Archives for December 2007

Cast Iron Skillet: The Ultimate Smart and Frugal Cookware?

Posted on December 30, 2007 // 62 Comments

When we got married, we received some very nice cookware as wedding presents. Calphalon, non-stick, anodized, big bucks. But after years of abuse due to my poor cooking skills, my $50 frying pans are anything but non-stick anymore. So, yesterday I spent some of my holiday Amazon gift certificates on a Lodge 12-Inch Pre-Seasoned Cast Iron Skillet. (I also picked up a bond investing book and got free shipping.)

I know plenty of folks already have one of these, but I’m joining the bandwagon! This New York Times article Ever So Humble, Cast Iron Outshines the Fancy Pans outlines the many benefits well, but here’s a summary and my responses:

It’s cheap, durable, and lasts forever
Brand new, and even pre-seasoned, mine only cost $15. That’s a lot less than most fancy cookware, and you don’t have to navigate all the marketing ploys. You can probably pick up a slightly cheaper one secondhand, but I remember finding one a year ago at a garage sale and they wanted $15 for that too! Finally, besides the occasional re-seasoning, it should last forever as long as you don’t drop it on concrete or something.

You can cook at high temps without worry
I admit it, I like to fry a lot. But reports suggest that Teflon and other chemically-treated pans can give off dangerous fumes when heated to high temperatures. So you’re not supposed to pre-heat, sear, or use them in ovens. I look forward to searing my very first steak and then putting it straight into the oven to finish for a warm center. (Been watching too much Food Network…)

Just as nonstick when seasoned
From the article:

Well seasoned, it is nearly as nonstick as any manufactured nonstick surface and far more so than stainless, aluminum or even copper pans.

Sounds good to me. Seasoning isn’t even that hard – directions vary, but basically you just grease and bake. Purists will want to do it themselves, but to me having it pre-seasoned both saves time and doesn’t cost more. There a few small maintenance tips to keep the seasoning going – avoid steel wool, not too much soap, and keep it dry to prevent rust – but I think I can handle that.

All of my foodie friends and the vast majority of the Amazon reviews love their cast-iron. Do you? Anything else I should know?

Filed Under: Frugal Living //

Do I Need To Make Any Last Minute Year-End Tax Moves?

Posted on December 28, 2007 // 24 Comments

Yikes, I’m cutting things close this year. Time to see if there are any last-minute things I need to do with the last two business days before 2008.

Selling Losing Stocks or Mutual Funds
If you have some investments that are currently in the negative and you don’t want anymore, you might consider selling them and taking the loss. This is because you can deduct the loss against your other capital gains, or even reduce your taxable ordinary income (up to $3,000 each year). In general, people like doing this. You can’t buy the same “substantially identical” investment again for 30 days though, as that would break the IRS wash sale rule.

If you have some index funds that have high unrealized losses, you might even sell them and buy a similar fund at the same time. Again, the general idea here is to take advantage of the fact that the IRS tax capital gains and capital losses differently. Losses can “save” you money at your ordinary tax rate (up to 35%), while long-term capital gains are capped at 15%. More information and an example of this technique here.

I don’t have anything that I’m looking to sell, as most of my investments are in tax-deferred accounts. I have a $31 loss right now in BRSIX, but that’s not worth the potential commission of buying a similar fund.

Make A Tax-Deductible Donation
If you mail in a donation (including a check or credit card info), it must be postmarked by December 31, 2007. Be sure to get a receipt! Usually the easiest thing is to just charge it on your credit card in time. That way you have your credit card statement as backup, and you’ll also earn some cashback rewards while you’re at it. This is the first year we might actually get to itemize our deductions, so that’s kind of nice.

On a side note, all of my Kiva loans are still doing fine, and one was even paid back early (the somewhat-controversial one from apparently-rich Ukraine!).

Using Up Flexible Spending Account funds
Our usual routine is to spend the rest of our FSA money on contact lenses solution, eyeglasses, Benadryl, and Aleve at Costco. From last year, here is a big list of things that qualify for Flexible Spending Account reimbursements. If you don’t have any immediate needs, Mapgirl had a good suggestion that you can complete your first aid/emergency kit with things like gauze that don’t expire.

Filed Under: Frugal Living, Investing, Taxes //

Have Your Baby Before New Year’s Day, Save Thousands

Posted on December 27, 2007 // 22 Comments

The baby wings of hospitals are getting really busy now, more than any other time of the year. And it’s all Uncle Sam’s fault, because having a baby any time before 11:59pm on December 31st can mean over a thousand dollars in child tax breaks. In fact, if you have an income low enough to qualify for the earned income credit, the difference can amount to more than $3,000.

