November 30, 2008

Save money with Free video games

New video games for your PC typically cost $20-50 each. Its pretty easy to spend a fair amount of money on video games. If you're casual gamer then you might find yourself picking up a game on a whim at the store for $40 because the box looks interesting and then playing it a couple days and realizing its not as fun as you'd hoped. Instead of buying games you can find a wide variety of free high quality games for download on the Internet.

A lot of the free games are developed as freeware which is software that is meant to be free and developed for free by volunteers. Many free games are developed commercially and then released for free later. Other games have some ads included or optional costs like online games with optional fees.

Below I list several individual game titles that you might like to try along with some lists and resources where you can find many many more games. There are a wide variety of games available for free in many styles with very good first person shooters, large Massively Multi-player Online games where you can interact with 1000's of other people from around the world, strategy games that let you manage your own empire and fun puzzle games. Whatever your taste in games you can find something for free.

A few notes about the games listed: Most of the games below are pretty large in size and I wouldn't recommend trying to download these without broadband Internet. To the best of my knowledge these games are all legally free with no illegal copies or copyright violations. I have not tested downloading these games and I haven't played many of them. I'm not listing shareware titles here since shareware is not completely free and generally only a trial version or limited functionality.

Selected Individual games:

Americas Army

Americas Army is a first person shooter (pictured to left). It was developed by the U.S. Army and its given out free. America's Army has a review score of 8.4 out of 10 on Gamespot.


This is another first person shooter game. It is built off the Quake engine and distributed free on the Internet.

Second Life

Second life is a Massively Multi Player Online (MMO). The game allows you to interact with people from all around the world. The game has 16 million total players of which over 1 million people logged into the game within the past 30 days. Downloading and playing the game is free but there are optional purchases using real world dollars.


This is another MMO like 2nd Life. Entropia is set in a sci-fi universe. The game is free to download and play, however if you want to buy money in game it will cost you. I tried this one out myself a while back. It seemed like a pretty good game. The graphics are not quite up to par with today's technology. You also need to be careful you don't get pulled into paying for money in game.

Poker TH

Poker TH is a free version of Texas Hold'em poker (pictured on right). You can play online against other players or in single player mode against the computer.


Electronic Arts has a classic version of its hit Sim City on their website. SimCity is a simulation about city building and management. The original Sim City is a game I played a lot in the 1990's on the old Macintosh computers.

Food Force

This is an educational game hosted by the United Nations. The game's story line is about fighting hunger.


This game (pictured left) is inspired by the hugely popular Sid Meyers Civilization games. Civilization is my all time favorite game franchise. I haven't played the FreeCiv version but it looks almost identical to Civ in look and design.

Railroad Tycoon

This is another simulation from Sid Meyer. Railroad Tycoon lets you manage your own railroad empire. The original version of the game is free for download at the developers website. Look for the 'Free Full Game Railroad Tycoon' button at the bottom of the page.

Warzone 2100

This is a real time strategy game set in a post nuclear war setting. This game was originally a commercial game for the PlayStation platform but has now been released for free on multiple platforms.

Area 51

This is a commercial game that has a free version available. You can download a copy that has advertisements in it sponsored by the U.S. Air Force.

Command & Conquer

The original Command & Conquer game was made available for free download. You can get a copy via this site.

Frets on Fire

This is a free game similar to the popular Guitar Hero title. It is a music simulator where you hit keys in time to play along with song.

This site has Tetris in flash to play on your web browser. Tetris is the classic puzzle game where you arrange falling blocks into rows. Tetris is one of my favorites. The online game plays just fine.

Lists and download sites for free games

Commercial games released for Free

This is a long list on Wikipedia of commercial games that have since been released as free copies. Commercial games generally have good professional polish with quality graphics and audio which makes for a better gaming experience. However many of these games are pretty old with many from the 1980's and 1990's. So they show their age. Also a number of the games have ads in them to support the free release.

Freeware games

This is another Wikipedia list of games. These are freeware games which are games developed and released for free.

Free Massively Multi-Player Online Games

In addition to 2nd Life and Entropia listed above there are many other MMO games you can play for free in one way or another. This Wikipedia list has games that are completely free, ad supported or have optional costs in game to purchase items.

The website has 100's of online flash games you can ply on your browser plus many games you can download. They have games in every category. This site is good for puzzle games and card games. The site is funded by advertisement.

The Free Video Games Project

This advertisement free site has pointers to a number off online flash versions of classic video games. One of the games is Tetris listed above. has various Windows and Mac programs in various categories. If you go there you can browse the Games category for all the titles. Many of the titles there are shareware or limited demos. However you can find many Free games there as well. You may have to sort through a lot of patches, mods and skins which are not complete games but just enhancements to games.

November 28, 2008

Avoid speeding to save money

Have you ever gotten a speeding ticket? Many if not most of us have gotten some sort of traffic violation at one time or another. Speeding is probably one of the most frequent offenses. The costs of speeding ticket can be pretty significant especially when you consider the impact to your insurance rates.

The cost of the ticket itself.

The cost of the ticket itself will vary a lot. Every state has different rates for tickets. Here are a couple examples, in Virgina a speeding ticket could cost up to $1050. has info on tickets for various states. I would guess your typical speeding ticket might run $100-250. But again it varies a lot state to state.

The cost of additional insurance.

Probably one of the biggest costs from a speeding ticket is due to increases to your insurance premium. Not only do insurance rates go up with a ticket, they also stay high for 3 years until the infraction is off your driving record.

Here is an example of how a $50 ticket ended up costing $450 in additional insurance costs. But thats likely small peanuts. THis MSN article discusses specifics on how your insurance can go up with 1 or 2 speeding tickets. The example they give has an insurance premium going from $574 with no infractions up to $781 with one ticket and then $1,071 with 2nd ticket and $1,247 for a 3rd ticket. And those rates are for 3 years. SO a single ticket would cost you $621 in increased insurance costs.

Whats the total cost?

One ticket might run you $150 for the ticket itself plus $621 in extra insurance. Thats a total cost of $771 for a single ticket.

