July 31, 2011

I've lost close to $300,000 in Real estate, but I've gained $150,000

My home is currently valued at about $184,000 on Zillow.   At the peak it was valued over $260,000.   Thats a loss of about $76,000.   Looking at all the real estate that my wife and I own, our properties are down $294,600 from the peak values.   At the peak all the properties were worth a bit over $1 million.   Now they are worth a total of about $737,000.   Overall our real estate is down about 28% in the past 3-5 years.   I could honestly say that we've lost about $300,000 in our real estate assets.  Thats not very warming thought is it?

The loss above is just a paper loss.  Nobody took any money out of my pocket.   My net worth suffered a hit.  We weren't and aren't planning to sell any of the properties in the short term.  Most of our assets are rentals that we plan to keep for quite some time.  One of the properties is our own home which we currently live in.  If or when we move to a different home our current plan is to rent out our current home.    That $300,000 paper loss doesn't hurt us in our daily lives.  A paper loss is nothing more than numbers on a ledger (or Excel sheet).

While our real estate has gone down in value since the peak, it has actually gone up considerably from what we paid as a whole.   The total purchase costs for all our real estate was about $580,000.   With a current market value estimate of $737,000 that means our real estate has gained about $157,000.   Thats roughly a 27% increase over all.   Over all our total real estate assets have appreciated at roughly 3% annual average growth rate over the past 13 years.   Two of our rentals are up 12% annually on average.   Only one of our properties is actually worth less than we paid for it.

The half empty glass :   We've lost $300,000 in real estate values and our assets are down about 28% in the past few years. One of our rentals is currently worth less than we paid and the mortgage is underwater.

The half full glass :   Our real estate has grown 27%.  We've gained over $150,000.   Overall our real estate assets have grown at an annual rate of 3%.  We own two properties outright and our total mortgage debt is only about 40% of the market value.

I could bemoan the $300,000 of paper losses from the real estate bubble peak values.  I could worry all day about that one rental that is underwater.   But I should instead be happy with over  $150,000 in gains and annual average growth of 3%.  

Side notes :
There are many people who are underwater on their primary mortgage and don't have the assets or gains that we do.   I'm not meaning to make light of the serious financial problems those people have.   My wife and I are in a much better financial situation than most people and we're thankful of that.

The real estate values I'm looking at are just what Zillow states.  Those estimates are not highly accurate and for a couple of our properties I think they are probably off by a lot.   If I were to actually consider selling the property I'd want to get a more accurate estimate of the value.   But for thinking out loud about my finances, the values on Zillow are sufficient.

July 30, 2011

FREE Movie Rentals at Blockbuster Express

The following 6 promo codes are good for $1 DVD rentals at Blockbuster Express.


The codes expire August 5th.

I haven't used Blockbuster Express myself before and I haven't tested the codes.   I heard about the codes on Fatwallet.

July 29, 2011

Best of Blog Posts for week of July 29th

Fivecentnickel lists 2011 Sales Tax Holidays for Back-to-School Shopping

Bundle asks Would you give up the Internet for $1 million?

Bankrate lists  6 Items to Review on Your Credit Report  via Yahoo

Monster.com lists  Worst Paying College Degrees of 2011  Not sure why they dated it for 2011.  I'd assume the list is the same for 2008, 2009, 2010, 2012, 2013... etc.

July 28, 2011

Certificate of Deposit rates over History

Right now Certificates of Deposit (CD's) pay pretty low interest rates.  You'd do pretty good to get a CD paying over 2% and shorter term CDs pay a fraction of a percent.   In years past when interest rates were higher CDs paid a lot better.  

Mortgage-x website has data on historical mortgage indexes.   One of the indexes is the Certificate of Deposit Index (CODI)   Mortgage-x defines it as "The Certificate of Deposit Index (CODI) is the 12 month average* of the monthly average yields on the nationally published 3-Month Certificate of Deposit rates. " 

I got the CODI numbers from their current index lists and their historical CODI data.

Here's a chart showing the interest rates from 1967 to 2010. 

I am only showing the rate for the month of January of each year just to keep the chart less cluttered.   There is some fluctuation in rates month to month but mostly they are gradually drifting up or down.    Showing January rates only is pretty representative for the long term trend.   If you want you can see the monthly data on the Mortgage-x website.

July 27, 2011

New Home Sales Historical Data

The other day I talked about the historical numbers for new home starts.    Today we'll look at the new home sales data per year.   The data I got is from the Census and I pulled the numbers out of the New Single-Family Houses Sold spreadsheet.

Now lets show the new home starts versus the new home sales data together.

I'm not sure why the starts are so much higher than the sales.   They must be measuring the numbers a bit differently somehow.

July 26, 2011

Pre-Paid Tuition 529 Plans

Many states give you the option of enrolling in a pre-paid tuition plan.   These are college savings plans that let you save money and then provide the full tuition when the beneficiary is college age.    The major benefit of these plans is that it takes the uncertainty out of saving enough for college and remove the worry that college costs will grow too fast for your savings to keep pace.

I think these plans are a great deal.  If your state has a pre-paid tuition plan then it is definitely worth looking into.

Here is a list of the states with pre-paid tuition plans and links to the individual state sites.

Alabama Maryland Mississippi Texas 
Florida  Massachusetts Nevada Virginia
Illinois Michigan Tennessee Washington

Plans in Colorado, Kentucky, New Mexico, West Virginia, South Carolina & Wisconsin are closed at least to new investors.

How Does it work?  

