Archives for March 2007

Family Emergency / Bereavement Airfares: Worth A Try

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

I recently learned that if you have to fly on short notice due to a medical emergency or a funeral, there is something called a “bereavement fare” or “compassion fare”. The rules differ between all the airlines, but basically if you qualify you get around 50% off the highest non-restricted airfare available. You’ll need to call each airline directly for details. These full fares can be extremely high, and even at half-off still way more than what you would get at a site like Expedia.com. The main benefit to these fares is that you can usually change your arrival and departure dates much more easily and without penalty fees. Here is a good article at SmarterLiving that goes into more detail about bereavement fares.

First, we went browsing online. Usually when you sort the results by price it looks something like this: $300, $315, $340, $410, …

But given our short notice, it went like this: $300, $800, $900, …

I called to get a price quote for a bereavement fare and the price was about double the lowest online fare. Luckily, the flight schedule that was available for the lower price was something we could work around. If that flight schedule was sold out, we would have gone for the bereavement fare.

Another idea to try is that you can try to use your frequent flier miles, and if you qualify under their bereavement fare rules (and there is a frequent flier seat available) they may waive the 14-day advance booking requirement. In the end, it’s a good thing to know that these alternatives exist, especially due to the added flexibility. But it’s quite likely that you’ll be able to do better on your own.

Confessions Of A Car Salesman: Beware Of The Four Square!

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

The Consumerist has a very enlightening article from a former used car salesman about the tricks that he used on customers, and how to recognize them. It’s a long article that contains a lot of common sense advice, but I found the carefully planned psychological tactics that they employ the most intriguing. Distraction, confusion, manipulation…

At the heart of it all is the “4-square,” a sheet of paper divided into four boxes: your trade value, the purchase price, down payment, and monthly payment. This is supposed to help you and the dealership come to an agreement, but as you’ll see, it’s really more akin to three-card monte dealer’s deck of cards. Many, but not all, dealerships use this tool.

4square, image credit: Consumerist.com

I’ve only shopped for a car by myself once, right after I got offered my first job. My experience was exactly as described by this article. They broke out the 4-square form, started high, tried to wear me down, showed me how good of a deal they were giving me as compared to the original price, all of it. Even down to the part where they made me sign the “X” to signify that if the price was right, that I would buy today.

I ended up talking about a used Toyota 4Runner that caught my eye, and somehow the price went from $21,000 down to $16,000 after 45 minutes of me saying “I don’t know, I need to think about it”. (What I was really thinking was – let me use your computer so I can look up the Blue Book value and see how badly you’re trying to screw me.) The whole sleaze factor turned me off so much I just stuck with my trusty old Nissan – which I still have today.

Also, if you haven’t read it before, check out this (also very long) expose as an undercover car salesman by a writer at Edmunds.com.

I do have a confession to make though – I have caught a few episodes of King of Cars late at night and it was pretty entertaining!

Have You Checked Out Your Local Public Library Recently?

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

library books, image credit: mountsaintvincent.eduAs a kid, I went to the library weekly, grabbing new books and getting yelled at for misplacing overdue ones. Even now, I remember feverishly looking for the next book in the Boxcar Children series, or re-reading How To Eat Fried Worms for the 86th time. Then I went for about ten years without public library card. I guess my recreational reading activity dropped due to school, work, and good ole’ cable TV. For a while I just bought every book I wanted from Amazon (mainly with gift certificates from various online offers). But over the past year I have again become a regular library visitor.

First of all, the selection is great. In addition to books, a lot of popular music albums and DVDs are available. Recently, I’ve gotten the newest Snow Patrol album and a full season of the Sopranos. Other features which may be in your area are Library2Go, which offers audiobooks that you can listen to on your mp3 player, and NetLibrary, which offers e-books that you can download to your computer or PDA.