The New York Times explores this phenomenon that is making December 28th the most popular birth date of the year. It’s like something out of Freakonomics, which explored curious ways that people respond to financial incentives.

By my calculations, about 5,000 babies, of the 70,000 or so who would otherwise be born during the first week in January, may have their arrival dates accelerated partly for tax reasons. When Mr. Chandra interviewed one mother in central Kentucky, she told him her doctor encouraged her to schedule a late-December birth well in advance, to be sure she got a delivery room. Anecdotes aside, Mr. Chandra thinks my estimate of 5,000 is conservative, based on his own more sophisticated statistical analysis.

The article goes on to talk about the potential health concerns of timing births in this way. I’m no doctor, but I would think common sense would suggest that that pushing things forward by more than a couple weeks just for the money might be a bad idea. Induced births and C-sections are also more expensive than natural births, which knocks up the cost of healthcare in general if not directly to the parents. I guess I could see this being something to consider if the due date was January 1st or something, but otherwise it’s something I’ve never even thought about!

Filed Under: Taxes //

Merry Christmas Sweetie! I Got You… Nothing.

Posted on December 25, 2007 // 47 Comments

Well, it’s official. My wife and I didn’t get each other anything for Christmas. For one, we were too busy buying gifts for others and trying to get our handmade holiday cards out on time. (Okay, she was too busy with all that. I was just a slacker.) We had the following conversation about 10 times while shopping for stuff:

What do you want for Christmas?

Nothing. What do you want?

Nothing.

Okay, I’m getting you nothing then.

Okay. You too.

Okay.

Not that we are being especially frugal or eco-friendly or whatever, we just have too much stuff coming in from other folks as it is. Is that weird? I always thought it was a bit funny for wives and husbands to buy each other large gifts. Like how Lazy Man explores those Lexus commercials where the husband surprises the wife with a brand-new car.

If you use the “one-pot” method of managing married finances, doesn’t it just end up as you spending each other’s money without permission? Or it simply “letting up” when you usually would be like “heck no, you’re not buying that!” Anyhow, I hope everyone is enjoying their holidays and all the wonderful things out there that can’t fit in a box.

Filed Under: Family //

I Don’t Understand Why Gift Cards Are So Bad

Posted on December 22, 2007 // 63 Comments

Shh… I’ve already opened up some of my Christmas gifts. Wait, what is this? A gift card? Nooo!!! Evil!

It’s trendy to bag on gift cards right now. Liz Pulliam Weston says gift cards are not gifts and complains that “holidays have rapidly devolved into what amounts to an exchange of cash. A gift card says nothing about the personality of the recipient — but it says lots about the giver.”. Miss Manners is quoted as saying they are “a pathetic compromise convenient to people who do not trust their judgment about selecting the right present for those whose tastes they ought to know.” Consumer Reports even took out a full-page ad in the New York Times with the following message:

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Umm… So? How many *gifts* go sitting unused every year?! How many sweaters, handmade widgets, DVDs, scented candles, or whatever sit in your house right now, collecting dust in a closet. How about just saying “Last year, shoppers like you were out $80 billion because of unused, lost, or inappropriate gifts. Easy money for retailers…”

Truth is, converting cash into gifts of any kind creates the potential for waste. If you don’t want that, either (1) don’t buy gifts at all or (2) give cash.

I agree with Mighty Bargain Hunter when he says that gift cards are gifts. And like any gift, it can be good or bad. You know what happens when I receive a gift? I say thank you, and do what I can with it. Even if it’s hideous or not useful to me. I have mine all stored in baseball card sleeves ready to go.

Idea for gift card compromise?
First, pick something (doesn’t have to be perfect) that is in the price range you want. Then figure out the exact price, including sales tax. Buy a gift card in that amount, and attach a card with an explanation. “I thought you might like Rayman Raving Rabbits 2 for the Wii. Here’s a gift card for $54.86 from Best Buy”. There, you put a little thought into it, but they can use it to buy anything without having to “reject” and return your actual gift.

Also, for the curious, I even investigated which gift cards have the highest resale value. The result was that Amazon gift certificates are the most versatile.

What’s so bad about giving cash, anyhow?
Newsflash: In many cultures and households, giving cash is perfectly acceptable and in many cases even preferred. What are we pretending? That gifts don’t cost money?! I give cash gifts all the time. For more formal gifts I go to the bank and request crisp $20 or $100 bills.

