May 31, 2011

The Fate of Renters During Foreclosure

Initially when the recession hit and the foreclosure rate went way up some renters were unfairly evicted from their homes with little notice.    Unfortunately at the time apparently there weren't any laws protecting renters in such a situation.  IN response to this problem congress passed the a new law called the Protecting Tenants at Foreclosure Act (PTFA)   It was enacted in 2009.  The details of the law are posted online here.

Generally under PTFA if you have a valid lease that existed before the foreclosure then you can stay at least 90 days after foreclosure as long as you pay rent to the new owners.

Some details of the PTFA :

The tenant can not be evicted until the end of their existing lease or at least 90 days.   If you have a lease then you to stay till the end of the lease.  There is however an exception where if the new owner wants to live in the home they only have to give you 90 days even if you have a lease for longer than that.  If there is no lease then you have at least the 90 days.

You must pay the rent to the new owner.  There is no free ride.

The lease has to have been agreed before the foreclosure started.  
The rent has to be reasonable rate close to fair market.  

The renter must not be a direct relative of the mortgage holder and the transaction has to be 'arms length'.  So you're not allowed to setup a deal with someone in advance or that negates the intent of the law.

So you can't setup a 99 year lease with your buddy for $1 a month and expect that to fly.

The PTFA was written as a temporary measure and unless its renewed the law will sunset (expire) in 2014.  

May 29, 2011

My Salary History

I'm very happy to have a good paying job and to have remained gainfully employed for the past 14 years.   

I previously told my own personal financial story in a 4 part series.   In part 4 of that I shared how my salary started at around $42,000 a year in 1997 and then grew to over $100,000 by 2009.

Here is the trend in my salary & total W2 earnings over the years:

My W2 earnings are a bit more than my salary due to profit sharing bonuses and stock benefits that I also get from my employer.   Those extra benefits are above my normal base salary.   The salary is fixed but the bonuses vary based on how well the company does.  

I've gotten pretty good raises over the years.   Three times in 1999, 2000 and 2008 I received promotions and in those years I got large pay raises.    The percentage increase in my pay annually looks like this :

The promotions made a huge difference in the growth of my pay over the years.   If you remove those big raises and replace them with a more standard raise level of 3% then my pay would be about 2/3 of what it is today.   Similarly if my pay had only grown with the rate of inflation then the $42,700 I made in 1997 would be equivalent to making about $59,800 today.   My pay has grown about twice as fast as the rate of inflation.

May 27, 2011

Best of blog posts for week of May 27th

fivecentnickel discusses how to Sell Your Stuff to Amazon

FreeMoneyFinance tells us Why I Like and Use Cash Back Credit Cards

DoughRoller talks about   Save Money On Car Insurance Using Progressive Snapshot

Lottery Payouts, Adiminstration and Proceeds by State

Most states have some form of lottery.   I occasionally enjoy playing the lottery as a form of entertainment.   $1 is not a large price to pay for a little day dreaming about what I would do with my giant jackpot which I fully realize I have virtually no realistic chance of winning.   Lotteries are often criticized as being a rip off for the player.

I got data on the lottery payouts and state revenue for 2006 from the National Conference of State Legislature website.  Its a few years old but I doubt the numbers have changed radically.

Nationally the average payout in prizes is 64.5% of the bets made.   That means for every $1 spent on lottery games the players get back 64.5¢.     Administration costs about 4¢ of every dollar.    These are the costs spent to advertise the programs, make and sell tickets and pay lottery staff employees, etc.    The remaining money left over after the prizes and administration is paid comes out to 31.5¢ of every dollar gambled.   This money is kept by the state to use for roads and schools and such.

Here is a table with the % of funds that are paid out in prizes, used for administration and retained in profits by the state.

Prizes  Admin Proceed
United States 64.5% 4.0% 31.5%
Arizona 59.2% 8.6% 32.1%
California 58.0% 4.6% 37.5%
Colorado 64.6% 7.0% 28.4%
Connecticut 64.1% 4.2% 31.7%
Delaware 55.1% 1.1% 43.8%
Florida 63.1% 3.9% 33.0%
Georgia 66.0% 4.4% 29.7%
Idaho 63.1% 8.5% 28.3%
Illinois 63.7% 3.0% 33.3%
Indiana 64.9% 6.3% 28.8%
Iowa 52.8% 12.6% 34.6%
Kansas 61.7% 10.8% 27.5%
Kentucky 64.0% 6.3% 29.8%
Louisiana 53.6% 8.8% 37.6%
Maine 67.6% 7.5% 24.9%
Maryland 62.0% 3.7% 34.3%
Massachusetts 77.0% 2.0% 21.0%
Michigan 64.1% 3.2% 32.7%
Minnesota 70.4% 5.6% 24.0%
Missouri 66.8% 4.0% 29.2%
Montana 55.1% 19.1% 25.8%
Nebraska 60.1% 11.9% 28.0%
New Hampshire 61.3% 6.7% 32.0%
New Jersey 59.2% 3.9% 36.9%
New Mexico 61.7% 13.0% 25.3%
New York 61.2% 4.2% 34.6%
North Carolina 62.3% 7.5% 30.1%
North Dakota 52.0% 16.1% 31.9%
Ohio 63.0% 4.6% 32.4%
Oklahoma 57.2% 6.9% 36.0%
Oregon 71.0% 2.9% 26.0%
Pennsylvania 64.2% 2.3% 33.6%
Rhode Island 78.5% 0.5% 21.0%
South Carolina 66.0% 4.0% 29.9%
South Dakota 78.1% 1.3% 20.6%
Tennessee 66.7% 5.6% 27.8%
Texas 64.5% 5.2% 30.4%
Vermont 67.3% 9.8% 22.9%
Virginia 60.0% 5.0% 35.0%
Washington 65.2% 7.5% 27.3%
West Virginia 56.4% 1.5% 42.1%
Wisconsin 62.0% 6.1% 31.8%

May 26, 2011

Expect to Live to 95

The life expectancy in the USA is 77.9 years according to CDC data from 2007.   It would seem logical to plan for a life that lasts about 78 years give or take.   If the average person lives to be 78 then it seems this is about how long you ought to figure you'll live.    However people who are 65 actually live longer on average.  This is generally because the older you get you've lived through the various potential risks of injury and illness that claim other lives earlier.   If you look at the CDC data for life expectancy at age 65 then you'll find that people who have lived that long tend to live another 18.6 years on average to the age of 83.6.

