Archives for October, 2009
31
Oct
Posted in holidays, humor by Roger |
By the time you read this, Halloween will have come and gone. Hopefully, everyone had a great holiday, with plenty of candy, creative costumes, and scares. (The good kind of scares, not ones that involve running out of candy as a gang of miniature hoodlums comes knocking on your door.)
There is something about Halloween that seems to bring out the kid in everyone. Or at least, the childlike thrill of becoming someone, being able to step outside yourself and take on a new persona, act and react in ways that you normally couldn’t. I don’t know what it is exactly; my best guess is that we all, regardless of how much we love our lives, occasionally want to see how the other half lives. If the other half happens to be a vampire who’s ready to drain the blood of innocent maidens or handsome rakes, well, all the better then.
Psychologically, the idea of wish-fulfillment and unconscious desires made into a reality is wonderfully inspiring. Add in the types of costumes chosen (sexy and seductive roles for the women, powerful predators for the men, figures of authority and control for the children) and the implications get even more profound. Everyone can seize whatever is lacking in their own life and become something more. That’s it; the true purpose of Halloween is nothing more than an id-releasing, ego-stroking, Freudian fantasy come to life!
Or maybe it’s all about the candy.
Candy: It's what's for dinner (for the next two weeks...)
Yup, definitely about the candy. Happy Halloween!
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29
Oct
Posted in Weekly Thoughts by Roger |
It’s that time of year for all good (and wicked) little boys and girls to put on their costumes, go gallivanting around town, and gather up candy from the townspeople. Yes, that’s right, it’s nearly time once again for Halloween. It’s one of my favorite holidays (and not just because my birthday falls a mere four day before); how many other days do you get the opportunity to dress up and pretend to be other people, regardless of whether you are eight or eighty? Other holidays might offer more in the way of presents or religious and spiritual significance, but for sheer possibility of childish glee, it’s hard to beat Halloween.
I’m not sure how things are done in all the other states, but here in Pennsylvania, we’ve developed the habit of not actually Trick or Treating on Halloween itself. Instead, each community has a particular day of the week, and during the week before Halloween, that day of the week is when kids go out to get candy. Wednesday is when my community held Trick or Treat, while it was on Thursday for my fiancee’s town. It’s kind of good, in that you don’t have to worry about what day of the week Halloween falls, but it causes some problems when children from other communities take advantage of the different Trick or Treat dates and go to different communities to get candy. (Yes, it is a problem we hear a lot about in October, although how bad situation has gotten is up for debate.)
Now, for your Halloween pleasure, enjoy a few of the best posts from this past week. No Halloween-themed posts yet (that’s for next week, I hope), but still a great deal of good information was created last week:
Dammed Lies, Statistics, and the Great Recession – As we recover from the ‘Great Recession’, there’s going to be lots of discussion of just who got hurt the most in the downturn. Frank Curmudgeon covers one report claiming that during this downturn, the rich got richer and the poor got poorer. While it’s a good turn of phrase (and a commonly encountered cliche, to boot), as Frank points out, it’s too early to make such a determination from official government reports, which tend to be rather slow in coming. We’ll have to wait a while yet before we can determine just what the fall out from this downturn really was.
Traditional and Roth IRA Contribution Limits for 2010 – You’ll probably hear much about this from the financial media soon, but My Life ROI has gone through the IRS’s Publication 590 to discover the contribution limits next year. I’ll admit I don’t know all the details of the contribution limits for 2009, so I can’t say for certain, but it looks like the limits are the same for next year. That means, another $5000 I get to add to my Roth!
Put a Stop to Junk Mail – Stephanie of Poorer Than You continues on her quest to help everyone protect their identity, this time focusing on how you can stop getting junk mail (and having your personal data coming into your mailbox every day). Besides being a good way to help protect your identity, anything that causes you to get less junk mail is always a plus in my book. Being able to do both at the same time is, as the Mastercard commercials would say, priceless.
92 Quotes about Debt – Apparently, Baker of Man vs. Debt and I share something beyond merely both writing a PF blog: we are both big into quotations. Here are 92 quotations (my speech coach in college would be all over me if I referred to them as ‘quotes’) from proverbs, historic figures, and the ever verbose ‘Unknown’ to help shed some light on this thing called debt. Enjoy reading through them as much as I have.
10 Ways to Speed Up Your Student Loan Repayment – While getting a college education can be very useful to your success in life (some people would even argue that it is downright essential), it comes with a price: student loan debt. Studenomics has some advice on how we, the indebted college grads, can reduce our student debt burden. I’d just offer one more piece of advice: whatever you do, do it quickly; as with any type of debt, the longer you wait, the more interest can build up, snowballing into ever greater debt. Try to chop some extra off in the beginning so you get a running start at repayment.
10 Free Online Budgeting Applications - Last week was a big week for lists, apparently; Lazy Man and Money is the third entry in this edition of the Weekly Thoughts (which is itself a list…) to make a blog entry in the form of a list. In this case, we get several budgeting applications you can find online provided for our future financial growth. Many of them I’ve heard mentioned before, (and even use myself), but a few, like Buxfer and Thrive were new to me, and might just be what you are looking for in a budgeting system.
Forbes Forgot a Key Ingredient to Becoming a Billionaire – Apparently, even Forbes has a sense of humor; they wrote a humorous take on what is needed to become a billionaire, listing five characteristics you need. Luckily for us, the Financial Samurai caught one they missed: inheriting the money from your parents. Certainly seems easier than, you know, working, saving, and investing.