My favorite feature is the internet-based hold system. I go online, pick out all the books I want, and make a few clicks. I get to see exactly how many people are ahead of me, and when the book is ready, it’s shipped directly to my local branch (only a few blocks away) and I get an e-mail saying it’s waiting for me. Renewing online is just as easy. I love it.

So don’t miss out on this great resource. I still buy a lot of books, but I can browse and explore so much more content this way. Also, this means there’s no good reason why you can’t read some of the best investment books out there. Check one out this weekend!

Possible Free FICO Score w/ 15-Minute Lesson

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Here is a potentially free FICO score and report for students that are willing to endure a 15-minute spiel, but it appears to be limited to the first 5,000 people. I’m running behind on a project, so let me know if it works 🙂 Thanks TK.

We’ve arranged with the Fair Isaac Corporation to pick up the tab on the first 5000 students who want to check their credit score. That’s right. It’s absolutely free.

So enter your info below to start. We’ll take you through a 15 minute tutorial on credit basics, credit cards, and building your credit. Once you’ve completed this 15 minute lesson, you’ll receive a free code and a link to MyFICO.com. Once you’re there, drop the code into the discount box and save yourself the $15.95.

How Good People Make Bad Investments

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Here’s another article by Jonathan Clements that I enjoyed – How Good People Make Bad Investments from the Wall Street Journal. It points that some traits that help us success in other parts of our lives actually hurt our investing performance.

For example, you would like to think the more energy you put into researching and trading stocks, the better your returns would be. But the research and historical data simply doesn’t support that. Here are some excerpts:

Athletes who train hard are more likely to win. Students who study conscientiously are more likely to get good grades. What about investors who diligently research their stocks? They’ll probably earn mediocre returns.

The fact is, the markets are full of savvy investors, all hunting for cheap stocks. Result: If there are any bargains to be had, they don’t stay that way for long. Indeed, much of the time, share prices are a pretty good reflection of currently available information.

“If you put in more effort, you’ll end up with worse results,” reckons Terry Burnham, co-author of “Mean Genes” and director of economics at Boston’s Acadian Asset Management. “It’s not the work. It’s the action that comes out of the work that’s the problem.”

Every time we buy a supposedly bargain-priced stock, we incur commissions and other trading costs. In addition, if we trade in our taxable account, we may trigger big tax bills, further denting our returns.

[…]

Your index funds will simply replicate the performance of the underlying markets, minus a small sum for fund expenses. Sound dull? You may be more excited when you look at your results — and you realize they’re so much better than those earned by optimistic, hard-working active investors.

A Warm Slice Of Humble Pie

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

slice of pie, image credit: http://www.mcpies.comI’ve been trying recently to try and make some minor adjustments to the target asset allocations of my portfolio. I want to create something that I won’t be tempted to change again for many years. While attempting this, I keep noticing how hard it is for a beginning investor to try and figure out where to put their hard-earned money. So many websites, books, magazines, television shows… and the amount of information being thrown at you just seems to multiply daily. Everybody has an opinion, including me. Am I right?

Who knows? I don’t. I’m simply doing the best anyone can do – read a steady stream of books, academic studies, participate in discussions, and then making a decision based on that information. I try look at the bigger picture and draw conclusions based on historical studies going back from the 1920s and not five-year historical returns. But none of us can predict the future.

What is accepted as common knowledge often changes with time. My own views shift as I read more. I also see a lot information out there that I disagree with. Therefore, I encourage everyone to do their own due diligence, keep their minds open, question things, and try to separate the wheat from the chaff for themselves. All I can do is to promise that I will try to keep doing the same.

(This will be added to my compilation of posts about managing money called My Rough Guide To Investing.)

Expense Tracking and Budget Results – February 2007

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Yes, you read it correctly. It’s the end of March and I’m finally typing in the last of my receipts into my PearBudget spreadsheet. Tsk tsk.

Overall Results
I started out strong, with my carefully laid out Expense Tracking Plan of Attack (with all of 2 steps!), and my Mid-Month update. But then I started dreading the monotony of sifting through receipts. “I’ll do it tomorrow” are four very dangerous words.

