reviewed, approved or otherwise endorsed by the issuer. This site may be compensated through the issuer’s Affiliate Program.”

Chase Ink Plus Business Card Review: $600 Cash, $750 Travel Bonus (This Week Only) from My Money Blog.

© MyMoneyBlog.com, 2013.

The Ink Bold® Business Card is a premium small business being offered by Chase, directly competing with the biz cards from American Express. If you have a small business including freelance or online eBay/Etsy sales, using a business card allows you to separate your personal and business expenses as well as get some nice rewards in the process. Just to get you to try it out, Chase is offering 500 bucks in the form of 50,000 60,000 bonus Ultimate Rewards points after spending $5,000 in the first 3 months your account is open.

60,000 Ultimate Rewards points can be redeemed for $600 cash (real money, via statement credit or check) or 25% extra = $750 when used towards airfare, split up however you like into multiple tickets. If your total is more than $750, you simply pay the difference. I’ve used this feature and it’s very easy and flexible to book airfare using their points (system and prices are like Expedia, Travelocity, etc). Here’s an example of combining cash and points:

If you prefer, you can also transfer points to British Airways Avios miles, United Airlines miles, Hyatt hotel points, and Marriott hotel points. 1 Chase point = 1 mile/hotel point for these transfers, so that’s 50,000 miles.

Until 6/30/13, Chase is offering a special 10% discount on gift cards from the following retailers: Kohl’s, Land’s End, Olive Garden, Outback Steakhouse, and Regal Movie Theatres. This means that 9,000 points = $100 gift card, a savings of 1,000 points off the usual prices. This means you can get over $550 in gift cards using 50,000 points.

You’ll also earn up to 5 points per $1 spent on the first $50,000 spent annually on eligible business purchases:

• Earn a total of 2 points for each $1 of net purchases made at merchants that classify themselves the following categories: gas stations and hotels stays booked directly with the hotel. (on the first $50,000 spent annually)
• Earn a total of 5 points for each $1 of net purchases made at merchants that classify themselves the following categories: wireless/telecommunications services (excluding equipment such as phones and fax machines), cable and satellite television services, office supply stores and wholesale distributors of office supplies. (on the first $50,000 spent annually)
• All other purchases will earn 1 point for each $1 of net purchases.

Getting 5X points back at Office Depot, Staples, and Office Max also means that you get 5X points back on the gift cards sold at these office supply stores. This includes places like Home Depot, Lowe’s, Kmart, Starbucks, TJ Maxx, and more.

There is no annual fee for the first year, $95 after that if you decide to keep it. You also get a free annual membership in Lounge Club, which gets you 2 complimentary visits to participating “first class” airport lounges each year and discounted rates on future visits. After you get the Ink card, register at loungeclub.com/inkcard. The Chase Ink Bold Charge Card is a business charge card where you must pay in full each month after a 30-day grace period with no interest.

Jot business receipt management. Chase has now partnered with Jot, so now I can snap a picture of my business receipts with my smartphone and link it to my card purchases. No more shoeboxes or scanning, and it exports into Quickbooks. I haven’t tried this yet, but it sounds like a good backup in case the IRS comes knocking.

Business Credit Card Eligibility

Many people aren’t aware of the fact that they can apply for business credit cards, even if they are not a corporation or LLC. Why? Because any individual can be a business as well. The business type is called a sole proprietorship. Perhaps you sell items on eBay, Craiglist, or Etsy. Maybe you do some freelancing and/or consulting. You might have gotten a 1099 tax form and filled out a Schedule C. Boom! You’re a sole proprietorship. This is the simplest business entity, but it is fully legit and recognized by the IRS. On a business credit card application, you should use your own legal name as the business name, and your Social Security Number as the Tax ID.

In addition, Chase business cards won’t show up on your personal credit report. Now, this card will require you to personally guarantee that you’ll pay them back what you charge on the card, which means they’ll check your personal credit score like any other consumer card. However, it won’t affect your credit score otherwise, since it doesn’t change things like your credit limits, average account age, or credit utilization ratio.

• Ink Bold® Business Card by Chase application link

This card is essentially the small business version of the Chase Sapphire Preferred(SM) Card, a consumer card which offers 40,000 Ultimate Rewards points = $400 cash = $500 in airfare.) Compare with the other $500+ Bonus credit card promotions currently available.

If you have any issues with approval, call the Chase small business credit reconsideration line at 800-453-9719. Ask them politely for the exact reason why you were denied, and offer to cancel and/or lower your existing credit lines in order to get the new card you want. You should be offered some way to get approved, I have heard many success stories. They want your business.

“Disclaimer: This content is not provided or commissioned by the issuer. Opinions expressed here are author’s alone, not those of the issuer, and have not been reviewed, approved or otherwise endorsed by the issuer. This site may be compensated through the issuer’s Affiliate Program.”

Chase Ink Bold Review: Business Card Bonus Worth $600 Cash, $750 in Airfare from My Money Blog.

© MyMoneyBlog.com, 2013.

1. $10,000 Passive Benchmark Portfolio that would serve as both a performance benchmark and an real-world, low-cost portfolio that would be easy to replicate and maintain for DIY investors.
2. $10,000 Beat-the-Benchmark Speculative Portfolio that would simply represent the attempts of an “average guy” who is not a financial professional and gets his news from mainstream sources to get the best overall returns possible.
3. $10,000 P2P Consumer Lending Speculative Portfolio – Split evenly between LendingClub and Prosper, this portfolio is designed to test out the alternative investment class of person-to-person loans. The goal is again to beat the benchmark by setting a target return of 8-10% net of defaults.