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28
Oct
Posted in Small Business 101 by Roger |
(Welcome, my friends to another edition of Investing…er, Small Business 101. Yes, in the interest of spreading my wings, broadening my horizons, and generally branching out, I’m going to switch gears a bit with my Investing 101 series and focus on different issues related to starting and running a small business. It’s a topic that has been tickling my fancy lately; after all, this blog could be considered as its own type of small business, so I do have a little experience in the field. So, join me as I attempt to explore other small business concepts and opportunities.)
Q: What is a franchise?
A: A franchise is a business structure where a person or (more often) a large corporation (such as, to use the most commonly encountered example, McDonald’s) allows others to use their products and trademarks.. The franchiser grants the rights to their intellectual property in exchange for the regular payment of a franchise fee and possibly royalties.
Q: Why bother with a franchise? Why can’t I open my own business and be done with it?
A: You certainly could open your own business; nobody would try to stop you. But there are some advantages of franchises, particularly from a customer’s point of view. Let’s say you’re driving in an area you’ve never been before, when you need to stop for lunch. There are two different restaurants available: Joe’s Burgers ‘N’ Fries and McDonald’s. Chances are, the McDonald’s will have roughly the same quality and selection of food as every other McDonald’s; Joe’s is a complete unknown, however. It might have the best food in the area, or it might give you food poisoning; there are few ways to know ahead of time. Given this unpredictability, most customers will opt for the known quality, even if it means settling for less than stellar service.
One of the most famous signs in all the world, and it could be yours
Q: So, name recognition is a big plus with a franchise; what are some others?
A: There are other advantages of franchises, for the franchisee and the franchiser. The franchisee gets a support network, help setting up and running their business, and can rely on a wide network of support and advertising to help boost their business. The franchiser gets financial compensation for their intellectual property, and the chance to expand their network of affiliated businesses without having to build them up personally.
Q: Seems pretty good all around. Are there any disadvantages of a franchise relationship?
A: As with anything, with the pros must come the cons. For the franchiser, this means losing some control over what happens to the businesses baring their company’s name. The more the franchisees are allowed to personalize or otherwise tailor the business model to their particular needs and desires, the less influence the franchiser will have over what happens to their brand name. In some cases, legal or other problems arising at one franchisee can taint the entire franchise, hurting the franchiser even if most of the franchisees followed all the rules and behaved in an outstanding manner.
There are problems for the franchisee, as well. The money paid to the franchiser cut into the bottom line of the company, meaning greater profits must be generated in order to get started with a franchise and simply stay afloat. As with the franchiser, there’s also the issue of control; being a franchise rather than an independent company means following certain rules and protocols set out by the franchiser to protect its brand. This means less ability to control and customize your own company according to your wishes. Finally, there are no guarantees; even a top flight franchise, with excellent support and promotion networks, can still fail for any number reasons, both in the franchisee’s control and outside of it.
Q: Alright, so if I’m still considering a franchise, where can I go to get more information?
A: If you have your heart set on a particular franchise, you can usually find information about being a franchisee through their website or other promotional materials. If you are still exploring the options, there are any number of sources online, such as Franchise.com and Entrepreneur.com, which specialize in franchises and can provide you with the information and help that you need to get started.
That’s about it for Franchise 101; hopefully, you’ve learned a bit more about franchises and how you can get started in the franchise game. Enjoy the franchise-owning goodness, if that’s where your interests lay.
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27
Oct
Posted in Personal, milestones by Roger |
Well, well, well, it’s that time of year again. Yes, I am another year older, and presumably, another year wiser. Certainly, I’ve been learning a lot about personal finance, investing, and money management over this past year. One advantage of writing a blog is that you tend to do lots of research into your subject matter, and as a result, I’ve had the opportunity to read more about personal finance in the past year than I did in my previous twenty-six (which makes me 27 now, in case you were wondering).
Of course, aging does have problems of its own. One of my biggest problems with birthdays as I’ve been getting older is that I no longer know what presents I should request. There isn’t too much I want, and frankly, what I do want, I can easily afford on my own. I didn’t have any good suggestions for possible presents from my family, although it would be nice to go out to dinner. (It’s official; I’m the father in an old sitcom, a fate I always figured would happen eventually.) Admittedly, this isn’t exactly a horrifyingly devastating problem, but that’s all I’ve really been worrying about this birthday.
So, in lieu of expensive presents or doodads I’ll play with for a little bit and then forget, all I really want for my birthday is to learn a bit more about my fellow bloggers. Please feel free to leave a comment listing your birthday, so I can add it to this post and have a reminder for when it rolls around next year. Hopefully, all your birthdays in the upcoming year will be as happy as mine (and less busy; I had to work last night and I’m working again tonight, even coming in early for a monthly meeting). Have a great October 27th, everyone!
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26
Oct
Posted in taxes by Roger |
You’ve probably learned by now, at least if you’ve been following me for any length of time, but I am a huge geek. One of my weaknesses is a fondness for creating spreadsheets to help visualize my thoughts. Sometimes, I even go a bit overboard, losing track of time as I work (no really, it’s happened before, and I dare say, it will happen again).
Luckily for you (and for the sake of this post), some of the spreadsheets I create are pretty useful for people other than me. Recently, I whiled away the wee hours of the night on a few of my days off by setting up a system to compare various tax systems and the best part is, you can try, too! Inspired by this article about a flat tax on the Financial Samurai as well as My Life ROI’s impassioned arguments against it, I created a tax system simulator, designed to enable all the other financial geeks out there to try their hands at rectifying the United States’ tax problems. The program has been uploaded onto Google, here.
