May 30, 2010

New Dishwasher Purchase

My wife and I recently bought a new dishwasher.   We'd been seriously considering buying a dishwasher for a few months.   My wife has wanted one for a couple years.  Our old dishwasher was about 12 years old and it was a very cheap model when it was purchased.   The worst thing about it is that it was very loud.   The noise was extremely annoying.  Plus it didn't clean the dishes well consistently. 

The purchase was not totally planned but not quite made on a whim.  

Originally we were going to go to Sears just to research what they had available.  We'd already looked at Home Depot and Lowes.   I had also compared Sears prices and selection to Home Depot, Lowes and another local store online.   We had a good idea what was out there as far as prices and selection.   When we got to Sears they had a lot more selection that we saw at the home improvement stores and the prices were pretty competitive too.   Plus Sears happened to be having a sale.  I don't think thats anything unusual, as it seems that Sears is often having a sale on appliances and if they aren't then its only a matter of a few weeks before another sale event hits.

We found a Maytag dishwasher with the features we wanted that was about 30% off the retail price.   Maytag is a pretty good brand as well from what I'd read.    We had previously considered an LG model at Home Depot that was a little more expensive.   However after we'd looked at the LG in the store I'd read online that LG didn't always do as well in the product reviews and reliability ratings.

The Maytag model had the features that we were looking for and a fairly good price compared to what we'd seen for models offering the design style and options we wanted.   We decided to go ahead and buy the dishwasher.

We hadn't gone to Sears that day with the mindset to buy.   So the purchase decision was not as planned out and methodically researched as ideal.   If I had to do it again I would have at least done a quick internet search to make sure we couldn't get the same Maytag model for cheaper elsewhere and verify that it didn't have a lot of bad reviews.

After the fact I did do such a search online for the model in question and found that the price we paid was fairly competitive and the consumer reviews for that model were quite positive.   So in hindsight it looks like we did in fact make a good purchase.   

I Signed Up for Sears Credit Card

When we went to buy the dishwasher the salesman pitched us the Sears credit card and the 10% savings as salespeople typically do at the time of checkout.    Usually I brush off these offers since I really don't need more credit cards and 10% savings isn't usually enough to entice me.   However this time the 10% came with an extra $15 off and would add up to close about $100 in our case.   On top of that I had a Sears card in the past but it was canceled simply because I didn't use it.   I figured saving about $100 was worth getting the card.   We will pay off the entire purchase when we get the next statement.  If we weren't able to pay off the purchase then we wouldn't even be buying it in the first place.   So I"m not paying any finance charges and I also made sure the card doesn't have any kind of annual fee.

Spent about $750

With the sale and credit card discount we paid about $750 for the dishwasher including delivery and installation.  The installation and delivery charge was around $140.  We could have saved some money by picking it up and installing it myself.   However I don't own a truck so I'd either have to rent one or hassle a friend to do me a favor.   I also haven't installed a dishwasher before so I'd have to figure out how to do it and could screw something up.  But the key reason we chose to pay extra for delivery and installation was for convenience.

The price range on dishwashwers is anything from $200 up to $1,500 not including delivery  and installation.    The very cheap $200-$300 price range is really no better than the basic model we already have.   We were satisfied paying the amount we did to get the features we wanted.

The expense was not a 'need'.

We wanted a new dishwasher, but we did not need one.  I think that it is important to recognize and be honest with yourself about when you're buying something you 'need' versus when you're buying something that you simply 'want'.

Pretty good shopping Experience at Sears

I was actually pretty impressed with the wide selection they had at Sears and the job the sales person did.   Sears had more selection than Home Depot or Lowes.   The sales people at Home Depot and Lowes were not quite as knowledgeable or attentive as the sales staff at Sears.   And the prices at Sears were pretty competitive as well.   The one local chain I know of that sells a lot of appliances doesn't have as competitive prices.

Delivery Delay

A day or two after we made the purchase I got a call form Sears saying delivery was delayed.  The delivery and installation won't happen for about four weeks.   We weren't in any huge rush to get the new dishwasher but it is honestly a bit annoying to have to wait that long.

May 28, 2010

Best of blog posts for week of May 28th

Bargaineering has good overall coverage on  How to Analyze Credit Cards Reward Programs

Bundle tells us that spending has gone up:  New 2010 Data on How America Spends: Bundle's first quarter numbers show a spring splurge

Freeby50 was praised as one of the Nine Best Personal Finance Blogs by Smooth Entrepreneur.

 My Money Blog passes along a link to Visualizing Economics for some very nice graphs showing how tax rates look over a range of income. Infographic: Overall Tax Rates For Single, Married Filers

Six Gas Mileage Myths are on Yahoo

Memory Day weekend sales at Ebates

Ebates has several sales for Memorial day weekend.  Here's a list...

Nordstrom, 6.0% Cash Back , Half Yearly Sale for women & kids.

Sears, 4.0% Cash Back, a ton of savings on home items, outdoor living and more.

Kmart, 4.0% Cash Back, Thousands of Items on Sale + Online Only Extra 5-20% off & free shipping.

JCPenney, 3.0% Cash Back, enjoy 15% off your order with coupon code: MAYSUR10.

Bloomingdale's, 3.0% Cash Back, Big Brown Bag Sale: Save 20-30% on select merchandise, plus Extra 20% with code EXTRA20.

Tobi, 2.5% Cash Back, take 25% off regular priced items with code: BEACHBUYS.

7 For All Mankind, 4.0% Cash Back, save 30% on a variety of clothing and accessories, click this link for savings.

Macy's, 3.0% Cash Back, Memorial Day Sale - Free Shipping on $99+ order & 2 Day Specials. Code KICKOFF.

Home Depot, 3.0% Cash Back, $5 OFF $50 or More. Coupon Code: MAYSAVE24. Online Only.

Gap, 2.0% Cash Back, 25% off $75+ order & Free Standard Shipping on $100+ order at Gap. Code GAPSUMMER (Not valid on sale items)

What Does Title Insurance Cost

When I refinanced my home last in 2003 I paid $484 for the title insurance fee.  The loan was for about $133,000.   At the time I just paid what they told me it cost and didn't even give it any thought.  I didn't even know what title insurance should cost.   Thankfully the rate I paid wasn't excessive.   If you're getting a mortgage then it would be a good idea to check the title insurance cost and then get quotes from multiple title insurance companies.

Normally a mortgage company will just pick a title insurance company and tell you what the fee is.  You might not even realize it but you are free to shop around and find your own title insurance.  The Wikipedia entry on Title Insurance says that "A federal law called the Real Estate Settlement Procedures Act (RESPA) entitles the individual homeowner to choose a title insurance company when purchasing or refinancing residential property."

But how much should Title Insurance cost? says that "In general, the cost of Title Insurance is around 0.5% of the purchase price of your home."   That gives rough ballpark.     The $484 that I paid was under 0.4% so that isn't bad given this 0.5% expectation.

I did a google search for title insurance providers in my town and found a few names.   Turns out a couple of them are owned by the same major company named Fidelity National Financial.    They have an online rate calculator that gives basic estimates of title insurance costs.    I also found another online estimator from First American Corporation.

Using those online calculators I did some searches on different home prices for each source.  The price of title insurance that I found for different home prices were as follows:

Home price - Title Cost
$100,000 = $450 to $743
$200,000 = $700 to $1,155
$300,000 = $950 to $1,568

It then goes up proportionally $250 to $412 for each additional $100,000.

In general you're looking at something in the range of 0.3% to 0.75% of the price of the house for the title insurance.