Generally the plans will require you to make an up front payment today of a certain amount and then promise you a year of tuition in exchange at a future date.    For example the plan may require you to pay the going rate of one years tuition today and then promise that this will get you a years worth of tuition in a future year.   The plans may have different variations on this.   You may buy 'units' that are a portion of a years tuition.  The current amount you pay may be based on some sort of formula rather than current tuition rates.    But for every plan the general system is the same : pay a certain amount today and get tuition in the future.

You CAN also go to out of state or private schools

No prepaid plan locks you into going to states public schools.   Every plan will let you go to an out of state or private college without forfeiting your money.  Most of the programs will pay out an amount equal to the rate of in state tuition at the states public schools.   They may use an average rate or the cost for the most expensive school.    Three states handle out of state or private schools differently :

Alabama - Actual tuition at other institution or amount equal to tuition in Alabama, whichever is less.
Massachusetts - Refund of principal and interest growth equal to inflation rate.
Virginia -The lesser of the principal plus actual rate of return or the in state tuition rate in Virginia.

Are they Guaranteed and Safe? 

Generally the plans are pretty safe.   Some of the funds are guaranteed by the states.    That doesn't mean they're 100% safe as there is always a small, remote chance that the state won't be able to keep its financial promises.   I'm generally not worried that state governments will start defaulting on their debts though.   A bigger concern I think is that the state may shut down its plan.   The plans could become underfunded over time and then the state may decide to shut down the plan.   What the state will do in the situation when it shuts down the plan may be documented in the details of the plan.  

July 25, 2011

Our Five Leg Retirement Plan

My wife and I have a money in several pots that is dedicated for retirement.  Today I'll look at the five different big pots that our retirement money is in and how they might add up to help replace our current working income.

For discussion sake I'm going to assume a conservative 6% growth in our investments and a 3% inflation rate. 

Social Security -    I pay into SS and I will a benefit when I retire.   The amount I get will ultimately depend on how many years I work and how much I make each year.  I should expect to get 20-30% of my income from SS.   My wife will also be eligible for at least 50% of my benefits so together we could have SS replace 30-45% of our income.  However it is quite possible that SS will be reformed sometime within the next 20-30 years.  Changes to SS could ultimately reduce the benefits that I might get at retirement age.   I'm going to be conservative and just assume 20-30% of income is replaced and plan that there is some benefit reduction by the time I hit retirement.  

Roth IRA - My wife and I both have Roth IRA accounts that we have contributed into.   This is post tax money so there will be no taxes due on this money once we retire.    If we continue to max out or Roth IRA contributions and get annual growth of 6% then we our accounts could grow to around $1 million by the time I'm 65.   This could replace about 20% of our income.

401k accounts - We also both have 401k accounts with some money in them.   My wife's 401k is from a previous employer and mine is at my current employer.   I don't contribute to my 401k at the present (there is no employer match).   So at this point there is no new money going into either of our 401k's.  If these accounts grow 6% a year then we'll have around $200k by the time I'm 65.    This should replace around 5% of my income give or take.

Rental Properties - As I've mentioned before, we own a few rental properties.   WE own two houses and also own 50% of two multi-units.   We have mortgages on the houses but not the multi-units.    By the time I'm retired we'll be free and clear of any mortgages on our rentals.    All together after expenses the rental properties should give us income that would replace about 20-30% of our income.

Employer Retirement Account - My employer contributes money for me into a cash based retirement account.   They do this instead of contributing a 401k match.   I get about 6% of my pay every year in the account.   If I were to work at this employer until I hit 65 then I'd have somewhere around $900,000 in the account.     This would be enough to replace around 15-20% of my income.   I also have the option to annuity from the money which would replace around 25-30%.

Plus Home Mortgage Free - While its not really a retirement account another way we plan for retirement is to have our home paid off and clear of a mortgage.  This will reduce our expenses during retirement and thus cut the amount of income we'd need.    Our current home mortgage will be paid off in 6 years or less.   We've been house shopping and if we do buy another house then we'll make sure its paid off by the time we hit 65 at minimum.

Add it all up and we get :

Income Replaced at Age 65

Social Security = 20-30%
Roth IRA = 20%
401k = 5%
Rentals = 20-30%
Employer Retirement = 15-30%

Total = 80-115%

We're on track to have a very healthy retirement income if I work until 65.  If however I decide to retire early then I can still replace a pretty large amount of our income.

Retire early at age 50:

Social Security =0
Roth IRA = 7.5%
401k = 0
Rentals = 20-30%
Employer Retirement = 10-20%

Total =37.5% to 55%

Having 37.5-55% of our current income and a paid off house would be enough for us to live off of.   There wouldn't be a lot of margin and we wouldn't have tons of money to take fancy vacations or drive expensive cars, but it should be enough to support ourselves.    One potential problem with retiring early will be the cost of health care.  That is a major unknown that we'll have to account for as I get closer to that goal.

Tax Treatment

I think its a good idea to hedge your bets on on the tax status of your retirement savings.  You don't want all your retirement funds to be taxable or tax free.

Social Security - 0% to 85% taxable. 
Roth IRA - Tax free
401k - 100% taxable
Rentals - Taxable with some deductions
Employer Retirement - 100% taxable

We have a pretty good mix of investments as far as tax status goes.

If I were to wait until 65 to retire then we'd be in very good shape financially.     I also have a fairly good shot at retiring early at age 50 with enough retirement savings to replace around half our current income.

July 24, 2011

History of New Housing Starts of Single Family Homes by Year

The Census has data on New Residential Housing. I got the data out of the Housing Starts Excel sheet.  I'm going to focus on just the single family homes.