Getting Oriented
Alright, there’s quite a lot here, so it might seem a bit much at first, but let’s take a tour of it, together. The top parts (those that aren’t enclosed in a box) are just raw calculations needed to feed into the final results (those things shown in the boxes). I don’t think that Google allows you to view the formulas I used, which is a bit of a shame, but you could possibly work out the logic I followed for my calculations. The real meat of this table is below, set up in the boxes:
In these tables, the italicized figures are the ones I played around with (and encourage others to do the same), while the non-italicized boxes should stay the way they are, seeing as they are either calculations based on the italicized figures or metrics that won’t change due to changes in the tax system (in the short run). Most of the big table should be self-explanatory; the groups of tax payers with their average income (as noted by My Life ROI), the taxes paid (as individuals and as a whole) and their taxes represented as a portion of their income and as a portion of the overall government budget. On the right, there are the current tax brackets of the US tax code, and the percentage of income to paid with each one. Below, on the right, there’s the total income taken in, the budget of the United States, and the surplus or deficit that results.
This chart, as currently set up, shows what we could expect to collect in tax revenue if (a) the income tax was the only tax system used by the Federal Government, (b) there were no deductions of any kind, (c) the tax brackets themselves remained the same, and (d) the number of taxpayers remained the same. It’s fairly progressive (the lowest income tax payers pay out 12% of their income, the highest ones pay out 33%), but alas, the deficit (with spending at the level of the actual budget next year; you don’t think I came up with $3.6 billion out of my hat, did you) is nearly one third of the overall budget. Of course, you don’t have to keep all those assumptions (and what would be the fun if you did?) By finagling these values, you can see how making changes to the tax system can affect how much is paid in taxes, by whom, and the effect on the overall budget. Let’s consider a few shifts in tax policy, and the effects on what you pay, and what the government takes in…
Other Possible Tax Plans
Tax Revenue - $10,000 deduction
A relatively small change to start us out; simply adding a flat deductible for everyone, and suddenly the system becomes much more progressive. The lowest tax bracket earner is now only paying 2% each year for taxes, while the top 1% earner is still paying 33% (albeit, a slightly smaller 33%). On the negative side, the budget deficit has now increased by $229 billion dollars, so this is far from perfect, as well. Let’s consider the flat tax to see what that looks like:
Tax Revenue - Flat Tax
Well, good news, bad news time, flat tax proponents. The good news is, the flat tax IS in fact progressive, so long as there is a healthy (flat) deduction to go with it. The bad news is (a) the lowest tax bracket earners are paying more than under the previous method (which was essentially the current graduated system, with few deductions and other loopholes) and (b) our deficit is much greater than either of our two previously mentioned systems. So, there are a few kinks to be worked out (at least, if you’re trying to sway me to your cause). Speaking of me, let’s see how my tax plan looks under the microscope:
Tax Revenue - My System
Well, there are some things to recommend it: the deficit is the lowest as we’ve seen under any of these plans, and it’s still pretty progressive. On the other hand, near the top of the income distribution, it starts to take a significantly larger chunk than any of the other plans so far. Personally, I’m not too bothered by that, but that’s my own personal view. Just to show you how a tax system could try to balance the budget at all costs, here’s my system, modified to actually show a surplus:
Tax Revenue - Balanced Budget
I’ll be honest: I thought it was going to have to be more punishing than this in order to actually balance the budget. Don’t get me wrong: it has the highest taxes for everyone of any of the systems we covered so far (with the exception of my default plan, the current set of tax brackets with no deductions, but that was more a matter of convenience than a real plan). The deduction is lower, the tax rates are higher, and the tax brackets are much closer together (meaning you reach the highest tax bracket with much less income). Still, as changes to reaching a balanced budget are concerned, it’s one method that doesn’t involve turning down requests for money from old persons, the army, and the sick (to say nothing of old, sick Army veterans).
A few final notes before I leave you to play with my little tables. First, it’s obviously just a table for income tax; if you want to figure out how the tax rates would compare between these systems and say, a sales tax system, it can’t really help you. Second, it’s obviously greatly simplified. Given the wealth of different tax deductions available, to say nothing of different tax rates for different types of income (capital gains vs. earned income, for example) designing a truly representative spreadsheet is a bit beyond my time and talents. That said, hopefully this will be amusing, and dare I say, helpful. Enjoy!
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23
Oct
Posted in Weekly Thoughts by Roger |
My biggest problem with working the graveyard shift is that it completely throws your sleep schedule off, even on those days you don’t work. Yesterday, for example, I ended up staying awake all day, simply because the sun was out. You don’t realize just how much of an effect sunlight can have on your ability to stay awake until you find it keeping you from getting any rest at all.
I think, from now on, when I have days off, I’ll just have to stay up all day and sleep at night; that’s what I do when I am visiting my Sondra, and it seems to work out alright. It’s also what a few of my coworkers do as well, and they seem to have adapted quite well to it. The only problem is that then I have days like today, where I have to go back onto a night schedule in order to make it to work. Alas, I think that all this switching from nocturnal to diurnal is not worth the small premium I get on my paycheck by working the third shift.
Alright, enough of my complaining; it’s time to go through some of the interesting personal finance posts from last week and see what some of my talented fellow bloggers had to say:
Blog Entries That Made Me Think
National Protect Your Identity Week – Apparently it’s nearly the end of National Protect Your Identity Week. Stephanie of Poorer Than You reminds us that even as we prepare to disguise our identities for Halloween, we need to be concerned with protecting our identity throughout the rest of our lives. (Also, remember to keep voting for Stephanie in NatureMade’s Good Mood Gig contest.)
Party Like It’s 1999! Ten Takeaways from This Recession – With the recent return of the Dow Jones Industrial Average to 10,000, people are starting to look back over the events of the last year and taking much different lessons than they would have during the depths of the downturn. If you asked me back when I started The Amateur Financier what the next eight months were going to hold, I doubt that a soaring stock market but stagnant job market would be high on my list of possibilities. The Financial Samurai draws a few lessons from the whole of the past 18 months, and his points are right on the mark (particularly about asset prices coming back).
