Archives for December 2006

A Better Way To View Stock Market Risk

Posted on December 13, 2006 // 48 Comments

(alternate title: Don’t Put Your Roth IRA into CDs or Cash!)

The prospect of losing your hard-earned money is scary. You know that if you invest with $1000 in stocks, in a year you could be left with either a huge gain or a huge loss. People (including me in the past) tend to look at the stock market like a slot machine:

Wrong Outlook

This is good in that, yes, for the short-term the stock market is risky. Don’t put money you may need right away into stocks. However, when young people tell me that they are putting their Roth IRAs in a bank CD because they are afraid of the stock market, that is bad. Roth IRAs are long-term investments. We’re talking 30, 40, 60 years for some people! The way you should be looking at the stock market is this:

Correct Outlook

[Read more…]

Filed Under: Investing, Retirement //

Understanding My Local Real Estate Market – Portland, OR

Posted on December 13, 2006 // 29 Comments

Although I try to keep this blog pretty geographically neutral, many of you know that I currently reside in the Portland, Oregon area. Although we aren’t planning to stay here that much longer, it’s a great place to live and we almost hate to leave. But we have made personal commitments to move closer to our family. In the meantime, my new hobby is going to be learning more about the local Portland real estate market. Hopefully I can better understand which cheaper neighborhoods are on the upswing and also look for houses for potential rentals. It also gives me something to do before we find new jobs and can therefore start looking for houses for ourselves. 😉

Besides comparing mortgage payments and the market rates for rent, I also need to figure out:

  1. Local property tax rates
  2. Average home insurance costs
  3. Average Vacancy rates
  4. Home warranty costs
  5. How to find foreclosure listings and auctions
  6. Property manager recommendations and rates
  7. (anything I’m missing?)

I’m probably not going to contact any real estate agents or mortgage brokers just yet, as I don’t want to waste their time. I’m going to hit the Open House circuit on weekends and maybe talk to For Sale By Owner houses. Pretty much keep it low key, but hopefully educational too. Also, I’ve discovered that while people tend not to like talking about money and salaries, they are much more willing to talk about houses!

Filed Under: Real Estate //

Private Mortgage Insurance (PMI) Is Tax-Deductible In 2007

Posted on December 12, 2006 // 14 Comments

Traditionally, if you couldn’t afford a 20% down payment on a house, you had to pay private mortgage insurance, or PMI. To avoid this, many people now take out “piggyback” or second mortgages, which carry higher (but tax-deductible) interest payments. But Congress just passed a provision allowing taxpayers with adjusted gross income of $100,000 or less to fully deduct (if they itemize) the cost of private or government mortgage insurance. The mortgage insurance contract must be issued in 2007, and currently only 2007, unless they extend it. More information can be found in this MSNBC article “Homeowners’ Lucky Day”.

This is potentially good news if you’re currently trying to buy a house with less than 20% down, but doesn’t really help the people who are already paying PMI.

Filed Under: Real Estate //

The Automatic Millionaire Homeowner: Book Review

Posted on December 12, 2006 // 17 Comments

David Bach has sold a lot of books under his “Finish Rich” and “Automatic” titles. Most of his books seem to be heavy on the inspirational talk and light on the specifics, but I think that’s actually what has helped them sell so well – they are targeted for beginners.

Case in point, I wasn’t very impressed his earlier book The Automatic Millionaire (review), but as a home-buying neophyte I found a lot of useful information in The Automatic Millionaire Homeowner. Sure, he recycles a lot of his “make it automatic” mantra when talking about saving up for a house down payment (set up automatic transfers to a online savings account) or setting up a bi-weekly mortgage repayment plan (set up automatic transfers with your lender), but you can pretty much just skip over those parts.

Besides all the automatic-talk, what this really provides is a brief overview of the home-buying process. Think of it as “Home Buying For Dummies”, but even shorter. From finding a real estate agent, to finding the right loan, to finding the right home. The writing is clear and well-organized. It promotes long-term homeownership, and is not at all about flipping properties. However, if you’ve already gone through the process once, the book will probably bore you to death.