Here is the history of housing starts :

You can see the giant drop in new housing starts from 2005 til 2009.   In 2005 there were 1.7 million new houses started and by 2009 it had dropped to 445 thousand.    Thats about a 75% drop.   Also notice that the 2009 and 2010 construction levels are far below the housing starts for previous decades going back to when the data set starts in 1959.

In total from 1959 to 2010 there were about 55.5 million housing starts for single family homes.   During that same time we went from about 52 million households to over 115 million.   Thats an increase of 63 million households.  Of course many of those households are renting in apartments and 2-4 unit housing.      Home ownership rates increased a few percentage points as well.   In 1965 home ownership rates were 62% and by 2010 they had hit 67%.   Another factor driving new home construction is the deterioration and demolition of old existing housing causing a need for replacement housing.

July 22, 2011

Best of Blog Posts for week of July 22nd

Yahoo says that  It's Not Too Late for a New Career

MyMoneyBlog points out that  Health Insurance Now Required To Cover Free Vaccinations

Bargaineering discusses Debt Avalanche vs. Debt Snowball Calculator

DoughRoller lists The Best Rewards Credit Cards – July 2011

CanadianFinance debates the Buy Term and Invest the Difference strategy

TheSimpleDollar lists Twelve Excuses that people give for their finances.

Cash in on Credit Card Bonuses

I've used rewards credit cards for several years now.    I've applied for and used 4-5 cards in that time.   I started with an airline rewards card but then switched to a cash back card.   Then I found another cash back card that had a better % cash back rate.   However that card then cut its cash back so I went to my Citi cards.   Lately I've been using the Amex Costco card.

Many rewards cares are now giving pretty good sign up bonuses to entice customers to get the cards.   You can fairly easily cash in $200+ in cash or travel awards by getting a new card.   You could feasibly get a new card about once a year to cash in the bonus and then retire an old card.

Warnings : Getting more credit cards should not be done unless you are free of credit card debts and you are able to use your cards responsibly.   Unless you can keep your spending in budget and pay off your card every month you should not use credit cards at all.   If you apply for credit cards and are approved this could negatively impact your credit for at least a short period.   Generally adding a card with more credit can help your credit score but applying for credit is also a negative.  I'm not sure what the exact impact to your score will be in general but be aware that applying for one or more credit cards could hurt your credit score.

With a little searching and reference to FreeMoneyFinance's Best Cash Back Credit Cards, July 2011 I quickly came up with the following list : 

United Airlines - 30,000 bonus miles & $50, probably worth $250 or more

American Airlines - 30,000 miles & $50, probably worth $250 or more

Delta Air - 25,000 miles + $50,  probably worth $250 or more

Southwest Airlines - 20,000 points + $50, worth $216 to $383

Marriott card -30,000 points + one free night, points gets you up to 5 nights but probably 2-3

Hyatt card - 2 nights at any Hyatt

Capital One Venture card - 25,000 miles worth $250 in travel

Chase Sapphire Preferred - 50,000 points worth up to $625 in travel

Citi Thank You Premier - 50,000 points worth $500 in gift certificates

Chase Freedom - $200 cash

Several things to keep in mind with these cards : These deals are all temporary in nature and will change over time.  To get the bonus money or points you usually have to spend a certain minimum amount, keep the card for a certain period and possibly meet other requirements.  Most (if not all) of the cards have annual fees.  They often waive the fee for the first year but you'll have to pay it for subsequent years.

The Chase Sapphire and Citi Thank You cards are the best deals in general.   They net the biggest bonus.   However some of the travel awards could be worth more to you in certain situations.  You could use airline miles to pay for part or all of an expensive airline ticket and net more overall savings.

July 21, 2011

FREE Prescription Eyeglasses from Goggles4U

Right now Goggles4U has a promotional offer where you can get a free pair of eyeglasses.   Shipping cost is extra for $4.99.   You have to 'like' them on Facebook to get a coupon code.   

This deal was featured on Slickdeals.net

5% cash back at BlueNile Today

Today's daily double deal at Ebates is for 5% cash back at Bluenile.     Bluenile sells diamonds and other jewelry online.   They have some very good prices for diamonds.   If you're in the market for an engagement ring then buying today would be a good way to get an extra 5% back with the Ebates cash back rebate.   Just make sure you don't spend too much on an engagement ring.

To get the 5% cash back you need to be signed up with Ebates.  Then simply go to Ebates to get the referral to the Entertainment site before you do your shopping.  I also get a referral bonus if you use my links to sign up with Ebates.

July 20, 2011

Percent Change in Median Incomes between 2006-2007 and 2008-2009

The economy has been tough the past few years.   That is reflected in median household incomes.   I visited the Census Bureau's data on median income and then got the figures by state  Using 2-Year-Average Medians.

The percentage change in median incomes from the 2006-2007 period and the 2008-2009 period is down 3.2% nation wide.   Most states have seen drops in that period.