Presents for Kids: Who Do They Belong To? – An interesting question: if your very young child receives a monetary gift, who should get to spend it? My Life ROI raises a few possibilities, from you (that is, your parent) to the kid him- or herself. Personally, I favor the third possibility he suggests, putting the money into a savings account or other investment until the child is old enough to know what he or she wants to do with it.
Is Generation Y’s Financial Situation Really That Bad? – Given that we were coming to age in the wake of the internet bubble bursting and now are getting a raw deal with this ‘Great Recession’, there’s no shortage of people bemoaning the plight of the young investor. But, we have one advantage that many people in the older age brackets would love: time to recover. As long as these downturns don’t scare too many of my fellow Gen Yers (including the author of this post, the Generation Y Investor), we can recover and do just as well, if not better than our elders.
Scary Calculation on Credit Card Debt Elmination - Studenomics reminds us all that paying off our credit cards by only paying the minimum due is nigh impossible. Quite fitting for about a week before Halloween, it’s downright scary how long it can take; a mere one thousand dollar debt at 18% takes over seven years to pay off, twenty dollars at a time. Save yourself some time (and lots of money): pay more than the minimum.
Where The Amateur Financier Has Been Featured
The Skilled Investor featured Is Your Child An Investment? in the Carnival of Financial Planning – 111th Edition
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22
Oct
Posted in humor by Roger |
Well, I’m in a bit of a humorous mood today, so we’re going to do something a little different. There are any number of weird and wacky words and phrases that are used by investors to help describe the investment world. You don’t normally think of investment bankers, accountants and others as the wild and crazy types, but they apparently have a pretty decent sense of humor when it comes to creating names to associated with the financial world. Let’s take a look at some of them (courtesy of Investopedia)
Ankle Biter – A small cap stock, that is one with a market capitalization of less than $500 million. The titans of Wall Street must have pretty high ankles if a company worth $500 dollars gets the same moniker as a 2-year-old toddler.
Black Knight – A company attempting a hostile takeover of another company. A nicely descriptive phrase regarding how a targeted company will likely view the potential acquirer, conjuring up some potent imagery of invading hordes and kidnapping. (Also, one of the nicknames that my Sondra uses for me.)
CNN Effect – The slowing of consumer spending during times of gripping news. During a war or terrorist attack, people tend to be glued to the tube, trying to get all the latest news, before going back to their normal schedules.. I suppose nowadays it could be called the Fox News Effect or MSNBC effect, depending on your political leanings.
David Hasselhoff Index – A stock index of companies associated with David Hasselhoff, under the assumption that companies linked to him are more likely to be profitable. (Really? Alright, we’ll run with it.) Other related celebrity indexes include the Eva Longoria Index, the Lindsay Lohan Index, and the Paris Hilton Index. (Again, I have to ask, really?) All are based on the idea that companies linked to particular celebrities dervie some sort of unquantifiable benefit from the association.
Eat Your Own Dog Food - To use the products that your company produces. If you’re a software company, for example, it means that your employees use your software in the course of their work. It’s a good way to show confidence in your own products, but I have to ask: what do professional investors eat that ‘dog food’ is the food product that they chose for this expression?
Fool In the Shower – A central bank that doesn’t wait long enough for a stimulus action to work, increases the stimulus, and eventually ends up overshooting its goal. Used by Milton Friedman, who used the allusion of a fool in a cold shower, who cranks the heat all the way up and ends up being scalded. A good reminder that major policy changes take time to move through the economy.
Hot Waitress Economic Index – The theory that the more attractive waitresses there are, the worse the job market is doing (since attractive people have little trouble finding other work in good economic times. So, if your waitress (or waiter; unlike Wall Street, I try not to discriminate) looks like a supermodel the next time you go out to eat, the downturn in jobs isn’t over yet.
Mad Hatter - A corporate executive who is considered incapable of leading the company. One good warning is if he starts yelling out ‘Change Places’ at various points during a board meeting.
Samurai Market - Slang term for the Japanese Stock market; included here because I’ve been spending way too much time on the Financial Samurai’s website of late (and because, as my carnival on Monday should have indicated, I’m a bit of a Japan-ophile). Similar to terms like ‘Yankee Market’ for the American stock market and ‘Bulldog Market’ for the British stock market.
There Ain’t No Such Thing As A Free Lunch (TANSTAAFL) – A reminder that there is a cost to every decision we make, in terms of time, energy, or money. Also, a reminder that nobody, with possible exception of your mother, will ever give you something with nothing expected in return. (Also known as There Is No Such Thing As A Free Lunch (TINSTAAFL) for those who don’t like to use the word ain’t or have double negative in their phrases. In either case, even the acronym is a mouthful.)
A Ton of Money – A lot of money; apparently, if you actually had enough one dollar bills to weigh one ton, it would add up to $908,000. Personally, I would prefer a ton of twenties or hundreds, but even a ton of singles is a pretty hefty wad of money.
That’s all the definitions I have time to share; there’s plenty more to consider (and chuckle at) on Investopedia’s financial buzzwords list.