Filed Under: General //

What If You Had To Live Solely Off Of Social Security?

Posted on December 21, 2007 // 64 Comments

A lot of us younger folks are so disillusioned by our government that we don’t expect Social Security to even be around when we turn 65 (or likely 75 by that time…). But the fact is that today millions of people rely on Social Security as their primary – if not sole – source of income. Taking into account that the average benefit is only $963 a month, that’s not very much.

AARP asked retirees who rely primarily upon Social Security how the manage financially, and reprinted a selection of the responses. I enjoyed reading them, as they gave me a glimpse of what obstacles they face, and it showed many different ways they deal with them. Being on a fixed income and having a limited ability to make more money due to disability or illness would be very frustrating to me. Here are some excerpts, which I have organized by the major spending categories:

Housing

We built our own house on a lake stick by stick, or we wouldn?t have a house on a lake. It took us two years. Our son helped with the framing, and my son-in-law did the painting, but my husband did a fantastic job, only contracting out the roofing. [..] We planned ahead and paid off our house before retirement.

We put our home into a reverse mortgage several years ago, and I will realize very little if I sell. I have no children within 130 miles but can’t afford to sell because of the dwindling equity.

[I] live in a Section 8 apartment. In this area, a one-bedroom apartment is $700 to $1,300 per month. I cannot afford this and was lucky to get on Section 8. I must share the apartment with two roommates.

The largest portion of your income will be taken up with rent, utilities, phone, and maybe an auto (I had to get rid of mine), so be certain to apply for government-subsidized housing as soon as possible, as there is likely to be a lengthy waiting list. I waited 3 years! Previously, my rent alone was higher than the current total expense for rent, utilities, and phone.

Healthcare

[…] Our biggest expenses are the cost of our HMO, our Medicare and our medications. My $511 monthly pension pays for that. Our medications, although prescribed by HMO doctors, weren?t on the HMO?s formulary, so the cost wasn?t covered. Since we don?t live too far from Canada, we used to buy our most expensive medications through a Canadian clinic. However, now they will no longer serve Americans, so we did what others do on limited incomes?we just quit taking our two most expensive medications.

[Read more…]

Filed Under: Frugal Living, Retirement //

Reduce Your Trading Costs with Capital One 360 ShareBuilder

Posted on December 21, 2007 // 21 Comments

In my review of Sharebuilder a few days ago, I overlooked an important feature that commenter a schmuck pointed out. I had complained that $4 a trade is pretty high unless your monthly contributions were at least around $400. For example if you paid $4 every time to contributed $50, you’d be behind 8% right out the gate. Before, your choices of investment schedule were only weekly, monthly, or twice a month.

But when you create or edit our Automatic Investment Plan, you can now also change the frequency to “invest when the funds are available”.

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From their Help section:

How does “invest when the funds are available” work?
If you decide to invest when the funds are available you are indicating that you want your plan to invest on the Tuesday immediately after your money market cash balance meets or exceeds the plan?s total investment amount. Every Monday at 5:00pm (ET), excluding holidays, ShareBuilder will create Automatic Investment Plan orders if your account?s money market cash balance meets or exceeds the plans total investment amount.

This is great! Say you only want $100 taken out of your bank account each month. At $4 a trade, I would want the commission be at most 1% of the trade amount. So you could see your Automatic Investment Plan to buy $400 of an ETF. Now, when you reach $400 in 4 months, you make the trade. In the meantime, your idle cash is actually swept into their money market account (BDMXX), which is current yielding a somewhat decent 4.11% APY.

Like commenter Stephen said, “If you’re dollar cost averaging, it doesn’t matter when you make your purchases.” And this way it’s all automatic! You won’t need to remember to do it 4 months out. You be less likely second-guess yourself before clicking the “execute trade” button, especially if the market is temporarily tanking.

If you do decide to use ShareBuilder to implement a buy-and-hold portfolio, I think this a really good way to do it.

Filed Under: Investing //

U-Haul vs. Penske Moving Truck Rentals: Share Your Story

Posted on December 20, 2007 // 216 Comments
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I’m helping a relative move this weekend, and I am trying to convince her not to go with the cheap choice (U-Haul), but pay $40 more for a Penske rental for her local move. This is mainly based on overwhelming anecdotal evidence (from me, my friends, and tons of people online) that U-Haul is just a logistical disaster and Penske is run at least competently, if not well. There’s nothing in this for me, except that I don’t want to deal with all the potential headaches that seem to happen with U-Hauls.