Summary. Values are as of June 1, 2013. 7 months into this experiment, the passive benchmark portfolio remains the leader although last month it was pretty flat. The speculative portfolio is bouncing back quite nicely, almost matching the benchmark portfolio. The P2P lending portfolio is still rather young, but I’m satisfied with the current trend of having 5 out of 450+ loans that are over 30 days late.

$10,000 Benchmark Portfolio. I put $10,000 into index funds at TD Ameritrade due to their 100 commission-free ETF program that includes free trades on the best low-cost, index ETFs from Vanguard and iShares. The portfolio was based loosely on a David Swensen model portfolio. Screenshot, click to enlarge:

$10,000 Speculative Portfolio. Many people speculate with their money, buying and selling stocks now and then, but they rarely track their performance even though they may brag about their winners. Honest tracking is the primary reason for this “no-rules, just make money” account. I dropped $10,000 into a TradeKing account for this portfolio due to their low-cost $4.95 trade structure, free tax-management gain/loss software, and free dividend reinvestment. Screenshot:

$10,000 Prosper and LendingClub Portfolio. For this one, I started with $10,000 split evenly between Prosper Lending and Lending Club, and went to work lending other people money and earning interest with an 8% target net return. So it’s also a race-within-a-race to see which option offers the best returns.

The LendingClub portfolio now has 211 current and active loans, 17 loans that were paid off early, and several in funding. Two of the active loans are currently between 31-120 days late, which to be conservative I am going to write off completely ($48).

My Prosper portfolio now has 225 current and active loans, 18 loans that were paid off early, and the rest in funding. 7 of the active loans are between 1-30 days late. Three are over 30 days late, which to be conservative I am going to write off completely ($73).

My plan going forward is to go into the portfolio holdings in more detail on a quarterly basis instead of the previous monthly basis.

$30,000 Beat-the-Benchmark Experiment Update – June 2013 from My Money Blog.

© MyMoneyBlog.com, 2013.

1. Go to Google.com, and run a search for “dealer autocheck inurl:vin“
2. Click on the first result that is not an ad. (Also ignore other car forums that are talking about this trick.)
3. Look at the URL toolbar. It will look something like:
   

   http://www.autoexact.com/autocheck.aspx?vin=LONG_VIN_NUMBER&Id=5122742

   Replace LONG_VIN_NUMBER with your own car or motorcycle VIN, something like:

   http://www.autoexact.com/autocheck.aspx?vin=5TETX22N66Z267004&Id=5122742

   (No spaces. Again this URL is only an example.)

4. Hit Enter, or copy/paste the new address into a new window and hit Enter. If it doesn’t work, use the next dealer website URL that comes up.

If you’d like a 3rd-party website to do this all for you, then try www.geniusvin.com. Salvage titles are known to generate errors with this method. To perform a basic check of whether your car has been reported stolen or has a salvage title, use this NCIB.gov VINcheck tool.

This worked for my personal cars to make sure there was no incorrect information out there. The report is pretty detailed, with ownership histories and odometer readings. Overall my reports were clean, although there were some gaps in the information.

Credit: Butcherboy/FW, Genius/E46Fanatics, Melania Pinola/Lifehacker

Free VIN Check Trick, Free Vehicle History Report from My Money Blog.

© MyMoneyBlog.com, 2013.

Target Asset Allocation

Since my last update, I made a minor change to our target asset allocation by removing Emerging Markets as a separate added weighting as it now includes some huge companies and comprises nearly 20% of the Total World ex-US (Total International) asset class.

I replaced it with Emerging Markets Small Value, focusing on the smaller, less-popular, less-trendy companies in those emerging countries. I think this fits better as the small 5% slices were always meant to spice things up a bit with a little extra risk in exchange for the possibility of a little extra return.

In general, I pick asset classes that are likely to provide a long-term return above inflation, as well as offer some historical tendencies to be less correlated to each other. I don’t hold commodities futures or gold because I am not confident in them enough to know that I will hold them through an extended period of underperformance (and if you don’t do that, there’s no point). Our current ratio is about 70% stocks and 30% bonds. Our investment strategy remains buy, hold, and rebalance. With low expense ratios and low turnover, we minimize our costs in terms of paying fees, commissions, and taxes.

Actual Holdings

Here is our actual asset allocation:

Stock Holdings (Ticker Symbol)
Vanguard Total Stock Market Fund (VTI, VTSMX, VTSAX)
Vanguard Total International Stock Market Fund (VXUS, VGTSX, VTIAX)
WisdomTree SmallCap Dividend ETF (DES)
WisdomTree Emerging Markets SmallCap Dividend ETF (DGS)
Vanguard REIT Index Fund (VNQ, VGSIX, VGSLX)

Bond Holdings
Vanguard Limited-Term Tax-Exempt Fund (VMLTX, VMLUX)
Vanguard High-Yield Tax-Exempt Fund (VWAHX, VWALX)
PIMCO Total Return Institutional* (PTTRX)
Stable Value Fund* (2.6% yield, net of fees)
iShares Barclays TIPS Bond ETF (TIP)
Individual TIPS securities
US Savings Bonds

For my US small-cap value allocation, I recently sold the Vanguard Small-Cap Value ETF (VBR) and replaced it with the WisdomTree SmallCap Dividend ETF (DES). The new ETF has holdings that are on average smaller and deeper value, but at a slightly higher expense ratio. I also added the WisdomTree Emerging Markets SmallCap Dividend ETF (DGS); I love that I’ve never heard of the companies that make up the Top 10 holdings of this fund. I think these two new ETFs do a good job of reaching into areas not well-covered by the huge, broad index funds (I couldn’t find any overlap between VXUS and DGS at all). Each of them only makes up less than 4% of the total portfolio, so again they just add a little spice to the mix.