Here is the list of all states alphabetically :

USA -3.2%
Alabama 0.3%
Alaska 0.1%
Arizona -6.1%
Arkansas -6.9%
California -3.1%
Colorado -4.8%
Connecticut -2.6%
Delaware -8.6%
D.C. 4.2%
Florida -5.9%
Georgia -13.1%
Hawaii -10.4%
Idaho -6.0%
Illinois -0.2%
Indiana -6.9%
Iowa -1.1%
Kansas -6.3%
Kentucky 1.0%
Louisiana 4.0%
Maine -3.6%
Maryland -5.9%
Massachusetts 0.1%
Michigan -7.0%
Minnesota -7.6%
Mississippi -5.5%
Missouri -0.4%
Montana -6.4%
Nebraska -1.9%
Nevada -5.0%
New Hampshire -4.3%
New Jersey -3.8%
New Mexico -3.4%
New York -1.4%
North Carolina -3.1%
North Dakota 7.6%
Ohio -7.0%
Oklahoma 6.7%
Oregon -1.4%
Pennsylvania -2.3%
Rhode Island -7.6%
South Carolina -5.4%
South Dakota 0.9%
Tennessee -6.8%
Texas 0.1%
Utah 6.4%
Vermont -1.4%
Virginia 0.2%
Washington -1.3%
West Virginia -7.2%
Wisconsin -5.4%
Wyoming 5.1%

Here is the list in order from of which states changed the most :

Georgia -13.1%
Hawaii -10.4%
Delaware -8.6%
Rhode Island -7.6%
Minnesota -7.6%
West Virginia -7.2%
Michigan -7.0%
Ohio -7.0%
Indiana -6.9%
Arkansas -6.9%
Tennessee -6.8%
Montana -6.4%
Kansas -6.3%
Arizona -6.1%
Idaho -6.0%
Florida -5.9%
Maryland -5.9%
Mississippi -5.5%
South Carolina -5.4%
Wisconsin -5.4%
Nevada -5.0%
Colorado -4.8%
New Hampshire -4.3%
New Jersey -3.8%
Maine -3.6%
New Mexico -3.4%
California -3.1%
North Carolina -3.1%
Connecticut -2.6%
Pennsylvania -2.3%
Nebraska -1.9%
Vermont -1.4%
New York -1.4%
Oregon -1.4%
Washington -1.3%
Iowa -1.1%
Missouri -0.4%
Illinois -0.2%
Texas 0.1%
Massachusetts 0.1%
Alaska 0.1%
Virginia 0.2%
Alabama 0.3%
South Dakota 0.9%
Kentucky 1.0%
Louisiana 4.0%
D.C. 4.2%
Wyoming 5.1%
Utah 6.4%
Oklahoma 6.7%
North Dakota 7.6%

As you can see many states lost a lot of wages.   38 states saw the median income decrease.   Only 12 states and D.C. had increases.    Georgia fared the worst with a drop of -13.1% and on the other end North Dakota has done OK with an increase of 7.6%.

July 19, 2011

Netflix Price Hikes : What to Do?

You may have heard that Netflix recently raised the prices on some plans.    What they did was split the online streaming service into a separate item at $8 a month then split the DVD by mail services priced separately.    Unfortunately this change also came with price hikes up to 60%.

I'm sure many customers who are hit with that 60% hike will quit Netflix.   I'm also sure Netflix knows that is coming and made the change with the expectation they'd lose those customers.

Personally I've been on the 2 DVD plan which was about $15 a month.   If I wanted the same thing then I'd have to pay $20 a month.   Thats a 33% price hike.   This makes me examine if I want to continue using Netflix or what.

Netflix Alternatives

Video on Demand I figure done good alternative to Netflix would be renting videos using video on demand services.   Amazon, Youtube, Blockbuster and Vudu all offer video on demand over the internet.   Unfortunately I looked at the selection on these services and they just don't have enough movies for us.  I took a sample of the most recent movies and TV shows that we've watched via Netflix and only one of 5 movies was available to rent through VOD.    Also the rental prices are fairly high at $4-5 per movie.   This may be an OK option if you watch very few movies a month.

Blockbuster online   Blockbuster has a service very similar to Netflix.   I could get 2 DVDs at a time through them for about $17.   They also have video games in their selection which is something Netflix doesn't offer.   However they don't seem to have online streaming service.    If you want video games and don't need online streaming then Blockbuster may be an OK alternative.   However for just the DVD by mail portion the Netflix plan for 2 DVD's is now about $5 cheaper than Blockbusters 2 DVD plan.   Blockbuster may be a good option for some people but it won't be better than Netflix for our needs.

Redbox   At just $1 per movie this is certainly a frugal choice.    If the Redbox selection of DVDs meets your needs and you don't mind leaving the house to get and return the DVDs then Redbox may work out for you.   Personally Redbox doesn't have the selection of stuff that I want.

Library - Many public libraries have DVDs to check out for free.  Our library has DVDs.    However the selection and availability at the library leaves a lot wanting.

Changing your NetFlix plan

I don't see any options out there that would work better for us than Netflix.    I'm not really thrilled about paying $20 a month for the Netflix service that we've had.  

Review your account history in Netflix and add up all the DVDs you've gotten in the mail and the online steaming programs you've watched over the past 3-4 months.  Questions to ask :

Do you use Netflix enough as it is?     If you aren't watching at least a few DVDs per month then you are likely paying too much for Netflix to begin with.  
Do you watch streaming more or DVD's by mail more?    If you watch streaming a lot but hardly ever get DVDs by mail then maybe you should cut back your plan to just the online steaming.   Or vice versa if you watch DVDs by mail mostly but rarely watch online then you could switch to just the DVD by mail option.   This could actually end up saving you money.
Do you watch tons of online and DVD by mail?   If you watch a lot of both mail and online services then paying the extra price for it may be worth while.   Its hard to swallow a $5-6 price hike on a $10-15 service but if its worth $16-$20 for you then its worth it.

I evaluated our usage of Netflix myself.   I found that we used the streaming a lot less than the DVD by mail.   Actually we used streaming more but the items that I watched were really nothing I needed to watch and could easily go without.   The streaming added little real value and is not really worth the extra $8 per month cost.   On the other hand we did watch enough DVDs to justify the DVD by mail program.   I decided to downgrade from the old $15 two DVD + streaming option to the new $12 two DVD.  