Details of my pleadings:

  1. I have used U-Haul once. The truck was a disaster – underpowered, dirty, and literally about to fall apart. It was not there when I wanted to pick it up, but I got another one. (Which probably screwed over the next person… see below)
  2. I have used Penske once. It was a brand-new truck with 200 miles on it, and they told me that Penske only uses their trucks for a few years and then sells them. (You may have seen lots of big yellow trucks with the Penske logo painted over, many of which look in great shape, as I have.) It was picked up, used, and dropped off with no billing surprises or funky fees.
  3. Multiple friends have used U-Haul, and most of them have some sort of horror story. In one, a tire blew in Montana on their trailer. They had to wait until the next day for a new one, but weren’t reimbursed for the extra required hotel room.
  4. U-Haul doesn’t actually do reservations, they are more like “yeah, we’ll see on that day. We might have just double-booked. If so, you might need to drive a couple hours to somewhere else or wait until tomorrow.” Avoiding that scenario by itself is worth $40 to me.
  5. Besides my personal experience above, U-Haul trucks have been shown to be unsafe and poorly maintained per this LA Times investigation – “Many trucks have high mileage, and The Times found safety checks were often overdue. Customers describe breakdowns and accidents.” Like perhaps, bald tires?

Am I overreacting? The Penske does “cost double”, but with the mileage I think it’ll be more like $130 vs. $90. If you’ve used U-Haul or Penske before, please share your experiences. Good or bad, I want it to be fair. But I’m betting it’s going to be lopsided…

Filed Under: Frugal Living //

Review of Suze Orman Show CNBC Special: Your Money Your Life

Posted on December 18, 2007 // 46 Comments

CNBC had a special Suze Orman Show last week, and I finally got a chance to watch it on TiVo. Recently, I’ve kind of lightened up on my view of Suze. Like all gurus, she makes blanket statements that may not apply to everyone, but at least she’s not pumping a get-rich-quick scheme involving real estate or stock-picking that is bound to produce more losers than winners. Overall, the show was pretty good for what was basically an hour of sound-bite-based financial advice for people (like me) with short attention spans.

Main Points
Here are her “action points”, which again seem to be generally good advice:

  • Get rid of credit card debt as soon as possible.
  • Keep your credit score high.
  • Save up an 8-month emergency fund.
  • You should have a 20% down payment for a house before buying one to live in.
  • Contribute up to your 401k/403b employer match, then fund a Roth IRA.
  • Create both a will and a living revocable trust.
  • Get adequate life insurance (term only).

I picked up two pointers that I need to research further involving estate planning. First, she stated that you can pass real estate without probate through a living revocable trust. This can save months of hassle and also can avoids court fees and lawyer fees which can eat up thousands of dollars. Second, you should always check your 401k beneficiaries, as whatever you designate on those forms actually trumps your will.

Motivational Story
There was also the oldie-but-goodie why-save-early explanation. Allow me to paraphrase:

If you saved $100 every month starting at age 25, and invested it with normal market returns, at age 65 you would have a million dollars! But you say, I’m 25, who cares? If I wait until 35, that’s only $12,000 I’m not investing. ($100 x 12 months x 10 years)

However, if you indeed started at age 35 saving $100 per month, at age 65 you would only have $300,000. That decade of waiting actually lost you $700,000!!

Of course my question was – what’s “normal market returns”. Doing the backwards math, it’s about 12.08% annualized. Very optimistic, but hey, inflated numbers make the story better. 🙂 It’s still a good lesson.

Don’t Buy Bond Funds?
Finally, a curious quote from her was that she hates bond mutual funds, and that people should only buy individual bonds. I thought to myself – how many casual investors actually buy individual bonds? Dealing with all the intricacies like call risk, par value, and quality ratings would be way too complicated for her target audience. However, digging a little deeper into her older show transcripts, I see that she actually recommends buying US Treasury Bills or Notes with a maturity of less than 5-7 years. Since these are of the highest quality and are relatively uniform, that definitely made more sense… but she didn’t explain this on the show!

Filed Under: General, Investing //

Bodega: Cheap Eats and Social Commentary For 25 Cents

Posted on December 16, 2007 // 29 Comments

Do you think the $1 menu at McDonald’s is disgusting, or a godsend? Well, check out this funny yet sad video about cheap eats in the Bodegas of New York City, otherwise known as the corner convenience store. (There are a few expletives, but nothing extremely offensive.)

A humorous yet searing commentary about the choices confronting people who live in “the poorest urban county in the country.” Under the yellow awning of the Bronx Bodega, all the important food groups are represented. Join Dallas Penn of DallasPenn.com and Rafi Kam of OhWord.com as they illustrate the finer points of the Bodega Food Pyramid.