With our ~30% allocation to bond holdings, I admit to doing some yield-chasing while still maintaining a high credit quality and relatively short duration. I still don’t like US Treasuries, the yields seem to be so low due to demand from countries and institutions that need safety and liquidity for their billions and trillions. In contrast, smaller individual investors can take advantage of higher effective yields from high-quality municipals, small stable value funds, and US savings bonds. I still like the inflation-protection of TIPS, although not nearly as much as in the past.

(Market commentary: Bond rates have been rising recently, but isn’t that a good thing? I’m happy to have my bonds go down a bit if that is result from my stocks are doing well. My portfolio is doing great as whole. I’m keeping my bonds because they still lower my overall risk profile if stocks go back down. Rising rates mean I’ll earn more interest on the money I invest in the future.)

With the volatility of the markets both up and down, I’m starting to think that for the purposes of early retirement I should only depend the income that comes off of this balanced portfolio (more stable) and simply hoping the principal keeps up with inflation over the long-haul. I don’t want to be one of those retirees that check the stock quotes every day. The overall dividend yield of my stocks between 2-3% and the overall bond yield is a little over 2%. Gotta spend some more time looking into this.

MMB Retirement Portfolio Update – June 2013 from My Money Blog.

© MyMoneyBlog.com, 2013.

Taking an equity ownership position means that you own a little slice of a single-family home or multi-unit complex while a professional does the buying, fixing up, renting out, and eventual selling. Realty Mogul only has done one deal like this so far (fully funded) and the intended timeframe is 5-7 years. You earn rent while the house hopefully appreciates in value, and cash out when the house sells.

Being a lender looks very similar to the age-old practice of hard money lending, just with smaller chunks. You lend the money to a house flipper who needs a short-term loan (3 months to a year) and doesn’t want to deal with traditional mortgage lenders and their closing costs and long underwriting delays. The loan is backed by a personal guarantee (not too special, you can try to sue and/or hurt their credit score) and more importantly you usually have a first position lien on the property (if they don’t pay, the lender gets the title to the house). Most of the previously funded loans have an annualized interest rate of 8%.

Realty Mogul states that they differentiate themselves from other similar startups like FundRise and Prodigy Network by (1) outsourcing the real estate expertise to vetted professionals and (2) keeping a focus on cashflow, either via rent or interest payments. Right now they’ve only had about 7 investments, but they seem to open a new one up after the last one fully funds.

Currently, the SEC limits this type of investment to accredited investors, which means either a single income of $200,000, joint income of $300,000, or net worth of $1 million excluding primary residence. When I tried the application, the only screening process was to check a few boxes and state that you qualify. Supposedly, the recently passed JOBS Act will allow them to drop this requirement later this year.

If given the option, should I drop $5,000 into this to try it out just like with person-to-person lending? $5,000 is still a lot of money to put into an investment where you are not able to do much due diligence. Getting good returns on a single investment project is all about the skill of that particular rehab team. Will the teams that sign up for capital via Realty Mogul always be the good ones, or those that are having a hard time getting funding from elsewhere? I thought that hard money lending rates were more in the 10%+ range; I don’t know if I’d be happy with 8% but maybe that’s the going rate now. Even if you have collateral, recouping your principal in case of a bad loan can get complicated and time-consuming. At least with P2P lending I can spread $5k over 200 different loans such that even though I am certain to get some defaults, it is unlikely I will get a negative return overall.

More: TechCrunch, LendAcademy, BizJournals, The Verge

Realty Mogul Review: Fractional Investment Property Ownership, Hard Money Lending from My Money Blog.

© MyMoneyBlog.com, 2013.

When Trombley [research engineer at Ford Motors] was expecting his first child, he and his wife, who also works at Ford, weren’t thrilled with the child-care options available, and she wasn’t eager to become a stay-at-home mother. Trombley remembered that a colleague from several years back had worked out a novel solution with her husband, with both taking part-time schedules to allow them to split the week up and each be home with their kids for half of it. Ford didn’t offer paternity leave, but it did offer a part-time track so long as an employee’s manager approved it. When baby Dylan arrived, Trombley went to his bosses and told them he wanted to drop down to 70 percent and work from home two days a week. [...] There are now three other men in his department with similar part-time setups; there were none when Trombley started.

Is there a list of large, Fortune 500 employers that offer such a “part-time track” option? I only found some job board sites like 10til2 and FlexJobs. I did find this 2004 research paper Beyond the Mommy Track: The Influence of New-Concept Part-Time Work for Professional Women on Work and Family [pdf]. From the abstract:

Compared to their counterparts who worked full time, mothers who worked in these part-time positions reported significantly greater work/family balance and did not report significantly less career opportunity. The part-time group reported 47% fewer work hours and 41% lower income than the full-time group. These data support the notion that new-concept part-time work is a viable option to assist women in professional careers to successfully integrate their family career.