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21
Oct
Posted in blogging by Roger |
As you might know, from any of the times I’ve mentioned it on my blog or via my Tweeter account (@amateurfinance, just in case you’re curious), I recently hosted the Carnival of Twenty-Something Finances. It was an interesting and even, dare I say, fun experience, but it was a little overwhelming. Since it was the first blog carnival I’ve ever hosted, I had little idea what to expect. So, for anyone looking to host a blog carnival of their own in the future, here’s some of what I learned from my experience, which I now pass onto you:
First, get an early start on making up your post. I’ll be the first to admit, I’m a bit of a procrastinator at heart (especially now, when I’ve got a night job that throws off my schedule both on work days and rest days), and tend to push things off as long as I can. You might be tempted to do the same thing with your blog carnival; after, you’re just going to be cutting and pasting a bunch of blog posts’ names and web addresses, right? But doing a good job requires more than that; you should read all the posts, get a feel for what they say, try to organize them by topic or type (maybe even picking out a few as your favorites and calling them the best of the carnival) and write a short blurb for each one. Done right, a decent blog carnival can take just as much time and effort as a good blog post (and perhaps even more, especially when there are a large number of entries and/or you decide to go really over the top with your presentation).
Which brings up my second piece of advice: go all out with your carnival blog. It’s tempting to look at a carnival as a freebie post; other people write all the interesting stuff, you just put it all together, slap on a few personal touches, and watch as you get all sorts of traffic from the contributors, their readers, and anyone who happens to mention the carnival in the future. But that’s exactly the opposite of how you should be thinking. If you’re going to drawing all this traffic to your site (and to this one blog entry in particular), you want it to stand out and be memorable. Show the visitors to your blog (some of whom are likely seeing it for the very first time) some of your wit, charm, and intelligence, as you try to impress them and convince them to become dedicated readers. It’s like a first date, so put your best face forward and give it all you can give.
Your Goal: Make your carnival more amusing than this
Third, choose a good theme for your carnival. A strong and unique theme can help you stand out from the crowd, provide you with plenty of ‘color commentary’ you can add to carnival, and even help you decide how to organize the posts you receive. (My theme of anime fit pretty well with dividing the posts by topic, while the previous host choose a Major League Baseball theme that worked well with how he ‘ranked’ the articles.) Try to pick a theme that you really like, that isn’t too close to the topic of the carnival (besides seeming uncreative, you might end up stepping on someone’s post), and that doesn’t conflict with the advice in the posted articles (if you’re hosting a weight loss carnival, don’t post pictures and recipes of your favorite desserts with comments about their delicious taste and aroma.) Also, unless your blog specifically covers more ‘risque’ material, themes like your favorite pornos or types of drugs should be avoided.
Fourth, follow the golden rule: treat the contributors as you would like them to treat you when you submit to a carnival. Read through their work, comment if you have anything useful to add to the conversation, write to them if you have any questions or comments, send a quick email letting them know they were included when the carnival has been posted; anything you can do to make the whole carnival seem easier and more fun can help make it that much more popular. Besides encouraging others to act the same way, you’ll also help to increase the chance that blog writers will link back to the carnival and visit it themselves, all of which will help to drive some traffic to your site. (Which is at least part of the reason you’re doing this, right?)
Finally, have some fun with it. Yes, a carnival is a lot of work, hours of time spent reading blogs you might not care about, organizing them, adding comments and pictures, and generally making the whole package that much more presentable. But there’s fun to be had, as well; choose a theme you’ll enjoy, add clever quips to your descriptions of the contents, even drop a few jokes into the post. All this will make it much it much easier to handle all the reading and other work you’ll need to do, and can let you add a personal touch to the post, as well.
That’s all there is to making a good blog carnival post. So go out there (there being the BlogCarnival page, in this case) find a good carnival related to the topic of your blog, and start the hosting! It’s definitely a fun time.
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20
Oct
Posted in credit cards by Roger |
Credit cards have become a regular part of most of our lives. Most of us use them as our major method of paying for our purchases. A large portion of them (including me) even make it our primary method of payment, because of the ease of use, the rewards offered by the credit card companies, or simply our own personal preferences. Yet, we also know that they can be hazardous to our financial health; stories abound of people who have accumulated tens of thousands of dollars in credit card debt, sometimes even more than they can pay. Sometimes they remain in debt for years or decades, unable to make any progress toward paying down their debt.
How can we use credit cards without being overwhelmed by them? We have to be careful with how we handle them, ensuring that they work for us, rather than forcing us to work for the credit card companies. To help show you how to do this, I present The Ten Commandments of Credit Cards, ways to maximize the advantages of your credit card use while preventing (or reversing) the damage that improper use can cause. Unlike the original Ten Commandments, not every commandment below will apply to every person with a credit card; different people have different relationships with credit cards, and thus, need to hear different advice. With that in mind, let’s consider some words of wisdom for those men and women who can use credit cards without ending up in debt.
For Those With No Credit Card Debt…
I) Don’t Build Up Debt – It sounds pretty simple, but that’s really the heart of smart credit card use. If you pay off the balance in full each month, you’ll be able to use credit cards without having to pay interest or penalties. If you have a rewards card, you’ll also be able to build up airline miles, points or even cash simply by doing your regular, everyday spending. Getting money from credit card companies without giving them any of your own; that’s the pinnacle of good credit card usage.
Resist the Lure of the Card Reader...
II) Budget For Your Credit Card Bill – Sit down and make up a budget showing how much income you have each month, as well as all the expenses you have to pay out. Once you know how much of your income is left after rent/mortgage payments, utilities, insurance payments, savings, and investing (for retirement or other goals), you’ll have to know how much you can afford to spend. Spend less than that amount and pay it off each month in order to keep yourself debt-free.
III) Don’t Spend More to Boost Your Rewards – If you are using a rewards card, it’s very tempting to spend more money than you can really afford in order to boost your potential rewards; I know, I’ve faced that temptation myself. Just remind yourself that even the highest rewards offered by credit cards are much lower than the interest rates for balances on said cards, and that staying within your budget will be much better for your bottom line.