The main weakness in the book is that it focuses on the upsides of homeownership without fairly discussing all the potential downsides. It’s very “rah-rah”, you can almost imagine David Bach wearing a cheerleader’s outfit complete with pom-poms:

original image credits: DavidBach.com, Party411.com

“I say BUY, you say HOUSE!” “GO REALTORS GO!”

(I added the Wells Fargo logo as he is sponsored by them.)

Conclusion
I would recommend this book for first-time home buyers, as it provides some helpful information. But, I would not recommend it as the only book to read, as it is doesn’t address the pros and cons as fairly as possible.

Overall Rating: 3 Stars [ratings explained]

Filed Under: Book Reviews, Real Estate //

New Costco ShareBuilder $90 Bonus Promotion

Posted on December 10, 2006 // 32 Comments

Sharebuilder is Costco’s “Service of the Month” for December, and they are running a promotion offering $90 Costco Cash for Executive Members ($70 for Gold or Business Members). There’s no reason not to go for the $90, since you can’t lose with Executive membership – They’ll pay you back any of the $50 extra you don’t gain in purchases. You do need to open an account and make one stock purchase.

Don’t have Costco? You can find a bunch of regular $50 Sharebuilder promotional codes here. Now, unless you really want to use Sharebuilder as your broker, there are two options to get your bonus, as selling stock there costs $15.

  1. Instant Gratification:Open with $5. Buy $1 of stock and pay $4 for commission. Wait for your bonus. Let the $1 in stock just rot there.
  2. Delayed Gratification: Open with $50. Buy $46 of a quality stock like Berkshire Hathaway and pay $4 for commission. Get the $50 (or more), and treat it like you just got free stock. Just sit back for a decade or two while it grows and grows. Details on this method here.

If you choose the latter and are going to open with at least $20, you can try to combine this with the $20 back from eBates. You can only get one eBate rebate, but myself and others have successfully gotten multiple Sharebuilder bonuses by applying again after getting the first bonus. Others simply opened up multiple accounts for others in their household: spouse, kids, parents, and so on.

Filed Under: Deals & Offers //

Five Things You May Not Know About Me

Posted on December 10, 2006 // 7 Comments

Okay, this isn’t financially related so feel free to tune out. I was tagged by Steve at AdventureMoney to reveal five things you might not know about me. In response, I submit to you these five tidbits:
[Read more…]

Filed Under: General //

In School And Working? Funnel Your Expenses Through A 529

Posted on December 9, 2006 // 16 Comments

29 states and the District of Columbia offer a tax deduction or credit for residents who contribute to their state’s 529 plan. Here is a list of them all. If you’re working your way through school, you should definitely try to take advantage and open a 529 plan for yourself.

How? It’s easy.

  1. Open a 529 and make yourself the beneficiary.
  2. Then, contribute to the plan and get the tax break, using the most conservative option (since you’ll be spending the money soon).
  3. Finally, take the money back out of the 529 plan to pay for your college expenses.

You must make sure that it’s okay for the contributor and beneficiary to be the same person. Also, you can’t pay for things with a 529 distribution that you want to use for the Lifetime Learning Credit. But this shouldn’t be a problem, as 529 plans are allowed to cover room and board, not just tuition. All you have to do is look up your school’s estimated tuition chart and see what their estimated room and board costs are.

For example, let’s take Oregon. You can deduct $2,000 a year in contributions. At Oregon’s 9% marginal rate, that’s $180 in savings each year. The estimated room and board for Oregon State University is $7,344, easily over $2,000.