Lets say you get 2 speeding tickets in a short period. The tickets themselves might cost $150 each. The insurance could add up to cost you $2,019 over three years. Thats a total cost of $2,319 for 2 speeding tickets.

Other costs and risks

Excessively fast and aggressive driving can waste a lot of gasoline. Driving the speed limit could improve your car fuel mileage by up to 33%.

If you are speeding then you are more likely to get in a traffic accident. A traffic accident can cost thousands of dollars easily and a very bad accident with large medical costs could cost 100's of thousands. And worst case someone might die. Speeding is a factor in about one-third of all fatal crashes, killing more than 1,000 Americans every month.

If you have multiple tickets then eventually your state will probably take away your driving license. Most states have some sort of 'point' system where each ticket adds points and if you get enough points on your record you'll lose the right to drive. Consider the costs and inconvenience of not being able to drive at all.

November 25, 2008

Discounts for students with StudentAdvantage card sells discount cards that students can use to save on various vendors. The card costs $20 and there are a lot of opportunities for students to save much more then that through discounts.

T-mobile discount of 12% on recurring charges. So if you have T-mobile cell phone you get 12% off your bill. For a basic $40 monthly service that would be an annual savings of $57.60.

Amtrack and Greyhound both give 15% off fares. So if you spend $100 to take a bus home for Thanksgiving then the StudentAdvantage card would save you $15. offers 10% off online purchases. gives 15% off. Office Depot also gives 10% off.

You can see the full list of discounts StudentAdvantage offers here.

November 24, 2008

Average wages and benefits

According to a report by the Bureau of Labor Statistics, average pay was $19.85 an hour and benefits amounted to $8.64 per hour as of June 2008.

Pay $19.85 (69.7%)
Benefits $8.64 (30.3%)

The cost of benefits break down as:
Health, disability and life insurance $2.39
Social security, medicare, unemployment insurance and workers comp $2.25
Vacation, holiday, sick leave and personal leave $1.99
Retirement and savings $1.25
Supplemental pay $0.76

Here is how the separate benefits and the base pay look as %'s of the whole:

Keep in mind these are average numbers. So they may be skewed up or down. The median numbers would give a better representation of the 'typical' worker.

180th Carnival of Personal Finance

Check out the 180th Carnival of Personal Finance which is hosted by Living Almost Large.

My article Saving energy from your Christmas lights display is featured in the carnival.

November 23, 2008

How much should you spend on an engagement ring?

A conversation in the comments for the post Who Gets the Ring when an Engagement is Called Off? over at Free Money Finance raised the question from a commenter asking: How much should you spend on an engagement ring? I thought that was a good question. 

I think the most important thing is to spend an amount that is within your means. Look at your income and your savings and decide on an amount to spend that won't put you in debt or stretch your budget. If you can't pay for the ring out of pocket with cash then consider saving up for a while so that you can buy it without a loan.

The rule of thumb that I've heard is that you should spend 2 months of salary for an engagement ring. Making the value proportional to your income seems like a pretty good way to decide how much to spend, but why 2 months and not 1 month? While searching on this question I found that Get Rich Slowly wrote about the topic last year: Ask the Readers: How Much Should I Spend on an Engagement Ring? JD voiced the same opinion I have that the 2 month rule is probably an invention of the marketing and sales staff of the diamond industry. Don't let this "rule" push you into spending more than you can actually afford or make you think that you have to spend 2 months salary (or more) just to meet expectations.

14k Yellow Gold Princess-Cut Solitaire Engagement Ring (.05 ct, I-J Color, I1-I2 Clarity), Size 7How much do people actually spend? This site that says that the average cost of an engagement ring in the U.S. is $3,500 to $4,000, while this Slate article says the average is $3,200 and this CNN article from 2005 said it was $2,600. So the average is somewhere between $2,600 and $4,000.

Do people spend 2 months? The average age of marriage in the U.S. is 26. Median income for people 18-24 is a little under $31,000. If you take 2 month rule for $30,000 income would result in a $5,000 cost for the ring. Yet people on average are spending $2,500 to $4,000. So it appears that people spend closer to 1 to 1.5 months salary on engagement rings on average.

What is the average carat? When I was buying my wifes ring the salesperson told us that the average diamond sold is 1 carat. But this article says that the national average is 0.38 carat. You can buy a 1 carat weight diamond engagement ring starting at $2,600 on to $2,800 on Bluenile has 0.4 carat rings for as little as $800 and on Amazon I found a .5 carat ring for $300. Keep in mind these are the cheaper rings I could find and they the diamonds have lower quality.

But again, don't let the amount that other people spend dictate how much you spend. You should figure your budget for the ring based on your financial situation.

Should you buy a big carat or a high quality stone? Figure the budget then buy the kind of ring and diamond that the future bride would value the most. Different women will value different things. So find out if the metal of the ring, the size of the diamond, color or clarity is most important and then look for a ring that gets you the most bang for the buck. So for example if the woman isn't as concerned about imperfections that are not visible to the naked eye then you could look for a diamond with some inclusions and get a larger or whiter diamond less money than if you bought a diamond with little inclusions.

14k White Gold Round Solitaire Diamond Engagement Ring (1/2 ct, H-I Color, SI2-I1 Clarity), Size 7The couple should discuss the topic in advance. This might be an awkward topic for some people. You aren't married YET. But it is a fairly important topic and I think discussing it before the purchase is the best idea. The man doesn't want to buy his future bride a ring that she doesn't like. Its not in the best interest of the couple to spend more than they can really afford. If you can't talk about finances or a topic like this with your girlfriend or boyfriend then I think this is something you need to work on if you plan to get married.

When it comes down to it, buying a ring is a personal choice. Some people will spend more or less on a ring than others. But my advice is that you should make sure you spend an amount that is within your budget and avoid going into debt to buy an engagement ring.

Photo by Somma
[edit May 27 2010 : had to fix a couple broken links]

November 21, 2008

Best of Blog posts for the week of November 21st

Blueprint for Financial Success has 100 Money Saving Tips for the Holiday Gifting Bonanza
and 13 Quick Ways to Make Extra Cash Money

Wealth is Boring tells us how to Make Your First Million The Easy (And Boring) Way

My Money Blog discusses Vanguard’s New Self-Employed 401(k) Plan - Roth Option Included
plus an intersting post from last week on Good Time To Hedge Against Higher Gasoline Prices?