IV) If the Temptation is Too Great, Drop the Card – Sometimes, you just need to get away from any sort of temptation. If you find yourself spending up to the limit of your credit card budget, or even going over it, the better part of smart money management might be to eliminate the temptation. Relying on cash, debit cards, and checks will limit you in what you can spend, enabling you to better control your spending. No reward or purchase is worth the chance that you will find yourself owing more than you can afford on your credit cards.
For Those With Manageable Credit Debt…
V) Stop Adding to the Debt - If you have credit card debt, the first order of business is to stop adding to it. Spend less on your cards than you can pay off each month, so you can apply the excess to paying down your previous debt. If you are still having trouble using credit without increasing your debt, take the advice from Commandment IV and drop your card; relying on other methods of payment, particularly cash, will cut down the your urge (and ability) to spend more than you have available.
VI) Aggressively Pay Down Your Debt – If you’re only paying the minimums on your credit cards, you are going to be paying for a very, very long time. You need to pay down your debts aggressively, putting as much money as you can into paying down your debt. Don’t empty your emergency fund or take money from your retirement account, but set a goal for each month above and beyond the required minimum, an amount you will pay in addition to the minimum charged by the credit card company (which is usually far below what you will need to pay to really cut down your debt).
VII) Negotiate With Your Card Company – Asking your credit card company to lower your interest rate will lower the amount you will pay overall as well as the increase in your debt from month to month. If you are a good customer with a strong history of repayment, particularly if you have offers for balance transfers from other card companies, you can likely get your rate reduced, making it easier to pay down your debt. Combine that with the above tactics, and you can hopefully cut your debt down in no time flat.
For Those With Unmanageable Debt…
VIII) Cut Down Your Spending Drastically – If you are so deeply in debt (credit card or otherwise) that you are having serious trouble paying it down, it’s (past) time to slice your spending to the bone. Cut out most of the luxuries (slowly, if need be) in your life, reduce the costs of recurring bills (by cutting services and added features), and reconsider both the major and minor expenses in your life. Dealing with a major debt requires a major commitment; slice your expenses as slim as you can, and put the money into debt repayment.
IX) Consider Consolidating the Debt – If the amount of credit card debt you have is too much for you to pay it down, one option is to consolidate it; that is, paying off the outstanding credit card debt with another loan, possibly from a family member or peer-to-peer lending network like Lending Club. (Be leery of commercial ventures that offer to consolidate your debts; as with anything that involves money, scams are possible, even likely. Thoroughly research any companies before you give them your trust and financial information.) If you do go this route, do NOT keep using your credit cards; the last thing you need is more credit card debt on top of your new loan.
X) Talk to the Card Company (Again) - Interestingly, even if the card company is not willing to work out an arrangement to help you pay down your debt when you don’t owe much, they could be willing when you are deeply in debt. If you are on the edge of bankruptcy, they may be afraid that they will have to write off your debt completely. (Since credit card debt is unsecured, that is, not backed by any tangible asset like a house or a business, it’s much harder for credit card companies to collect anything in cases of bankruptcy.) Attempt to come to some agreement that will enable you to eliminate the debt while making reasonable payments, and be sure to get verification so you have proof of the new arrangement.
If you follow this advice, you should be able to get out of debt and/or stay out of debt, and avoid having to consider bankruptcy or other much more drastic measures. Good luck with proper care of your credit card!
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19
Oct
Posted in Blog Carnivals by Roger |
Welcome to all my friends, fellow bloggers and lovers of personal finance information. You are in for a treat today: a brand-spanking new edition of the Carnival of Twenty-Something Finances! Whoo! Since you’re in my neck of the woods now, I thought I would combine this week’s edition with one of my other loves: Anime! (For those of you who aren’t big dorks like me, anime refers to Japanese animation or cartoons; although they cover a lot more ground than your typical American cartoons.) As you read through some of the great financial posts for twenty-somethings that came out recently, enjoy some recommendations of my favorite anime series, as well.
Now, let the commencement beginulate with the best posts from this crop of submissions!
Best of the Best
One of my favorite anime series would have to be Azumanga Daioh, a comedy focused on a group of Japanese high school girls and their wacky misadventures. It is easily one of the funniest things I’ve ever watched, and one of my goals in life is to get everyone in the country hooked on it too. I’ve already got my girlfriend ensnared, now it’s time for all of you… What follows are six articles (well, five articles and one video) that were nearly as good as Azumanga Daioh; read them, enjoy them, and perhaps consider following the authors for their assuredly good future works (I know I will):
Credit Scoring Variations: FICO vs Vantage Score – On The Digerati Life, there’s an explanation of how different companies calculate your FICO score (or related credit scores). Given the importance of credit to our society, knowing how to improve and protect the number banks and other sources of credit see is a vital part of getting your financial ship in order.
Lending Club Review: Lending Money for Profit – Millie Kay G. writes on The Smarter Wallet about Lending Club, the service that allows you to lend money to other people and profit from the interest they pay. She covers both sides of the process (lending and borrowing) in enough detail to help you through the process. (An addendum to what she included: if you are a member of a state where you are not allowed to lend directly (yet), you can still invest by buying existing notes from other people. That’s what I did.)
Could the US Dollar be Replaced as the World’s Reserve Currency? – If so, it will have some big implications for investors in the US and abroad, most of them negative (at least for me and my fellow Americans). Darwin of Darwin’s Finance details why this might occur, what would replace the dollar, and why we don’t have to worry about this happening quite yet (although, knowing what could happen will make it easier to handle when the time does come).
Stop Trying to Time the Markets! – Baker from Man Vs. Debt comments on the market speculation that is sure to result from the emphasis we’ve put on this ‘magical’ 10,000 Dow Jones number. The only ‘markets’ in our lives worth speculating on… are our own personal ones. (Baker did a pretty good job of summing up his point on the ‘milestone’, so I just quoted him verbatim. His video is well worth the few minutes it takes to listen.)
