Industry and Frugality

New Credit Card Law

2009-06-15T15:44:00.001-07:00

Congress recently passed the Credit Card Accountability, Responsibility and Disclosure Act (Credit CARD Act... cute, huh?). Here are some of the highlights.

Companies required to mail statements at least 21 days before the payment is due.
The payment due date is required to stay the same each month.
Credit Card companies will be required to show how long it will take to pay off your balance making only the minimum payment. *I think this is a great change. Too many people don't realize the impact of small payments with high interest. Too bad they don't show how much total interest you would end up paying.
You can no longer be charged an over-the-limit fee for transactions that exceed your credit limit unless you sign an agreement saying that you specifically want to allow transactions that will exceed your limit.
Payments in excess of the minimum amount will be required to pay off balances with the highest interest rates first.
Companies won't be able to increase rates on the existing balances for the most part, but they will be allow to increase the rate on new purchases after the first year. A penalty rate cannot be applied unless you don't make your payments for more than 60 days, and then a 45 day notice is required before the rate change. *I disagree with this provision. I think it is the companies right to fluctuate the rate in response to the market. If you don't want to be subjected to market changes in interest rates, then you shouldn't take out unsecured credit.
For rate changes on new purchases, 45 days notice will be required. Also, you will have the option to close your account if you disagree with the new rate.

Source: USAA

Thrift Savings Plan Upgrades

2009-06-13T04:53:00.001-07:00

In typical government fashion, a tobacco bill is carrying changes to the Thrift Savings Plan.

From the article:

• A Roth 401(k) option, which would let participants
put some or all of their after-tax salary into an account that will
grow without tax liability on future earnings.

• Automatic enrollment of new federal civilian employees.

The Federal Retirement Thrift Investment Board said this will encourage
more young employees to start saving for their retirement as soon as
they begin working for the government and take advantage of matching
funds offered by their agencies.

• A survivor benefit that would allow spouses of deceased TSP participants to maintain TSP accounts.

• A mutual fund option that would allow participants to direct their
TSP funds to private-sector mutual funds. The board would be authorized
to select the mutual funds that would be available to plan
participants.

It’s far from certain that a mutual fund option will become reality.

I think the first three are definitely good improvements to the program. The fourth one I could care less about. It's noncongruent with the Boglehead philosophy. I'm very pleased with their current low-cost index funds. As long as they keep those, I'll still be happy. The bad thing is that people will bite off on these funds, which I think is a mistake.

The original article from the Federal Times can be found here.

Free Mother's Day Card

2009-04-28T16:35:00.000-07:00

There is no longer any excuse for not showing your mom some love this Mother's Day. Hallmark is offering a free customized card through their website. The best part is they even mail it to your mom for free! Check out all of the info from the SlickDeals post. Also, to help you get in the Mother's Day mood, here's a message from Mr. T. I pity the fool who doesn't send his mother a Mother's Day card!

Mr. T - Treat Your Mother Right

iTunes Ups Their Prices

2009-04-07T21:35:00.001-07:00

From Slashdot "Steve Jobs vowed weeks ago that when iTunes shifted to a tiered
price structure in April, older tracks priced at $0.69 would outnumber
the contemporary hits that are rising to $1.29. Today, several weeks
later, iTunes made the transition. While the $1.29 tracks are
immediately visible, locating cheaper tracks is proving to be an
exercise in futility. With the exception of 48 songs that Apple has
placed on the iTunes main page, $0.69 downloads are a scarce commodity."

I stopped using iTunes a while back and have been very pleased with the decision. The DRM is an unnecessary hassle that just makes life more difficult. I used TuneClone to convert my iTunes songs from DRM'ed m4p files to mp3. It creates a virtual CD burner and allows you to 'burn' playlists to the virtual drive. It automatically converts any songs sent to the drive into mp3 and stores them in the folder you specify. As far as purchasing new songs, I've chosen to use Amazon.com since they've already had songs less then $0.99 for a while and their music is already in mp3. They are obviously aware of consumer wants and aren't just out to trap consumers into their products indefinitely. I don't like how Apple has always been less open than other tech companies.

Free Game from Amazon

2009-03-23T13:31:00.001-07:00

Amazon is again offering a free game. Big Kahuna Reef (which was offered before) can be yours, free, from amazon.com. http://slickdeals.net/permadeal/19287

This Too Shall Pass

2009-03-10T06:30:00.000-07:00

Here is some more info on past bear markets compared to the current one. All of them were bad, but all of them eventually recovered. Try to keep your cool and maintain your plan and asset allocation no matter what the markets are doing.