I like the Whole Foods comment. This stuff could be called “Empty Foods”. This reminds me of my breakdown of What 200 Calories Costs – The Economics of Obesity. If you’re poor, it can be tough to turn down pork rinds, snack cakes, ice cream sandwiches, and sugar water for just 25 cents apiece. You could get 1,000 calories that would fill your stomach quickly and easily for a buck. Can you really justify spending more than that if you don’t have to?

Sure, you could get a side salad at McDonald’s for $1, but that provides a mere 20 calories. Even with the low-fat Italian dressing, that’s another 60 calories for a total of 80 calories. That’s not going to satisfy you.

Is there just not enough demand for nutritious, cheap, and convenient foods? Or is it just too expensive to manufacture?

Filed Under: Frugal Living //

How Do You Track Your Home Value In Net Worth?

Posted on December 15, 2007 // 42 Comments

Calculating net worth from an accounting perspective is simply assets minus liabilities. However, most people who track their net worth (like me) end up making some judgment calls. I mean, that printer by your computer has a value. If you put it up on Craigslist, you might get $20 for it. But I doubt you measure it’s value in your “net worth”. What about your car? Jewelry? Your home?

Here are some ideas on accounting for your home in your net worth:

Option #1 – Estimate market value, and subtract amount owed.
I think this is the most technically accurate definition of home equity: fair market value (asset) minus loan balance (liability). However, the hardest part is calculating fair market value. Even professional home appraisers have told me it’s “not rocket science” and there is a lot of subjectivity. (Hint: Most appraisals are ordered by the lender, and the lenders really like it when the home appraises near the purchase price. It makes loans go through smoothly.)

Some ways to estimate current market value:

  • Use a home valuation website like Zillow or Cyberhomes. The problem is that these sites often rely on tax records or other databases with outdated information, leading to some weird numbers. Even comparing the exact same house on the two websites side-by-side, I have found them to differ by up to 20%.
  • Take your purchase price, and then adjust according to the the percentage change in your area. For example, if you bought for $200,000 and the median house price in your town went up 10%, then put your value at $220,000
  • Use your local tax authority as a reference. Some areas estimate your home’s value every year, and use it to find your property taxes due.
  • Do your own comps. Did a neighbor’s house just like yours sell recently? Find the cost/area ($/sq.ft.) and compare to your own square footage.

Finally, you could also take off 3-6% to account for the (almost) inevitable real estate commissions you’ll have to pay upon selling.

Option #2 – Track the amount of mortgage balance loan paid off.
Here you essentially assume that your home just stays at the price that you paid for it. So all you need to track is the sum of your down payment and the amount of loan principal paid off so far. This should be included in your mortgage statement.

Alternatively, you could view this as a “countdown to loan payoff”. You’re ignoring the month-to-month fluctuations of the real estate market, and focusing on what you have left to pay before actually owning your home.

Option #3 – Just ignore it.
If you plan on staying in your home for the foreseeable future, then you may not care what your home value is. Your mortgage payment is simply a housing payment like rent, except that one wonderful day it you’ll just be left with property taxes. It doesn’t change how you spend your money, or how much you wish to save.

Any other ideas?

Filed Under: Real Estate //

Get Out Of Your Sprint Cellphone Contract Without A Penalty

Posted on December 13, 2007 // 52 Comments

One good way to get out of your cell phone contract without paying the fat penalty is to wait for them to change your contract terms. I believe by law if they change your contract, you can either accept or cancel within 30 days without any fees.

The Consumerist reports that Sprint is adding some new charges as of January 1st, 2008. I don’t remember seeing this change on my Sprint bill, but many users on the SprintUsers forum have reported success canceling their contracts without fees, and one posted this as part of a conversation with a Sprint representative.

Sprints current policy as read by account services: “On Jan. 1st 2008 Sprint customers who have been affected by the fees, [consumer and IL customers], will have their ETF waived if they wish to terminate their contract. There will be no post-dating of cancellation where the ETF will be waived as only customers affected by the new surcharges will be eligible.”

If you want out of your Sprint contract, or just want to get some fresh new-contract deals, it may be worth a call. Even if you just jump ship to the Sprint SERO plan. 🙂

As for other carriers, I just ran across this “roaming hack” which supposedly lets you cancel with any wireless provider by placing a ton of calls while roaming. The idea is that you will make yourself and unprofitable customer that way, and they’ll just “fire” you. Not sure if it works though.

Filed Under: Frugal Living //
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