Keep in mind that these are just some example prices and the exact prices will probably depend on where you live.  I also looked at the cost of title insurance for foreclosures or refinances if they had the options and those kinds of title insurance fell within the ranges or regular purchase.

May 27, 2010

Get a Job and Keep It

With news that some jobs are not coming back  I'm sure some people will be looking for new careers and many of us will be trying to hang on to the jobs we have now.   Below are several recent articles from the major news outlets that deal with employment and career advice.

 Be The One Who Gets the Promotion
Has various tips and strategies to help you keep your job in these difficult times.  

Worst-Paying College Degrees
This one gives a short list of the degrees that don't usually get good pay.  I don't think it should be any surprise that these degrees don't get high pay.

The Path To A $100K Career
A short list of careers that can lead to 6 figure pay.   Its certainly not a comprehensive list of jobs that pay well.  But its a list of careers that many people can follow to 6 figures.   They also have a path for people with a bachelors in education which is one of the worst paying degrees listed in the previous article.

Safe, Secure and Super Hot: 10 Sexy Jobs
This one is a list of jobs that might help attract a mate.   I guess in general its a list of stable and well paying jobs and if you have a stable and well paying job that is generally an attractive thing for deciding who to marry.

May 25, 2010

Spread Out Your Free Credit Reports

You can get your free credit report online via the  But if you get all 3 reports at one time then that just gives you a snapshot of your credit once every 12 months.  It would be ideal to check your credit more frequently.   An easy way to do that is to spread out how you access your free credit reports over multiple months rather than getting them all at once. allows you to get a free credit report from Experian, Equifax and Transunion every 12 months.   You could get all three reports at at the same time or just get them one at a time.  Quizzle lets you get a free Experian credit report and score every six months.

Between Quizzle and you can get  five free credit reports every year.  If you spread these out then you can effectively check your credit report for free every 2 1/2 months.

You could spread out your credit reports to access them like this:

Jan 1 - Experian via Quizzle
Mar 1 - Equifax via Annual Credit Report
June 2 - Experian via Quizzle
Aug 6 - Transunion via Annual Credit Report
Oct 22 - Experian via Annual Credit Report

This would spread out your free credit reports and allow you to check a credit report for free every 2-3 months.

May 24, 2010

How Fast *Could* Gold Drop?

I've said before that I don't think gold is a very good investment based on the historic trends.  I think there is way too much hype nowadays over gold as an investment.   It seems to me that much of the hype over gold is due to peoples fear about the economy and people jumping on a bandwagon.  In my opinion the gold market has the signs of a bubble and eventually the bubble will pop.  But just how fast might gold go down when (if) it does?   I figured that looking at past declines of gold would give a decent reference.

We can find historical data on gold values from the Kitco site.  Back in the late 1970's and early 1980's gold prices grew significantly and then crashed.   Gold also had some smaller crashes later in the late '80's and 90's.  Here are some examples of recent periods when gold dropped in value:

  • Then after hitting a high of $850 an ounce in Jan. 1980 gold dropped to $481 by March that same year.   That is a 43% drop in value in just 2 months.   
  • Gold then recovered and hit $710 in Sept. 1980 but the price then slid again and by July 1981 it was down to $397.   That is a drop of 44% in a 10 month period.
  • Then from Sept. 1981 when gold was at  $463 to June 1982 when it hit $296 gold lost 36% in about 9 months.
  • Gold hit $499 in Dec. 1987 and dropped to $395 by Oct. 1988.   Thats a drop of 20% in 10 months.
  • In Feb. 1990 gold hit $423 and then dropped to $346 by June of that year.   Thats a loss of 18% in 4 months.
  • In Aug. 1993 gold hit $405 then dropped to $343 by Sept. 1993.  within just 2 month period gold lost 15%.
  • Most recently in 2008 gold hit $1011 in March 2008 and then sunk to  $712 by Oct. 2008 which is a 29% drop in 7 month period.
If we look at some longer periods of about 2.5 years (give or take a month or two) then we can see some fairly sizable declines.
  • All together from the peak of $850 in Jan. 1980 to June 1982 price of $296 gold lost 65% of its value in a 2.5 year period.
  • Then after recovering to $481 in Sept. 82 the value had dropped to $284 by Feb '85.   That is a 41% decline over a 2.5 years. 
  • In Dec. 1987 gold hit $499 but by June 1990 it was back down to $345.  That is a drop of 30% down in a little over 2.5 years.
  • In August 1990 gold hit $413 and then it $326 by March of 1993. This is a loss of 21% in under 2.5 years.
  • Gold hit $414 in Feb. 1996 and then slid to $273 by August 1998.    This is a 34% loss in 2.5 years.

Here are the drops that gold saw in periods of 12 month or less:

Jan 1980 to Mar '80: 43% in 2 months
Sept '80 to Jul '81 : 44% in 10 months

Sept '81 to Jun '82 :  36% in 9 months

Dec '87 to Oct '88 : 20% in 10 months
Feb '90 to Jun '90 : 18% in 4 months
Aug '93 to Sept '93 : 15% in 2 months
Mar '08 to Oct '08 : 29% in 7 months

Drops over periods of roughly 2.5 years:

Jan '80 to Jun '82 : 65%
Sep '82 to Feb '85 : 41%
Dec. '87 to June '90 : 30%
Aug '90 to Mar '93 : 21%
Feb '96 to Aug '98 : 34%

Now of course the past doesn't predict the future.   But if something has happened in the past then I see no reason why it couldn't happen again.

Looking to the past to give us ideas of how fast gold has dropped in value we can see that gold has dropped in value by as much as 44% in a short 2 month period and as much as 65% in a 2.5 year span.

In the past 3 decades gold has lost 15-44% in separate individual periods of 2-10 months.   And we've also seen gold lose 30 to 65% in separate individual 2.5 year declining periods.

In my opinion then when gold drops next then its pretty likely we could see a drop of about 30% within a 12 month period and potentially 40% losses within a 30 month timeframe.

Photo by tao_zhyn

May 23, 2010

Bond Credit Rating History Standard & Poor's NetAdvantage via Libaries

A while ago I talked about finding the credit rating history of  GM and at the time I didn't know a source for the rating history on bond issuing companies.  Now I've found one that might be available via your local library.

I have access to the Standard & Poor's NetAdvantage service via my local library.  Your local library may or may not offer access to the service. You'd have to check your library to find out.   I don't know how common it is for libraries to carry the service so sorry if this doesn't apply to you.   If your library does have S&P NetAdvantage then its a good source for corporate credit history ratings on bonds.

 Its fairly easy to find the bond rating history for a company.   In the top right side of the screen is a search box for 'Database Search'.   For that select 'Corporate Bond Reports' under resources then for search by select 'Company Name' then type in the name of a company in the 'Enter' field and hit the arrow button.

I searched for a few companies and it was hit or miss.  I'm assuming some companies simply don't have bond reports since they don't have a report specific to that company or they may just not issue bonds.   I searched for Microsoft, Toyota and Walmart and came up empty. But I found several other well known names.   The bond rating history for a sample of companies I found is given below:

Ford Motor

Rated Last Change Date
CCC 11/3/2009
CCC- 4/13/2009
CCC+ 11/27/2006
B 9/19/2006
B+ 6/28/2006

Rated Last Change Date
AA- 11/16/2004
AAA Initial

The Boeing Co.
Rated Last Change Date
A 7/29/2009
A+ 11/3/2006
A 5/15/2003
A+ 2/5/2002
AA- 12/4/1998

If your library has access to it then Standard & Poor's NetAdvantage service has a lot of information including the credit rating for bond issuing companies.