When you are planning retirement that basically starts at age 65. Retirement assumes you'll live to retirement age.  Once you've made it that far, you should figure your retirement planning based on the life expectancy for someone at age 65 because that is how old you'll be.    For this reason if you're figuring your retirement you should plan on living well into your 80's.   Given that the average life expectancy is exceeded by a good percentage of people it makes even better sense to plan for a longer life than average in order to give yourself some margin.  

Because life expectancy at age 65 is in the mid 80's and because many people live longer than average, I think it makes good sense to plan to live to age 90 when you're figuring your retirement planning.

Married couples should plan for one spouse to live longer.   According to this article form Wachovia : "While a 60-year old man today has a 20 percent probability of reaching 95 and a 60-year-old woman a 30 percent chance, there is a 40 percent chance that at least one member of a married couple at the same age will live until 95."

That means that there is a pretty good chance that you'll need your retirement money to last 30 or more years if you're a married couple that plans to retire at age 65.

Of course averages are just averages.   You may live longer or not.   To be safe though you really do need to plan for a longer lifetime.  If you made the mistake of thinking that average life expectancy of 77 means you only need 12 years worth of money at age 65 then you could drastically short change your retirement savings.   To ensure a more financially secure retirement you really need to plan as if you expect to live to age 95 or longer.

May 25, 2011

The Medical Financial Cost of Obesity

In a recent edition of Money magazine they have a article on health and weight loss titled Slim Your Body,, Not Your Wallet.   In the article they had a side graphic showing the average medical spending of people based on different BMI or Body Mass Index values.   

I've reproduced the numbers in the graphic below:

I wanted to point this out since as you can see the medical costs escalate as the BMI goes up.   Theres not really much difference from BMI 25 to BMI 30, its not even 10% more.   From BMI 30 to BMI 35 though it goes up 42%, then from BMI 35 to BMI 40 the increase is 86% and from BMI 40 to BMI 45 the costs escalate 142%. 

You may think that the cost is not a big concern to your wallet since you have health insurance.   However you'll likely foot some if not all of that bill.   Most people have deductibles, copay or co-insurance costs that mean they end up paying a good portion of their health care costs.    You also may be made to pay extra by your employer.  The article also says that currently in 2011 there are 7% of employers who charge extra for medical insurance for people with health issues like high BMI.   They say that by 2012 it is projected that 33% of employers will charge extra.

What the numbers mean
BMI of 25 is the threshold for 'over weight' and BMI of 30 or more is considered obese.   The wikipedia page on Obesity has different definitions of the higher BMI levels.  You can use the BMI calculator to find your BMI.

A note about BMI:   I don't believe that BMI alone is a perfect measure of your weight.   BMI is a reasonable measure of over weight for most people but there are exceptions.  You should also get a measurement of body fat or best yet the evaluation of a medical professional.

May 24, 2011

Adventures in Couponing Weeks 5-6

I've been doing a little experiment in couponing to see how much I can save with a little effort.   I covered the 1st and 2nd weeks and the 3rd and 4th in previous articles.

I think I forgot to bring the coupons during week 5's shopping trip. 

This Week I used a $1 coupon for cereal and a 50¢ coupon for lunch meat. 

I also had some other coupons that I didn't get out of the newspaper.   Our grocery store gives us coupons directly based on their frequent customer rewards card as well as the checkout receipt style coupons.   Between those we got several dollars worth of savings. 

So all together my savings from newspaper coupons have been  :

Weeks 1-2 : $9.49
Weeks 3-4 : $2.00
Weeks 5-6 : $1.50

Thats about $13 in total savings in 6 weeks.  Some of those weeks I didn't do much.  I pretty easily saved over $2 per week with minimal effort.     I was getting the newspaper free during this time.   If I had to pay for the newspaper then that would have ran me around $3 to $5 per week.  

If I had to pay full price for the newspaper then the cost of the newspaper would be more than I saved in grocery coupons.

I am sure I could have done better with the coupon savings.   I have never done a lot of couponing so to learn what works best.   I also forgot to bring the coupons with me when we went shopping.  

I think our free limited time newspaper subscription promotion is about done.   So I'm probably done with this experiment. 

Bottom Line : I had mixed results.  I pretty easily saved some money with fairly minimal amount of time.  The amount I saved didn't pay for a newspaper subscription however.  With more experience I could save even more.

May 23, 2011

How Many Workers Get Health Insurance At Work?

Did you know that employers are not required by law to provide access to health insurance?   Some people believe that the law requires companies to provide health insurance.  There is no such federal law.  Most full time workers do have access to health insurance from their employer.  Its considered a standard benefit in the US to get health insurance from your place of employment.   However not all employers offer health insurance to their full time workers and few offer it to part time employees.

The BLS tracks data on benefits for workers and they have a table with the stats for medical care benefits for workers.

In private industry 71% of workers have access to health insurance from their employers. 