Filed Under: Taxes //

Weekend Project: List One Thing On eBay

Posted on December 9, 2006 // 15 Comments

While digging through the garage to find our (three) Christmas decorations, boy did I find a lot of junk. I’m pretty sure that everyone reading this has a least one thing that they feel has some value and also don’t want. Old cell phones, DVDs, that-old-thing-you’ve-had-forever, whatever. Remember my 3 eBay selling tips:

1) Just list it. – The most common mistake I see people make is put off listing their items for sale, waiting for the perfect time or when they’re less busy. Unless you are listing antiques, your stuff is losing value by the second, especially electronics.

2) Take a picture. – Wouldn’t you rather see the actual thing you are buying? This is critical to getting the best price.

3. Make your description honest, clear, and concise. There is no need for fancy templates or a dissertation on your product. People just want to know what it is, and if there is anything wrong with it. I’ve seen so many auctions that have plain straightforward text with a good picture sell for much more than a gaudy listing that’s 3 screens long.

In other words, it really shouldn’t take more than 15 minutes to list your item. Just snap a picture, and write up a paragraph about it.

Filed Under: eBay, Frugal Living //

Modest Needs and Kiva: See Where Your Money Goes

Posted on December 8, 2006 // 16 Comments

One of the things I don’t like about some charities is the lack of specific impact. Where is the money really going? Here are two charities that use the internet to add transparency and interaction to your charitable giving. In addition, they offer a way to leverage your donation to create even better change.

ModestNeeds.org is a non-profit 501(c) charity, operating predominantly online, with a goal of helping people who live paycheck to paycheck survive past life?s unexpected speed-bumps and perhaps save them from a slippery slope to financial ruin or even homelessness. Most of their ?grants? are less than $300 and go for things like unexpected medical bills. You can see all the money requests, and even vote on which requests to fund. The neat thing is that it started with just one teacher giving 10% of his salary every month.
[Read more…]

Filed Under: Giving Back //

Citi Credit Protector $100 Gas Rebate Update

Posted on December 7, 2006 // 19 Comments

As promised, this is a quick update to the Citi Credit Protector $100 Gas Rebate offer. If you signed up, don’t forget to cancel your 30-day trial. The number again is 1-888-592-7344. If you haven’t, the offer is still available.

Here is a scan of my rebate form. It’s for the $100 all at once, and it says nothing about having to remain a member to redeem. I called to confirm and they said that receipts before your sign-up date are not valid (makes sense). I did a lot of driving over Thanksgiving and easily spent $100 in gas, so I’ll be sending in my rebate form in tomorrow. Hopefully this will be another easy hundred bucks to fund my gifts… uhh, Roth IRA! 😉

Filed Under: Deals & Offers //

Google Checkout Now Free Until 2008

Posted on December 7, 2006 // 4 Comments

Google has extended their free credit card processing until December 31st, 2007. Not only is Google’s normal commission of 2.0% + $0.20 already better than PayPal’s base level of 2.9% + $0.30, but now you can get a whole year fee-free. If you accept any non-eBay payment via PayPal now, this is a great incentive to switch. I’ve already accepted a few payments through the service, and it has been very smooth. You simply send your clients an invoice, much like you would through PayPal, and they can pay with any major credit card. Most still pay me with checks, but now I don’t have to think twice about losing 3% to fees.

As you might expect, some people are trying to use this promotion to gain free frequent flier miles and whatnot, but I’m staying clear of that. My taxes are already messy enough, without thousands of dollars running around in circles. Still, now you can pay your friends back and also earn some credit card rewards at the same time.

Filed Under: Credit Cards, Entrepreneurial //

E-Loan 5.38%, iGObanking 5.30%

Posted on December 6, 2006 // 17 Comments

» E-Loan Savings lowered its rate from 5.50% APY to 5.38% APY. Commenters to my Eloan Savings review added that they had some transfer glitches as well.

» iGObanking is yet another online no-minimums savings account, offering 5.30% APY. I know little else.

» Capital One 360 recently raised its rate from 4.40% to 4.50% APY. $25 opening promotion.

See my online savings account comparison for a summary of the banking options out there.

Filed Under: Banking //
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