May 21, 2010

Best of blog posts for week of May 21th

FreeMoneyFinance has a pretty good list of The Ten Worst Money Mistakes Anyone Can Make

Consumerism Commentary asks Should We Discourage Some Students From Attending College?
I've stated my personal opinion on the matter before that I don't think C students should go to college. 

Neal Frankle writes the guest post What YOU Can Learn from Baby-Boomer Blunders on Get Rich Slowly.

Entertainment Coupon book for $15 and 30% back until 5/31

Right now you can get the Entertainment coupon books for $15 with free shipping.   Plus Ebates has 30% cash back on Entertainment coupon books until May 31st.   That would bring the total cost down to $10.50 after getting $4.50 back from Ebates.   To get the deal for 30% back you'll have to be registered with Ebates and then follow their link to the Entertainment coupon site before you make your purchase.

Watch Your Savings Account Rates

I haven't checked the rate on our savings accounts lately.   I just checked them and found that our savings account at Chase was only paying 0.5% interest.   I knew that our rate wasn't the greatest but it used to be a lot more competitive.   We originally banked with Wamu and a couple years ago our rate was 4% which was great.   The reason Wamu's rate was that good was they were nearing failure and trying to get new accounts or hang onto those they had.   When Wamu was bought out by Chase our rates dropped and then kept dropping.   Any way, long story short Chase has cut the rates so they are not nearly as competitive as they were a little while ago.  

I moved the bunk of our savings over to ING Direct.  I also have an ING account which I've had for many years now.   ING is currently paying 1.1% in my savings account which is 0.6% better than the rate at Chase.    So the ING rate is over double what we've been getting at Chase.

I moved $40,000 from Chase to ING.   At Chase that $40,000 would get us just $200 a year in interest.  At ING we'll get $440.  That means moving the money to ING from Chase will net us an extra $240 a year (before taxes). The entire process of moving the money including discussing it with my wife to make sure we both agreed on the idea took no more than 20 minutes.

$240 is not bad for 20 minutes of my time.

Now I'm not going to act as if this is an amazing discovery or anything special.   I really should have done this earlier of course.   Better late than never.   The point here is just to keep your eye on your savings rates so you notice if one of them drops a ways.   Its easy to get occupied with life and not even notice if your rate drops. 

The more you have in savings the more the interest rates matter.   If you have very little in a savings account then don't sweat it.  If  I only had $50 in savings then it really wouldn't matter if they paid me 1.2% or 0.2%.  But since we've got a large cash reserve, the little differences in interest add up to quite a bit. 

Also, I could make a little more money by opening a new account with one of the banks offering 1.3% or 1.4%.   At 1.4% I'd be getting another $120 over what ING is paying.   However those highest rates are usually 'teaser' introductory rates that tend to go down over time.   ING has consistently competitive rates.  
As long as my interest rate is fairly competitive and consistently high I'm happy with ING.

May 20, 2010

Varying Auto Depreciation Rates Have Signficant Impact

A while ago I talked about Car Depreciation.    Its generally well known that new cars lose a significant % of their value after the first year.  Its also pretty well known that certain cars hold their value better than others.   The amount that depreciation varies from one car model to another can make a pretty big impact on the value of a car.

Lets say that you're in the market for a family sedan.    You are looking at various models from several manufacturers.   I'll use the depreciation figures from the Yahoo auto site.  Here is how the depreciation in the 1st year compares for some typical sedan models from various manufacturers:

1st year
Honda Accord 27%
Chevy Malibu 41%
Dodge Charger 41%
Ford Fusion 33%
Hyundai Sonata 30%
Toyota Camry 33%
VW Jetta 31%

So in just one year the Honda Accord will lose 27% of its value while a Ford Fusion would lose about 33% of its value.

Now lets look at the total depreciation for the same set of cars over a 5 year period:

5 years
Honda Accord 55%
Chevy Malibu 68%
Dodge Charger 65%
Ford Fusion 57%
Hyundai Sonata 66%
Toyota Camry 60%
VW Jetta 61%

There is a 13% difference between the highest and lowest depreciation rates.  Thats a pretty significant amount.

Lets say you're comparing the Honda Accord to the Chevy Malibu.   The Accord costs $21,855 MSRP and the Malibu is $21,825 so they are very close in initial purchase price.   However after 5 years if you went to sell them the Accord would be worth about  $9,873 and the Malibu would fetch just $7,065.   That is a $2,808 difference over 5 years or $561 per year.   The slower depreciation for an Accord would save you $561 each year over a 5 year period compared to a new Malibu.

When comparing two car models the expected depreciation over time can make a significant difference in the value of the purchase.

Now keep in mind that this is just a semi-random sample of sedans.  The depreciation figures I'm using come straight from the Yahoo auto site.   So this shouldn't be treated as fact, but more of a pretty educated guess based on trends.

While you might draw some generalizations about depreciation by brand theres no hard fast rules.    Hondas may typically hold their value better than Chevy's.   But that doesn't mean that every Honda will retain value better than every Chevy or that every Chevy will lose value faster than every Honda.   For example the Chevy Camaro is only expected to lose 19% of its value in the first year.

Keep in mind that depreciation is just one factor that you should look at when buying a car.   Other costs such as fuel, repairs and insurance rates should also be considered.   Sites like Yahoo Auto or Edmonds help you calculate the total costs of a car by figuring the 'True Cost to Own' or 'Total Cost to Own' respectively.

May 19, 2010

Upgrading Windows to Save on Energy

When we got our home energy audit they said that our windows were fine and it didn't make sense to replace them.   We were told the same thing by at least one or more of the contractors that gave us estimates for the insulation work we had done.  Our windows are double pane and the house is not very old.   Theres no drafts around the windows and they're all in pretty god shape.   Windows are a pretty expensive item to replace  and I was doubtful that improving our windows would save us much.  

The Energy Star site has a map of the USA showing energy savings for various regions.   For each region they give a figure upgrading from single pane or double pane.  For example if you live in South Atlantic region then you'd save about $213 on average if upgrading from single pane and $86 average upgrading from double pane.   I'd only be upgrading from double pane and given my region I'd save barely over $100 a year.   These are just average figures so they are more of a ballpark estimate.

Its hard to get good solid information on the cost of windows.   Window costs are quite variable due to various sizes and quality.   Costhelper cites costs of $300 to $700 for window replacement.  My house has 10 windows so that means I'd be looking at $3,000 to $7,000 to replace our windows.   If I were to save $100 per year then that is only 1.4% to 3.3% return.   Rough payback period would be 30 to 70 years.  Thats not a very good return and I have other home energy saving improvements that would make more sense to do first.

If I lived in a colder climate and had single pane windows then it might make a lot more sense to replace my windows with new energy efficient ones.    An average house in New England could save about $501 a year by replacing single pane windows with new Energy Star windows.   If the house is similar to mine and we use the guesstimate cost of $3000 to $7000 to install new windows then that would be a 7.1% to 16.6% return and 6 to 14 year payback.    Thats a lot better return and would be a smarter move than some other home energy savings improvements.

In general it looks to me that replacing single pane windows in a cold climate could be worth the money, but replacing double pane windows or replacing windows in mild climates is likely not a high priority energy saving improvement.

May 18, 2010

Things I'll Buy The Store Brands For and Things I Won't

As a generalization I think you will get usually the best prices if you buy store brands.    I buy store brands for many products and it saves us quite a bit of money.  For some things like over the counter medicines I  think the store brand is a automatic good deal.   However some items I'm basically 'brand neutral' but I lean towards buying brand names as I feel theres lower quality in store brands.   There are also a few brands that I won't budge on and I'll only buy the brand I like.