Quit Worrying About 80% of Your Life – It’s easy to get bogged down in all the details and confusion required of us on a daily basis, and lose track of the big picture. At times like that, it’s good to take a page from Tyler of Frugally Green, look over our life, and re-prioritize on the most productive things we do towards what we hope to accomplish, whether those accomplishments are financial, environmental, or, for us blogging types, literary.
11 Unbelievable Glittering Golden Objects – I like to believe I’m pretty hard to surprise. Yet, sometimes I come across something so odd it just makes me pause. This post, from Linda on Money Compare, had me pausing at least half a dozen times. If you were ever wondering where all the gold in world ends up, here are a few of the most bizarre places. (Also, according to Linda, my blog is quirky, which seems a bit like the pot calling the kettle black after reading this post.)
Investing
Fullmetal Alchemist is set in an alternate reality where alchemy developed into a thriving, powerful force, with numerous alchemists able to transmute one material into anoth
er (like the classic lead into gold). You might wonder how, in a world where a small (but substantial) number of residents can literally make money from trash, how does the economy keep from collapsing? Well, in the anime, a law against making gold is vigorously enforced, so alchemists have to go and earn money the old fashioned way. Similarly, in our world, you have to learn how to grow and invest your money, but luckily, you have some help in that department:
Scottrade Discount Brokerage Review- By Money Blue Book, providing a review of the services and features provided by Scottrade, the online stock trading site.
Stock Picking Pros and Cons: Should You Buy Individual Stocks? – A question that most investors ask themselves at one point or another. Francis Investor of Investing Toolkit covers both the pros and the cons of individual stocks, and there are many.
How to Begin Investing in the Stock Market- Jeff Williamson of Before You Invest provides some information to help the would-be stock investor get acclimated to the process of buying and selling stocks.
The Definitive Guide To Natural Gas ETFs: Natural Gas ETF Investing 101 - The name says it all; everything you could want to know about investing in natural gas productions and distribution via ETFs, as discussed by the ETF Database
Calculating Capital Gains and Capital Losses – If you’re going to be investing in a taxable account, you’ll need to be able to calculate your gains and losses. Luckily, the ABc’s of Investing has you covered with a short guide to the math involved.
Credit
Even anime characters need spending money, and like real life, some people have all they can handle, and some struggle to get by. The heroes of Cowboy Bebop are in the latter category; although set in a futuristic reality, they can barely bring in enough money from bounty hunting to keep their space station in orbit. They’ve also got an uncanny knack for having bounties not being paid, reminding us to never count the money we’re owed before it’s paid. For more advice on handling credit, let’s turn to some of the finest personal finance bloggers from our time:
Low Score Got You Down? How to Establish or Rebuild Your Credit – By PT Money, who includes several ways to improve your credit, as well as several ways NOT to improve your credit score.
Prepaid debit cards to control spending – One way to cut down on your credit card spending is opt for a prepaid debit card instead, as noted on One Mint.
Is It the End of the Credit Card Era?- Credit Card Assist discusses some of the recent signs showing the downturn of credit card use as of late, and brings up prepaid debit cards as an alternative. (Suddenly, prepaid debit cards seem to be becoming quite popular.)
Looking at Charge Offs and the Health of Consumer Credit – Sadly, the bad news on the credit front keeps on coming; the number of charge-offs (outstanding balances that credit card companies have written off as noncollectable) has increased by more than 60% since last year, as noted by Clear Choice Credit Cards.
R1 Credit Rating: How to Keep it- Mike of Gather Little by Little provides some explanation of credit ratings, as well as tips to help you keep yours as high as possible (including having a budget and making sure to call if you are going to be late with a payment).
Top 8 Credit Card Terms – A list of several of the most important terms to know when discussing or researching credit cards, all with easy to understand definitions provided by Learn Credit Cards.
Insurance
Somtimes, unpredictable things happen in life; cars break down, loved ones get sick, alien women riding on mopeds strike you in the head with a guitar causing a bump that turns into a giant 
robot. Alright, that last one probably isn’t going to happen (unless you’re Naota from FLCL), but the fact remains: you need to protect yourself from the unexpected things in life, including moped-related accidents. That’s where insurance comes in:
Insurance You Can Do Without-Credit Life Insurance – To quote Tom of The Canadian Finance Blog, “Credit life insurance is purchased so that the balance of your car loan or credit line would be covered if you die before your debt is paid.” As his title says, this is insurance you can do without.
LifeLock Review: Can The Program Really Protect My Identity? – A review of the Lifelock system provided by the Sun’s Financial Diary. Some details of the program are provided which I hadn’t previously known (particularly about the one million dollar guarantee they’re so big on hyping).
College
There’s so many manga series about going to college that it’s hard to choose just one. Still, one of my personal favorites is, was, and will probably ever be Love Hina, a romantic comedy involving long forgotten promises, eternal hope, and true love. Oh, yes, and repeated attempts by our hero to get into Tokyo University (the Harvard of Japan). If you are able to get into the school of your choice, here’s some help in paying for it all:
Saving For College – A few considerations when deciding whether to help your child(ren) with college expenses is covered by Travis on Christian Money Mountain.
Student Loan IBR Income Based Repayment Plans - Jim on Bargaineering discusses some of the features of the Income-Based Repayment (IBR) plan for paying off college tuition, which would save most graduates, particularly lower income graduates, money over the long run.