Free Dr Pepper on Sunday

I found out about this at Free Money Finance in his post: Free Dr. Pepper

Apparently Dr. Pepper is going to offer a coupon for a free pop on their website. The coupon will only be up on Sunday.

Save energy from your Christmas lights display

Its about that time again when people start lighting their homes and Christmas trees for the Christmas season. If you use a lot of lights then the electricity consumption can add up to quite a bit. The display at for 2004 had 17,000 lights and cost him $150 in electricity for the season. That Komar display is also used to raise money for Celiac disease research. The Komar display is similar to the home pictured, but not the same house. You can see pictures of the Komar display at their site. Of course most of us don't have thousands of lights on our homes like they do but we may have a few hundred outside and some more on the tree inside. The energy consumption adds up.

Consider an example of standard outdoor Christmas lighting:

Lets say you have your Christmas lights up and in operation for 60 days around Christmas. If you run the lights all night then you might turn them on at 5PM and then turn them off at 8AM. That would be 900 hours of operation.

For example lets say you use three of : Set Of 200 Clear Christmas Icicle Lights By GE - White Wire (purchased for $7) This string uses 67 Watts. If you light this set for 900 hours then that would amount to 900 hrs x 67 W = 60.3 kWh per string With electricity cost of $0.10 per kWh that would equal $6.03 electricity usage for a single string of lights. The total electricity bill to light a house all night for 60 days with these lights would be $18.09 for the season. With a larger house or more elaborate lighting display you could end up using more electricity.

There are a few ways to cut the cost of electricity.

Simply use your lights less days

For the example above I assumed that the lights would be turned on for 60 days. But you could limit your usage to 30 days instead. This would directly cut your costs in half. Lighting your outdoor Christmas lights for 30 days instead of 60 days would save $9.04 compared to the example above.

Manually turn your lights off at night

If you turn your lights on at the evening and then leave them on at night when you go to bed then you're really wasting the electricity that you use at night. Nobody needs to see the lights at 3AM.
If you turn the lights off at Midnight instead of leaving them on all night then that would cut your usage to 7 hours a day instead of 15. That would reduce the usage to 420 hours instead of 900 hours. This alone would cut your electricity usage by 54%. With the example above your cost would go down from $18 to $8.4. Thats a savings of $9.60 per year for simply turning the lights off late at night.

Setup your lights with a timer

Its easy to forget to turn the lights off. You can automate that process by using a a timer to automatically turn your lights on and off at specified times. Timers can be bought for $8-10. An indoor model : Intermatic TN711C Security Timer for $8.21
Or an outdoor model: Intermatic #HB35R 10A 1200W Out Light Timer for $9.29
With a savings of $9.60 for turning the lights off compared to not doing so you could pay for the timer in a single year.

Combine turning off lights at night and lighting for fewer days
Lighting for 30 days instead of 60 will cut your bill in half. Turning off the lights at night will also roughly cut your bill in half. If you combine both of these then you'll cut the bill down to 1/4. If you operate the lights from 5PM to Midnight for 30 days you would have 7 hours a Day for 210 hours of usage for the season. At 67 Watts this would be 14 kWh or about $1.40 electricity per string. So for the 3 strings this would be a total cost of $4.22. Turning your lights off at night and lighting them for half the days would save $13.86.

Now the above suggestions are easy and straight forward ways to save on the electric bill. But many people enjoy using their holiday lights for more days so cutting back on usage would not be something they prefer to do. There are other ways to save on energy by using more efficient lighting.

Use blinking lights

If your lights are the style that blink on and off then they will be off part of the time. They will probably be off 25-50% of the time. Since the lights are off more of the time they will not use as much electricity. Blinking lights could save you 25-50% of the electricity used by lights that are on all the time.

Use LED lights

LED lights use a lot less energy than an incandescent bulb. The LED bulbs work pretty good for Christmas lights. Another bonus of LED lights is that they last much longer than incandescents so you won't have to worry as much about replacing burned out bulbs. You can buy a UL 200 Count LED Multi Color Icicle Lights
for $28 and they use 19.2W. If you used 3 strings of these LED icicle lights and ran them 900 hours like the original example then it would use 900 h x 19.2W x 3 = 51.84 kWh for a cost of $5.18. Thats $12.91 less than the normal lights. Since the LED lights are $28 a string and the normal lights were $7 each, buying 3 strings of LED lights would cost $21 x 3 = $63 more. So with an extra cost of $63 and a savings of $12.91 then it is about a 5 year payback period for the extra cost of LED lights.

This is just one example. The savings could be more. In fact according to the Dept. of Energy: "
If you run Christmas lights on your tree for 12 hours a day for 40 days with traditional incandescent Christmas lights, you’d pay $23.95 in electricity. With LEDs, you’d only pay $0.54 for the whole 40-day period. If every home in the U.S. switched to LED holiday lights, we could save $160 million in energy costs this season alone."

Use Solar lights for outdoor lighting

If you're in a region that gets a decent amount of light during the winter months then a set of solar powered Christmas lights might work well. You can buy
SOLAR POWERED CHRISTMAS LIGHTS for $20. That string gives you 60 lights. The icicle lights use 67 Watts for 200 lights so that's 0.335 Watts per bulb. If you bought a string of normal lights with 60 bulbs then they would use about 20 Watts. Over a 900 hour season that string of bulbs would use 18 kWh or about $1.80 in electricity more than the solar set. A standard string of lights would probably cost you $4-8 so the increased cost of the solar set would be $12-16. The payback period for the solar lights would be around 7-9 years.

Don't overlook the energy use of the lights on your Christmas tree. Some of the larger incandescent bulbs on Christmas tree lamps can use a lot of electricity.

Replace C7 tree lights with LEDs

A string string of the large C7 size Christmas tree lights can use a lot of energy. Each of the bulbs takes about 5 Watts. So a string of 25 lights would use up 125 Watts. If you run your lights 12 hours a day for 60 days then that would be 720 hours. One string of C7 bulbs would use 90 kWh or about $9 in electricity for a season. You can buy a string of C7 lights that use LED bulbs. The LED bulbs only take about 1W each. LED C7 tree lights would cut the cost 80% for an electricity savings $7.20 per year.