My usual method for managing my spending is to simply consider each and every purchase before I make it. The main benefit of typing in these receipts over that is the ability to judge my progress and perhaps adjust my money “attitude” as the month goes on. Am I in thrift-mode or relaxed-mode? It gives you an reason to perhaps not splurge on that seemingly minor-item, either for yourself or as an explanation to others – “Oh, I’ve already spent to much on XXX this month”.

But I did finish, and I still think that everyone should do this if they are trying to improve their financial situation. The only two ways to get more money is to either make more or spend less. And the best way to spend less is to fully comprehend what you are buying.

Specific Numbers
I won’t share all the gory details, but here are some of the major categories. This is for two people:

February Budget Results

The first step of the budget spreadsheet is to put down the amount of money you want to budget for each category. If you have never tracked your spending before, you may be very surprised after the first month and need to make some adjustments.

We were actually pretty close in most of the categories. We could do better than $600 a month on food, but we consciously enjoy eating out and it is within our means. We bought some new ski gear and bought some gifts this month but nothing special, so I should probably bump up the allowance for the “Personal” category a bit more.

One surprise we did have was our heating bill. Old house + old furnace = $200+ gas bill! Even when we had electric baseboard heat in our old house our heating bills peaked at $100. Nothing we can really do about it now, but it’s something we should have considered it while browsing for rentals.

In the end, the only real thing I would change is to add more cushion into our budget for “expected” unexpected expenses that I’ve mentioned before. To that end, I think I’ll continue to try out new budgeting methods each month.

Sunrocket VoIP Phone Service – 2 Years for $199

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

SunRocket VoIP is currently offering 2 years of phone service for $199, expiring tomorrow (3/28). If you miss it, this “special” seems to come around once every few months. I’ve been using SunRocket instead of a landline for well over a year now now and I remain very satisfied for the price (I paid $199 for the 1st year and $99 for the 2nd) – check out my SunRocket Review for details. There have been no added or surprise fees.

Added: You can also get two years for $229 from ViaTalk VoIP.

My Net Worth Tracking Template

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

You may be curious as to how I keep track of my net worth updates. It’s actually highly manual and nothing fancy. I simply log into Yodlee account aggregation via Bank of America’s MyPortfolio and copy-n-paste the appropriate balances into this simple Excel spreadsheet file. Then I make a screenshot and post it online. This way, it only takes a few minutes – I don’t have to log into 12 different websites, I have a permanent copy for my own records, and I don’t have to write any HTML.

The net worth progress bar on the top right of this page is also made manually with a graphics program (I’ve migrated from Microsoft Paint to Macromedia Fireworks). If you are looking for something automatic for your own site, try this progress bar image maker or run a search for “percentage bar javascript”. Hope that helps!

My $300 Cup Of Coffee

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

I spilled coffee on my Dell Inspiron 4150 laptop today. It made a sad sort of grunt, and shut itself off… apparently forever. I’ve used compressed air and dried it all day, all to no avail. This was actually my largest impulse buy ever, at about $1,200. I’m very sad, this laptop has served me well for four years, and was my sole computer for a long time. Of course I bought the three-year warranty, which was never used. I don’t know if it covers spills anyways.

Now I’m considering my options:

  • Pay someone to fix it. Bringing it into a repair shop would probably cost $50 just for them to touch it… Then I’d have to pay for parts.
  • Fix it myself. Motherboards (if that is even what is broken) cost about $100 online. Probably not. Could it be another cheaper part? I don’t know enough to figure it out.
  • Sell it as-is on eBay. After looking on eBay, I see that my model would still sell at a pretty good price if it worked – about $300 before shipping. This broken one without a hard drive actually sold for $225. I can probably get any critical information off the hard drive myself and sell that too.
  • Sell the parts individually on eBay. There are all kinds of separate parts on that I could sell separately – hard drive (wiped first), monitor, keyboard, touchpad, memory, AC adapter, dvd/cd drive, recovery CDs? I don’t know if it would worth the hassle of dealing with possible returns as I can’t really test the items anymore.