Debt Management
You might be tempted to think that you’re having a hard time repaying your debt; it just seems to keep piling up, higher and higher. Hopefully you won’t be 
tempted to take the path chosen by Hayate’s parents, who sold his organs to mob in order to pay off their gambling debts. Luckily, he happened to save a passing heiress from being kidnapped, and she paid off his debt… in exchange for his service as a butler for the next hundred years or so. If you don’t want to rely on the kindness of strangers (or indentured servitude) to pay down your debts, here are a few tips to help you out:
Balance transfer option off of the table?- Raj Patel of DebtGoal.com writes about alternate ways to help pay down your debt, in light of harder to obtain balance transfer options.
Am I Debt Management Suitable? – One Advice of the UK provides some commentary to help you decide if you are suitable for debt management.
Working
If there’s one thing that’s certain in this world, it’s that there will always be the need for people to do work. Even as machines do more and more of the tasks in our offices and homes, there’s still the need for human intelligence to control them. Although, in the future, the line between human and computer might start to get a little blurry, as in Ghost in the Shell, where anyone (and nearly everyone) can be a cyborg, and robots can make better philosophers than most humans. Unfortunately (or fortunately, depending on your outlook), we’re not there yet, so there’s still plenty of work to be done:
Back to Work: It’s Expensive to Make Money – By a.b. on Modern Tightwad, covering some of the expenses as he (I’m guessing) rejoins the work place after a period of unemployment (I especially sympathize with the cost of commuting).
Don’t Kill Yourself Over a Job – A reminder that your life should not be entirely about your job is provided by The Investor on Monevator.
The Ugly Jobs Scenario From A Ground Level View – If you’re reading the Carnival of Twenty-Something Finances, chances are that you are a young person. If so, you’re probably aware that the entry-level job market…sucks, to put it bluntly. The key is to keep moving forward, as 20s Money highly recommends.
Declining a Job Offer after Accepting It – If you are able to get a job offer in this economic climate (and good for you if you can), you might not be inclined to give it up; but if you do have your reasons to decline a job offer you’ve already accepted, Nissim Ziv of The Job Interview Site has some advice.
Retirement
It’s hard not to sympathize with Excel and Hyatt; two down on their luck girls who work tirelessly toward their final goal, their ultimate dream: helping Lord Illpalazzo take over the world! Well, it would make for one interesting retirement, at least. Assuming your retirement plans don’t involve global conquest, it might be worthwhile to consider some alternate plans:
SEP-IRA Retirement Plan for the Self-Employed – Jill on My Dollar Plan provides a short (but sweet) introduction of Simple Employee Pension or SEP IRA plans, one retirement plan for self-employed and small business people.
Best Companies to Retire From- Apparently, there are still companies that provide excellent retirement benefits to their employees, and My Retirement Blog lists them.
Roth 401K vs Regular 401K – Some of the differences between a Roth 401(k) and a Traditional 401(k) are brought up by Roth IRA Rules, including the fact that employer contributions can only be added to a traditional and not a Roth 401(k). (Which makes sense, as you would never be taxed on that money if it was added to a Roth.)
Banking
With the way the banking industry has been acting lately, it’s hard to tell if you’re still on Earth. Reputable banks are closing, bank failures are dragging down the whole economy, and bank executives seem more worried about keeping their bonuses than preventing the second Great Depression. If you feel you’ve fallen into Wonderland, you’re not alone: Miyuki-chan could certainly tell you a thing or two about what that’s like. Of course, her Wonderland was filled with lots of cute girls (who had the bad habit of hitting on her), while ours is filled with bankers who get rewarded for doing things that would cost your retirement. Since we’re already down the rabbit hole, let’s see what advice we can get on surviving around here:
The State of the Banking Industry vs. Economic Recovery – On Banker, Saver, there is a discussion of how the banking industry is recovering (or not) from the economic downturn. Of particular note is how the Federal Deposit Insurance Corporation (FDIC) is faring after all the recent bailouts. (Not too good, although you should click through to find out all the bloody details.)
Why You Should Only Bank at FDIC Insured Banks – Patrick on the Military Financial Network reminds us that even if it is having trouble at the moment, FDIC insurance is major safety net for anyone who holds money in a bank (which is most of us); if your bank is not ensured, a bank failure would be even more devastating.
Miscellaneous
Fruits Basket rounds out my list of recommended anime; it’s about a family who has a curse: several of its members turn into animals from the Chinese Zodiac when hugged. From that odd plot comes one of the most popular girls’ anime ever; sometimes the most unexpected start can lead to the best end. On that note, enjoy these articles that I couldn’t fit anywhere else; sometimes unique is a very, very good thing:
25 Ways to Save on Craft Supplies – My younger sister would never let me live it down if I didn’t include this article from Craft Stew, which details numerous ways to be crafty AND frugal.
Probate- Why and How to Avoid Probate Fees – If you’re a twenty-something, chances are that you are more likely to be receiving an inheritance than gifting one to your heirs. Still, Ray gives a few suggestions on avoiding probate on Financial Highway, which you may wish to pass onto your parents or grandparents (try to do it in a way that doesn’t make it seem like you’re hoping for their deaths…)
My “Worst” Buyer’s Remorse Story… - J. Money of Budgets are Sexy shares his biggest case of buyer’s remorse: choosing to buy his house instead of continuing to rent. (He doesn’t regret it for financial reasons; rather, it’s being tied to one place that seems to get to him).
How to get the best deal on your next rental car- Bob of Christian Personal Finance is going on a trip shortly, and uses the opportunity to give some advice on finding an inexpensive rental car. (Hint: shop around)
‘Bailout’ blues falling on deaf ears- As Connie Prater on Taking Charge tells us, the recession has even hit the novelty song industry; we can only hope that ‘Weird Al’ Yankovic will still be in business by year’s end.
Alright, that’s it for this Carnival; pack up the tents, grab the last of the cotton candy, and let’s call it a day!
(All manga featured here (c) the respective owners)
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