Only 51% of employees participate in an employers health insurance program.   That means that among the workers with the health insurance option 73% of people take the insurance.  There are various reasons why someone with the option of health insurance wouldn't sign up.  For one they may have a spouse working at another job with better or cheaper insurance covering the family.  Individuals may choose not to sign up for insurance because the cost is higher than they can or want to pay.  

Access to health care insurance for various demographics:

Full time employees : 86%
Part time employees : 24%

Unionized : 91%
non-Union : 68%

Workers with lowest 10% of wages : 23%
Workers with highest 10% wages : 92%

Employees of companies with 1 to 49 workers : 55%
Employees of companies with 500 or more workers : 88%

Service jobs : 44%
Management, business and financial : 94%

May 22, 2011

More Jobs that Don't Usually Make 6 Figures

Yahoo published the article  Surprising Six-Figure Jobs that they got from CNBC.    The jobs they list either don't usually make 6 figures or which I don't find surprising  at all.     This list is very similar to the list I wrote about before with You Probably Won't Get Paid $100,000 To DO That    Its yet one more of the Stupid Job Lists that get published by the media.

The new list of jobs that supposedly surprises us with their alleged 6 figure salaries are :

Call Center Analyst
Afghan Language Specialist
Personal Trainer
Flight Training Coordinator
Nuclear Power Reactor Operator
Court Reporter
Elevator Mechanic

Lets look at each job a little more detail :

Call Center Analyst  - What they are really talking about here is a management level kind of job.   They are not talking about actual call center employees but the people who oversee call centers.  It should be no surprise that people in management or supervisory level jobs can make over $100k.

Afghan Language Specialist -   Do you want to work in a war zone?   I doubt you'll make high 6 figures as a translator from a nice cushy office chair in the USA.   The high paying jobs I found for Afghan linguists are in Afghanistan.  One DOE job includes danger pay.  Yes you can make a fat salary if you have a specialized skill in high demand and you want to work in a war zone.   I also wouldn't expect these to be long term or permanent jobs. 

Personal Trainer - Fitness instructors make average wages around $30k so that is not a high paying job.  It is only the small minority at the top of the field who make over $100k.   The people doing that well are self employed and have established their own clientele.  This is not a typical income.

Flight Training Coordinator - I couldn't find much about this job.   Seems pretty specialized and not common.   I would imagine to be a flight training coordinator you may need to be a licensed pilot with significant experience.  If not then there are likely some other highly specialized skills needed.

Nuclear Power Reactor Operator -  Yes according to the BLS, the top 10% can make over $100k.   I'm not surprised that the top people in this role make a very good wage.    Furthermore very few people do these jobs and they are not likely to have many openings.   Nationally there are only about 5,000 total people who work as nuclear power reactor operators according to BLS.   To become a nuclear power reactor operator you may need multiple years of work experience in the reactor, you may need to get special licensing and pass special exams and you may need a college degree.   Its a pretty specialized field with a handful of people that has a lot of requirements and even then only 10% hit the 6 figure level.

Court Reporter - The average wage is closer to $50k.   But they say: "those who are more experienced and can type 200+ words a minute make an average of $105,000"     However BLS says the top 10% make $91k.    Can you type 200+ words a minute?  You probably can't.    If you can type very fast then this kind of job may work out but its debatable if you'd make 6 figures.   In the comments for the article someone says that the pass rate on the certification tests is 20%.   Sounds about right.   Very few people can actually type that fast to pass the exams required and then among them very few actually hit the 6 figure pay level.
Elevator Mechanic  - The average wage is about $70k.   According to the BLS the top 10% of Elevator installers and repairers do make just over $100k.   This is a good paying job for sure and you can hit 6 figures.     You do have usually have to go through an apprenticeship program to get a job in this field but it doesn't require a 4 year college.   However the job is physically demanding and can be a little dangerous like most construction field jobs.   

Pharmacists - I don't know why it would be a surprise at all that pharmacists can make 6 figures.  Pharmacists require professional level education and its a highly skilled job. 

May 20, 2011

Best of blog posts for week of May 20th

DoughRoller asks Should You Pay Off Your Mortgage Early?

Newsweek Worries about 5% Unemployment Among College Educated White Males

I was in the doctors office recently and was flipping through the magazines.   I found the Newsweek article Can Manhood Survive the Recession?  and I started to read it while I waited.   It seemed like an interesting story about how middle aged college educated men are having a hard time in the recession.   I read through a page or two and then came across the lines

"Through the first quarter of 2011, nearly 600,000 college-educated white men ages 35 to 64 were unemployed, according to previously unpublished Labor Department stats. That’s more than 5 percent jobless—double the group’s pre-recession rate."

I wondered if I was missing some major detail about how 5% unemployment was a tragedy.   I wasn't.   The entire story reads as if its written from an insulated position of people who are not really used to the reality of unemployment.   5% unemployment is something that most Americans would be thrilled to see but this article paints that 5% unemployment rate in the specific demographic as some sort of tragedy.

When I say that they painted it as a tragedy I mean it.  They used over the top language like "Detroit of the soul" and ""this hitherto privileged demo isn't just on its knees, it's flat on on its face."  or "“if they lose their job, they are toast.”   "The gnawing fear that this may be the beginning of a slow, shaming crawl to early Social Security."  You get the idea.

A few pages later they had a sub-story titled Love Means Never Having To Say ‘Get a Job’   That was a story written by the wife of one of the tragically afflicted upper middle class middle age white men with college degrees who had been subjected to actual unemployment.   Few notable details in that story.  The man had been a CEO at one company.  He voluntarily quit his job at Google during the recession because his job had  become "less exciting".   Gasp!    Then he cleaned his garage.   Within 6 months he found another job but it was 2 hours away from home.  I think the 2 hour thing was supposed to make us feel bad.   Oh.. but it was his "dream job".   Not only did this guy voluntarily quit his own job in the middle of the recession but he was able to find another in a relatively short 6 months.   This is a success story if you ask me.  Plus he had some time off to clean out the garage to boot!   Seriously... he quit Google?   Are we supposed to feel sorry for him or angry at him?  I don't know.