I’m selfishly fascinated by the idea of part-time work for salaried jobs (as opposed to hourly workers). I’ve met part-time doctors, engineers, professors, lawyers, even judges. For most of them it’s been a figure-it-out-yourself exercise, but hopefully the idea of breaking down the traditional “full-time” job into smaller pieces is gaining momentum in the corporate world. It would not only be great for mothers and fathers, but anyone who wants more control over their life.

Part-Time Track Jobs For Mainstream Professionals? from My Money Blog.

© MyMoneyBlog.com, 2013.

On learning business skills from playing poker:

“Playing poker in the Army and as a young lawyer honed my business skills. What you have to learn is to fold early when the odds are against you, or if you have a big edge, back it heavily because you don’t get a big edge often. Opportunity comes, but it doesn’t come often, so seize it when it does come.”

On the merits of buying and holding onto investments for the long haul:

There are huge advantages for an individual to get into a position where you make a few great investments and just sit back and wait: You’re paying less to brokers. You’re listening to less nonsense. And if it works, the governmental tax system gives you an extra 1, 2 or 3 percentage points per annum compounded.

And you think that most of you are going to get that much advantage by hiring investment counselors and paying them 1% to run around, incurring a lot of taxes on your behalf? Lots of luck.

On being prepared for the volatility of stock investments:

Munger tells investors to conduct their financial affairs so that no matter what crazy things happen in the markets, they can stay in the game. He cautioned that if you can’t afford for your Berkshire Hathaway stock (or any stock, for that matter) to drop 50%, you probably shouldn’t own it.

On how being smart doesn’t mean you’re always right:

…the hedge fund known as ‘Long-Term Capital Management’ recently collapsed, through overconfidence in its highly leveraged methods, despite I.Q’s of its principals that must have averaged 160. Smart, hard-working people aren’t exempted from professional disasters from overconfidence. Often, they just go aground in the more difficult voyages they choose, relying on their self-appraisals that they have superior talents and methods.

On the importance of knowing yourself when it comes to investing:

A frequently asked question is, how do you learn to be a great investor? First of all, you have to understand your own nature, said Munger. Each person has to play the game given his own marginal utility considerations and in a way that takes into account his own psychology. If losses are going to make you miserable-and some losses are inevitable-you might be wise to utilize a very conservative pattern of investment and saving all your life. So you have to adapt your strategy to your own nature and your own talents. I don’t think there’s a one-size-fits-all investment strategy I can give you.

I found this last one amusing regarding one of Munger’s favorite childhood books, Robinson Crusoe (free via Kindle and Gutenberg):

When Charlie’s grandparents read and reread Robinson Crusoe to him, they planted a notion in his head. “He wanted to be rich so he could be completely independent, like Crusoe on his island, and not have to do what anybody else said.”

I felt the same about The Boxcar Children when I was young. Also see this previously highlighted quote about parenthood.

If you are interested primarily in the teachings of Charlie as opposed to his personal history, I would recommend reading Poor Charlie’s Almanack first over this biography (although it is rather expensive and hard to find in libraries).

Book Review: Damn Right! Biography of Charlie Munger from My Money Blog.

© MyMoneyBlog.com, 2013.

We’re still trying to stick with our existing simple budgeting system and only putting money into our checking account that we are willing to spend. That way we basically force ourselves to meet a minimum savings rate for the year by “paying ourself first” with a good chunk of our paychecks into savings-type accounts (401k’s, separate bank accounts, brokerage accounts, etc). If the checking balance still grows past a certain point (hasn’t been happening much lately!), then we skim off some and transfer it over to savings.

I would note that I don’t put the credit cards themselves on auto-pay, as I still want to spend the time and look over those statements each month. I know some folks do this as well to reach nearly full-automation.

Another backup use for this chart is for reference in case something happens to me, as I usually keep track of all the bills. This fits into our 2013 resolution to get our crap together.

Household Cashflow Diagram with Automated Savings & Bill Payments from My Money Blog.

© MyMoneyBlog.com, 2013.

• one free rotisserie chicken (~$5 value)
• one free 48 pack of Kirkland Signature AA batteries (~$10 value)
• one free case of 36/16.9 oz Kirkland Brand bottled water (~$5 value)
• You’ll also get some coupons for $10 off Prescription Eyeglasses, $3 off Kirkland Cookies, $5 off Kirkland Coffee, $5 off Fresh Meat, $3 off Kirkland Canned Chicken, $3 off Kirkland Canned Tuna, $5 off Food Court 18″ Pizza, and $1.50 off Select Salad Mixes

Here’s a blurry sample of what they look like. The total value of this discount would vary based on if you’d actually use these coupons, but it’d be up to $50. The pizza, canned tuna, and canned chicken coupons would definitely get used at my house. You’ll also get 550 MyPoints, which isn’t worth much but it’s still something (roughly 1/3rd of the way to a $10 Amazon gift certificate). I’ve bought these certificates before from this company (National Membership Programs) and they worked fine.

I’ve been a member at Costco for many years (though I avoid going on weekends). I find it a convenient place to get a decent deal on a lot of stuff with a flexible return policy. If you’re a serious bargain hunter and/or grocery couponer, you could probably find some lower prices but I choose not to spend my time that way. Also see Is Costco Executive Membership worth it?, although the math has changed a bit since the upgrade is now $55 so you’d need to spend $2,750 in a year to earn $55 from the 2% cashback given to Executive members.

Costco New Member Discount Certificates: Over $50 Value from My Money Blog.