Store Brands Items that I definitely buy

There are some things that I automatically look for the store brand and am happy to get a store brand  if its cheaper.   For these things I don't really care who makes it and I consider all brands equally equivalent.

Over the Counter Medicines - ibuprofen (Advil), acetaminophen (Tylenol), cough syrup, etc.
Condiments - ketchup, mustard, etc.
Staples - flour, sugar, salt
Kitchen consumables - aluminum foil, paper bags

For all of these items I feel we don't give up any quality by buying a store brand and the prices are lower than brands.

Things I'm Brand Neutral on

For these items I don't exactly look for store brands but I'm not tied to a given brand.  I usually just grab the cheapest item on the shelf.   But I might pick a brand name rather than a store brand more often than not as I assume generally that the brands are 'better' product.

shampoo & conditioner
potato chips
toilet paper
peanut butter

For these items I'm not opposed to store brands but I'm either not sure the store brand is as good or I haven't found store brands that offer good savings for equal quality.

Brands I won't change

For the following items I won't buy anything but the brand in question.   These are just brands that I personally like and have never found good replacements for.

Oreo cookies
Satin floss

For these items I simply can't find any other brands or store brands that are equal in quality.

What brands are you flexible on and what brands are you loyal to?

May 17, 2010

Mortgage Interest May Save You Very Little In the Long Run

A while ago I pointed out that not everyone saves taxes from their home mortgage interest payments.   One often overlooked facet of the tax deduction of home mortgage interest is that the interest paid will go down over time and eventually not warrant itemization.

If you look at a home mortgage today for say $200,000 and get a 5% rate then that would equate to about $10,000 in loan interest.   That would make a pretty big tax deduction.   But over time that $10,000 will seem like a smaller number and eventually it will probably be much lower than the standard deduction and not warrant itemizing your taxes.     Today that $10,000 deduction might equate to a $1,500 tax savings if you're in the 15% bracket but over the life of a 30 year loan it will not amount to nearly as much savings.   It would seem at first glance that you're getting 15% of your interest back in the form of tax savings.   That may be mostly true for the first year but your tax savings will go down over time.

To illustrate this lets look at an example.    

Say you make about $60,000 a year and you buy a house with a fixed 30 year mortgage of $200,000.   Your interest rate is 5% and the property tax is about 1%.   For the sake of the example I'm going to arbitrarily assume that you put about 10% of your income between charity contributions and state taxes.  If you itemize your taxes then you'd have about $10,000 in mortgage interest, $2,000 in property taxes and $6,000 combined between charity and state taxes.  

Here's the basics:
Annual Income = $60,000
Marital status = married, filing jointly

Mortgage loan = $200,000
Property tax rate = 1%
Charity & state taxes = 10% of income

That would add up to total itemized deductions of $18,000.   The standard deduction for a married couple is $11,400 for 2010.   So compared to the standard deduction you have $6,600 extra in deductions if you itemize.   Since you're in the 15% bracket that equates to a $990 savings on your tax federal income bill over the standard deduction.

This revels the first detail of the tax savings.   You don't necessarily get the full 15% back but instead you get 15% of the difference between the itemized deductions and the standard deduction.  In this case it equates to 9.9% of your mortgage interest. 

Ok, now lets project this over the future 30 years of your mortgage.   I'm going to assume arbitrarily that inflation of home values, income and standard deduction are all at an average rate of +3% annually.  Of course I don't know if inflation, home values or incomes will go up at a 3% rate or not but I'm just making an assumption for the example sake.

If you continue to have the same mortgage, 1% property tax and 10% of your income go to charity & state income taxes over the years then gradually over time your property tax, charity & state tax amounts will go up but your mortgage interest payments will drop as you pay down the principal.   At the same time the standard deduction is going to increase with inflation.

Here is a chart showing the projected amounts you'd have for mortgage interest, property tax, combined charity & state tax as well as the standard deduction and the sum of the itemizable deductions.

The green line is the standard deduction.  The cyan line is the sum of the itemized deductions.  You can see that in about 18 years the lines cross and the standard deduction is higher than your other deductions.   After that point for the last 12 years of the mortgage you would have NO tax savings from your home mortgage interest.
As the standard deduction goes up and your interest payments go down your tax savings by itemizing would go down every year until they hit zero.   Here is what itemizing your deductions including your mortgage would save you on taxes per year: 

If you sum up the total tax savings it is $10,125.   The total amount of interest paid on the mortgage over the full 30 years would be $190,309.   This means that you'd only get back about 5.3% of your mortgage interest in tax savings over the course of 30 years.

At first glance if you're in the 15% tax bracket then you might easily conclude that  you'll save 15% of your mortgage interest via tax deduction.   But in this example your actual accumulated tax savings is only about a third of that and your only get back 5.3% of your interest payments via tax savings.

Of course this is all built on a theoretical example with specific assumptions.   If you change any of the variables then the exact tax savings would differ.   For example if you have higher state taxes and charity deductions then you may always have higher itemized deductions than standard deductions.   But if you have very little itemized deductions other than your mortgage then your tax savings would be lower.

You could save a higher rate on your taxes:
Lets say you make $400,000 and live in California.  Your California state income tax alone would be enough to exceed the standard deduction.   So you'd see the full amount of your mortgage interest deducted from your taxable income.  With $400,000 of income you'd be in the 35% tax bracket on your federal income taxes so you'd get back 35% of your mortgage interest in the form of tax savings.

Mortgage interest could save nothing on taxes:
If you you don't have enough to itemize your deductions then you won't see any savings from mortgage interest.  If you live in a state with low state income tax and have a relatively small mortgage then it might not add up enough to warrant itemizing.  Say you make $60,000 and buy a $100,000 house in Nevada.   If your property tax is $1500 and you give 5% of your income to charity then your total itemized deductions would be $5,000 in mortgage interest, $1500 in property tax and $3000 in charity or $9,500 total deductions.  That is lower than the standard deduction for a married couple.   In this situation you'd get back 0% of your mortgage interest in tax savings.

May 16, 2010

Ways To Use Small Amounts of Airline Miles

Recently my American Airlines miles were going to expire.   I didn't have enough time to get more mileage credit so I had to figure out some way to use the miles or they'd be lost.   Previously I talked about Cheap Ways To Delay Expiration of Airline Miles but as I found out that doesn't always work out as well as planned and most of those methods have a delay before the miles hit your account.   Thankfully I found a good way to use my miles without them going to waste.

American Airlines lets you book travel via their AAVacations site with miles and that option worked pretty well for me.   I had a bit over18,400 miles on American and I was able to get a credit of $123 towards a hotel stay.   That works out to about 0.66¢ per mile.  Not great but certainly better than nothing.  Rather than let the 18k plus miles simply go to waste I saved myself $123.

United and American both have some good non-air options for using your miles by getting hotel or car reservations.   If you travel enough then hotel or car rentals are generally something you can make good use of.   Otherwise the options available to redeem miles amount to getting magazine subscriptions or miscellaneous merchandise.   These give less of a return on your miles but maybe you can find something you want.  Another good option for miles about to expire is to donate the miles to charity.   That way the miles don't go to waste and the charity gets good use of them.