Reading the article I had a couple questions to myself:  Why should I care that a group of college educated men are 'suffering' with 5% unemployment when the rest of he country is suffering with much higher unemployment?   and    Why would Newsweek even publish such a story?     I don't know the answer to either of those questions.   If I was a Newsweek subscriber I would consider canceling my subscription.

I wasn't alone in questioning the article.   Feministing wrote Maya and Lori on the “Beached White Male”: Newsweek spews steam out of its blowhole and FAIR wrote Newsweek Bravely Highlights the Plight of the Beached White Male.   Both articles point out that unemployment in black workers is higher.

Maybe it was all supposed to be a joke?   The article was not dated April 1st.  I had to check to make sure.

May 19, 2011

Busy Lately & Accidental posting

I've been pretty busy lately at work and in my personal life.   I haven't had too much time this week to write.  
  I'm still here but just a bit preoccupied. 

Earlier today I accidentally had a post publish which was only in draft stages.   The article wasn't even half finished but it went live prematurely.  Sorry for that.  I accidentally set it to publish. 

Can You Afford a Horse?

My wife loves horses.   One day it is her wish to own a horse (or two).  However we live in the suburbs and don't have space to keep a horse plus horses can also be pretty expensive.   Its still a long term goal for her to get a horse.    The upfront cost of buying a horse is only a small part of the total costs.    To know if we could really afford a horse at some point we'd need to know what the total long term costs would be.

What does a horse cost?

The cost of buying a horse is just the start.   The bulk of the costs for a horse are in the ongoing expenses.  
There are a lot of ongoing costs related to the keeping of a horse.   You will have to pay for :boarding / stabling, food, gear, routine vet bills, etc.     I found a few references to what horses cost.   
The cost of horse ownership at Alpha Horse
Horse Cost Calculator at WOW Horse
Learn the True Cost of a Horse at

Altogether I think if you're stabling a horse then you can expect to spend something around $400-$600 per month.  

Of course that is just a broad estimate number and the exact amount you spend will depend greatly on the situation.  If you have your own acreage and stables then the cost will be a lot less.   I'm sure that some people spend a lot more on their horses.

Horse Insurance

You can insure horses for both mortality and major medical insurance.   I think that getting major medical for a horse would be a good idea.  I only did a little research on horse insurance, but it appears that major medical policies are issued as as an addition to a mortality policy.   A couple more references to health insurance:
Horse Insurance, You Bet! at Five Star Ranch

Choosing to Insure Your Horse at Horse and Horse Information

Total Costs last Decades

If you're planning on buying a horse then you have to plan affording the monthly expenses.  Horses can live 25-30 years so you need to cover the costs for a LONG time.    If you assume $500 per month cost then that is $6,000 per year.  If the horse lives 30 years then the total cost is $180,000 not accounting for inflation.   Maybe you've got $6,000 extra to spend this year but will you have that money to spend in 5 or 25 years?

One way to figure the total costs over a long period would be to calculate the Net Present Value.   You can figure the NPV using the NPV formula in a spreadsheet.   The NPV will give us an idea of the present cost of a series of cash flows over time.  I assumed 5% interest and 3% inflation rate and came out with a Net Present Value of about $131,500.   So if you started with a sum of $131,500 and made 5% on your money then this would give you enough to pay $500 monthly costs adjusted for inflation over a 30 year period.   Therefore using this calculation we could say the long term cost of a horse in today's dollars is about $131,500.

Again though I must point out that every situation is different.  I'm assuming a $500 monthly cost and everyones individual costs will differ.  We also don't know for sure how long the horse will live and I'm just using 30 years as a guess.

Photo by peter pearson

May 15, 2011

Distribution of Monthly Housing Rent Costs

How much people pay for rent depends on the nature of the housing and where it is located.   You'll of course pay more to rent a 4 bedroom house in a nice suburban neighborhood than you'd pay for a cramped studio apartment in the ghetto.  The cost of rent varies a lot across the nation.   In the high cost urban areas rents are much more expensive than in the rural south.  

The 2009 American Housing Survey has data on the cost of rents.     I used table 4-13 which is the selected housing costs for renters in occupied units.   They give the number of people who pay rent at various levels.   The distribution is as follows:

RENT # people
Less than $100   247,821
$100 to $199   728,148
$200 to $249   737,987
$250 to $299   643,144
$300 to $349   580,787
$350 to $399   778,144
$400 to $449   993,290
$450 to $499   1,100,710
$500 to $599   2,985,135
$600 to $699   3,807,736
$700 to $799   3,708,979
$800 to $999   6,060,278
$1,000 to $1,249   4,776,518
$1,250 to $1,499   2,630,587
$1,500 to $1,999   2,246,719
$2,000 to $2,499   718,360
$2,500 or more   596,433
No cash rent   2,037,037

And graphically it looks like this :

You can see that the bulk of the renters fall in the middle area.    64% of renters pay between $500 and $1,250.     17% of renters pay under $500.    The remaining 19% of renters pay over $1,250.

About 2 million people pay no cash rent.  I'm not showing those in the chart.  I assume those people are getting free rent from relatives or something along those lines.

Geographically the different major regions in the USA also have different distributions of rent.   Here is a look at the percent of renters who fall into three broad groups of under $500, $500 to $1,250 and over $1,250:

The biggest difference is between the Midwest and the West.   24% of people in the Midwest pay under $500 and 12% of people in the West pay that little.  On the other end 30% of West renters pay over $1,250 and only 8% of the people in the Midwest pay that high.