The LED lights like these: GKI/Bethlehem Lighting Indoor/Outdoor LED 25 Multi-Color Light Set, Green Cord
cost $20. The normal lights such as : 25 Count UL LED Diamond C7 Light SET - Multi are $8. So the LED lights cost $12 more and save $2.40 per year. Again this is about a 2 year payback period for the extra cost of the LED lights.

More resources on saving energy on your Christmas lighting:

Home light photo by C.P.Storm $25 certificates for $2 extended through Nov. 24th

I wrote the other day about a $25 certificate for $2 offer that was expiring yesterday. They have now extended the offer till this coming Monday Nov. 24th ...

80% off Savings on Dinner of the Month Club Purchase. Code SURPRISE. Now thru 11/24/08.

November 20, 2008

Costco selling 20% off gift cards for San Diego

This tip comes from a comment on the article Save 20% on gift cards at Costco.

The commenter there wrote:

"Costco now also sells "The San Diego Gift" online at the Costco website. The Gift Card is accepted at over 100 Restaurants in San Diego, and many other restaurants in select cities.

Two $50.00 Gift Cards for $79.99."

So if you're in the San Diego area or plan to go there soon then you might want to check out these gift cards at Costco for sale at this page.

November 19, 2008

What is the Alternative Minimum Tax (AMT) and how does it work?

[edit : Note that this article is out of date now and the details such as exemption figures have changed over time ] 

You may have heard of how the AMT or Alternative Minimum Tax is starting to impact more Americans. AMT doesn't impact too many Americans. In 2005 about 3% of tax filers ended up paying AMT. But one ongoing issue with AMT is that its exemption rates are not indexed with inflation so if the exemption isn't increased then it will impact more people every year. Thankfully congress has been passing increases to the exemption to increase the thresholds. SO in the future it may become more relevant and as your income goes up it is something to be aware of.

Why was it created?

From the Congressional Budget Office: "The stated purpose of the alternative minimum tax (AMT) is to keep taxpayers with high incomes from paying little or no income tax by taking advantage of various preferences in the tax code. The AMT does so by requiring people to recalculate their taxes under alternative rules that include certain forms of income exempt from regular tax and that do not allow specific exemptions, deductions, and other preferences"

So basically as AMT name indicates it is an alternative to the normal taxes that incurs a minimum tax level.

So should you worry?

When AMT won't impact you:

If your adjusted gross income is less than the exemptions ($46,200 for single or $69,950 for married in 2008) then you will NOT be impacted by AMT.

If you do not itemize or have any credits then you are unlikely to be impacted by AMT.

When AMT might impact you:

You're more likely to be impacted by AMT with higher income.

If you have a high income with lot of credits and deductions then its more likely to be paying AMT.

How do you figure if you're impacted?

There is no specific income threshold or straight forward rule about who is or isn't going to pay AMT. Its actually a bit complex to figure and that's one of the criticisms of AMT. Thankfully the IRS has provided a relatively easy way to figure if AMT might impact you by using the IRS AMT assistant. Its a simple web wizard that asks you a few questions and will tell you if you would have to figure AMT or not. They don't have one up yet for 2008 but you can see the 2007 version for reference. But keep in mind that they raised the exemption levels for 2008 so the 2007 numbers are a little bit different.

What you are supposed to do is fill out a worksheet in the tax form instructions to determine if you might owe AMT. The worksheet might tell you if you do not need to worry about AMT. Or it might tell you that you have to figure AMT. To figure the AMT fully you use the IRS form 6251. If you do have to figure AMT then you figure the AMT tax and the regular tax and then you pay the larger of the two.

A method to approximate AMT

First a note, this method is just a very rough approximation and if you are filing taxes then you should really use the full worksheets and ideally seek the aid of a Certified Public Accountant. I only present this method as a very rough aid to figure if you're in the ballpark for AMT or not. At a very basic level AMT is calculated by taking your Adjusted Gross Income (AGI) minus exemption and multiplying by 26-28%. The exemption for 2008 is $46,200 for single and $69,950 for married filing jointly. Also if your income is over $112,500 for single or $150,000 for married joint filers then they start to phase out that exemption. Usually the AMT tax is 26% but it hits 28% for higher incomes. So that would give us approximations of the following:

For filers with income of less than $112,500 for single or $150,000 for married:

AMT tax = (Adjusted Gross Income - exemption ) X 26%

Where exemption is $46,200 for single and $69,950 for married. Keep in mind that this is just a rough calculation.

For example: if you are married and you made $120,000 income then it would be :

(120000 - 69950) * .26 = $13,013

By comparison if you took a standard deduction and 2 exemptions then your tax for $120,000 for a married couple with no children would have been $18,473 in 2007. So the AMT tax rate is $5,460 less than the standard tax. So in this example you would have to pay the regular tax rate and AMT is less so it would not impact you.

If your income is over $112,500 for single or $150,000 for married then you will start to lose some of the exemption. You have to add back 25% of the difference between your income and the threshold.

SO if you make over the thresholds of $112,500 for single or $150,000 for married then that would make it :

AMT tax = ( (AGI - exemption ) + ( (AGI - threshold ) x 25% ) ) x 26%
For example, lets say you're married couple making $200,000. That would give:
(( 200000 - 69950) + (( 200000 - 150000) * .25) ) * .26 =
( 130050 + (50000 * .25) ) * .26 =
(130050 + 12500) * .26 =
142550 * .26 = 37063
AMT Tax = $37,063

By comparison the tax rate with a standard deduction and 2 exemptions from 2007 would have been $45,200.

If your income exceeds a certain level then you'll have to pay 28% on the top margin as opposed to 26%. This rate doesn't hit until you're making over $250,000 or so. I'm not going to go into that level of detail here as this is just an approximation. If you make $250,000 then you should probably work with a CPA.