Side Note :
Interestingly you can also order their Starz Play service separate as a stand alone product for $6.99 a month.   Thats actually kind of neat if you only want Starz online.   But for an extra buck you can get all their streaming services including Starz so I can't imagine why anyone would want to pay $7 for Starz and not pay an extra $1 for all the rest of the streaming.  

July 18, 2011

Don't Assume You Get Discounts for Buying Larger Quantities

The other day I was at Home Depot shopping for some garden supplies.  Among other things I had to buy some of the black cloth stuff that you put down around your bushes to block weeds.   I needed a lot of the stuff so I thought I might get a couple big rolls.   Tell me if you can tell whats wrong with the following :

Item #1 :

Item #2 :

The problem here may or may not be obvious especially at a quick glance.

The 3' x 50' roll of weedblock is $12.97 each.   The 3' x 100' roll is $27.67 each.   The 100' roll has twice as much as the 50' roll.   You would assume that the 100' roll would be a little bit of a discount compared per foot compared to the 50' roll or at minimum it ought to be twice the cost.  

2 x $12.97 for 2 x 3' x 50' rolls = $25.94 for 300 sq ft
1 x 3' x 10' roll = $27.67 for 300 sq ft

You spend an extra $1.73 if you buy the 300 sq ft roll compared to buying two of the 150 sq ft rolls.

I'm not going to jump to the conclusion that Home Depot is trying to scam people here.   In my opinion its most likely that one of the items is priced wrong on accident.   The small roll may be  priced too low or the large roll may be priced too high.    Its also a possibility that one of the items is a new version or an old version and the prices have changed between the new and old versions.   For example maybe they ran out of the old 3 x 100 rolls which used to be priced at $23 each and replaced them with the new rolls that also happened to have a new, higher price.  But at the same time they may still have the older, cheaper priced 3 x 50' rolls.   A third and more unlikely possibility is that for some reason the larger rolls are more expensive to make or transport or something that makes them more expensive so they are passing along the price too us.  Its also possible that Home Depot does this on purpose cause they know people aren't good at math and they make an extra $1.73 this way, but I don't want to assume that nor accuse them of it.  

I would have guessed that the most likely reason is a simple pricing error at my local Home Depot.  I checked the Homedepot.com website and they have the same prices there, see the picture to the right.   I also checked other merchants and didn't find anyone selling Weedblock for less than Home Depot.

I'm not writing this just to bash on Home Depot.   There is a bigger point here.  

You can not assume that buying a larger item will get you a price discount per unit.

Generally when you buy larger items you pay less per unit.    This is almost always true of consumer goods such that its often taken for granted.   When I was shopping for the weedblock I almost grabbed the larger roll without even examining the price difference.   

Sometimes the price discounts are obvious.   A half gallon of milk might cost $2.09 and a gallon is $3.19.   Two half gallons would be over $4 so its easy to see that the gallon of milk is cheaper than 2 x half gallons.

Sometimes the price difference isn't obvious.   The 12 oz box of serial might cost $2.99 and the 18 ounce box might cost $4.29.   This math isn't as obvious or easy to do in your head.  The smaller box is about 25¢ per oz and the larger box is about 23.8¢.    Its not a big difference but the larger box is cheaper per ounce.    What if the larger box was $4.68?    Then it would cost 26¢ per ounce and that might not be as obvious that its more.

Whether merchants do this on purpose or just do it accidentally you need to make sure to look at unit costs rather than just assume larger quantities are a better deal.  

Check price tags for unit cost.    Price tags at grocery stores often have a per unit cost.    If the item comes in ounces or pounds then you may see a price per ounce or price per pound.  

Use a calculator.    If the price label has no unit cost figured for you and if the math isn't easy to do in your head, then you should use a calculator and figure the unit costs.    Most cell phones have a calculator function built in so most of us have a calculator on hand.

July 17, 2011

Two Entertainment Coupon books for $10

Right now you can get TWO Entertainment coupon books for just $10.   Standard shipping charge is just $1.   Plus if you use Ebates to make the purchase you can get 17.5% cash back.    That would put your cost at about $9 total after the cash back or $4.50 per book.   You can get one book from your home town and a 2nd book for another town of your choice or get a book for a friend.

If you aren't familiar with Entertainment coupon books then you should first check out their website to see if they have deals that you'd actually get value out of.  This year the 2011 book wasn't that great of a value for us and we've not really used it unfortunately.  But in past years they had at least one coupon that I could use for $20 at a particular restaurant so it was a great deal.

To get the 17.5% cash back you need to be signed up with Ebates.  Then simply go to Ebates to get the referral to the Entertainment site before you do your shopping.  I also get a referral bonus if you use my links to sign up with Ebates.

I heard about this deal on Slickdeals.net

Bonds are Safer than Stocks

Recently Jim at Bargaineering asked Are Bonds a Safe or Risky Investment?   He concluded "In the end, I don’t think bonds are any safer or less risky than investing in stocks."   Theres more to his discussion then that, so read his full article for all the details.    I thought this was a good topic to discuss so I'll give my take on it.

In general as classes of investment : Bonds are safer than stocks.   If you look at the two classes of investments there are several reasons why bonds are safer.

1. Protection of principal.    If you buy a bond then hold the bond to term you will get back your principal.   With a stock you have no expectation at all that your principal will be refunded.  

2. Defaults and bankruptcy are generally better for bonds than stocks.   Bond holders have a higher priority to recover funds if a company goes bankrupt.   Remember when GM went bankrupt?   The bond holders got 29% of their money back (if I recall right).   What do you think the stockholders got?  Nothing much.