May 13, 2011

Best of blog posts for week of May 13th

Consumerism Commentary writes an  Ebates Review
They also discuss Budget Categories Based on Maslow’s Hierarchy of Needs
which I think is a good take on prioritizing our different levels of needs and wants.

GetRichSlowly says All That Glitters: Why I’m Not Investing in Gold 
and  Ask the Readers: What Is My Financial Obligation to My Family?

FreeMoneyFinance shares Reader Profile : Apex

May 11, 2011

Why is COBRA So Expensive?

If you've ever paid for COBRA or heard of a COBRA premium then you may know that the costs of coverage under COBRA can be very expensive.   Its not at all unusual for monthly COBRA premiums  to be $1000 to $1500.   This is a very high cost.    Why is COBRA so expensive?

No, not that kind of Cobra.
Let me quickly step back and explain that COBRA is a way that you can extend the health insurance you receive at your place of employment after you work.  It is temporary in nature and can normally only be used 18 months.  COBRA enrollment is available but optional.

The Dept. of Labor's FAQ on COBRA explains that "Qualified beneficiaries must be offered coverage identical to that available to similarly situated beneficiaries" and "The premium cannot exceed 102 percent of the cost to the plan for similarly situated individuals who have not incurred a qualifying event, including both the portion paid by employees and any portion paid by the employer before the qualifying event, plus 2 percent for administrative costs"    In other words COBRA coverage is identical to what you got when you were employed and the cost of COBRA is 102% of what the actual insurance costs.    The cost of COBRA is no different than what the insurance costs for employed workers.

Let me put it another way.   Simply put : COBRA is expensive because the insurance policy is expensive.   When you are working for a company the employees generally pay a portion of the cost of the health insurance and the employer pays the bulk of the insurance.   That is how most employers have the health insurance benefits setup.   According to Kaiser Foundation, in 2010 the average health insurance premium costs paid by workers for family coverage was $3,997 in 2010.    However unknown to many employees their employer is still paying the large majority of the costs.   Costs to employers averaged $9,773.    The combined average cost of family coverage for health insurance premiums was $3,997 paid by the worker + $9,773 from the employer for $13,770 total.   For this average policy cost the COBRA rate at 102% would be $14,045.    As an average worker you may go from paying about $4,000 for your insurance to seeing a COBRA bill of $14,000.   Thats a lot more than you paid so you could easily get sticker shock at the high cost.  

You may shop around and find an individual health insurance policy that is much cheaper.   Individual policies may be cheaper than a group policy via an employer for many reasons.   First of all group policies cover everyone regardless of existing conditions, age, or other factors.   If you are young and healthy then you would be relatively cheap to insure so you may be able to get individual coverage for a fairly low price.  Employers paying for group policies have to pay for all their employees which can include older people or people with existing illnesses.   Another reason group policy offered by an employer could be more expensive is if it is simply better insurance.   Often times you'll see cheap individual health insurance that cuts many cost corners.  A cheap individual plan my offer lower prescription drug coverage, negligible out of network coverage, low limits on mental health, no maternity care, high out of pocket maximums, high co-insurance, etc.   Unless you really do a close examination of what is offered you may think a policy is similar but be missing many ways it is not equivalent.   Whether or not you should pay for COBRA is a different topic.

While we're eon the topic of COBRA, I would like to point out that it is one of the things you can use Health Savings Account (HSA) to pay for.   Thats another reason I really like HSAs.

Bottom Line:  COBRA is expensive because that is what the insurance costs.  Group coverage may be more expensive than some individual plans.

Photo By RussBowling

May 10, 2011

Is High School Worth It?

It seems that one of the topics du jour lately is to ask "is college worth it?".    If you're going to question whether or not college is worth it then why not question if High School is worth it.    I think the same logic applies generally.  If you're going to rationalize why college is a waste of time and money then can't you also rationalize yourself out of wasting 4 years in High School?

It seems that the prevailing opinion nowadays is that high school is so watered down and lax on standards that it is useless.   We bemoan  that our kids can't read or write and the USA lags every nation in the world on every kind of academic test.    Ok thats an exaggeration but it seems to be the kind of attitude people have about the quality of K-12 school in the USA nowadays.   But it begs the question : If we all agree that HS is horrible then why even bother going?

If you look at the statistics it is clear that people with high school diplomas make more money and have lower unemployment on average compared to people with out a diploma.    But those are just averages and everyone can come up with anecdotal evidence to counter such averages.    Doesn't everyone know someone without a HS diploma who has done well for themselves?    I know at least a couple people who never officially finished HS but who are doing fine financially and have higher incomes than average college grads.

I bet you that we can also find a super rich millionaire or billionaire who didn't finish high school.   Just a little research and I find an old Forbes article that cites two billionaires who never finished high school.   J R Simplot who made a fortune on potatoes and Micron and Alan Gerry who made his money off his company Cablevision.   Both dropped out of high school and ended up billionaires.

So here are the main points against a high school education:

  • The education isn't really valuable.
  • You can learn that stuff easily on your own elsewhere.
  • If you don't do HS then you can get get a 4 year head start in the workforce and get paid to work that whole time which puts you 4 years ahead.
  • Everyone knows someone without a HS diploma who is doing fine.
  • There are even billionaires which act as evidence that you don't really 'need' a HS diploma.
There you go.  Everyone should drop out of high school, right?

Before you answer that let me assure you that I'm not serious.   I'm making this argument to try and illustrate why I think the 'is college worth it' argument is sometimes irrational.    Look at the bullet points above.   All these arguments are made about why people shouldn't go to college.   If you're going to ignore higher wages and lower unemployment as the key benefits of a college degree then why not argue that HS should be avoided as well?    I mean if the argument applies to college then why doesn't it also apply equally to high school?