Below is a summary of the ways you can redeem miles on various major airlines other than buying airfare: 

American Airlines

AAVacations - You can use your AA miles to pay for air, hotel or car reservations.   The exchange rate is $6.63 for 1000 miles.   Make sure to shop around to compare to other travel sites.   Some of the prices on AAVacations are good and some aren't as competitive.
Magazines - They have a variety of magazines you can get for relatively low miles.  A year of Sports Illustrated for 1400 miles or Entertainment Weekly for 1200 miles.  129 issues of Wall Street Journal is 1800.
Charity - give your miles to a charity.

United Airlines

Book hotels - They give you the option to book hotel stays for miles.  I did a quick search for Vegas and found a 1 night stay at The Mirage would cost 15,300 miles.   I could book that same night via Orbitz for $132.  So thats about 0.86¢ per mile return.   Other hotels gave a worse return.  Luxor cost 12,300 miles and cost only $50 via Orbitz which is only 0.4¢.
Car rental - You can also redeem United miles by booking car rentals via United.   However this is not a very good deal.   The cheapest car rental for 1 day in Vegas was 10,000 miles.   Sites like Orbitz and Hotwire have rental cars from the major companies starting in the $40-$50 range.  A better option seems to be getting a certificate good for 2 days of car rental at National, Avis or Hertz.  You can get 2 weekend days for 8500 or 10500 miles depending on the company.   A weekend in Vegas in June would cost around $80-$120 for those brand names.
Other options - 6 day Wall Street Journal 39 week subscription for 2626 miles (may vary depending on location), dining certificates, merchandise or FTD flowers.

Charity - give your miles to a charity.

US Airways, Delta Air & Continental

These airlines have options to buy magazines, newspapers or merchandise.   I don't see any great deals there but you might find something you really want.      Or you can donate your miles to charity.

Alaska Air & Frontier Airlines

Giving miles to charity is the only options I see other than airfare.

Southwest Airlines

I don't see any options to redeem Southwest rapid rewards points for anything other than airfare.  I don't even see an option to give your rewards to charity though I may just not be finding it.

May 14, 2010

Best of blog posts for week of May 14th

Trent at The Simple Dollar recommends that you Never Cosign a Loan Unless You Want to Pay It Yourself

Fivecentnickel dispels Five Common 529 College Savings Plan Myths

The farm house and baseball field featured in the movie Field of Dreams is up for sale for $5.4 million.

TomTom One GPS Navigator for about $55

Right now Macy's has the TomTom One 130S GPS navigator for $49.99.    The shipping is about $10 so thats about $60 total.   Ebates has 11% rebate for purchases at Macy's so that should get you $5-6 back.   Total cost after the Ebates refund would then be around $55.    To get the 11% rebate you have to sign up with Ebates then follow their link to Macy's and search for 'tomtom' on the Macy's site.     I'm not sure of the exact price after rebate but it should be about $55.   You might have to pay sales tax and I don't know if the 11% back is on the $49.99 or the total including shipping.

A TomTom for about $55 is a pretty good deal.

Normally GPS navigators start at $100 and go up.    I've got a TomTom One myself and it works fine.   I'm a big fan of GPS navigators and I think they can save time and money and avoid a lot of frustration.. I highly recommend getting a GPS navigator if you're at all directionally challenged like myself and/or if you do much traveling.

I heard about the Macy deal at Fatwallet.

Beware Las Vegas Resort Fees

Last few times I've been to Vegas I've become aware of a new trend at many Vegas resort hotels to add a "resort fee" on to your bill at check in.   These fees allegedly cover various resort activities like access to the pool, a daily newspaper, unlimited local phone calls or maybe internet in the room.   Sometimes they are part of an "energy surcharge" fee that is added to the fee to cover the high cost of energy.   Whatever the resort calls the fee or says that it supposed to cover it amounts to an extra fee arbitrarily added to your bill.   The fees are mandatory whether or not you use the services they are supposed to cover.

The problem with these fees is that they are usually buried in the fine print and not part of your room rate when you reserve the room.   Because they are almost hidden it can be pretty easy to not notice the fee and create a nasty surprise bill when you check in.

The has a handy list of the resort fees by hotel.   They also list all the hotels that currently don't have a resort fee.   The resort fees change over time so I'd be sure to check the fine print when you compare room reservations to see what the current fees are.

I did a quick search at Orbitz for 3 star hotels on the Strip in mid June.   Here is a sample of some of hotels' and the room rates:

Room rate
Sahara $26
Stratosphere $34
Riviera  $38
Excalibur  $44
Tropicana  $52

 Those are pretty cheap.   But if you add in the resort fees the actual costs are quite different:

Room rate Fee Total
Sahara $26 $6.00 $32
Stratosphere $34 $7.50 $42
Riviera  $38 $0.00 $38
Excalibur  $44 $10.00 $54
Tropicana  $52 $8.00 $60

You might think that an extra $6-10 is not a whole lot.   But keep in mind that the fees are per night and it adds up fast.   For these resorts with the resort fees they increases your hotel cost by 15-23%.   An extra $10 per night at the Excalibur could give you a surprise $70 bill for a week stay.   Some of the more expensive resort fees are $20 or more.   The resort fee at Treasure Island is now $20.  That could easily add over $100 to a Vegas vacation.

I don't know if hotels in other areas are adding fees like this at all, but its a big trend in Vegas now.   If you're heading to Las Vegas anytime soon then make sure you keep your eye out for these fees. 

May 13, 2010

Offer Good For Limited TIme - Often A Sign of Bad Deal

Browsing the net looking for info on home remodeling I ran across someone saying they were quoted a price of $13,500 to get kitchen cabinets resurfaced but the company in question "will only hold the price for 12 hours".    Someone responded to the person to say that a limited time offer like that smells fishy and they have learned they should decline such offers.  I agree that offers made like this with such a time limit are likely just a high pressure sales tactic meant to push you into a hasty decision.    Was $13,500 too high for that cabinet work?  Quite likely.   The highest cost cited on CostHelper for refacing kitchen cabinet is $9000 and that is for solid wood veneers.

If you are getting a quote on a item or services and the person quoting the price is saying its only good for a certain short period then I'd question why the price won't be good longer.   This kind of time limit is often a good sign that the price is too high or you're otherwise being pressured into a bad deal.

Some less legitimate sales venues frequently use rushed time limits as a high pressure sales tactic.  TV infomercials selling stuff sometimes have these fictitious time limits.  They are offering some special deal that is only good for the next 5 minutes.   Door to door salespeople are often offering a supposed deal that is only good immediately.   Timeshares are usually sold under some sort of imminent deadline that they say won't be offered tomorrow.   Yet we know the same exact infomercial will run an hour later on another network, the door to door salesperson will offer the same deal tomorrow on the next block and the timeshare person will make the same claim to everyone they talk to until all the shares are sold.   These limited time deals are based on a clock that resets every time it hits zero.

I once fell for this tactic myself in a car dealership.   I bought my first car at a dealer and was offered an extended warranty.   They told me that the offer for the warranty was only good that day.   I don't know why I believed that for a second but for some reason I didn't question it and made the mistake of buying the warranty.

Sometimes a time limit on a price makes sense.   If a retail store has a sale for a limited time then it is perfectly normal for them to quote a price only good for a few days.   If you are getting a quote on a home mortgage then the quote may expire after a time or be "locked in" for a set period.   This is because interest rates fluctuate outside the control of the mortgage company.

If you're faced with a purchase decision that has a time limit then I'd question why they have a time limit.   If theres no real good reason for there to be any time limit then it could be a sign of a bad deal and just a high pressure sales tactic.

May 12, 2010

The Education Level and Job Status of My Friends

When I graduated high school about 80% of my graduating class went to college of some sort.  I thought it would be interesting to look at my friends now and see how their education level was and what kind of job they were in.  