3. Guaranteed returns rather than speculation on appreciation.    With bonds you have a fixed rate of return.   With stocks you hope your investment might do better and if theres dividends then you hope the company will continue to pay them.   With bonds you have a contract that says you'll get paid X interest for the term of the bond.  Theres no hoping, its an agreement.

4. Lower volatility.    Bonds can go down in value based on fluctuation in interest rates and the market forces.   So yes, bonds can lose their value.   However stocks are much more volatile.   Stocks can go down significantly in short periods of time.  In general the volatility of bonds is much lower than stocks.

Lets compare the Vanugard Total Stock Market ETF (VTI) versus their Total Bond Market ETF (BND).   For the past 5 years this is how their prices have looked, red is VTI and blue is BND (click on image for larger version):

Clearly the bond fund has been much less volatile.   Of course this is just a short few year period for two ETFs, but if you look back longer periods the markets are much more volatile for stocks.   Stocks have bigger ups and downs over time in general. 

Different risk levels for individual bonds and stocks
Of course there are different kinds of bonds and stocks out there.   Now that I've said in general that bonds are safer than stocks, I should point out for completeness that not all bonds are created alike.  There are riskier bonds and safer stocks.  A junk bond is a riskier investment than buying GE stock but US Treasuries are much safer than Enron's of the world.   However, if you buy bonds or stocks of entities with similar credit ratings then your overall risks will be higher in general with the stocks.

July 16, 2011

FREE Movies on Youtube

Right now you can watch several free movies on Youtube.   These are full length theatrical movies like Men in Black, Bram Stokers Dracula, The Patriot, and others.    Its a free promo deal and I'm not sure if it will last long or not.

I heard about this on Fatwallet

July 15, 2011

Best of Blog Posts for week of July 15th

MarketWatch takes a look at How the Bubble Destroyed the Middle Class

Investopedia says Why Extreme Couponing Won't Work For You

DoughRoller tells us How to Build a Website for Your Business

FreeMoneyFinance discusses  10 Ways to Waste Money on a Car

GetRichSlowly examines The Blurry Line Between Experiences and Stuff

Buy 2 Get 1 FREE - Video Games on Amazon

Amazon is having a Buy 2 Get 1 Free sale for select video games right now.

Here is the : list of specific games that are eligible.   They have a lot of popular PS3, Xbox 360 and Wii titles.     If you're in the market for specific games then this could be a good deal for you.   

On the other hand buying video games used is generally a cheaper option, so I'd consider that before buying new. 

This article may contain referral links which pay this site a commission for purchases made at the sites.

Cumulative Bond Default Rates

Data from the Municipal Bond Fairness act has cumulative historic default rates for various ratings of municipal and corporate bonds.

Here is the table :

[in percent]

Ratings Categories Muni Corp Muni Corp
Aaa/AAA 0 0.52 0 0.6
Aa/AA 0.06 0.52 0 1.5
A/A 0.03 1.29 0.23 2.91
Baa/BBB 0.13 4.64 0.32 10.29
Ba/BB 2.65 19.12 1.74 29.93
B/B 11.86 43.34 8.48 53.72
Caa-C/CCC-C 16.58 69.18 44.81 69.19
Investment Grade 0.07 2.09 0.2 4.14
Non-Invest Grade 4.29 31.37 7.37 42.35
All 0.1 9.7 0.29 12.98
Source. Moody's, S&P.

A few things strike me about this. First of all the cumulative default rate for junk bonds is awfully high. On the other hand the cumulative default rate for investment grade bonds is quite low. There is a significant difference in the risks of default between high rating and low rating bonds over their lifetime.

July 14, 2011

How Much Does Long Term Disability Insurance Cost?

I am thankful that I have long term care insurance provided free benefit by my employer.    However many people do not get such a benefit for free.   According to BLS data only 33% of employees in the private sector have access to a long term care insurance plan through their employer.

First of all we have to answer :

What is Long Term Disability Insurance?

Long Term Disability Insurance (LTD) pays you a monthly or annual cash benefit if you become disabled such that you are no longer able to work.    Policy terms differ but a typical policy may pay 60% of your wages from 1 year after the point of disability up until you hit age 65.   Generally policies will pay a % of wages with a cap.  For example an LTD policy might pay 70% of wages with a cap of $5,000 a month.    Policies also often exclude short periods so they only kick in if the disability is long term in nature.  If you are disabled for 6 months then the LTD policy may not take effect.   This is a pretty brief explanation of the nature of LTD.


Just a quick note, Long Term Disability insurance is not to be confused with Long Term Care insurance.   LTD is if you are disabled and unable to work and will pay a cash benefit to help replace your lost wages.  LTC is to help pay for specialized medical care such as you may receive in a nursing home during your elder years.   These are two different things entirely.

Group Rates versus Individual Plans

If your employer happens to offer LTD policy coverage as a group rate then it will probably be much cheaper than if you were to buy a policy on your own.   Employers like mine that do provide LTD coverage often do so without requiring an employee contribution.  However some employers offer LTD as a optional policy.  

Ok, So what Does LTD cost then?

Unfortunately I don't find easy to access references that cite solid numbers for LTD policies.   There are many examples out there, but they are based on just a few examples.   At best all I can do is then cite some references that give some example costs.   This will at least give a ballpark idea of what LTD can cost you.

Costhelper gives a rough cost estimate of 1-3% of your wages.    By this they mean that the premium cost would be about as much as 1-3% of your income.   Generally disability insurance is tied to your income so if you make a higher income you'll want a higher disability insurance rate.   If you assume a 2% rate then someone making $50,000 a year would pay $1,000 a year for the disability policy.