If you are a poor student and don't put in effort, if you are a super talented one in a million entrepreneur or if you choose to study a field that nobody wants to pay well for or that has excessive supply of aspiring employees then further education may not be your best choice.   But for most people further education is absolutely worth while.

Here are the key reasons why high school and college are both worth it :

Education is what you make of it.    Yes you could fail to learn anything in high school or college and walk away with a meaningless diploma or degree.  But if you apply yourself then you can gain a valuable education.

Higher income and higher employment levels make college and high school better value in the long run for most people.   Making significantly higher income over the bulk of your working career will make up for spending an extra 4 years getting the education.

Anecdotal evidence of people who buck the trends or the exception to the rule billionaire isn't a good argument against something.   There are always exceptions but we don't run our lives based on rare exceptions.

May 9, 2011

Median Incomes By State

The Census Bureau data for 2 year average median household income by state.  Below are the numbers for 2008- 2009.   The 2-year-average median is the sum of two inflation-adjusted single-year medians divided by 2.

Median household income 2 year average of 2008-2009

New Hampshire  $    65,028
New Jersey  $    64,918
Connecticut  $    64,644
Maryland  $    63,828
Alaska  $    62,675
Virginia  $    61,126
Utah  $    60,396
Massachusetts  $    59,732
Hawaii  $    58,469
Washington  $    58,404
Colorado  $    58,321
California  $    56,466
Minnesota  $    55,404
District of Columbia  $    54,260
Nevada  $    52,985
Illinois  $    52,961
Wyoming  $    52,803
Rhode Island  $    52,337
Vermont  $    51,416
Delaware  $    51,312
Wisconsin  $    51,122
Iowa  $    50,337
Oregon  $    50,315
New York  $    50,243
Nebraska  $    50,065
     United States  $    49,945
North Dakota  $    49,759
Pennsylvania  $    49,690
South Dakota  $    48,615
Michigan  $    47,797
Missouri  $    47,316
Maine  $    47,276
Idaho  $    47,009
Texas  $    46,895
Ohio  $    46,318
Arizona  $    46,238
Kansas  $    46,206
Oklahoma  $    45,907
Indiana  $    45,324
Florida  $    45,159
Georgia  $    44,696
New Mexico  $    42,742
Louisiana  $    42,423
North Carolina  $    42,337
Alabama  $    42,144
Kentucky  $    41,828
Montana  $    41,587
South Carolina  $    41,548
Tennessee  $    40,034
West Virginia  $    39,170
Arkansas  $    37,987
Mississippi  $    35,693

May 6, 2011

Best of blog posts for week of May 6th

The Simple Dollar is Announcing The Simple Dollar Personal Finance Seminar!

Doughroller tells us How to Read a Form 10-K Like a Pro

Adventures in Couponing Weeks 3-4

In my first article on this series I covered weeks 1 and 2.   I explained my couponing experiment which is briefly simply to cut the coupons out of the local paper and see how much I can save without putting in too much time or effort.

Easter holiday fell in the 3rd and 4th weeks of my experiment.   Easter weekend there wasn't much of any coupons in the Sunday paper.   I assume people don't do much shopping so much on Easter so the merchants didn't bother doing the coupons.

One weekend I forgot to bring the coupons with us on our shopping trip.  

The second week I clipped coupons on Sunday as usual but didn't get many good coupons.   There was one 50¢ coupon for the deodorant brand that I use which is a safe bet for me.

I did find some of the double coupons for Albertsons again.   In the first two weeks I used these and saved a few extra bucks.  However doing so required a separate trip since we don't normally shop at Albertsons.   This time I couldn't resist and I went ahead and made another trip to Albertsons to see if I could quickly cash in on the double coupons.   However I decided to just swing by there on my way home from work so that I didn't make a totally extra trip but instead just did a side stop.   I had found some good $1 coupons on dog treats and was hoping that with the double coupons that I might get the treats for dirt cheap or even free. However the dog treats were normally priced in the $4 range so I decided against buying them.   Saving almost 50% on the dog treats is a good deal but they aren't necessarily something we'd purchase.  Buying something simply because its on sale isn't a good purchase.   I could have used some of the 50¢ coupons and doubled those but I decided against that too since I didn't want to wait in line and spend much time shopping just to save an extra $1 or so.    In summary the Albertsons trip was a bust and I didn't use their double coupons.

On our next normal grocery shopping trip we did use the $2 coupon for dog food.   I considered using a 75¢ coupon to buy a jar of pickles but the store brand was actually cheaper than the brand name even with the coupon savings.   

I've still got 50¢ coupons for tea and the deodorant.  Those are definitely ones I'd use.   Otherwise the coupons we have are things we might buy but may not.

Savings so far
Weeks 1,2 : $9.49
Weeks 3,4 : $2,00

May 5, 2011

Physicians Per Capita in the USA

This really doesn't have much to do with personal finance.   I just found it interesting.

This slide at the Kaiser Foundation shows the number of doctors per 100,000 people over the past 40 years.

The number of physicians per capita has done nothing but go up since 1970.  In fact in the last 10 years alone the number went up 20%.   The number of doctors per capita more than doubled from 1970 to 2008.   In 1970 there were 146 doctors per 100,000 people and by 2008 it hit 322 per 100k.  

Doctors per capita figures vary a lot from state to state.   In another Kaiser page you can see that the number of doctors per capita by state varies considerably. 

The staff levels in hospitals has been pretty flat really with some variation.  Kaiser also has a slide showing the number of employees per admissions from 1980 to 2008.