Note: This is totally unscientific and it isn't safe to conclude anything based on it.  I'm doing this more for idle interest sake than anything.  

I'm looking at a sample of 37 total people.   I know the education level for those 37 people but I don't know the current job level for all of them.

78% of my friends have a 4 year college degree or more.  19% of my friends have graduate degrees.

My friends have various jobs.   The jobs that my friends have are listed below in groups based on their eduction levels:
High school diploma: construction supervisor, supermarket employee, bartender, waitress, auto shop manager
Associates or some college: retail clerk, secretary
Bachelors degrees are : 5 engineers, 3 IT workers, 2 managers, accountant, respiratory therapist, account executive (salesperson?), retail clerk, artist, realtor and 2 are currently unemployed
Masters degrees: 2 engineers, planner, counselor and one unemployed
The Doctorates are : 1 engineer and 1 professor

You see that 3 of my friends are unemployed.  Out of the total 37 that means that my friends have a 8.1% unemployment rate.

I don't know what everyone makes for their salary of course.   But I can make some generalizations and put different jobs into different general bins.   Engineers, managers, professors, etc are in higher compensated fields.   Retail clerks and bartenders are making little more than minimum wage.   I'm going to make an assumption and put each job into high, medium and low wage levels based on my perception of the profession in question.

Heres how my estimation of the different compensation level by education comes out:
High school diploma: 17% high, 17% med, 66% low,
Bachelors degrees are : 50% high, 22% med, 17% low and 11% are currently unemployed
Masters degrees: 60% high, 0% medium, 20% low, 20% unemployed
The Doctorates are : 100% high

My friends with less than 4 year degrees are mostly in low compensated jobs.   Most of my friends with 4 year degrees are in highly compensated jobs.  All of my friends (both of them) with doctorates have high paying jobs.

Almost all of my friends are 35-45 years old.  You'll notice that there are a lot of engineers in the list, that is a reflection of me being an engineer and the fact that I know several engineers.

May 11, 2010

11% off at Ebates

Ebates  has 11% rebates for several stores right now.   The deal is a promotion for Ebates 11th birthday.

Merchants you can get 11% off at include:
Old Navy
Barnes & Noble
Gap Gap Kids
Baby Gap
Ann Taylor
Banana Republic
Vitamin World

and many others

A Look at "Cash for Caulkers"

The US House recently passed the 'Cash for Caulker's bill.    The bill will still need to pass the Senate and then be signed by the President so its not a law yet.   But its one step towards becoming law.

The bill is officially named the Home Star Retrofit Retrofit Act or just Home Star Program. But it has been nicknamed by many the 'Cash for Caulkers' bill as a take off of the 'Cash for Clunkers' bill.  Details on the house bill H.R. 5019: Home Star Energy Retrofit Act of 2010 are at the Govtrack site.  This is the initial senate bill.   The house and senate versions differ a bit and right H.R. 5019 is the bill in progress.

Right now the bill is still not law so it could change before it is passed or it may not become a law at all.   Everything about the law is subject to change and nothing may happen at all.   Having said that, lets take a look at the provisions of the proposed law as it stands right now.

There is a summary of the bill at the Home Star coalition website.   There are two different rebate programs, the Silver Star and Gold Star.

They explain the Silver Star program as : "Homeowners receive between $1,000 and $1,500 for each measure installed in the home, or $250 per appliance, with a benefit not exceeding $3,000 or at least 50% of total project costs (whichever is less)."   and it covers : "air sealing; attic, wall, and crawl space insulation; duct sealing or replacement; and replacement of existing windows and doors, furnaces, air conditioners, heat pumps, water heaters and appliances with high-efficiency models."

The Gold Star level is starts with a home audit, then makes improvements and then gives a rebate based on expected energy savings.   The summary says: "A certified professional with accreditation from the Building Performance Institute (BPI), the Residential Energy Services Network (RESNET) or an approved equivalent conducts an energy audit before work begins, and a test-out when the performance retrofit is complete. Consumers receive $3,000 for modeled savings of 20%, plus an additional $1,000 incentive for each additional 5% of modeled energy savings, with incentives not to exceed 50% of project costs."

In brief that breaks down to :

Silver Star:

up to $1000 to $1500 or up to 50% back for various energy saving improvements:
air sealing
attic insulation
wall insulation
floor insulation
duct resealing
window replacement
door replacement
furnace replacement
$250 back for efficient appliances
$125 per door and per skylight
$400 gas or propane water heater
$750 for other 'fancy' water heaters (tankless gas, solar power, etc)
$250 for rim joist insulation
$50 for each storm window or door, with a minimum of 5 storm windows or doors and a maximum of 12;
$250 electric tankless water heater, maximum 4
$500 for window film
$750 for heating system replacement
$500 for a wood or pellet stove
$500 for desuperheater

Gold Star:

$3000 rebate for 20% home energy savings,  PLUS another $1000 for each 5% of savings up to 50% of costs.

These rebates could be some pretty good incentives for consumers.

I'm not exactly sure about all the details on what would qualify so we'd have to wait to see the details if or when the bill becomes law.  I'm not sure how the appliances rebate would work.  $250 seems like quite a lot for appliances and I'm not sure exactly what appliances would qualify.   I also don't know if this rebate program will add to existing federal tax credits for energy savings.

Our home insulation project cost a total of $6000 roughly.   We got about $2000 back in rebates from the utility and about $1500 in tax credits from the state and federal.   Our total out of pocket was around $3000.   As I understand it Silver Star rebates would give me back $3000 for the work we did.   So if this law existed a year ago in its current bill form then we might have been able to get our home insulation virtually free of charge after all the rebates and tax credits.

We're planning to get a new dishwasher sooner or later.  Hopefully that $250 rebate will apply to that but I'm not holding my breath.    We've still been thinking about maybe getting a heat pump installed.   If the Cash for Caulkers goes into effect then its pretty safe it would give us $1000 or more toward the cost of a heat pump installation.   At some point we might also want to have a new front door installed and 50% off of that cost would be pretty good incentive.

Again, all of this is subject to change and it may never become law.  Some of the details are currently vague.   If it does ever pass the Senate it might be modified further before it becomes law.

May 10, 2010

Should I Buy Season Tickets?

My wife and I are fans of our local NBA team.   We like to watch all the games on TV and go to several games a year.    The past couple years we have gone to about 10 games.  This season and the tickets were around $25 each.   Next season the tickets are going up about 20% to about $30 each.   But the season ticket price will be $25.   One of my coworkers has season tickets and I envy how he gets to go to any game he wants while we're stuck going to whatever game we can find tickets for.   I'm tempted to get season tickets but they are pretty expensive.

I don't want to go to all the home games since thats 44 games a year and both a high cost and significant hassle traveling across town to games every few days.  I'd ideally like to go to around 10 or so games a year.   One option I've thought of is to buy season tickets and then resell the tickets we don't use.  (I'm not a fan of scalping but you can sell back tickets you don't use for face value.)

Single games - $60 per game or about $600 for 10 games
Pros - no large cash outlay, not committed to large # of games, more expensive per ticket
Cons - hard to get tickets for good games, harder to get tickets for weekend games

Season Tickets- $2000 for 44 games or $50 per game
Pros - cheaper per ticket, go to any / all games we want, first rights to post season tickets
Cons - high initial total cost, have to deal with selling tickets for some games, might get stuck with tickets we don't want, if you want post season you have to commit to buy them all at higher prices per game

Split Season Tickets 50/50 with a friend - $1000 for 22 games or $50 per game
Pros - rights to up to 22 games, better access to good games and good days
Cons - potential argument with friend over who gets which games, some risk of being stuck with tickets we don't want and can't resell

I'd like to be able to pick the games we want to go to and not have to fight to find tickets.   But I don't want to fork over $2000 up front with no guarantee that I can't sell the tickets we don't use.  