SmartMoney wrote an article Do You Need Disability Insurance? and there they say for individual policies:
"Here's one example from MetLife: A 40-year-old male non-smoking business executive would pay $1,150 in annual premiums for $3,500 per month in benefits delivered up to age 65 with a 90-day waiting period."

The insurer Unum says "Here is an example of an individual policy that may be purchased through an independent insurance agent. A 40-year-old professional man who makes $50,000 a year would pay about $1,700 a year for a policy that would pay him $2,900 a month for up to five years for a covered disability."
Insure.com discusses The Basics of Long Term Disability Insurance and say for group policies that:
"The average annual premium for a new group LTD policy in mid-2009 was $238 per person based on a 158-person group, according to King."

Generally speaking then group policies can often be had for a few hundred dollars whereas individual policies may cost $1000 to $2000 range.    The exact costs will differ based on age, gender and occupation.  

July 13, 2011

Top Personal Finance Blog List at Money Crashers

Money Crashers has a list of Top Personal Finance Blogs

Free By 50 comes in at #231 on their list.    There are 476 blogs on the list so thats not too bad.  

The ranks are a compilation of various statistics that track readership and traffic levels.

There are a lot of great blogs on that list.   I read 8 of the top 20 blogs myself. Its a pretty cool list, check it out.

July 12, 2011

Suze Orman Thinks Housing Prices Will Drop 66%

The other day I was watching an episode of Suze Orman.  Suze thinks seems to think that you shouldn't buy a house now cause her opinion is that housing prices are going to go down even more.    In fact she seems to think that its reasonable to expect a home to potentially lose 2/3 of its value.   She gave the example of a home in Tampa, FL that used to cost $750,000 but was now $150,000.    That sounds like a pretty good price right?   Well according to Suze it isn't cause it could go down to $50,000.   Her "logic" was that a neighbor who was desperate to sell might try to sell their house at $100,000.   Then if the house didn't sell right away then they might drop to $50,000.   Presto wammo your house is now lost 67% of its value and is only worth $50,000. 

The whole scenario just doesn't seem realistic at all.   If you were house shopping and looking at homes for $150,000 and you saw an equivalent house at $100,000 then wouldn't you jump at such a bargain price?   On the other hand if you were selling a home why would you discount it 33% right off the bat?   Even worse if your heavily discounted house didn't sell right away then why would you hastily slash the price in half?  I just don't think this scenario is very serious.   I admit its possible that housing prices could drop a lot, but then anything is possible.  

I don't know if Suze really thinks this is how housing market really works or if its just total hyperbole meant to scare everyone away from buying a house.   Honestly it seems like fear mongering to me.   I don't think the housing market is in great shape but I do think we are close to the bottom at this point.   Prices could go down some more but I don't see values going down significantly.

July 11, 2011

FREE Amazon Prime for Students and Moms

Here are 2 ways to get free 2 day shipping on Amazon.

Amazon Student : Any college or university student can join Amazon Student   You have to have an email with .edu to confirm eligibility.  Its free to join.   If you're an Amazon Student member then you get free 2 day shipping for 12 months.  You can learn more about it here

Amazon Mom's : Another totally free program is Amazon Mom.   This program is actually open for any parent or caregiver so Dad's and guardians can join Amazon Mom's too.    The program is targeted at parents of babies or toddlers but parents with children of any age can actually join too.  Amazon Mom's get free 2 day shipping.   Also you can save 30% off select diapers and wipes and 15% off most other items if you sign up for a subscription.   The subscription program at Amazon is where they mail you a package every so many months.  For example you can get a new box of diapers ever 1 or 2 months as you need them.

Note: the Amazon Prime benefits you get in these programs do NOT include all the benefits of paid Prime membership.  You do not get the free online streaming video.  There may be other benefits you don't get as well.

July 10, 2011

27% cash back at 4inkjets

Today's daily double deal at Ebates is 27% cash back at 4inkjets.    4inkjets sells inkjet printer cartridges

You can also get 10% off with discount promo codes at Retailmenot.com     The 10% off codes do not work with OEM original ink cartridges just the remanufactured types.

Between the 10% off from the promo code and the 27% cash back thats a total 34% discount.

I haven't used 4inkjets myself but I did a quick search for reviews and theres some pretty positive ratings for them.  I found :
4.5 out of 5 at epinions with over 6000 reviews and an inkjet review website gave them an A+

I've just placed an order myself for color and black cartridges for our printer.

To get the 27% cash back you need to be signed up with Ebates.  Then simply go to Ebates to get the referral to the 4inkjets site before you do your shopping.    To get the 10% discount you have to use one of the promo codes (like 'BEACH22' ) found on Retailmenot.com.   Enter the promo code BEACH22 during checkout.  Note the promo codes do not work for OEM printer cartridges.

I also get a referral bonus if you use my links to sign up with Ebates.

Getting Another Credit Card Didn't Hurt my Credit Score

Earlier this week I wrote about my latest credit score report.   My credit score was 779.     Before that it was 776 and before that it was 773.   You might notice a pattern.    Then this past week FreeMoneyFinance (one of my favorite personal finance blogs) wrote How Getting a New Credit Card Impacts Your Credit Score

It occurred to me that during that time we applied for and got a Sears credit card while buying a new dishwasher.

Here is the timeline of my credit score checks and getting that Sears card.
Dec 2009 = credit score 773
May 2010 = apply for Sears credit card
July 2010 = credit score 776
July 2011 = credit score 779

It would seem that getting that Sears card didn't have much impact on my credit score at all.    You can see that before I got the Sears card my credit score was 773 and then after I got the card it had gone up to 776.     Its possible that the card application had a negative short term impact but if so then it didn't last.    I would expect though that if there was a large impact to the credit score that it would have lingered longer or had more impact in general.  