May 4, 2011

The Sad State of American Vacation Benefits

I'm happy to work for a company that gives pretty good amount of paid vacation time.   Many Americans aren't so lucky to have good vacation benefits..  Most of Dad's vacation time was called "being unemployed". 

USA versus Other Countries

Compared to almost all other industrialized nations, Americans get and take very little vacation time off.     We get no guaranteed vacation and the average amount of vacation given by employers is around 10-15 days.   By comparison many of the European nations get 4 weeks paid vacation every year mandated by law.

These countries all get 20 days of vacation or more :
Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland and United Kingdom

Canada and Japan are both similar to the USA in the amount of vacation time people get.   They both average about 10 days vacation time.

This CNN article from back in 2007 discussed a report by the consulting company Mercer that shows the amount of vacation and paid holiday time that people get in various nations.   The USA ranks pretty close to bottom.     Also the Mercer report gives the numbers that are 'typical' in America.    There is a big fat asterisk by the US numbers and at the bottom of the table it explains the asterisk as: "These numbers reflect typical practice among large U.S. firms. There is no federal law requiring employers to give a minimum number of vacation days and holidays off, paid or unpaid."

We don't Use what we Get

This ABC News article from last summer reported that "only 57 percent of people here are taking all of their vacation time"     By comparison 89% of the French and 77% of the British use all their allotted time.  This older article from Businessweek in 2007 says "more than half of American workers fail to take all their vacation days. Thirty percent say they use less than half their allotted time. " and "42% claim they have to cancel vacation plans "regularly."  

Now these reports don't specify if the vacation time is 'banked' or paid out in cash or simply forfeited.   Some of the people not taking vacation may simply be saving it for later.   Still going long periods without time off is not very good for your productivity.

Vacation Days  Per Years Seniority

The amount of paid vacation time goes up with seniority as a general rule.   The BLS table for the number of annual paid vacation days by service time breaks down the numbers.

Number of vacation days for private (non government) workers are as follows: 

mean median
After 1 year 10 10
5 years 14 15
10 years 17 15
20 years 19 20

You might expect that government workers in the USA get big fat vacation time but they only average 1-3 days more than private employees.  Extra 1-3 days is nothing to whine about but its not like they get 3 extra weeks or anything.

For government workers the number of vacation days are :

mean median
After 1 year 12 12
5 years 15 15
10 years 18 18
20 years 22 22

Percent distribution of number of days off 

BLS has a page on the Paid Vacation Benefits 2009   They give the percentage distribution of the number of paid vacation days based on years of experience.

Here is that data in a chart :

After 1 year After 5 years After 10 years After 20 years
<5 days 7% 2% 2% 2%
5 to 9 35% 9% 7% 6%
10 to 14 39% 36% 15% 12%
15 to 19 11% 36% 43% 17%
20 to 24 6% 11% 23% 38%
over 24 2% 6% 12% 25%

As you can see, in general the more experience you have on the job the more vacation you get.   But there are variations there.   A minority of people with 20 years experience get a week or less of vacation.     On the other end some people with just 1 year on the job get as much as 4 or more weeks paid vacation.

Nature of Job

The data table for private employees on the BLS site breaks down paid vacation data further.

78% of workers got paid vacations
22% of workers received NO paid vacation

Only 44% of the people making wages in the bottom 10% got paid vacation.
88% of the highest 10% earners got paid vacation

91% of full time workers got paid vacation
38% of part time workers got paid vacation

69% of employees of companies that have 1-49 workers got paid vacation
90% of employees for large companies with 500 or more workers got paid vacation

Bottom Line:  Relative to other industrialized nations we don't get much vacation time in America. On top of that Americans use their available vacation less as well. 

What is a Medallion Signature Guarantee?

When I wrote about how I made $652 for free off of Travelzoo stock I mentioned briefly that I had to get a medallion signature guarantee stamp on my stock shares.

The SEC has a page discussing the medallion guarantee.   They explain that the stamps are used to protect the transfer of stock shares.  The Medallion Signature Guarantee is a special stamp given to witness and guarantee the authenticity of a signature on the transfer of stock shares.

The company Kemark administers the signature program.   The stamps are required as part of SEC rules:
"SEC Rule 17ad-15 requires that Transfer Agents adopt an equitable methodology for acceptance of signature guarantees from eligible Guarantor institutions. To comply with the SEC Rule, Transfer Agents approved three Medallion Signature Guarantee Programs, STAMP, SEMP, and MSP (Medallion Signature Program)."

The stamp looks like the image below.

Source : Wikipedia
Over 7000 banks and credit unions participate in the medallion signature guarantee program.   That would include most of the banks in the country.      The SEC site says that if you are not a customer of a participating financial institution then it is likely that they will not guarantee your signature.    Therefore they say "the best source of a Medallion Guarantee would be a bank, savings and loan association, brokerage firm, or credit union with which you do business."

The Wikipedia article on the topic adds to that : "Different institutions have different policies as to what type of identification they require to provide the guarantee and whether they charge a fee for such service (usually nominal if any.) Most institutions will not guarantee a signature of someone who has not already been their customer."

The SEC also says that you can get guarantee signatures from "Stock Exchanges Medallion Program (SEMP) whose participants include the regional stock exchange member firms, and clearing and trust companies."  or from  "New York Stock Exchange Medallion Signature Program (MSP) whose participants include NYSE member firms. "   So you may be able to get a guarantee via one of these firms.  

If your bank doesn't offer the service and other stock exchange firms are not available to you then you might try asking around other banks and credit unions.   They may do the signature if you sign up for a free account or they might do it for non customers. 

When I got my TZOO stock shares guaranteed we went to our bank branch in our grocery store.    We are customers of the bank we went to.   We had to wait for the manager to actually do the stamp.    The bank didn't happen to charge us a fee for the service.

