Archives for July 2009

What Is Your Motivational Burrito Currency?

Posted on July 8, 2009 // 34 Comments

(image credit: chipotlebreakfast.com)

Sometimes people wonder why a guy who makes a six figure salary will still bother to fill out a form for a free razor, or sign up for a credit card for the $100+ bonus. Well, for one thing it’s a habit leftover from making $15,000 per year. Back then, adding anywhere from $2,000-$5,000 a year to my annual income from various shenanigans was a huge benefit. It allowed me to enjoy niceties like not eating spaghetti three times a week and booking flights to visit my girlfriend (while still paying down student loans).

In this way, I started to correlate little savings with specific things. $5 meant a plate at the Indian food cart or a loaded burrito. So $100 wasn’t just an amorphous $100 to be deposited into a bank and forgotten, it was 20 meals. I’ll do XX for a month of naan & curry!

By extension, creating additional freelance income of $1,000 to me meant a flight + hotel to a new and strange spot in the world I hadn’t been before. For another person, they might think in terms of Lucky jeans, automotive gear, or ski lift tickets. I know this is a consumeristic form of thinking, but you don’t have to spend all the money you make, nor do you have to save all the money you make.

Do you have a form of motivational currency? Or is cash king?

Filed Under: Frugal Living //

American Express Card Statement Shows Restaurant Tips

Posted on July 8, 2009 // 12 Comments

If you’re like me, you keep receipts to reconcile with your credit card transactions online. If you dine somewhere you leave a tip, you might be wary that the waitperson might alter your tips, either by accident or on purpose. If you just see the total amount charged and lose your receipt, it’s hard to remember what your tip was. Well, I just noticed on an American Express credit card statement that they actually break down the food and tip charges for your convenience.

I didn’t bother scanning, but it looks just like this:

MOM & POP INDIAN CUISINE $26.44

FOOD/BEVERAGE $22.44
TIP $4.00

A nifty feature, I wonder why others don’t do this as well. However, I am still sticking with the Citi Forward for the 3.5% cash back.

Filed Under: Credit Cards //

Monthly Net Worth Update – July 2009

Posted on July 7, 2009 // 27 Comments
Net Worth Chart 2009

Credit Card Debt
I have taken money from credit cards at 0% APR and placed it into online savings accounts, bank CDs, or savings bonds that earn 4-5% interest (much less recently), and keeping the difference as profit. I even put together a series of step-by-step posts on how to make money off of credit cards in this way. However, given the current lack of great no fee 0% APR balance transfer offers, I am mostly waiting on existing offers to end. My credit score remains high enough that I haven’t seen any negative actions.

Retirement and Brokerage accounts
Markets most went sideways this past month. 401k contributions are still going regularly, and I want to make my 2009 non-deductible IRA contributions soon. I still think the best thing to do is to keep investing regularly, although it is quite boring to watch.

Cash Savings and Emergency Funds
We still have a year’s worth of expenses in our emergency fund, and it is still growing. Possible uses for extra cash might include capital improvements to the house, including a solar hot-water system to reduce electricity bills, or a photovoltaic system to possibly eliminate them! I love the idea of selling electricity back to the city.

Home Equity
Using four different internet valuation tools – Zillow, Cyberhomes, Coldwell Banker, and Bank of America (old version) – I took the average and took off 5% to be conservative and 6% for real estate agent commissions.

We remain “underwater”, with our outstanding mortgage balance greater than what we probably would net after selling our home. Home equity variations continue to dwarf all other activity, which is somewhat annoying since it’s not that important. Just gotta shrink that mortgage!

Filed Under: Goals, Investing, Real Estate, Retirement //

Chase Sapphire Preferred 40,000 Point Sign-up Bonus

Posted on July 6, 2009 // 34 Comments

The Chase Sapphire Preferred card is offer 40,000 points after you make $3,000 in purchases in the first 3 months. There is a $95 annual fee, but it is waived for the first year. Thanks to the readers who sent this in. (There is also a regular Chase Sapphire card with no annual fee, that is offering 10,000 points after you only spend $500 in the first 3 months. Don’t get that one.)

What can you do with 40,000 points? You can get a credit towards a travel purchase of $500 (online booking free, but $20 fee via phone), or 40,000 frequent flier miles with a 1.25 miles per dollar point transfer. The exact participating airlines are unknown. Info taken from their benefits guide.