Source: dshort.com

Free Credit Score... If You Hurry

2009-03-09T16:54:00.001-07:00

Fair Isaac Corporation (FICO) is giving 10,000 people their credit score for free. Click here

Is $6600 Really That Low?

2009-03-08T08:07:00.001-07:00

I know the state of the economy right now is troublesome to most people. Many people have investments that have lost half or more of their value. However, I don't think we're necessarily that far off from what we should expect. Take a look at the chart of the Dow Jones Industrial Average, below.

Flash Player 9 or higher is required to view the chart
Click here to download Flash Player now

View the full .DJIA chart at Wikinvest

If we look at 1980, the Dow was around $830. A common number for the average growth of the market is 8%. So if we take $830 in 1980 and grow it at 8% for 29 years, it comes out to $7,733.34. This is higher than where we're at, but not too much higher. Even at 10%, we'd be looking at $13,166.37. I think the $14,000 range that the Dow was at previously (July 2007) was outside of the norm and that at least part of the drop in value is due to a correction back from that bubble. I know that won't do much to comfort those (myself included) who have seen a drastic drop in the value of their portfolio, but maybe it will help keep you from worrying too much about a total collapse of the market.

What is the Savings Deposit Program?

2009-03-06T22:28:00.001-08:00

The DoD describes the Savings Deposit Program as "A safe way to save for those members serving in designated combat zones." Basically, it's a savings account for the military with a really good interest rate. Here's what you need to know.

Must be in the armed forces and receiving Hostile Fire Pay
Must be deployed 30 consecutive days or at least part of 3 consecutive months
Deposits may not be more than your unalloted pay and allowances for the given month.
10% APY, compounded quarterly
Deposits must be in multiples of $5.00
Withdrawals may only be made when you leave the combat zone or in the event of an emergency (requires commander's approval)
However, if you have more than $10,000.00 in the account, the amount of $10K (the part not earning interest) may be withdrawn while still deployed
Interest will continue to accrue for up to 90 days after you leave the combat zone (so wait three months to withdraw the money! Or, redeploy within three months to keep it going.)

This is a really good deal, especially given current rates on savings accounts.

Reference: http://www.dfas.mil/militarypay/woundedwarriorpay/SDPBrochure_Mar08.pdf

Oldie but Goodie

2009-03-05T15:49:00.001-08:00

Don't Buy Stuff You Can't Afford. A simple one step program to being debt free! This clip is pretty old but still funny and especially pertinent now-a-days.

http://www.hulu.com/watch/1389/saturday-night-live-dont-buy-stuff

Industry and Frugality in 1919

2009-02-23T17:35:00.001-08:00

I was skimming the results that come up when you google "Industry and Frugality." The second one was from an article written in 1919. I'm not exactly sure what the circumstances were but they were referring to high costs of living. The quote I like from the article was by Governor Milliken, "Nothing but the return of the old-fashioned virtues of industry and frugality will solve the problem."

Unfathomable Spending

2009-02-18T17:59:00.001-08:00

If you have ever had any significant credit card debt, you know how difficult it can be to dig yourself out of a hole. Now imagine a 787 billion + 75 billion + 200 billion = 1.062 trillion dollar hole. This number is most likely difficult if not impossible for you to imagine. In fact, I'm willing to bet that a very large majority of people could not write this number down if you asked them to. I'd like to see this challenge on one of those clips you see on late night talk shows. This number is close to the total known digits of pi as of 2002. It is also more than 6.5 times the total market capitalization of Microsoft (161.1 Billion). And, according to this article, our federal governments obligations now exceed the world's gross domestic product. Add to that the interest accrued when we borrow from China and other countries. It is going to be impossible to pay this off in the foreseeable future. I cannot believe that our politicians are running the country this way. Individual responsibility and now national responsibility is going down the drain.

P.S. - 1.062 trillion is 1 062 000 000 000

How to Add the TSP to Mint.com

2009-02-16T17:50:00.001-08:00

I didn't think it was possible but after receiving a tip from a fellow Boglehead I've figured out how to add the Thrift Savings Plan to Mint.com. Go to your mint account and under "Overview" (the first page that shows up after you log in) click "Edit" on the top left next to "Your Accounts." From here you will see all of the accounts you have added so far. Choose to add a new account and then search for "Thrift Savings Plan." This is what it should look like.