Bottom Line:   Medallion signature guarantees are special stamps to certify a signature on a transfer of stock.   Best place to try and get one is your local bank branch.

May 3, 2011

Sign up for email + wait 13 years = Make $652 from Travelzoo

Remember the wild west of the Internet tech boom?   Remember how any company with .com in their name could IPO and make themselves instant gazillionaires even thought they hadn't made a single cent of revenue much less profit?   OK maybe I'm exaggerating a little but it really did seem like the Internet boom was simply a crazed money grab with no sense of reality.  It was in that era that Internet related companies gave away lots of free promotional deals in order to get their company some publicity and customers.    Their promotions didn't really have to be cost effective as far as gaining actual business since the real goal was to get some buzz and increase the value of their IPO.  Plus companies seemed to be banking on future gains since everyone seemed to assume 200% annual growth for anything Internet related.

Free money!

I set that stage to tell you the story of how I came to make $652.70 off of Travelzoo stock.

Travelzoo is a company that sends out email newsletters about travel discounts and sales.  When Travelzoo first started business back in 1998 they had an innovative marketing strategy.    Travelzoo decided they would give you free shares of stock in their company as a promotional deal for signing up to get on their email list.  This old CNN article discusses the free stock giveaway.   Initially Travelzoo was private company and not publicly traded.  So the value of the stock at the time was debatable at that time.  Free stock?  Sounded like a good deal to me.  I signed up for the email and shared it with some friends.   I ended up getting 8 shares of Travelzoo stock for free with little effort.

Time went by and I pretty much forgot about my 8 shares of Travelzoo stock.  I was still on their email list for a while and then eventually I must have canceled the email subscription.  In the mean time Travelzoo went public in 2003 and has been traded as TZOO on the NASDAQ since then.   It IPO'd at $6.50 a share.   It had some ups and downs.  At one point in December 2005 the stock hit $110 a share.      It spent the next few years trading between $15 and $40.    In the midst of the recent recession the stock crashed down to under $4 at the start of 2009.

Have you heard of Groupon?   You probably have.  You may also know that its business is growing like gangbusters and the company is worth a ton of money.   Groupon is a Internet discount coupon kinda deal.   Why am I talking about Groupon all the sudden?    Well Travelzoo and Opentable are internet sign up kinda deals sort of vaguely like Groupon.   This vague relationship between Groupon and companies like Travelzoo and Opentable have caused the stocks of Travelzoo and Opentable to go up a lot lately because they are riding the coattails of Groupon.  At least that is my interpretation of what is going on.  People want to cash in on the Groupon bonanza and are looking for other ways to take advantage of what they think might be a trend in that category of businesses.

Travelzoo stock history, Source

Because of this Groupon effect that is pumping up interest in Travelzoo the share values of Travelzoo have climbed considerably lately.      I sat amazed recently watching the stock go up and up and up.  First it hit $40.... then $60... $70...   From October 2010 to April 2011 the stock tripled in value from $25 level to $75 range and it wasn't done yet.    So now my 8 shares of Travelzoo are worth several hundred dollars.

I decided it was time to cash out.  The problem with selling the shares however was that they were not in a brokerage account.  The shares were being held by Travelzoo themselves as custodian.  I couldn't just hit a 'sell' button.   In order to get those Travelzoo shares sold I had to do a few things.    Another complication on the matter was that Travelzoo had spelled my name wrong.   So first I had to fix that.   To fix my name  I had to print a form, have it notarized and then mail the form in.   Then I had to sit and wait for them to fix my name.   Thankfully that didn't take too long, I think they got it fixed within a couple weeks.  For the next step I had to request that they send me a physical stock certificate so I could transfer the shares to my brokerage account at Scottrade.   That meant filling out another form and this time I had to get it signed and then get it "medallion signature guaranteed".   That medallion signature guarantee is similar to a notary but only done by banks and stock brokers.   I found out that our local bank branch in our grocery store does that thankfully.  So it wasn't too much of a task to get the medallion signature guarantee.  We just stopped in at the bank while doing grocery shopping one Saturday afternoon.   Then we mailed in that form and waited.   I think it took another couple weeks till we finally got the shares in the mail.   Last I had to go to the local Scottrade branch office and give them the certificate to deposit into my account.

While this was happening recently Travelzoo issued their Q1 report and after that on April 21st the stock rocketed up over $20 in just one day.   Crazy!   Unfortunately my shares had not yet arrived in the mail or I would have sold them that day or the day after.   My shares arrived around the weekend if I recall right.  I was a little busy so I didn't get around to depositing them right away.   In the meantime the stock was up even more and peaked over $103 on Monday April 25th.

Finally on Thursday I found time to drop by a local Scottrade office and handed them the paper certificate.  I signed the stock certificate on the back and they gave me a receipt.   They said it would show up in my account Friday by around Noon sometime.   By Noon time Friday the shares were in my account and I entered a sell order.

I sold the 8 shares at $83.34 for a total of $659.70.   The commission on Scottrade was $7 so my total profit was $652.70.  All for free.   I will of course have to pay long term capital gains taxes on the stock sale, but since I've owned the shares for over a year the tax rate is 15%.   After taxes I'll be left with $554.79.

All I had to do was :  Sign up for an email subscription and share the link with some friends.  Wait 13 years.   Fill out a form and have it notarized and mail it in.  Fill out another form and have it stamped with a signature medallion guarantee at the local bank office.   Make a trip to my brokerage office to give them my stock certificate.   And then finally issue a sell order to cash in my $652 of free money.

Side note:  The fact that Scottrade has convenient local offices is one very nice benefit of Scottrade that I like.   They have a local office just a few miles from my house where I can quickly stop by during business hours to do stuff like this rather than having to deal with it all online or via mail.

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