Rewards program quality? At 1 point per $1 spent with no special bonus categories, and only a 20% bonus for $50,000 in annual spending, this card is not worth a $95 annual fee. I’d sign-up, redeem the points for a quick and easy $400, and then cancel the card within the first year.

Instead, get a 1:1 frequent flier point transfer and 1.25 miles per $1 spent with the cheaper Starwood American Express card (which also has their own 25,000 Starpoint sign-up bonus).

“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.  “The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.”

Filed Under: Deals & Offers //

Citi Forward Card Bonus & Rewards Follow-up: 5x Rewards at Restaurants and Amazon.com

Posted on July 3, 2009 // 37 Comments

Citi Forward CardI promised to follow-up on the features of the Citi Forward® Card after getting mine, and am finally getting around to it. Read on to see how you can get a $100 gift card and also 3.45% cash back with this card at restaurants, Amazon.com, and more.

Sign-Up Bonus

The bonus ThankYou points showed up promptly. The bonus amount changes and is different now than before, so please see their website for the current offer. But I did get them as promised.

5x ThankYou Points

This card works off the same ThankYou points system as many other Citibank cards. 10,000 points = $100 gift card at stores like Sears, Macy’s, Staples, Old Navy, Gap, etc. 10,000 points = $100 towards a student loan or mortgage payment. 14,000 points = $100 prepaid Visa credit card. 14,500 points = $100 statement credit.

What makes this card unique is that you get 5 points for every $1 you spend on restaurants, book stores, video rental stores and movie theaters. On everything else, you get the plain vanilla 1 reward point for every $1 spent. No annual fee.

5x Rewards at Restaurants
Again, at 1 penny per point with gift cards, getting 5x points is like getting 5% back when eating out. Even if you convert to straight cash, that’s still 3.45% cash back at restaurants (5/1.45). Or 3.57% back if you are okay with prepaid Visa card, which I am since they are usable anywhere that takes credit cards.

I have gotten my 5x rewards at fast food restaurants (McDonald’s), chain sit-down restaurants (Chili’s, etc), and also mom-and-pop places.

5x Rewards at Amazon.com
I can also officially confirm that Amazon.com is considered a bookstore. This is true even if your entire purchase (or any of it) did not contain books. I made one purchase with books, and one with only electronics, and got 5x points for both. So you can indeed get 3.45% cash back at Amazon, or 5% back in the form of gift cards.

The 5x points show up separately under the “Bonus Points by Category Earned” on your online statement:

Earnings Screenshot

I can also confirm it works at Regal movie theaters. I have this card stored online at my Amazon account so I don’t forget, and it’s in my wallet marked for restaurants only. Makes it easy to track my dining-out budget!

Filed Under: Credit Cards, Deals & Offers //

My Dog’s Favorite Chew Toy Is Now Free

Posted on July 3, 2009 // 14 Comments

This might be completely obvious to others, and I’m probably opening myself to ridicule, but I only recently discovered it and find it awesome. If you have dog that like to chew things, many of those fancy plush squeak toys last about a day. But if you take an empty plastic water bottle, slip in inside an old sock, and tie off the end, you now have an endless supply of free dog toys!

I did this after finding $10 “bottle buddies” at a dog store, and have already gone through three of these things in a little over a week. Removing the cap and ring helps avoid a choking hazard.

Filed Under: Frugal Living //

Creating Your Own Three Legged Stool of Retirement

Posted on July 2, 2009 // 10 Comments

You may have heard the term “three-legged stool”, taken from the idea that a stool needs three legs to maintain balance. (Photographers use tripods, no duopods or quadrapods. Even a four-legged chair will likely wobble.)

Old Three-Legged Stool of Retirement

Traditionally, the components of the three-legged stool of retirement have been presented as Social Security benefits, Pensions, and Personal Savings (401k, IRA, and other assets).

stool
image via Michigan.gov

This is partially supported by data from the Social Security Administration:

pie chart
image via Pbs.org

The Qualified Retirement Plans slice combines pensions, 401ks, and IRAs together, making it hard to see the breakdown. The Other Assets include income from other investments like capital gains or dividends from taxable accounts and real estate. We observe that a quarter of all income in retirement is still from working for a paycheck.

Shaping Your Own Retirement Legs

These are just averages, and each of us will have their own path to retirement. If you’re planning on retiring early, you won’t have Social Security yet. For people born after 1960, the full retirement age for benefits is already 67, and expect it to rise even further the younger you are. I think some form of SS will still be around when I’m 70, but who knows.