Any suggestions? I’m probably going to take this chance to upgrade to a new laptop, given that you can get a basic one for under $500 these days.

Are You A “Maestro Of Money Management”?

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

A friend of mine sent me this link, and I think he was trying to mock me! 😉 It’s an article from the Wall Street Journal entitled Nickel-and-Diming Your Way To Riches, if That’s Your Thing Here’s an excerpt:

I thought I was fairly deft at handling money. But that was before I met the maestros of money management.

We’re talking here about the legions of Americans who manipulate their monthly cash flow like chess masters, along the way snagging frequent-flier miles, cash rewards and interest income.

Am I such a maestro? Are you? Let’s see:

Maestro Activity #1: Maximizing Bank Interest

Consider Dan Goldzband, a cost accountant in San Diego. He has his paycheck deposited directly into a high-yield savings account, where the money sits until he transfers it to his checking account to pay bills. His reward: $35 to $85 in interest each month.

“My checking-account balance rarely exceeds $100,” Mr. Goldzband says. “If it does for more than a couple of days, I am doing something wrong. Of course, only a compulsive like me could make this work. But the general idea, less rigorously applied, would still work for many people.”

Well, my checking account usually hovers around $500-$2,000, because we often have to write paper checks for weddings/graduations/baby showers/birthdays/donations. It’s not writing the checks that’s the problem, it’s that we can never tell when people are actually going to deposit them. Shrug. I also have one free overdraft per year on my Washington Mutual free checking account (review) as a backup anyhow.

But someone is exaggerating… At $35 a month in a 5% APY account, that is suggesting that he would otherwise have $8,000 sitting around earning 0%. ($85 would be $20,000+!) I doubt he needs that much for everyday cashflow. I would bet a good chunk of that is considered his emergency fund or other cushion. Not putting that away into a high-yield saving account would just be silly. The author agrees:

Meanwhile, if your checking account is on the plump side, keep enough there to avoid triggering fees and move the rest into a high-yield savings account or a money-market fund. If you shift $5,000 into an account paying 5%, you will pick up $250 in interest over the next 12 months.

Maestro Activity #2: Credit Card Arbitrage

Don’t have much money in your savings account? No problem. Maestros will borrow from credit cards with 0% introductory rates and then use the money to earn a little interest, often stashing the cash at EmigrantDirect, HSBC Direct or one of the other banks with high-yield online savings accounts.

Okay, I’m definitely guilty of this. I even got so many questions about it that I wrote a detailed, step-by-step Guide On How To Make Money From 0% APR Balance Transfers. Don’t miss the introduction though – this is definitely not for everybody.

Maestro Activity #3: Using Credit Cards But Paying In Full To Reap Rewards

When the maestros aren’t gaming those 0% offers, they’re hunting for the credit cards with the best rewards. Thanks to this strategy, Mr. Bilker says he hasn’t paid to take his family to the movies for two years. He’s also got $500 in convenience-store gift cards, and he garnered a $1,700 discount by charging $17,000 in kitchen remodeling expenses.

For many cardholders, the prize is frequent-flier miles. Bob Smith, a retiree in rural Michigan, has 30 credit cards. He charges everything, from groceries to utility bills, to whichever card is currently paying the highest reward. He figures he and his wife have collected more than 100,000 frequent-flier miles over the past year.

Yes, yes, I do this too. Here are the three cards that I keep in my wallet. The article even admits this may be worth the effort on a smaller scale:

Forget shuffling back and forth between your checking account, your savings account and the latest, greatest credit-card offer. Instead, go for the easy money. Pile your expenses onto a good rewards card and be sure to pay off the balance every month. Let’s say you charge $1,000 a month to a credit card that earns frequent-flier miles. That should give you enough points every two years to get a domestic round-trip ticket worth perhaps $400 — and maybe two or three tickets if the card pays double miles and gives you a sign-up bonus.