So, in summary:

  1. AMT was established initially to make sure certain high income individuals wouldn't be able to avoid all tax liability.
  2. The AMT might impact you if your income is relatively high.
  3. I'd use the AMT Assistant on the IRS site to determine if you have to fill out the IRS form 6251.
  4. You can use the formulas above as a ballpark estimate for the AMT tax rates but this is just a rough estimate.
  5. To calculate your actual AMT tax amount you would need to use the complete 6251 form.

One last note: I'm not a tax professional and the information presented here is not meant as tax advice. You should seek the advice of a qualified tax professional when you file your taxes.

Additional resources on AMT:

November 18, 2008 $25 certificate for $2 ends Thursday Nov 20

There is another promotion for certificates:

80% off Savings on $25 Gift Certificates. $2 when you use code SURPRISE.Valid only 11/18/08 thru 11/20/08.

The promotion ends on Thursday November 20th.

Info on certificates:

I have used these at my steak house in the past and they worked great. But if you're interested in getting them then first: Check the site and see what restaurants in your area take the certificates. Second check out the rules and limitations for the gift certificates. For example my steak house requires a minimum purchase of $50 to use the $25 certificate and they require a mandatory 18% gratuity. Lastly I wouldn't recommend buying them unless you plan to use them shortly. The restaurants that accept the certificates can change over time.

For more on saving money at restaurants see my older posts:

How much does term life insurance cost?

Out of curiosity I was looking at life insurance prices. Currently right now I pay for supplemental insurance through my employer.

I did a google search for insurance quotes and came up with the site Quick Quote. They give quick quotes on term insurance for a number of providers and they do not require an address or phone number. So I could easily get quotes based on age and basic health details. I don't like to get quotes from a site that won't tell you anything without your phone number and address because if they want that info it means to me that they'll be sending you stuff in the mail or having salespeople call you at home.

Anyway, I did some quotes on Quick Quote and came up with the following prices for one provider. So below are some quotes to give a basic idea of the costs for term insurance.

For a 30 year old male in good health, the annual rates from ING are for the policy amounts of $100k to $1m and for term lengths of 10,20 or 30 years :

10 years20 years30 years
$100k$96 $127 $159
$250k$102.50 $147 $248
$500k$155 $245 $445
$1 M$250 $420 $800

And for a 40 year old male in good health the rates from ING were:

10 years20 years30 years
$100k$109 $160 $231
$250k$127.50 $198 $335
$500k$205 $345 $620
$1 M$330 $610 $1,180

Keep in mind that these are just example quotes from one provider. Your exact age and health condition would impact your rates up or down from these numbers. If you are a smoker then your rates will be significantly higher. A 40 year old smoker would pay $1595 for a 20 year $500k policy compared to $345 for a non-smoker. ING was usually among the cheapest providers quoted but other providers were cheaper for some policies.

I don't know anything about ING insurance or the Quick Quote site. I'm not endorsing either of those services. I'm just using them for convenience to get an idea of rates for term life insurance. If you are interested in term insurance I'd recommend you shop around yourself to find a provider that meets your individual needs for a reasonable price.

November 17, 2008

BMG Music Club is a good deal

Joining the BMG Music club is a good deal. Their initial membership offer gives you 12 CDs for the price of 1. When you sign up you get 7 CDs for free first and then after you buy your 1 full price CD you get 4 more free CDs. The full price CD will run you around $20 usually and then $2.79 shipping is added per CD. So the total for buying the 1 CD and shipping on all 12 would run you around $54. This comes out to a rate of $4.50 per CD.

OK so what is the catch you might ask? The only real catch for BMG is that they will automatically send you their selection of the month unless you specifically decline it. This means that eventually you'll probably miss the deadline to reject a selection and you'll end up with a CD in the mail that you didn't want and a bill for about $23. So if you decide to join the club and then stay in it for any length of time its important to make sure you decline the selections of the month assuming you don't want to purchase it.

The initial offer for new members on BMG is the best deal. After you've bought your 1 CD at full price and gotten all your free CDs from the 12 then you are free to quit the club if you want. However if you stay in the club you can take advantage of their normal member deals. BMG frequently offers buy 1 get 2 free or get 70% off type deals. Right now the Christmas sale at BMG is get 5 for the price of 1 offer. Regular club prices are about $19-24 per CD generally. Buy 1 get 2 free comes out to about $10 per CD. Get 5 for 1 is about $7.50 per CD.

BMG is always sending members an offer for a sale. In the past 3 months I've gotten offers from BMG for the following sales: Buy 1 get 4 free Halloween sale, get 5 for the price of 1 Christmas sale, an 80% off sale, Buy 1 and pay 99¢ per CD sale, and a CDs for $3.99 sale. The 5-for-1, 80% off sale and $3.99 sales come out to about $7.50 range per CD with shipping added. The Buy 1 and get additional CD's for 99¢ sale would be a good deal if you were buying a large number of CDs. For 10 CDs that sale would average about $5.90 per CD and for 20 CDs it would be about $4.85 per CD. BMG has frequent sales and the sales prices are good deals for new CDs.

So if you are a music lover that buys a fair amount of CDs then consider joining the BMG music club. Its a good way to save on new CDs. Just remember to decline the selection of the month.

November 16, 2008

Historical price of silver

Previously I discussed the historical price of gold. Generally people think of gold as an investment more than silver. But silver is a precious metal and can be bought as an investment just the same as gold. A relative of mine bought some silver as an investment during the boom in the 1970's and it took decades for the price to return to the level that he paid. Today I'll look at how the price of silver has varied over the years.

The Silver Institute has a history of the price of silver. They discuss why silver went up and down over the years and go into detail about a large boom and bust in silver prices around the 1970's and 1980's. The history they give is an interesting read and I'd recommend checking it out if you're interested.

As I write this in November 2008, spot silver is trading for about $10 an ounce. Earlier this year silver peaked over $20. The Kitco website has historical data on silver prices.

Here is a chart of silver prices for the past 100 years:

The following chart shows the price of silver from 1965 to 2008:
[edit additional] Note:  The numbers shown in the graphs above are the annual average prices.   This graph is meant to show long term trends in silver prices and not short term fluctuation.  The annual high and low prices are not shown.