After you click "Search" you should only have one option. Choose that and then you should get the next screen shown below. Make sure it says tsp.gov on there somewhere.

Now just fill in your information, you'll need your TSP account number, your ID that you created on the website, and your web password. Notice you'll need to enter the TSP account number 3 times. I recommend copying and pasting because there's no worry of putting in the wrong account number. It won't go through if the password doesn't match. If you haven't created an ID yet, you'll have to go to the website and then wait for your custom ID to become active before adding the account to mint.

After you're all done, you will see your TSP account listed under investments. Hurray!

More Tax Software

2009-02-04T22:55:00.001-08:00

Apparently you can get TaxCut Standard 2008 for $1 at the Dollar Tree. Also, if you meet certain requirements, you may be able to use TurboTax Free edition. The free edition is really for people who don't have a business and haven't sold any investments in the past year.

Senate Bumps Up Homebuyers Tax Credit

2009-02-04T16:47:00.001-08:00

Currently, a tax-credit of $7,500 is offered to new homebuyers. The senate has voted to increase that amount to $15,000 as part of the economic stimulus package.

The Senate voted Wednesday night to give a tax break of up to $15,000
to homebuyers in hopes of revitalizing the housing industry, a victory
for Republicans eager to leave their mark on a mammoth economic
stimulus bill at the heart of President Barack Obama's recovery plan.
The tax break was adopted without dissent, and came on a day in which
Obama pushed back pointedly against Republican critics of the
legislation even as he reached across party lines to consider scaling
back spending.

Look for more information in the coming week. The original article can be found here.

Evil Landlords, Archaeologists, Scuba Divers, and Scruffs?

2009-02-03T08:33:00.001-08:00

SlickDeals has a post today about 4 free games from Amazon.com. The only one I've played before is Build-a-lot, which is a somewhat entertaining, although mindless, real-estate game. I've heard of Jewel Quest before but haven't played it. Not sure about the other ones, but you can't beat the price.

http://slickdeals.net/permadeal/17933

Free Tax Cut Premium

2009-01-17T20:55:00.001-08:00

H&R Block TaxCut 2008 Premium Federal + State + E-file for FREE!!!

P2P Lending Debacle

2009-01-12T08:54:00.000-08:00

For those of you who haven't heard, the P2P Lending sites (with the exception of Lending Club) have been under a cease and desist order for some time. Normally in my Prosper account, I would have a return of 13.8%. I typically reinvest the payments I receive when they reach the $50 minimum to bid on a new loan. However, since Prosper is no longer accepting new loans, my money just sits there not earning interest. This is cutting into my effective APY. For this reason, I'm in the process of withdrawing my funds from Prosper. I haven't decided whether or not I will move them to Lending Club. With the economy how it is, the risk of default is probably higher. I think I may just put the money back in savings.

Chop Your Mortgage

2009-01-10T09:25:00.001-08:00

Have you ever heard that you can chop years off your mortgage just by paying a little extra each month? Well, it's true! Let me show you how you can calculate your savings resulting from extra payments on your mortgage.

For this example, I'll be using DecisionAide.com's Mortgage Prepayment Calculator. Let's say you have $100,000.00 remaining on your loan. You've owned this place for 1.5 years and so you've got 28.5 years left on the mortgage. Your interest rate is 6.5% and you make payments every month.

1. Enter 100000 as the loan amount in the first box
2. Enter 6.5 as the interest rate in the second box
3. Now, you need to figure out how many months are remaining on your mortgage. 28.5 years * 12 mos./year = 342 months. So, enter 342 for the third box.
4. Most likely you make payments every month. So, enter 12 for the fourth box.

5. Now, if you'd like to know what adding $200 / month will do for you, setup the first line of extra payments like this: Monthly | 200.00 | 1 | Until End of Loan | [leave this blank]

Now click "Display Extra Pmt Benefits." You will see that an extra $200 /mo. will result in a savings of $59,379.04 and shorten the length of the loan by 151 months (12 years and 7 months)!!

$7500 Federal Housing Tax Credit

2009-01-08T17:26:00.000-08:00

For aspiring home owners who find their goal stubbornly elusive, newly enacted legislation providing a tax credit of as much as $7,500 for first-time home buyers might just be the opportunity of a lifetime.