© MyMoneyBlog.com, 2013.

Much like electricity, refrigeration, and other great ideas, the broadly diversified, low-cost portfolio has the potential to raise our standard of living. [...] The adoption of great ideas typically follows an “S” curve, starting slowly, then accelerating. Eventually, the great idea becomes commonplace. The adoption of the “broad low-cost portfolio” seems to be following this pattern.

Here’s a chart they created illustrating how the adoption of various technologies spread to include the majority of US households.

Defined as the percentage of U.S. mutual fund and ETF assets under management with annual expense ratios of less than 25 basis points (0.25%), low-cost investing has grown from less than 5% penetration in 1995 to about 25% of industry assets in 2012. Very few ETFs or mutual funds charge such low amounts unless they passively track an index, so at least right now low-cost is nearly synonymous with index funds. Will low-cost investing one day be as common as owning a car?

Tadas Viskanta adds more commentary in this Abnormal Returns post. It does seem like index fund investing has been gaining some momentum lately, partially because most hedge funds have been lagging major indexes for some time.

Low-Cost Investing: The Next Consumer Revolution? from My Money Blog.

© MyMoneyBlog.com, 2013.

One of the main characters was head trader Dean Carney, who had his “8 Rules of Carney”:

1. Never get into something you can’t get out by the closing bell. Every trade you make, you’re looking for the exit point. Always keep your eye on the exit point.
2. Don’t ever take anything at face value. Because face value is the biggest lie of any market. Nothing is ever priced at its true worth. The key is to figure out the real, intrinsic value — and get it for much, much less.
3. On minute, you have your feet on the ground and you’re moving forward. The next minute, the ground is gone and you’re falling. The key is to never land. Keep it in the air as long as you f—ing can.
4. You walk into a room with a grenade, and your best-case scenario is walking back out still holding that grenade. Your worst-case scenario is that the grenade explodes, blowing you into little bloody pieces. The moral of the story: don’t make bets with no upside.
5. Don’t overthink. If it looks like a duck and quacks like a duck — it’s a duck.
6. Fear is the greatest motivator. Motivation is what it takes to find profit.
7. The first place to look for a solution is within the problem itself.
8. The ends justify the means, but there’s only one end that really matters. Ending up on a beach with a bottle of champagne.

Mezrich also wrote about the MIT Blackjack team in the NYT Bestseller Bringing Down the House, which was recently made into the movie 21 with Kevin Spacey. If you enjoy financial thrillers, both these books are fun page-turners.

Ugly Americans Book: Eight Rules of Carney from My Money Blog.

© MyMoneyBlog.com, 2013.

Sick Leave from My Money Blog.

© MyMoneyBlog.com, 2013.

And that’s probably our biggest lesson from this year: people adapt very fast — much faster than they think. The new normal sets in and new routines established quickly.

They had no car. No cell phone. No TV. The village had no cafe, no Wal-mart/Target, not even fresh beef. But they were very happy. From the post Learning To Live With Less:

Humans have an amazing skill: the ability to adapt to a new environment without affecting our mental well being. Our ancestors honed this skill for millions of years before we emerged and became the most adaptable species ever to roam the earth. But too often, we forget that we have this skill, this genetic gift, and we squander it and make decisions in life as if we’d fall apart under adversity. And many of us sacrifice gravely in order to “maintain standard of living.”

My feeling is that humans can adapt very quickly, but they usually only find this out if they are forced to. Studies have found that those with permanent disabilities like being confined to a wheelchair are often quite happy. Conjoined twins tend to be happy the way they are. Adaptation also works both ways. People who earn more than $60,000 don’t get any happier.

However, if we are given the option, usually we’ll stay with the status quo. But think of how much more flexible your life would be if you were more confident of your ability to adapt. You could live in a smaller house, live in a new state, live in a new country! You could drive a used car, drive one less car, or have no car at all. It’d feel weird at first, but you’d adapt and still be happy. By spending less, you could build some F-you money. Instead of constantly fretting about losing the steady paycheck of your current so-so job, you can spend your time reaching for that next, better job.

I need to remind myself not to be afraid of positive change. I can adapt.

Don’t Squander The Power of Adaptation from My Money Blog.

© MyMoneyBlog.com, 2013.

Consumer Reports used to say that anything above SPF 30 doesn’t get you much extra protection, but this year’s test results suggest that going up to SPF 40 can actually help. Above SPF 40, it will likely wear off before it makes any difference. Instead, reapply every 2 hours and after swimming or sweating.

2013 Consumer Reports Best Buys
Equate (Walmart) Ultra Protection Lotion (SPF 50, $0.47 per ounce)

2012 Consumer Reports Best Buys
No-Ad Lotion (SPF 45, $0.59 per ounce)
Walgreens Continuous Spray Sport (SPF 50, $1.30 per ounce)

2011 Consumer Reports Best Buys
The Target Up & Up spray (SPF 30, $1.16 per ounce)

The Consumer Reports test results haven’t always been consistent over the last few years. CR has noted that their testing on UVA/UVB effectiveness has varied from year-to-year with the exact same product, even though the manufacturers claim the formula hasn’t changed. A brand that had one of the highest tested SPF in 2012, tested last in 2013. In addition, I noted last year that the Target spray which was a 2011 Best Buy wasn’t even tested in the 2012 issue. It was included again in 2013, again taking the top score rated “Recommended” although it didn’t win the Best Buy rating due the higher per-ounce cost.