I think buying a full season for my wife and myself is too much of a commitment and risk so we won't do that.  The ideal option would be to split a season ticket 50/50 with a friend, but I don't have any close friends who are big fans so thats not an easy option for us to do.

Bottom line: As things are we'll continue to buy single game tickets and take our chances getting some of the games we want and settle for some less preferable games.

May 9, 2010

Capturing Heat from Clothes Dryer

Clothes dryers cost about $0.36 per load or $85 a year to operate.  Most of that power is used to heat up the clothing.   Your dryer then vents the air outside the home which wastes much of that heat.   Wouldn't it be nice if you could capture the heat from your dryer exhaust and use it to help warm your house in the winter?  

A little web searching turns up a couple devices that will redirect the dryer exhaust into your home.   One option is the Clothes Dryer Heat Saver that costs $9.29.   A little more elaborate option is the Indoor Lint Trap Filter for $32.99.

I don't know how well either of those devices work but the mechanism is very straight forward.   The idea is to just vent the exhaust directly into the home and somehow capture the extra lint.  A simple vent and filter can do that OK.   Its hard to say how well these things work as far as saving energy and I couldn't find any information on how much money they can save you

Of course you want to redirect the heat outside during the warmer months.   Another thing to consider is the moisture.  When you redirect the dryer exhaust into your home you're also getting moisture from the dryer.  That extra moisture will increase humidity in your home with may not be a good thing.

But a warning, according to this source using a vent to redirect the clothes dryer exhaust into your home may not be up to code and you should not do this for gas dryers.

Unfortunately I can't find enough information on this to know if its a really practical solution or not.   Without more information it is hard to know if buying and using one of these devices would be worth the cost.

May 7, 2010

Best of blog posts for week of May 7th

Bargaineering discusses a Costco New Membership Promotion that can get new members 2 months free when they sign up for a year.

Consumerism Commentary has some good advice on dealing with customer service with Customer Service: Politeness vs. Demands

bripblap talks about  how to learn to love your job  A job is a means to an end. Not something to define yourself by.

NY Times has an interesting infographic about the debts of Greece, Ireland, Italy, Spain & Portugal

Darwin's Finance asks Is Putting in a Swimming Pool Worth It?

I Did NOT Lose 36% of My Money Yesterday

Yesterday the stock market crashed a bit.   The overall market indexes lost 3-4%.  Thats a pretty significant sell off.   At one point I glanced at my Roth IRA investments and I saw a figure that gave me temporary mini panic attack.   I took a quick screen shot of the Yahoo finance page and here is what I saw:

VYM is one of the positions that I hold in my Roth IRA.   VYM is the Vanguard High Dividend Yield Indx ETF.  This is not an individual stock but its an index fund.  

You can see when I snapped that screen shot it was down 36.7% at that time.   This is the bit that made me momentarily panic.    But then I noticed that the real-time quote was "only" down 6.6% or $2.65.    Look a little closer and see that the day range figure is 0.10 - 39.60.   That means at some point during the day the index had apparently dropped to just $0.10.  

Something is obviously wrong with this.  The market was bad yesterday but not that bad.

I found some discussion of possible errors made.   One account from the AP says that "There were reports that the sudden drop was caused by a trader who mistyped an order to sell a large block of stock." and also that "Nasdaq issued a statement two hours after the market closed saying it was canceling trades that were executed between 2:40 p.m. and 3 p.m. that it called clearly erroneous. It did not, however, mention a cause of the plunge."

 I don't know if VYM was literally trading for $0.10 yesterday or if this just an error in the system.   But in any case the stock was down $1.25 at $38.40 at the end of the day.   So I didn't actually lose over 1/3 of my money. Whew.

I checked the pressroom page at the Vanguard site to see if they had anything about it but there wasn't any new press releases there about it.    There may be more news in the future to explain exactly what happened, I'll keep my eye out.

May 6, 2010

$20 Bill Auction

I recently caught an episode of Nova on PBS called Mind Over Money.   It was a very interesting episode that talked about rational versus irrational forces that drive people to make the decisions we make regarding money and economics in general.  You can watch the full episode online if you want.

One of the examples they had in the episode was an auction of a $20 bill.   They had a $20 bill they auctioned off starting at $1 bids.   The rule of the auction was that the highest bidder would get the $20 for their winning bid BUT the 2nd highest bidder would receive nothing but also pay the amount they bid.   The auction ended at $28.   Why?   The individuals made what seemed like rational choices choosing to bid the auction up to $19 because if they won they'd be making a profit.  But the 2nd highest bidder at any point had an incentive to bid even higher so they wouldn't be stuck paying their losing bid and getting nothing.   So if I bid $18 and then I'm outbid by $19 then I will go ahead and bid $20 so that I can break even and not loose $18.  Then my competitor is faced with either losing $19 or bidding $21 and taking a net loss of $1.   This then goes back and forth in a game of chicken until one of the bidders just gives in and takes the loss.

To see this game of chicken eventually happening each bidder will have to think several steps ahead.  Or they could avoid the whole trap by never bidding in the first place.

But where do you stop bidding in order to cut the losses and maximize the profits??   The ideal bet is $1 and stop.   That way you win $19 and nobody else loses anything.   But the other guy will likely want to take the risk and bet $2 and hope that he wins thus profiting $18.   Now you're losing $1.  You might then take the risk to bid $3 and hope you win.

The whole idea is discussed in the wikipedia article on the "Dollar Auction".   They talk about an auction of $1 but but a $20 bill auction is the same principle.

I found it a very interesting situation to think about.  Of course its a very fictional idea.  Theres never any real world situation where you can bid on something and have to pay the money and get nothing in this way. The closest scenario I can think of is casino gambling where you wager money and face winning or losing, but there your losses are limited to no more then the amount you wager at any given point.

But the emotional greed and desire to not take losses that drives the $20 bill auction up is the same emotional reactions that cause markets to go up and then crash in a classic speculative bubble.  People bid up the $20 first cause they hope to profit, then they keep hanging on desperately even though they face a loss simply because they don't' want to eat the loss and hope to hang on for some sort of profit.    When a speculative bubble happens people initially ride the bubble up in hopes of profit then they ride the collapse cause they are hanging on in hopes of not eating the loss.

The Nova episode talked about some other examples of irrational money choices that people make.  If that kind of thing sounds interesting then I'd recommend watching the entire episode.

May 5, 2010

K&N Air Filters Can Save You Money

Recently I ran across a sale on K&N auto filters advertised on the web.   The company K&N Engineering sells the K&N filters.  The replacement filters from K&N are supposed to improve air flow while still filtering the air efficiently.   This should help improve performance and horsepower.   The filters are also reusable.   I've heard about this kind of filter before and had a vague idea that they should save you money but I wanted to take a closer look.

Are there MPG improvements?
 Some people believe that these filters improve MPG but the actual impact to fuel economy is unclear.  K&N doesn't directly claim or boast of increased MPG.   Personally I think if the filters did really increase MPG then the company that made them would be bragging loudly about it.   Some users claim they have improved MPG.  For example this article claims a 0.5 MPG increase on a truck.   The governments site  cited a study that found with new fuel injected and computer controlled engines that a clogged fuel filter shouldn't matter but for an older carbureted car the clogged filter did impact MPG.   Since there are mixed opinions on this I wouldn't count on MPG improvement.