1. Flexible, reliable, part-time income
We already saw that lots of people over 65 still work. Even though I want financial independence early, I’ve also come to realize that I’ll never stop working. Ask yourself what are you really going to do in retirement? In addition, I think it would be stressful to stare at a big pile of cash and think to myself – “Crap, I hope this lasts for 30+ years!” Maintaining a part-time job and the related skills would help my cashflow, and also ensure that I could return to the workforce if disaster strikes.

I would want a part-time job that could provide some socialization and a sense of improving your community or helping others. Most of my imagined jobs involve teaching, coaching, sporadic technical consulting, or something tourism-related. It can’t be 9-5, and I’d want to be able to take months off at a time. This won’t be easy to find, so I need to start developing more “fun” skills as well as personal relationships now.

2. Personal Savings: Accumulate 30 times annual (non-housing) expenses
Without a pension or Social Security, you’ll need to live off your own savings. If you invest in a balanced portfolio of 60% stocks and 40% bonds, studies have estimated that you can have a “safe withdrawal rates” of about 4% per year. By being a bit more conservative than that, this means accumulating 30 times your annual expenses.

For example, if your annual expenses are $30,000, then you need to save $900,000. This is a very general rule of thumb. Taxes are tricky, but if your income is only $30,000 per year, you won’t be paying very much income tax. Check out the historical effective tax rate over a past 25 year timespan:

For reference in 1995, to be in the bottom 50% (safely in Q1/Q2) your adjusted gross income had to be under $31,000. And this even includes payroll taxes of about 9%, which you won’t have to pay on investment income. The result: very low taxes (possibly under 5%) if you keep your expenses down! Which brings me to…

3. A Paid Off House
I don’t think everyone needs to own a home. However, I happen to enjoy many of the intangibles of owning a home, I love my house and neighborhood, and plan on staying here a while. The cost of this leg can vary widely, from a $1,900 house in Detroit to… where I live, so choose where you want to live carefully. 😉

Financially, owning a home protects you from future inflation and rising rents. You are still subject to property taxes and maintenance costs.

In addition, not having to pay rent means you need less income from savings, reducing your needed nest egg in #2 above. You also pay less taxes. Withdrawing additional money from an IRA, for example, will mean subjecting them to your marginal tax rate, which could be 25% or higher. So to pay $750 in rent, you’d have to withdraw $1,000. Not very efficient.

So there, you have it, my three-legged stool. Yours may be very different – you may like renting, have a pension, own investment property, or have some other sources of income. I still worry about health insurance, but I’m still hopeful that some positive health care reform will occur that will create affordable health insurance for individuals under 65 not covered by an employer group plan.

* You can read more about the last two legs in my related post A Quick & Dirty Plan To Reach Financial Freedom.

Filed Under: Frugal Living, Real Estate, Retirement, Taxes //

Your Take: Rent Control Based On Tenant’s Income?

Posted on July 1, 2009 // 43 Comments

I saw this LA Times article San Francisco beefs up renter protections over at SavingFreak, and it nagged at me all day as both a recent renter and possible future landlord.

Here’s the quick summary. City Supervisor Chris Daly introduced legislation to add the following additional tenant “protections”:

  • Landlords cannot raise the rent above 33% of tenant’s income. An alternative amendment restrict this to situations where the tenant has a “hardship” – defined as being unemployed, having wages cut, or living on a fixed income and receiving a cost of living increase.
  • Allows tenants to add roommates other than family to help pay rent, even if explicitly forbidden in the rental contract.

My take. I think this going too far, and I am glad the mayor seems to agree and will veto it. Already 88% of rental units in San Francisco are subject to rent control, with annual rent increases being capped at an average of 2% per year. Now a landlord must charge rent based on a person’s future income? How can they control that? And then tenants can bring in whomever they want as additional roommates, also creating more wear and tear on the place?

This is different from having the government provide unemployment benefits, or even “bailouts”. This is forcing individuals to directly subsidize other individuals arbitrarily. Imagine being a cabinet maker and being forced to accept a 50% discount to any customer who lost their job recently, regardless of your own costs or financial needs. I echo the concerns of this editorial:

We all like the idea of businesspeople doing the benevolent thing when their customers are hurting, but it is not fair for a public entity to force such behavior on a private one.

Am I missing something here? Let me know in the comments.

Filed Under: Real Estate //
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