From 1908 to 1965 silver didn't go up too much. Silver was commonly used to make coins. In the USA our nickels, dimes and quarters were made of silver up until 1964. This kept the price of silver fairly steady since it was tied directly to the value of currency.

After 1965 silver started to go up in value. From 1965 to 1979 silver rose from $1.29 an ounce to over $21 an ounce. For that 14 year period it had an annual average growth rate of 22%. Then the boom busted and by 1985 silver was down to under $6 an ounce. From 1979 to 1985 silver dropped at an average annual rate of -20%. Silver started another boom around 2004. From 2003 to 2008 silver climbed from less than $5 to over $20 at its peak. From 1965 when silver was $1.29 to its current price of about $10 silver has had an annual average increase of about 5%.

Silver has had a couple large booms and busts. The price has been very volatile. Overall as an investment silver has not performed very well. Given the high risk due to volatility you would be much better off investing in stocks or real estate.

November 14, 2008

Best of Blog posts for the week of November 14th

Lazy Man discusses supplemental newborn screening and How $100 Could Save Your Child’s Life

Jim at Blueprint for Financial Prosperity posts a humorous SNL skit video titled: Don’t Buy Stuff You Cannot Afford

Jim also posts about a bunch of Holiday Photo Deals where you can get discounts on photo items bought online such as calendars and greeting cards.

JD at Get Rich Slowly discusses home loans and the debt to income ratio in : The Debt-to-Income Ratio: How Much House Can You Afford?

My Money Blog writes about a Coinstar Promo: $40 in Coins = $50 in Gift Certificates where you can get an extra $10 gift certificate on Coinstar machines when cashing in $40 in coins. There is no fee when you get the gift certificates.

Should you pay for COBRA?

Usually when you have a health plan at work and you lose your job you will get the option of paying COBRA premiums to stay on the same plan. COBRA premiums can be pretty expensive and there are likely cheaper alternatives for individual insurance plans. There are a few things to consider if you are looking at paying for COBRA or choosing an independent plan. Pre-existing conditions could make COBRA a good choice. Comparing alternatives to COBRA should consider all the costs including the potential maximum costs as well as the quality of coverage. What your finances will allow may determine if COBRA is even practical and if you can't afford COBRA then you may need to settle for cheaper alternatives.

Pre-existing conditions If you have pre-existing conditions then sticking to your current plan is likely to be cheaper. Getting individual health insurance coverage when you have pre existing conditions can be difficult and costly. But if you're already on a group plan then you can continue with that plan via COBRA payments.

Can you get the same coverage cheaper?
I'm going to look at my current coverage and what it would cost to extend it via COBRA and then compare that to an equivalent plan via independent insurance. Maybe I could save money over COBRA with the same coverage level. For my current plan I have a high deductible HSA plan. To stay on this plan the COBRA payments would be over $350 a month for my spouse and myself. If we had two children then the payments would be around $550 a month. I checked eHealthInsurance and they have a very similar plan for $270 a month for my spouse and myself or $430 a month for me, my wife and two children. The plan on eHealthInsurance is from the same provider but the deductible and coinsurance are a bit more. My current deductible is $2400 and coinsurance is 10% up to $4200 maximum out of pocket. The plan on eHealthInsurance has a deductible of $4000, 20% coinsurance and $10,000 maximum. If I look for a lower deductible plan on eHealthInsurance then I'd be paying more than COBRA. As another option, I could also get a non-HSA plan through eHealthInsurance. I checked for a plan from my current provider and they have a standard plan with $3000 deductible, 20% coinsurance and $10,000 maximum for $330 a month for me and spouse or $530 for family of 4.

So the options are:

COBRA through employer = $4200/ $6600 a year with $2400 deductible and $4200 maximum
Self insure HSA plan = $3240 / $5160 with $4000 deductible and $10,000 maximum
Self insure no HSA = $4008 / $6360 with $3000 deductible and $10,000 maximum

Looking at these three options the COBRA plan is fairly good given the low deductible and maximum out of pocket. I think the COBRA is my best option here. COBRA would have lower deductible and maximums. I could save a little more out of pocket with the self insurance HSA plan but its deductible and maximums are higher. Worst case I could be looking at $5800 more out of pocket with the self insurance. Maximum total worst case costs for COBRA would be $10,800 for family of 4 but the self insurance worst case maximums would be $15,160 or $16,360. So I would risk spending $4,360 or $5,560 more with self insurance for a premium savings of $1,440 or $240 respectively. I don't think the savings are worth that risk. So if I could afford it the COBRA plan would be my better choice among these options.

But what if I can't afford COBRA?
If you lose your job you are out an income may be short on money so paying over $500 a month for insurance could be a stretch. I shopped around a little more on eHealthInsurance and found a couple options for HSA plans from other providers with higher deductibles and lower premiums. For a family of 4:

Low cost Plan #1: $2900 annual cost, $5600 deductible, 50% coinsurance, $10,000 maximum
Low cost Plan #2: $4300 annual cost, $5800 deductible, 20% coinsurance, $11,200 maximum

That gives you minimum and maximum costs of $2900 to $12,900 for plan #1 and $4300 to $15,500 for plan #2. In any case plan #1 would end up costing you less out of pocket.

Compared my COBRA plan costs for a family of four, the plan #1 would cost $3700 less per year. Thats over $300 a month. If your finances are tight then going with a low cost self insurance plan could save you a substantial amount over paying COBRA via your ex employer. However you should keep in mind that the deductible and maximum costs are higher here. So you are still running a risk that you could end up paying more overall if you have higher medical expenses for the year.

If you are faced with ending employment for one reason you should look at alternatives to COBRA to see what is your best option. If you have pre-existing expenses then COBRA coverage may be your best bet. Otherwise you can do cost comparison shopping to see if you can get similar coverage for a lower cost. Or if you are tight on cash then consider going with a high deductible plan instead of COBRA to save monthly expenses short term.

November 13, 2008

Median Property tax bills by state for 2007

Below is a table of the median property bill by state. This information is from the US Census 2007 American Community Survey data.