I’ve tested a bunch of other sprays myself, including Neutrogena, Coppertone, and Banana Boat. Target was indeed the best value, with just-as-good performance and a great price compared to the big brands. I usually find it for under $0.75 per ounce. Neutrogena was my overall favorite as it was the least greasy, but it also cost more than twice as much. All of them tend to stain white clothing. (I use the Neutrogena lotion despite the higher cost for the face due to the non-greasiness.)

If you’re pregnant, you should check your sunscreen for retinyl palmitate, a common inactive ingredient in suncreens which has been linked to birth defects and thus should be avoided by pregnant women.

Consumer Reports acknowledged that other ingredients in sunscreen have also been linked to health problems in animal studies. This may indirectly refer to another popular sunscreen guide by the Environmental Working Group (EWG) which only recommends a limited amount of sunscreens that don’t include any ingredients they deem hazardous. EWG also recommends againsts using any spray sunscreen of any kind, due to the potential for inhalation. In contrast, CR believes that the benefits of sunscreens in preventing skin cancer outweigh potential risks from their ingredients.

Best Sunscreens in 2013 – Consumer Reports from My Money Blog.

© MyMoneyBlog.com, 2013.

• Complaining is silly. Either act or forget.
• Thinking life will be better in the future is stupid. I have to live now.
• Being not truthful works against me.
• Helping other people helps me.
• Organizing a charity group is surprisingly easy.
• Everything I do always comes back to me.
• Drugs feel great in the beginning and become a drag later on.
• Over time I get used to everything and start taking it for granted.
• Money does not make me happy.
• Traveling alone is helpful for a new perspective on life.
• Assuming is stifling.
• Keeping a diary supports my personal development.
• Trying to look good limits my life.
• Worrying solves nothing.
• Material luxuries are best enjoyed in small doses.
• Having guts always works out for me.

Stefan Sagmeister: Things I Have Learned from My Money Blog.

© MyMoneyBlog.com, 2013.

The whole family got to do many things they’d never do otherwise. Financially, they offset their mortgage by renting out their Boston home completely as-is for a year to another family on a temporary work assignment. His wife Kristin was able to get a job teaching elementary school in Norway for a year, as it was a remote area that needed teachers. They could keep expenses low as the tiny village had no need for a car, no malls, and no restaurants. One of his pursuits ended up being an iPhone app that took off and now supports their entire family, although that wasn’t the goal.

The inspiration came from the TEDtalk “The power of time off” by designer Stefan Sagmeister. Here’s a screenshot (sorry for the poor quality) illustrating the traditional working timeline: learn for 25 years, work for 40 years, then retire for 25 years.

A commenter pointed out that this shows that our society seems to feel that education is for the young, work is for the middle-aged, and leisure is for the elderly. But what if you decided to snip 5 years from those retirement years and sprinkle them between your working years? This is essentially the idea of sabbaticals, usually associated with tenured professors taking a paid year off from their usual teaching and research duties. Every 7 years, Sagmeister completely shuts down his popular design shop for an entire year.

Both Sagmeister and Winston Chen add that if you do this, you shouldn’t just give yourself a year of nothing and expect to figure it out along the way. At the minimum, you should make a list of all the things that you want to try and/or accomplish (Chen’s included oil painting, photography, reading, learning Norwegian, and learning how to play the ukulele). Both broke it down into a daily schedule as well (Chen’s is below).

(click to enlarge)

I’ve been thinking about doing something similar, except with a straight-up house-swap where we live in say a French house and the French family gets to live in an American house, so that housing costs are pretty much taken care of. I don’t think food costs should be too bad, and I’d like to find a city where public transportation is all you need. My favorite quotes from Chen’s follow-up comments:

Society tends to throw obstacles in front of people who want to do things out of the norm. [...] I really believe everyone can do it, if you want it badly enough.

Chen blogged about his adventures at http://arcticdream.me/. A similar concept of “mini-retirements” was also explored in the book The 4-Hour Workweek by Tim Ferriss. NPR segment found via @steveo3387, RT by @ramit. Here’s the TEDtalk embedded:

Non-Traditional Retirements, or DIY Sabbaticals from My Money Blog.

© MyMoneyBlog.com, 2013.

Anyone can take the courses online, but if you want the accredited degree and grades you’ll still need to gain admission into the program. As AT&T is funding the 2014 pilot program, it appears that most initial students will be from AT&T and other corporations affiliated with Georgia Tech, with enrollment hopefully ramping up in future years. Still, this is a big step in the evolution of online education, and especially good news for those looking to get further education but can’t afford to be a full-time on-campus student.

More news coverage: Atlanta Journal-Constitution, Forbes, WSJ

If this is successful, it’d be natural to wonder about a cheap, 100% online bachelor’s degree from a major public university (not some regionally accredited/for-profit diploma mill). I can’t help but keep recall this excerpt from Is College a Lousy Investment? by Megan McArdle:

In Academically Adrift, their recent study of undergraduate learning, Richard Arum and Josipa Roksa find that at least a third of students gain no measurable skills during their four years in college. For the remainder who do, the gains are usually minimal. For many students, college is less about providing an education than a credential—a certificate testifying that they are smart enough to get into college, conformist enough to go, and compliant enough to stay there for four years.

Will such online degrees maintain the same prestige just with a lower price tag, or will it just devalue the entire concept of having a degree even further? Or will an on-campus degree always be seen as better?

Georgia Tech Online Master’s Degree in Computer Science: $7,000 from My Money Blog.