Maestro Activity #4: Keep Your Investment Expenses Minimal

Most important, focus first on your portfolio rather than your monthly cash flow. Suppose you revamp your $300,000 mutual-fund portfolio, cutting your annual fund expenses by half a percentage point. That would save you $1,500 a year — without the ongoing hassles that come with juggling credit cards and bank accounts.

Sure, that would be great, except my mutual fund portfolio expenses are already under 0.30% annually. 😛

Nickel and Diming, Huh, Punk?
Actually, I pretty much agree with the premise of the article. As I’ve said before, the time I spent talking about a subject is not directly proportional to how important I think it is. Mentally, I divide them into the big things that help guarantee I’ll reach my goals, and also the small things that will make those goals arrive earlier. Besides, it’s fun to have a profitable hobby. (My other hobbies aren’t cheap!)

The World Is Flat: Book Review and Commentary

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

I’ve been chipping away at it for months, and finally finished Thomas Friedman’s The World Is Flat: A Brief History of the Twenty-first Century. By a flat world, he means that the playing field is being leveled and the gap between emerging and developed countries is closing faster and faster. For many people this means the fear of losing jobs to outsourcing, but it’s actually a lot more than that.

Flat means less friction. Yes, less friction for jobs to go back and forth across the world (usually away from the US). But the same holds true for people, money, ideas, and even cultures. He says this is caused by the “triple convergence — of new players, on a new playing field, developing new processes and habits for horizontal collaboration.” We can either look at this loss of friction as a bad thing and try to ignore it or keep it from happening, or we can realize that it is inevitable and work to take best advantage of it.

Up to now, many of the best jobs were here, and you had to live here to perform them. But thanks to new technology like the internet and computers, as long as someone is able to learn the same skills, they can do it from anywhere. This varies from the familiar cheap manufacturing of goods and telephone support, to highly skilled jobs like corporate accounting, computer chip design, even medical procedures.

Up to now, the best education was here. To me, this is critical, and I don’t think people realize it enough. Historically, we have had the most advanced and desirable graduate schools in the world. While in grad school, just in my building alone, I was surrounded by the top students from Germany, India, China, Taiwan, Brazil, and Russia. I’ve heard their stories about having to be the top 0.01% in their country just to get here. The vast majority of these people ended up getting jobs and settling down in the US. If you look around, first-generation immigrants anchor many of the research arms of all our major corporations. Microsoft, GE, Genentech, Google…

In other words, this country has been skimming off much of the smartest and most driven people in the world for ourselves. That’s a pretty sweet deal. But as I type many countries are working feverishly to make their own educational systems better.

If another country has a similar or better educational system, and their workers can do it for less, you can bet the job will be moving there. Patriotism, protectionism, or whatever – it’s still fgoing to happen. This means that we need to work to improve our own education systems and get rid of any sense of entitlement. Soon, simply being lucky enough to have been born in the US won’t be enough.

The book touches on many more topics than this, and I don’t even claim to understand all of it. I’m not an economist nor am I much of a historian. Although Friedman overall is a great storyteller and good at explaining complex ideas, there are also several slow and repetitive parts that literally made me fall asleep while reading it.

Conclusion
In the end, The World Is Flat reminds us that we are all in constant competition with each other. Before, it was your neighbors across the street. Now, it’s anyone with internet access. While it is not a zero-sum game (there is not a fixed number of jobs), there will be people who do better than others. As Americans, we are being chased. Our choices are either to run faster or risk getting left in the dust. Just making us consider such a possibility is a good result from this book.

How you think this competition will unfold can also alter your investment strategy. I still haven’t made any conclusions regarding this, but have been considering simply weighting my investments in proportion to the value of the world’s companies (i.e. using a world market cap-weighted index).

Overall Rating: 3 Stars (ratings explained)