Alabama $ 351
Alaska $ 2,346
Arizona $ 1,201
Arkansas $ 492
California $ 2,697
Colorado $ 1,348
Connecticut $ 4,332
Delaware $ 981
District of Columbia $ 1,807
Florida $ 1,859
Georgia $ 1,217
Hawaii $ 1,249
Idaho $ 1,185
Illinois $ 3,187
Indiana $ 1,181
Iowa $ 1,482
Kansas $ 1,518
Kentucky $ 797
Louisiana $ 223
Maine $ 1,801
Maryland $ 2,434
Massachusetts $ 3,327
Michigan $ 2,123
Minnesota $ 1,927
Mississippi $ 453
Missouri $ 1,179
Montana $ 1,385
Nebraska $ 2,117
Nevada $ 1,640
New Hampshire $ 4,366
New Jersey $ 6,072
New Mexico $ 789
New York $ 3,472
North Carolina $ 1,099
North Dakota $ 1,522
Ohio $ 1,792
Oklahoma $ 736
Oregon $ 2,053
Pennsylvania $ 2,171
Rhode Island $ 3,355
South Carolina $ 770
South Dakota $ 1,537
Tennessee $ 902
Texas $ 2,241
Utah $ 1,246
Vermont $ 3,183
Virginia $ 1,754
Washington $ 2,454
West Virginia $ 443
Wisconsin $ 2,894
Wyoming $ 874
Puerto Rico $ 111

The census tables I found actually gave separate medians for homes with mortgages and homes without mortgages. I took a weighted average of the two median values to find the median for the total.

Additional resources:

November 12, 2008

Balanced Money Formula: wants, needs and savings

A past article in Get Rich Slowly discusses the The Balanced Money Formula. This is a budget idea presented by Elizabeth Warren and Amelia Tyagi in the book All Your Worth: The Ultimate Lifetime Money Plan. The basic concept for the Balanced Money Formula is that out of your net income (after taxes) you should aim to spend 50% on your 'needs', about 30% on 'wants' and save 20%.

When they talk about needs, wants and savings they mean:

  • Needs are the things you can't go without and include: Housing, food, clothing, transportation, etc.
  • Wants are the items that are luxury in nature and that you could cut back if you needed to. Wants include eating out, cable bill, movies, vacations and the like.
  • Saving is any money you retain in an investment, put in the bank or put towards retirement.
This may seem obvious but part of personal finances is sorting out the wants and the needs. Many people feel they "need" things that they really don't and should treat more things as luxury "wants".

For our own budget I figured out the percents and we're putting roughly 36% into 'needs', 27% into 'wants' and 38% into savings. Our money usage:

So by this measure I'm doing much better than goal. I'm saving a lot more of my net income than the goal. If I had a lower income then this might be considered in some eyes as a bit too miserly. You don't want to save so much that you end up skimping on necessities and end up having no fun at all. Generally though my saving % looks a lot higher cause I have a relatively high income level and I've minimized my spending on the 'needs' category. I don't have car payments and my home mortgage is only about 19% of my net income. We also minimize most of our bills and are fairly frugal about spending in general. In other words we're living well within our means. This is one of they fundamental keys to being successful financially.

Our spending on 'wants' is fairly healthy. We spend nearly the 30% that the authors suggest. Thats a pretty large amount given my income. I personally think that spending some money on 'wants' is healthy. You don't want to be so frugal that you deny yourself any fun. Striking a balance between saving for the future and enjoying life in the present is important.

I like the concept of the Balanced Money Formula. It allows you to track your finances with a budget mindset without going into so much low level detail as most budgets. I figure as long as you're saving 20% of your income or more then you're doing fine.

November 11, 2008

History of new car costs and average inflation

CPI data

The Bureau of Labor Statistics tracks the Consumer Price Index. One of the prices they track is new vehicle costs. THey have data on prices for new cars dating back to 1935. The following is a graph of the price index from 1935 to 2007:

You might notice the gap in data points during the mid 1940's. This was the period during WWII when US production of personal automobiles was halted in order to use manufacturing capacity for the war effort.

From 1935 to 2007 vehicle prices rose 2.7% average annually. For the last 20 years during 1987 to 2007 prices have only risen an average of 0.9% per year.

Looking at individual decades the annual rates were:

1940's 6.8%
1950's 2.3%
1960's 0.3%
1970's 5.2%
1980's 3.2%
1990's 1.4%
2000's -0.4%

Yes prices are actually going down this decade. That is a reflection of people buying smaller and more affordable vehicles.

Prices versus wages

The company Comerica tracks auto affordability. One way they look at it is to put new car prices in relation to wages. The chart below, from this report from Comerica, shows the number of weeks worth of median wages that an average consumer would have to work to afford a new vehicle:

Spot check on prices in 1949 versus 2008

If you look at actual car prices from 1949 as listed in The Peoples HIstory, you get real world values. They list 14 prices for 1949 ranging from $1,472 to $3,497. The average of the prices given is $2,680. In 2008 prices range from $10,235 at the low end for a Chevy Aveo to a very high figure for exotic luxury imports. The average price for a new car in 2008 is $27,704 according to Comerica.

If we compare the low prices of $1,472 in 1949 to the low price of $10,235 in 2008 that would be an average annual increase of 3.3% If we compare the mean prices of $2,680 in '49 and $27,704 in '08 that gives an increase of 4.0%

This method and the resulting numbers should be taken with a grain of salt. The prices for 1949 given in the Peoples History are only a handful of data points so this is not that reliable of an estimate and the margin of error for that is higher.

What do you get for your money?

Another important aspect of new car prices to consider is how much vehicle you get for the price. Its reasonable to say that today's car is twice as good as a vehicle from the 1940's. Cars last longer, have more power, get better fuel economy and are safer.

One example is a 1949 Lincoln Cosmopolitan convertible. The car cost $3,948 in 1949. It had a V8 engine that got 152 HP and 8 miles per gallon. There were no airbags, no seatbelts and few modern features.

Today in 2008 you can get a Mazda Miata for $20,635. The Miata has 166 HP and gets 22 MPG city/ 27 highway. It has front side airbags, anti-lock brakes, an AM/FM CD player and remote entry as standard features.