© MyMoneyBlog.com, 2013.

Charles Munger is best known as Warren Buffett’s long-time friend, business partner, and vice-Chairman of Berkshire Hathaway. I find him fascinating on many levels – as a thinker, investor, philanthropist, and even philosopher. One of my favorite tips from him is to Work For Yourself An Hour Each Day, something I found in Warren Buffett’s biography The Snowball.

Here’s a memorable quote from the book dealing with his childhood:

Like Warren Buffett, Munger inherited no wealth. [...]

“While no real money came down, my family gave me a good education and a marvelous example of how people should behave, and in the end that was more valuable than money,” explained Munger. “Being surrounded by the right values from the beginning is an immense treasure. Warren had that. It even has a financial advantage.”

Right now, there is a lot of focus on teaching “financial literacy” – which is good – but if you’re a parent of young children I feel that you have to think differently. It’s not critical to give your kid some fancy allowance iPhone app or online savings account to teach them how to manage money. What you should really be conscious of is how you act around them. Positive character traits like self-discipline, being dependable (keeping your promises), and frugality (not being wasteful) are often best taught by example. Watching you and learning such traits will help them to avoid credit card debt more than showing them how APR works. If only I could just buy them a book or something.

Charlie Munger on Parenting and Childhood from My Money Blog.

© MyMoneyBlog.com, 2013.

Shoprunner is similar to Amazon Prime in that it offers unlimited free 2-day shipping with no minimum order amount from a variety of online merchants including Newegg, Babies R Us, Blue Nile, Sports Authority, Drugstore.com, and GNC. It also allows you free return shipping and the ability to ship to any address, making it handy for gifts.

If you have an American Express card, you can now get a free 1-year membership at Shoprunner or a 1-year extension on an existing membership by going to shoprunner.com/americanexpress. You’ll need a consumer or business American Express card issued by an AmEx-affiliated bank (Starwood Preferred yes, Blue Cash Preferred yes, Business Gold yes, Costco yes, FIA/Fidelity no, Citibank no, prepaid versions no).

I’ve been enjoying my free membership from other sources for over a year now, although I wouldn’t pay $79 a year for it. I don’t know if this is still available, but you used to be able to get another free 90-day extension by signing up for Shoprunner Central. This service scrapes your Gmail or Yahoo e-mail account to help keep track of receipts. You need to allow them access your personal information, which I was not cool with, so I just used my seldom-used @yahoo.com e-mail account.

Fine print:

You can receive a one-year promotional ShopRunner membership if you enroll an eligible Card at www.shoprunner.com/americanexpress by May 15, 2014. An “eligible Card” is a valid American Express U.S. consumer or small business credit or charge card issued to you by the U.S. banking subsidiaries of American Express. All single-load and general purpose reloadable prepaid products (including, for example, the American Express Gift Card, American Express Prepaid Card, Pass, Serve, and BlueBird), American Express Corporate Cards and American Express-branded cards or account numbers issued by third party financial institutions are not eligible. In addition, you must put an eligible Card account number on file with ShopRunner during the ShopRunner enrollment process to receive this offer. This eligible Card account number will also be used to validate your eligibility for this offer with American Express and as your primary 2-click express checkout payment option when such option is available at the retailer website. If you have an eligible Card and already have an active ShopRunner membership, you may also enroll in this offer and you will receive the promotional membership at the end of your existing membership. Limit one promotional membership per eligible Card.

Free Shoprunner Membership with American Express from My Money Blog.

© MyMoneyBlog.com, 2013.

When I wrote about What are the Cheapest Vegetables Per Pound?, reader Brady kindly pointed out the Aggregate Nutrient Density Index (ANDI) as a measure of relative nutritional value. Which got me to thinking, which vegetable or fruits provide the most nutrients per dollar? I decided to start with fruits first.

The ranking calculation is detailed below, but here are the top 15 fruits ranked by nutritional units per dollar:

Top 10 Frugal Fruits (Nutrients per Dollar)

1. Oranges
2. Plums
3. Watermelon
4. Bananas
5. Apples
6. Kiwi
7. Strawberries
8. Grapefruit
9. Tangerines
10. Mangoes

Ranking Calculation

A. Nutrients per Calorie is measured by ANDI. Specifically, ANDI measures micronutrients (vitamins, minerals, and many other phytochemicals) per Calorie and is scaled between 0 to 1,000. The values can be found online at creator Dr. Fuhrman’s site and others like Whole Foods. ANDI primarily only covers whole raw fruits, so I didn’t include canned or frozen fruit as I wasn’t sure how that would affect the nutritional densities.

B. Calories per cup of fruit was obtained from the USDA National Nutrient Database. A rather neat tool covering hundreds of different types of food, and relatively easy to use.

C. Cost ($) per edible cup was found via the aforementioned USDA research paper called How Much Do Fruits and Vegetables Cost? [pdf]. The USDA got these numbers from a 2008 nationwide survey of over 60,000 households taken over a 1-year period.

Now, in order to get the units correct, you have to divide multiple A by B to get nutrients per cup and then divide that result by C. Final result: nutrients per dollar.

Commentary

After the recalculations, oranges are the top frugal fruit.