But like so many of the good things in life, time is of the essence for buyers who want to take advantage of this outstanding opportunity. Only homes purchased on or after April 9, 2008 and before July 1, 2009 are eligible. Use the links below to learn more about the tax credit.

If this offer sounds too good to be true, it's because it is. Reading the website you might not realize what the catch is. Although the government is giving $7500 to qualified new home-owners (income of < $75,000 and have not owned a home in the past 3 years for single individuals) you are required to pay that money back over 15 years or whenever you sell the house. You make no payments for the first 2 years and if you sell the house at a loss, the debt is forgiven.

On the whole, I would not recommend this unless it's absolutely necessary. I don't think it's a good reason to buy a house you wouldn't otherwise buy or be able to afford, and I'm always against taking on unnecessary debt. However, if you think you are disciplined enough to invest it instead of blowing it on something and you can afford your new home with or without the tax credit, then go ahead.

2009 Action Plan for Free!!

2009-01-08T17:15:00.001-08:00

As someone once told me, "if it's fo' free, it's fo' me!" Until January 15th Suze Orman is offering up her book, Suze Orman's 2009 Action Plan, for free!

Jack Bogle Wishes Bogleheads a New Year

2009-01-04T15:32:00.000-08:00

Jack Bogle, founder and former CEO of Vanguard, visited the Bogleheads forum to wish everyone a new year. If you haven't read it yet, I highly recommend grabbing a copy of The Bogleheads' Guide to Investing and finding out what it means to be a Boglehead!

Minty Fresh Software

2008-12-22T07:41:00.000-08:00

While some people are hesitant to use online personal finance software, I personally find it refreshing. I've been using Mint for more than a year now and enjoy watching the new features as they add them. I used to use Quicken to monitor my finances - and if I was using a desktop product I would still use it - but I find the convenience of online software and the simplicity of mint.com make it worth the switch. There are some risks since you are allowing another company to have access to all of your accounts but I feel that Mint.com is taking the proper precautions to protect my information.

Recently Mint.com announced their iPhone App. While I haven't been willing to spend the money on an iPhone, I do think these things are pretty cool. This is just another way Mint is staying on the edge of technology. It seems to allow you to do most of what you would do from your PC with the added convenience of mobility. If any of you out there have an iPhone please leave your thoughts on this free app.

What is a Monte Carlo Simulation?

2008-11-04T14:28:00.000-08:00

If you've been interested in investing for a while now, you may have come across Monte Carlo simulations before. For those of you who may not have heard of it, let me explain. When calculating out the future value of your investments it is common to apply an expected interest rate over a number of years using the compounded interest equation. This works especially well if the exact interest and periodic payments are known in advance. For example, in a fixed-rate mortgage. However, when looking at your investment portfolio as a whole, there are many variables and most of them will change over time.

The purpose of the Monte Carlo simulation is to inject random variability into your calculations. You typically specify which variables will change and an expected range of variability. It is not hard to see that it would be difficult to construct a truly accurate model. This is why there are companies which specialize in creating software, backed by statistical data, to provide more accurate simulations.

Below are some links to information if you'd like to learn more.

Info: Investopedia, Univ. of Nebraska, Bogleheads Discussion
Free Software: Excel Add-in, Money Chimp, Flexible Retirement Planner

*If you're interested in commercial software for more accurate modeling, I recommend reading through the Bogleheads discussion above.

Frugal Travel

2008-09-24T10:46:00.000-07:00

I'm going to be moving in the next couple of months and decided to start searching for a house. This weekend I will be checking out my new location. I have two buddies from back home meeting me to hang out and look at houses with me. Normally, it would be fairly expensive to get a hotel room for 3 people for 3 nights. Going with the absolute cheapest choices from kayak.com (which is about the same as the TLF on base) this would cost me around $150 (with tax). Since my parents gave me their old pop-up camper last year, I'm going to be staying at the FamCamp on base for a mere $8/night. This isn't normal camping, mind you, but comfortable living with a stove, sink, ice box, air conditioning/heater, and room for 4 to sleep comfortably. My parents bought it used a little over 20 years ago and got a steal for around $1200. You'd be lucky to get that same deal today. Needless to say, it has been an outstanding purchase and I expect it to continue to serve me well for many years.