I should point out that this isn't super scientific.   Ideally I would have wanted to check the credit score the week before I applied for the credit card and then checked it again the week after and then monitored it for a while longer.

July 6, 2011

Specific Maturity Date Bond Funds

Earlier this year a new style of bond funds was introduced by some of the investment companies.   I read about these in a recent CNN Money article.  The funds are specific maturity date bond funds.   Each such fund holds only bonds that mature in a specific date.   For example a 2012 funds would consist entirely of funds that mature in 2012.  This kind of fund is compelling to me for a few reasons.  

First of all it beats buying individual bonds because with such a fund you will be diversified across multiple bonds rather than having all your eggs in one basket.   You could of course buy a bunch of individual bonds and diversify your holds that way, but this kind of fund does all that for you. 

The second big benefit of a specific maturity date funds is that it will retain the principal of the bonds.   THe way normal bond funds are setup the funds trade bonds in and out in a regular cycle.   One downside with that is that if you want to cash in the fund at a given time then the trading value of the fund as a whole may be negative due to market conditions.   With the specific maturity date fund on the other hand the funds don't trade the bonds in and out, they hold the set of bonds until the maturity date and then liquidate them all at maturity.   In the given year of maturity the funds will be returned to the investors in the form of cash.  However the specific maturity date funds aren't immune from fluctuations in value either.   If you buy a 2017 fund then it could go up or down from now till 2017.   If you do hold the fund till 2017 and then they liquidate you should get your principal value back however.  

There are at least a couple investment houses offering this kind of bond fund so far.

Guggenheim has a set of BulletShare corporate bond ETFs for 2011 to 2017 (BSCB through BSCH).   They also have a set of High Yield Corporate Bond ETFs for 2012 (BSJC) to 2015 (BSJF).    Summary of the Guggenheim BulletShares ETFs.

iShares has AMT-free Municipal series ETFs for 2012 (MUAA) to 2017 (MUAF).

One way to invest in these funds would be to ladder a sum across multiple years.   Say you had $10,000 to invest, instead of putting it all into one fund you could put $2,000 into each year from 2012 to 2016.

I like the idea of maturity specific bond funds.   They offer the safety of diversification and should retain the principal values.   However they are relatively new and not very tested yet.  Hopefully they will work out well.

Jobs for High School Grads

In general I think that a good college education is the best route to getting a good job.   But college isn't for everyone.   What if for one reason or another you don't go to college, then what kind of jobs should you pursue?

Here is a list of what I'd consider to be decent jobs / careers for individuals with high school diplomas but without college degrees (in no particular order):

Electrician, plumber, carpenter, etc.
Elevator installer, repairer
Waiter/ waitress
Truck drivers, UPS driver, taxi drivers, etc.
Railroad workers
Casino dealer
Postal workers
Flight attendant
Real Estate agent
Auto mechanic, auto body repair
Meter reader
Insurance claim clerk
Business owner

See the BLS Occupational Outlook Handbook for details on wages and employment outlook for these and other jobs.

Jobs on this list may start out with relatively low pay, but all should offer the chance to make an OK wage at least after you have some experience. In any of the fields listed you can also potentially work up to a manager or supervisor role and then earn even higher wages.  

In some cases a few of these jobs might require some college at least in some areas.  For example police and firefighters sometimes require some college.    Certain jobs on the list may require apprenticeship training which may include some community college courses like Electrician for example.   Some of the jobs may be competitive and hard to get.   Jobs like waiter, casino dealer, salesperson and realtor would all have variable wages that are based on tips or commissions.   You could make very little money or pretty good wages depending on how much tips or commissions you get.

I have business owner on the list.  Of course starting your own business doesn't require a college degree but being a business owner isn't suited for everyone and generally requires some start up funding.  Still there is a lot of opportunity in owning your own business.

July 5, 2011

My Credit Score is 779

I just got my free credit report and credit score from Quizzle again.    Today my credit score is 779.    Last time I checked it was 776 but that was a year ago in July 2010.   The first time I got my score from Quizzle it was 773.   Thus far every time I've checked my score has been up +3 points.   779 is a good credit score.

If you're not familiar with it, Quizzle is a site where you can get a free credit report and credit score two times a year.   They give the Experian report and 'FAKO' score.  

On the Quizzle site they have a feature to see the history of your credit score reports and this is what mine looks like. 

The line looks flat but thats due to scale.   A +3 change isn't so noticeable within a range between 500-850.

Also check out my step by step guide to getting your free annual credit reports.  Between Quizzle and the Annualcreditreport.com site you can spread your reports out and get 5 credit reports a year.

July 4, 2011

Happy 4th of July!

Happy 4th of July!!

Image by Beverly & Pack

July 2, 2011

$5 off and 40% back at Magazines.com

Right now you can get $5 off of 251 magazine titles at Magazines.com and a 40% cash back rebate from Ebates  They have a few dozen titles under $10 including:

Field & Stream
Motor Trend
Ladies' Home Journal
Vegetarian Times
Cat Fancy
Better Homes & Gardens
Reader's Digest

To get the $5 off and the 40% cash back you need to be signed up with Ebates.  Then simply go to Ebates to get the referral to the Magzines.com $5 discount before you do your shopping. 

I also get a referral bonus if you use my links to sign up with Ebates.

July 1, 2011

Best of Blog Posts for week of July 1st

Get Rich Slowly shares a Biking vs. Driving Calculator  (spoiler its cheaper to ride a bike).

FreeMoneyFinance asks What's It Take to Be "Rich"?

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