The Miata will likely last twice as long as the Cosmopolitan. In the 1950's to 1970's a car would not be expected to last over 100,000 miles. But todays cars should last for 150,000 to 200,000. The new cars are MUCH safer. If you look at fatality rates per miles driven, from 1966 to 1996 the fatality rate per 1 million miles driven dropped from 5.5 to 1.7.

By every objective measure the Miata clearly performs better. It lasts twice as long, it is much safer and it has better fuel efficiency. $25 certificate for $4 plus free $10 certificate ends Thursday Nov 13


There is a new promotion for certificates:

Save 60% off $25 Gift Certificates and receive a Free $10 Gift Certificate. Use code HARVEST and pay $4 through 11/13/08.

The promotion ends on Thursday November 13th.

I have used these at my steak house in the past and they worked great. But if you're interested in getting them then first: Check the site and see what restaurants in your area take the certificates. Second check out the rules and limitations for the gift certificates. For example my steak house requires a minimum purchase of $50 to use the $25 certificate and they require a mandatory 18% gratuity. Lastly I wouldn't recommend buying them unless you plan to use them shortly. The restaurants that accept the certificates can change over time.

For more on saving money at restaurants see my older posts:

November 10, 2008

Updown : down -16%

Practice invest

My Updown performance has been pretty poor lately. I'm down 16% total since March when I started. The S&P 500 is down almost 30% for the period while the Dow and NASDAQ are both off about 28%.

Only a couple of my stock picks are positive overall right now. AT&T and Walmart are both up roughly 3% from what I paid for them.

I put around $280k into about half a dozen REITs and they have lost around 20-20% so far as a group. Buying the REITs was a long term investment with the assumption that the REIT market would recover in a couple years and in the time being their high dividend yields would help add to my returns. The REITs are yielding 15-30% each from dividends.

While my performance in Updown hasn't been anything to brag about lately, I think its a fun game and helps me learn more about picking stocks.

OK Book : How to Pinch a Penny Till It Screams

This is a review of the book How to Pinch a Penny Till It Screams by Rochelle LaMotte McDonald. The copy I read was published in 1994.

The book presents a variety of cost cutting tips. There are probably a few hundred tips overall. There are a number of chapters organizing the information into a few broad categories: grocery bills, housing, energy, car costs, leisure time and others.

Most of the the tips in How to Pinch a Penny Till It Screams are pretty basic in nature and covered in a variety of other resources. There are few suggestions that were new to me personally. There were also a couple tips that I strongly disagreed with. At one point the author suggested leasing a car and in another section they said renting furniture. Neither of these are generally going to be a frugal route and I don't think they belong in a book that is about penny pinching.

How to Pinch a Penny Till It Screams wouldn't be a bad read. It presents the tips in easily digestible way so you can easily skim through the book and capture any new information and make sure you're not missing anything. But the book is really geared towards the beginner audience. If you're already pretty frugal and consider yourself familiar with cost saving measures then this book isn't for you.

So, overall I'd recommend the book marginally for someone who is a beginner to penny pinching. How to Pinch a Penny Till It Screams isn't bad for a quick skim. But I don't give it a strong recommendation since it doesn't cover advanced topics much and virtually everything in it is pretty common cost savings practices. I'm sure there are better books out there on this topic. I give it an 'ok' recommendation only for beginners. Check to see if your library has a copy.

November 9, 2008

Lazy portfolios easily beating S&P 500

A while ago I mentioned Lazy Investing. The idea is discussed at the Marketwatch article on lazy portfolios. Simply put the concept of lazy investing is to place your investments into a simple mix of mutual funds. For example the Margaritaville portfolio is made up of 33% each of Vanguard Inflation-Protected Securities (VIPSX), Vanguard Total International Stock Index (VGTSX), and Vanguard Total Stock Market Index (VTSMX).

Lazy portfolios are nice because you are well diversified across different types of investments. They include such things as emerging markets, US large caps, bonds, fixed income, energy, REITs, etc. Plus they are very simple to implement and generally using low expense Vanguard funds.

But how well do lazy portfolios do versus simply throwing all your money into the S&P 500?

The S&P 500 has not done very well in the past few months (thats an understatement). The index is off over 33% from its high earlier this year over 1500. The S&P is even down about 10% for the past 5 year period.

Lets compare the performance of the S&P to a few of the Lazy portfolios over the past 10 year period. Below I look at a few of the lazy portfolios and figure how they've performed for the past 10 years. The performance numbers I'm using here are the 10 year return figures quoted on the Vanguard site as of Oct. 31st.

S&P 500 alone:

Fund Allocation Return
VFINX 15% 3%

Return = 3%

Margaritaville portfolio:

Fund Allocation Return
VIPSX 33% 7.44%
VGTSX 33% 6.16%
VTSMX 33% 3.94%

Combined return has been = 5.8%

Yale University Unconventional Portfolio

Fund Allocation Return
VIPSX 15% 7.44%
VGSIX 20% 12.18%
VUSTX 15% 5.99%
VEIEX 5% 14.40%
VDMIX 15% 1.80%
VTSMX 30% 3.94%

Combined return of = 6.6%

Aronson Family Portfolio

Fund Allocation Return
VFINX 15% 3%
VEIEX 20% 14.40%
VEURX 5% 5.01%
VEXMX 10% 6.93%
VWEHX 5% 3.72%
VIPSX 10% 7.44%
VUSTX 5% 5.99%
VPACX 15% 5.96%
VISGX 5% 8.68%
VISVX 5% 9.77%
VTSMX 5% 3.94%

Combined return of = 7.5%

So while the S&P 500 fund had a 3% return for the given 10 year period, these three lazy portfolios have had returns of 5.8%, 6.6% and 7.5%.

Each of these lazy portfolios is doing far better than the S&P 500 alone. Even a little bit of easy diversification with the Margaritaville portfolio gives you nearly double the return. Now this might be simply due to the S&P performing horribly in the specific time period. But in general thats a good example of yow if you diversify your investments you stand to have a more reliable return. Rather than run the risk of having all your eggs in the one basket that has very bad returns, spread the money around a few places and average out the return. Lazy portfolios are a very simple way to diversify and give you decent return with low volatility.

Blog Widget by LinkWithin