Cost benefits of reusable vs disposable
I can buy a K&N 33-2260 Replacement Air Filter off Amazon for my Toyota for about $28.  A cleaning kit costs about $11, the cleaning solution is supposed to be enough for 5-10 uses.   The FAQ on the K&N site says that you should only need to clean the standard filters once in 50k miles.   So you're talking about $40 for a filter and cleaning kit that should last the life of your car.   

A standard disposable air filter would cost $10-11 on Amazon or NAPA.   The typical paper filters are supposed to be replaced every 10k to 15k miles.

Lets say you operate your car for 150k miles and the disposable filters last 15k miles each.  You'd need 10 disposable filters at a cost of about $10 each for $100 total.  The reusable K&N filter would cost $40 and last as long.    The reusable K&N filter could save me $60 over 100k of driving.   Now keep in mind this is just one example and the air filter costs vary depending on the make of the car in question.  

What do customers think?
I found a few sources of reviews of the K&N filters.   Amazon reviews for the 33-2260 model were good with 13 reviews and over 4 stars.   The33-2031-2 model had 23 reviews also over 4 stars.  The site Car Review had over 100 reviews for K&N filters with average score of 4.1 out of 5.  Thats pretty good review averages.   Generally the reviews I find for K&N filters are quite good.

Bottom line the K&N air filters seem like a good deal.   They have some solid benefits in increased performance and lowered costs plus some pretty happy customers.   But I wouldn't count on an MPG increase.

[edit: I forgot to mention that I have not used K&N filters myself]

May 4, 2010

Tri-plex for $50k? Too good to be True

I have an email notice setup on the site to send me email anytime that a new rental property comes up for sale in their listings.   A while back I got an email about a rental for $50,000.   I followed the link in the email over to the listing on Realtor and found out that it was a 3 unit rental.   That price for a tri-plex would qualify as a "steal" in my book.  Lower price rentals in that relatively low cost of living city usually sell for minimum of  $30,000 to 40,000 per unit.

The listing on Realtor site didn't have much useful detail.   All it really had was the city location and address.  It did list the rent income which was a healthy $1,650 per month or $550 per unit.  The listing had the name of the realtor offering the property to I did some digging and found the realtors website to look there for more information.  This is where I found out the major 'catch'.   The property is actually a lot with 3 mobile homes on it.   So they weren't selling  a normal tri-plex but instead its land and 3 trailers. 

Still the rental income seems pretty good at $1,650 a month.  Thats $19,800 income a year for a $60,000 purchase.   Your expenses could eat up 30-50% of the rent so you'll be taking a profit in the ballpark of $10,000 to $14,000.   Still not bad income for a $50,000 investment.   That is a 20% to 27% return on equity.

But then I looked closer details.  While the realtors for sale listing says the rent is $550 a month they also say that the rent "has potential to hit those numbers again with some repairs" or words to that effect.   That tells me that they aren't actually getting $550 a month but just expecting or projecting that rent.   The fact that some repairs are required means theres more costs involved in the property.

Older single wide mobile home trailers are not worth much.  I did a search in Realtor and found about a dozen for sale for $10,000 to $20,000 range.  I also found some similar sized empty lots for sale for around $20,000.  So while $50,000 seems cheap for 3 units it seems that market cost for 3 trailers + 1 lot is in the $50,000 to $80,000 range.

Trailers can depreciate in value.   Contrary to what mobile home sales men have often claimed mobile homes often decline in value over time.   I would also expect that repair and maintenance costs for an older trailer may start to get high.   However, I'm not sure how expenses for trailers really compare so this is just assumption on my part.  I honestly wouldn't be surprised if the trailers are a total loss after 10 or 20 years. 

When I first saw the ad I thought it was a tri-plex for about 1/2 market value with likely potential of 20% annual return on equity.   After a little digging I find out its just 3 run down trailers with some rent figures made up by on optimistic Realtor.

Whenever you find a potential real estate investment that looks like a "steal" you need to be careful use some scrutiny about the details.    One of the keys to being successful with real estate is buying properties for good prices, but sorting out the real good deals from the lemons can take some work.

Things to look for if you're evaluating a potential rental investment to tell if a good price is really a good investment:

* Is the rent quoted a real value based on current lease rate or is it a projection or estimated figure based on rent potential?
* What utilities does the landlord pay?   Paying heat in a colder climate can make a big difference on your profitability.
* Are the units vacant?
* What is the neighborhood like?   Is the unit 10 feet from the railroad tracks or in the 'ghetto'?
* Is the unit in need of major repair or maintenance?
* Are there any major bills due on the property like a lien for a new sewer line or road improvements?

May 3, 2010

Social Security About to Go Bankrupt For 7th Decade

Here's a couple quotes on Social Security: 

"As you know, the Social Security System is teetering on the edge of bankruptcy. Over the next five years, the Social Security trust fund could encounter deficits of up to $111 billion, and in the decades ahead its unfunded obligations could run well into the trillions. Unless we in government are willing to act, a sword of Damocles will soon hang over the welfare of millions of our citizens."

"‘Wage earners, you will pay and pay in taxes...and when you are very old, you will have an I.O.U. which the U.S. Government may make good if it is still solvent.’”

Many people would agree emphatically with both of these statements.  While they seem like something yanked out of todays paper, but of those are actually very old quotes.   The first quote above comes from our President.   However it isn't from Pres. Obama or Pres. Bush before him.  That quote is from Ronald Reagan in 1981.   The second quote is actually much older than that.    It predates most people who are already retired and getting social security.   That second quote was made in argument against Social Security before it actually became law in 1935.

Back in 1977 Social Security was going to run out of money by 1983.

"--The worst recession since the Great Depression and the worst inflation since the Civil War had depleted the reserves in the trust funds to the point that the Disability Trust Fund would be depleted by 1979 and the Old Age and Survivors Trust Fund would run out by 1983."
-- President Jimmy Carter.  Dec. 20, 1977.

Its not just Social Security that has been in perpetual imminent doom of bankruptcy any year now for the past few decades.   Medicare is was going to have been bankrupt 10 years ago or any day now.   (Sorry its hard to get the tenses right on something that was going to happen yesterday for a long time but hasn't happened yet and is still going to happen tomorrow anytime now.  Why do I feel like time travel is involved?)

"Medicare is projected to be bankrupt maybe as soon as 1997."
-- President George H.W. Bush, Oct. 15 1992

Social Security was going to be a failure before it became reality in 1935.   Social Security was going to run out of money in 1983.  Medicare was going to be bankrupt in 1997.   Today Social Security and Medicare are functional and paying out benefits.  Yet today we hear cries of alarm that Social Security and Medicare are going to run out of money and fears that there will be zero benefits by the time working people today are of retirement age. When do all the warnings of imminent doom become crying wolf?    

Social Security and Medicare certainly have some long term potential problems.   In the long term something will likely need to change.   But this isn't a new situation.   In fact as you can see in the quotes above problems with the long term health of Social Security is something that we've been fighting and handling for many decades.  

The reality is that Social Security has been in need of change many times and it has been changed many times.   There have been 20 increases in the Social Security tax rate over the years.   Plus they've increased retirement age and adjusted the taxation of Social Security benefits.   Simply put the government has kept Social Security working over the years by gradually raising the tax rates and dropping benefits.   Why is this time any different?  I don't think it is.

Blog Widget by LinkWithin