I was surprised that watermelon was such a good nutritional value, given that I think of it as a summertime treat consisting mostly of sugar water (which it is). Some quick research reveals that it is also high in Vitamin C (antioxidant), Vitamin A (beta carotene), Vitamin B1 (thiamine), lycopene (antioxidant), potassium, and magnesium. As a kid, we’d always buy cheap watermelons off the side of the road from someone in a pickup truck. The hardest part was having to wait while the watermelon got cold in the fridge overnight. Gotta buy some watermelon this summer!

Outside of the top 5-7 fruits, the values are so close such that small variations in price would change the rankings. Prices may vary due to geography, seasonal availability, or simply a good sale. Apples are considered year-round fruits, strawberries are spring/summer, plums are summer, and oranges are winter/spring. Farmer’s markets are often a good place for seasonal fruit at a good price.

I didn’t list them here, but the fruits with the lowest nutritional bang for the buck include raspberries, cherries, and grapes. Of course, eating any fresh fruit at all is better than having a glazed doughnut or a Frozen Coke like I did yesterday (ANDI value of 1 ).

Top 10 Frugal Fruits: Which Fruits Offer the Most Nutritional Value Per Dollar? from My Money Blog.

© MyMoneyBlog.com, 2013.

The more selective the school, the higher the return on investment (ROI) as calculated by Payscale. Here the annualized ROI seems to average around 10%, while other studies have found it closer to 16%. Public schools tend have a higher ROI than private schools (remember that ROI isn’t in absolute dollars). The bad schools are pretty bad, as Payscale found that 1 in 5 have a negative ROI over 30 years.

The lifetime earnings of a graduate also varies widely with the type of major and subsequent occupation:

The above charts deal with graduates. Another issue is that less than 60% of students who enter a 4-year school even finish within six years. That means you spent lots of money on tuition with no diploma at all.

Basically, the Brookings report points out that some students actually end up worse off due to college, especially if they don’t graduate. The authors suggest that this means you should enroll at the most competitive college that you can get into, as well as perhaps focus on the most lucrative major with which you find a fit. They also promote the idea of apprenticeships and vocational education as an alternative.

Calculating the ROI of a 4-Year College Degree from My Money Blog.

© MyMoneyBlog.com, 2013.

Health Insurance Marketplaces
Every state will soon have a Health Insurance Marketplace where individuals, families, and small business owners can shop online for insurance. Open enrollment will start October 1, 2013. Coverage will start January 1, 2014. As early as June 2013, the website Healthcare.gov promises to have more details (sign up for updates). So far 18 states and the District of Columbia have elected to have state-run exchanges. 25 states will have federally-run exchanges. 7 states elected to have planned partnership exchanges where the responsibility is shared. Here is the state-by-state list.

(Even members of Congress will be buying their insurance from these Marketplaces in 2014. So at least the D.C. plans will be affordable. )

Application Process
You will be able to apply online, by phone, in-person, or by mail. The latest draft is a simple 3-page application [PDF] which is refreshingly short and simple.

The biggest difference is that the PPACA doesn’t allow insurers to deny people with pre-existing or chronic conditions, so they don’t even ask. I’ve filled out individual health insurance applications at sites like eHealthInsurance and will ask for your entire medical history. There will still be a price difference based on age, but the law states that you can only charge an older person a maximum of three times as much as the youngest adult they cover.

Another nice feature is that if you apply online, you’ll enter your income details and be able to see your tax credit immediately. Even better, it will be sent directly to the insurer thus directly lowering your out-of-pocket costs without having to wait to file a tax return.

Tax Credits and Subsidies
A majority of households will get some sort of tax break. There will be subsidies provided to households with annual income up to 400% of the federal poverty level (FPL) (~$88,000 for a family of four). Individuals and families earning less than 250% of FPL (~$27,000 for an individual and ~$55,000 for a family of four) are also eligible for additional cost-sharing credits.

Plan Options: Bronze, Silver, Gold, Platinum
Each state will have their own set of plan options, broken down into four tiers: Bronze, Gold, Silver, and Platinum. All must cover “essential benefits” as well as match the benefits of a benchmark “typical employer plan” from a major provider.

The four levels are based on actuarial value (AV), which is a fancy way of saying how much of the total healthcare costs the plan will cover. For example, the Bronze level has an AV of 60%, which means the deductibles, copays, coinsurance, and annual out-of-pocket caps are set so that on average the plan pays 60% and the consumer pays 40%. The AV for Silver is 70%, Gold is 80%, and Platinum is 90%. As you’d expect, Bronze is the cheapest and Platinum is the most expensive. The Congressional Budget Office estimated that the annual premium for a bronze plan would be roughly $5,000 for a single person (~$400 a month) and roughly $12,000 for a family (~1,000 a month), but that is before subsidies. I’d wait until the exchanges actually go online before trusting these estimates.

Penalties
For 2014, individuals who are not covered by an acceptable insurance policy will be charged an annual penalty of $95 or 1% of income over the filing minimum, whichever is greater; this will rise to a minimum of $695 ($2,085 for families) or 2.5% of income over the filing minimum by 2016. This penalty (ahem, tax) cannot exceed the national average premium for Bronze health plans. This means that for a healthy person, it may be much cheaper to simply pay the penalty and just sign up for insurance if and when they get sick, as you won’t be denied coverage due to pre-existing conditions like the old days. See this WaPo article for more.

If you currently have a good individual plan or high-deductible health plan that you like, my understanding is that you’ll be allowed to keep it as you long as you keep renewing.

Affordable Care Act Summary for Self-Employed, Unemployed, and Early Retirees from My Money Blog.

© MyMoneyBlog.com, 2013.